Is Risant Health the rising star of scalable, profitable value-based care models for health systems?
It’s a little early to break out the champagne and toast to the company’s success, but it might soon be time to start thinking about ordering some flute glasses should a celebration be in order.
Kaiser Permanente-owned Risant Health named its newest acquisition target last week and while the deal is pending regulatory nods, experts say the deal will likely be successful in advancing value-based care.
Last year, Kaiser Permanente launched Risant Health, a company designed to acquire and operate nonprofit health systems under value-based care models. For its first acquisition, Risant bought Geisinger, a Pennsylvania-based health system comprising 10 hospitals and a health plan with more than half a million members. The deal was finalized in April.
This time around, Risant is buying Cone Health, a North Carolina-based health system with five hospitals and an insurance arm. Under the deal, Cone will be owned by Risant but will continue to operate independently and maintain its brand, just as was the case with the Geisinger acquisition. Financial terms were not disclosed.
While it’s too early to judge success, Risant’s first two acquisitions show a commitment to bringing together organizations with a strong focus on population health — as well as a dedication to spreading Kaiser’s care delivery models across the country.
“It expands their footprint into an entirely new geographic market and demonstrates Risant’s commitment to follow through on its growth plans,” Seth Joseph, managing director of Summit Health Advisors, a Boston-based consulting firm.
Why Cone?
Risant CEO Jaewon Ryu — who served as CEO of Geisinger before Risant launched last year — said in a statement that Cone’s efforts to advance value-based care align well with Risant’s vision for the future of healthcare.
“Their longstanding success and deep commitment to providing high-quality care to North Carolina communities make them an ideal fit to become a part of Risant Health. We will work together to share our industry-leading expertise and innovation to expand access to value-based care to more people in the communities we serve,” he said in the statement.
Experts agree that Cone checks a lot of Risant’s boxes. It’s a leading health system with a strong brand, it has a health plan component, and it has already forged the path of value-based care, Joseph explained.
Cone is also thousands of miles away from Kaiser’s stronghold on the West Coast, which makes it much less likely to be subject to anticompetitive regulatory scrutiny, he noted.
Michael Abrams, managing partner of Numerof & Associates, agreed with Joseph.
“[Cone’s] current market in North Carolina does not overlap with that of Geisinger or Kaiser. While there has been some talk in Washington lately about giving healthcare mergers closer scrutiny, this one qualifies as a cross-market or non-overlapping market merger. Such mergers have so far been greenlighted by the FTC, meaning the deal can get done quickly without the cost and uncertainty of an FTC investigation,” Abrams remarked.
The deal is expected to eschew FTC scrutiny — but more importantly, it will likely avoid the internal scrutiny that brought down a previous merger deal Cone had pursued.
In 2021, the health system entered into a definitive agreement to merge with Virginia-based Sentara Healthcare, but the deal never went through.
“The issue at the time appeared to be physician concerns about an out-of-state takeover by Sentara. With Cone’s promise to keep its local board, its Greensboro headquarters, and its clinic locations the same, that concern has hopefully been addressed,” Abrams said.
He noted that Cone has been operating an accountable care organization for more than a decade. With more than 700 employed physicians and about 1,800 independent physicians, Cone has created a culture that is proactive about managing patients’ health, Abrams declared. In his view, that cultural compatibility is an additional point in favor of the merger.
It’s also worth noting that Risant is not looking to purchase an asset that’s in financial trouble.
Cone’s financial results for last year showed a 3% operating margin on $2.8 billion in revenue — “perhaps not a star, but in healthcare delivery, respectable,” according to Abrams.
Risant is serious about scaling value-based care
Through this acquisition, Risant is showing that it is serious about its growth timeline. When it launched in April 2023, Risant said it wanted to acquire five or six health systems over five years.
Should the deal go through, Risant will be gaining its second health system with a deep track record of stellar population health management, said Mark Pascaris, senior director and analytic lead of nonprofit healthcare at Fitch Ratings.
“With Cone, it’s not just about being a successful hospital operator with a good balance sheet. The real fit, from Kaiser’s perspective, is about population health management, and Cone operates the largest accountable care organizations in its state. They have more than 200,000 enrollees in various at-risk contracts, including Medicare Advantage, and that’s the kind of thing that I think Kaiser is looking for. And you can say the same thing about Geisinger,” Pascaris explained.
Overall, he thinks the deal reinforces Kaiser’s dedication to the Risant concept. In his view, Kaiser is a “unique animal” — and perhaps the only health system that could successfully pull off a new company like Risant.
While there are plenty of health systems that have developed population management tools and/or established their own health plan, none have been able to accomplish these things at the scale Kaiser has, Pascaris remarked.
“Kaiser is really big — big is not necessarily an indicator of success, but you don’t get to be that sizable by accident. From a revenue perspective, Kaiser is probably close to three times the size of the next closest, not-for-profit health system. It’s just very big, and there’s a long track history of having deep pockets,” he said.
Which will be the next nonprofit health system to be acquired?
Through Risant, Kaiser wants to make itself even bigger, all with the purported goal of scaling value-based care across the country.
By acquiring new health systems, Risant will gain testbeds for its population health management technology and processes, pointed out Anu Sharma, CEO of Millie, a maternity care startup that partners with health systems. To her, being able to test models in new geographies will be a key factor termining the success of Risant’s mission to scale value-based care across the nation.
“Kaiser has a significant presence in California, but has often struggled with bringing its model to the rest of the country. A key reason is that Kaiser’s integrated health system model — which knits together health insurance and care delivery with aligned incentives, clinical workflows and technology enablement — needs these relevant pieces at some scale to work,” Sharma declared.
In other words, Sharma believes Kaiser needed a vehicle like Risant to be successful in its efforts to scale value-based care. With an entire company dedicated to acquiring health systems and driving better population health management within them, Kaiser finally has the infrastructure it needs to accomplish its goals at scale.
Outside California, Kaiser has not really had the care delivery assets or membership based needed to thrive in the value-based care innovation game, she noted. Through Risant, she thinks Kaiser is seeking to build out the care delivery infrastructure it needs to grow.
What might Cone gain?
Cone CEO Mary Jo Cagle said in a statement that by joining Risant, her health system will “build upon its long track record of success making evidence-based health care more accessible and affordable for more people.”
If Geisinger’s recent financial results are any indicator of what a health system could gain from joining Risant, then the deal will likely be a smart one for Cone, said Abrams of Numerof & Associates. Geisinger’s 2023 financial report shows that the organization has made significant strides in repairing its balance sheet — cutting its operating net loss by 85% and increasing operating revenue by nearly 12%.
While this might spell good news for the future of Risant and its portfolio of health systems, Abrams isn’t convinced that those results are wholly attributable to the Risant deal.
“It’s doubtful that in those eight months the technology and processes that Kaiser Permanente reportedly brings to the patient care enterprise had the time to carry much impact. The politics and logistics of importing new ways of thinking and delivering care into an organization cannot be rushed, especially in healthcare,” he pointed out.
He thinks Geisinger’s recent financial success was likely multifactorial, influenced heavily by metrics like lower labor costs and higher patient volumes, which were observed among many hospitals during the latter half of last year,
Still, the creation of Risant and its commitment to doing business on a value-based care basis has raised the profile of this new approach, possibly making it less scary to healthcare executives reluctant to let go of their fee-for-service ways, Abrams declared.
Measured against its own timelines and expectations, the company seems to be executing this strategy well. But anyone in the healthcare industry knows that these things take time.
In the meantime, the question becomes: Which nonprofit health system will become a Risant target in 2025?
Photo: Kimberly Knoefel, Getty Images
