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UnitedHealth Deal for DaVita Medical Unit Wins FTC Approval

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UnitedHealth Group Inc. won U.S. antitrust approval for its $4.3 billion acquisition of DaVita Inc.’s physician practice group, letting the health conglomerate close a deal it struck 19 months ago to expand its business of taking care of patients directly.

The Federal Trade Commission said Wednesday that it had signed off on the tie-up after UnitedHealth agreed to sell assets to resolve competition problems in the Las Vegas area. UnitedHealth, the United States’ biggest health insurer, will add DaVita’s medical clinics to the 35,000 physicians who already work for its Optum unit.

(Related: CVS Makes a Pitch for the ‘HealthHub’ Model)

DaVita shares closed up 3.1% to $51.27. UnitedHealth rose 1.8% to $250.19.

Policy makers have become more concerned about how consolidation in the health care industry affects the price of care. A Trump administration report in December took note of “a level of consolidation that is changing the competitive landscape for the worse,” and recommended reducing regulations and making other changes to improve competition.

Optum said in a statement that the unit provides services to about 80 health care plans and a total of 16 million patients. The company is one of the U.S.’s biggest employers of doctors.

The settlement with the FTC followed a separate agreement announced Wednesday with Colorado Attorney General Phil Weiser.

Weiser said that without condition imposed on the deal, UnitedHealth would gain the power to raise prices on elderly consumers enrolled in Medicare plans offered by private companies, known as Medicare Advantage. He criticized the FTC for not taking action in his state, saying the agency “declined to seek any remedies to protect Colorado consumers.”

“The merger would result in reduced competition, higher health care costs, reduced benefits, and fewer choices for seniors,” Weiser said. “We are taking action today to protect older Coloradans from increased prices and decreased options in health care.”

Under the FTC settlement UnitedHealth will sell DaVita’s health care provider organization in the Las Vegas area to Intermountain Healthcare, a Utah-based health care provider and insurer. Without the sale, the deal would increase costs to Medicare Advantage insurers, the FTC said.

Consolidation Concern

The deal was first announced in December 2017 at a price of $4.9 billion. A year later, the companies reduced the transaction price to $4.3 billion, “as a result of underlying business performance and in an effort to expedite” the antitrust review, DaVita said in a regulatory filing.

UnitedHealth has built up Optum, which includes physician practices, drug benefits and consulting, mostly through small, local deals. It already has doctors in many areas where DaVita Medical Group operates, including Southern California, Las Vegas and Florida, according to the companies’ websites.

Under the agreement with Colorado, UnitedHealth will lift an exclusive contract with hospital chain Centura Health for at least three-and-a-half years. That will give seniors enrolled in competing Medicare Advantage plans an additional health care provider to choose from. Colorado is also requiring that DaVita Medical Group’s agreement with insurer Humana Inc. be extended through at least 2020. Humana competes against UnitedHealth.

Peter Grauer, the chairman of Bloomberg LP, the parent company of Bloomberg News, is a member of DaVita’s board.

—With assistance from Joshua Fineman.

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