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UnitedHealth Continues Healthcare Shakeup With DaVita Deal

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On Wednesday, only a few days after the CVS (CVS - Free Report) and Aetna (AET - Free Report) deal helped shine a light on the quickly changing healthcare industry, UnitedHealth Group (UNH - Free Report) announced that it will buy a unit of DaVita Inc. (DVA - Free Report) for nearly $5 billion.

UnitedHealth, the country’s biggest health insurer, announced that its Optum division reached an agreement to acquire DaVita Medical Group for roughly $4.9 billion in cash. This deal, which is expected to close in 2018, is aimed to help expand UnitedHealth’s primary and urgent care services.

UnitedHealth hopes to pair DaVita Medical Group’s 300 medical clinics, 35 urgent-care centers, and six outpatient surgery centers—which reach around 1.7 million patients a year—with Optum’s massive insurance division.

“Combining DaVita Medical Group and Optum advances our shared goal of supporting physicians in delivering exceptional patient care in innovative and efficient ways while working with more than 300 health care payers across Optum in ways that better meet the needs of their members,” Optum CEO Larry C. Renfro said in a statement.

Optum also runs its own primary and urgent care centers, surgery centers, and senior and advanced care centers. Officials at both companies noted that the deal aims to help improve and streamline the ability to treat patients.

This move is part of a growing shift for health insurers to play a more direct role in actual medical services. Many health insurers now want to be able to provide their own patient care as often as possible. The deal will hopefully cut costs and improve care, given the proximity and number of care centers—especially for people with non-life threatening, chronic conditions.

The move comes after CVS announced its acquisition of healthcare benefits giant Aetna on Sunday. The $69 billion deal will allow the companies to offer more healthcare services at CVS stores.

UnitedHealth's latest deal is its second acquisition in 2017 aimed at bolstering its offerings beyond insurance. In March, UnitedHealth purchased Surgical Care Affiliates for $2.3 billion.

Shares of DaVita soared 12% premarket on the back of the announcement. Since then, the stock has cooled a bit and now hovers up around 10% at $67.20 per share, which is still $3 below its 52-week high.

UnitedHealth saw its stock price dip in early morning trading, but shares have since gained around 0.80%. CVS stock dipped slightly on Wednesday following the UnitedHealth and DaVita deal.

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