Risant + General Catalyst: 2 approaches to buying health systems

Two distinct — yet similar — approaches for buying health systems emerged in 2023.

In April, Kaiser Permanente, the huge payer-provider based in Oakland, Calif., agreed to acquire Danville, Pa.-based Geisinger as part of a new value-based care nonprofit called Risant Health.

Then in October, venture capital firm General Catalyst formed a new company named Health Assurance Transformation Corp., or HATCo, that wants to purchase a health system in the $1 billion to $3 billion range.

After HATCo launched, commentators noted the similarities with Risant Health. Both aim to use their technology and scale — in 2022, Kaiser Permanente had $95.4 billion in revenue while General Catalyst reportedly had $24.8 billion in assets under management — to shift American healthcare from fee for service to value-based care. But are the two really that much alike?

One major difference is that Risant Health plans to keep amassing health systems, while HATCo said it intends to buy one that will serve as a digital innovation testing ground that can be emulated industrywide.

"By acquiring multiple health systems, we will learn from the experience of these health systems, creating a continuous learning environment," Greg Adams, chair and CEO of Kaiser Permanente, told Becker's.

While Risant Health's goal is to land four or five health systems over the next five years, it "won't stop there," Mr. Adams said. "We invite other like-minded health systems to join us in delivering value-based care customized to the communities they serve."

An article in legal news service JD Supra noted that HATCo will comprise a "single model and blueprint for health system transformation" while Risant Health will have a "platform with an array of tools for nonprofit health systems from which those health systems may pick and choose."

"We do not envision a 'single model or blueprint for health system transformation' in our diverse and complex nation," Mr. Adams said. "Risant Health will tailor the support we provide to health systems based on where they are operationally and how best to meet their local communities’ needs.

"Risant Health is not in the software business, or the outsourcing business. We believe that truly transforming care in communities requires an enduring commitment in addition to tools, technology, and services."

HATCo CEO Marc Harrison, the former chief executive of Salt Lake City-based Intermountain Health, told Becker's in October that the company doesn't plan to buy more than one health system, but intends to own it for the long haul.

"We anticipate using that system, in concert with our leadership team, as a concept of what healthcare can look like," he said. "We don't want other folks to think that we're out there to roll up hospitals and become their local competitor. What we'd like to do, between the system that we own and the 20 systems that we work with, is to be able to demonstrate to them that we can be of help to you."

The two health system hunters also have different budgets. HATCo said it is looking for a hospital group in the $1 billion to $3 billion range, while Risant Health's first acquisition target, Geisinger, had nearly $7 billion in revenue last year. Risant has said it plans to become a $30 billion to $35 billion organization.

Another distinction is that Risant Health, like its umbrella organization, will operate as a nonprofit, while HATCo, like its parent, will be for profit.

For-profits typically have "healthier margins" and are better positioned to link technology use to the bottom line, Dr. Harrison told Forbes. He was unavailable to comment for this story, according to a spokesperson.

"Tell me any industry that has transformed itself based on the goodwill of the participants in the industry versus business imperatives?" he told the news outlet. "It doesn't exist."

While Kaiser Permanente has history on its side, with its own customized Epic EHR and digital tools it has been using for value-based care for decades, HATCo will effectively be crowdsourcing the latest in technology from its dozens of healthcare startups.

"We think it should be a 'clicks and mortar' future," Dr. Harrison told Becker's. "We are a little bit more interested in the full spectrum of how digital health is deployed."

He cited "artificial intelligence-powered tools, telehealth, asynchronous care, tools that crawl EHRs to look for potential problems in patients, and tech stacks that help primary care doctors close care gaps."

"We think that world is really pretty integrated going forward," he added.

While HATCo is open to acquiring either a nonprofit or for-profit system — transitioning a not-for-profit will require extra regulatory hurdles — it wants one that serves a diverse patient population. "It has to be a system that takes care of poor people as well as rich people," Dr. Harrison told Forbes. "We're not interested in finding a system that cherry-picks rich people out in the suburbs." (Interestingly enough, he said HATCo would like to acquire a health system with its own health plan, a la Kaiser Permanente or his former employer, Intermountain.)

Risant Health, meanwhile, believes that a nonprofit approach is superior.

"We know what it means to be mission-driven, using our resources as a not-for-profit organization to address the unique needs of each community we serve and are rooted," Mr. Adams said. "With that history, we want to enable other community-based health systems to learn from the best of our care delivery model."

Mr. Adams said Risant Health will be able to ease the transition to value-based care for health systems unable to do it on their own. They will gain the scale and tools to negotiate value-based deals with payers and provide treatment that's "proactive" and health-promoting rather than "episodic" and based on volume. Kaiser Permanente, which insures its own patients, has effectively been doing value-based care for its nearly 80-year history, way before it was a buzzword.

"To the extent that others — including General Catalyst — are also investing to advance such value-based care, we welcome their efforts," Mr. Adams said. "Transforming healthcare in this country requires the leadership of many, and we're heartened to see others drawing inspiration from the Risant Health model."

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