Amid revenue growth, UnitedHealth considers acquiring $2B Tenet subsidiary

UnitedHealth Group, a Minnesota-based managed care company, is exploring an acquisition of Tenet Healthcare’s healthcare management subsidiary, Conifer Health Solutions, The Wall Street Journal reported.

UnitedHealth Group is reported to be one of several suitors for the business in a deal that could be valued as high as $2 billion, according to the WSJ. Tenet has been shopping around for a sale of Conifer since late 2017, after the company, which is one of the nation’s largest hospital companies, suffered several setbacks and announced cost-cutting measures as well as other asset sales. The company stated it would decide on the sale of Conifer in the first half of 2018.

Conifer generated $1.6 billion in revenue in 2017, about 8 percent of Tenet’s total revenue.

The report comes after UnitedHealth Group posted 12 percent revenue growth during the second quarter of the year. The company has recently ramped up M&A, including rapidly expanding its pharmacy benefit manager business, Optum, and making major acquisitions in 2017. UnitedHealth Group is also the parent company of UnitedHealthcare, the nation's largest healthcare insurance provider.

As the company continues to act as a consolidator across the healthcare space, UnitedHealth Group could run into a potential snag with other operators.

“Some hospital operators may be leery of working with Conifer if it becomes part of Optum, whose surgery centers and clinics compete directly with them in many markets,” the WSJ reported.

Yet, UnitedHealth claims it maintains separation between its insurance operations and Optum.

UnitedHealth Group’s appetite for acquisitions helped its second quarter revenues climb to $56.1 billion. Enrollees in its Medicare Advantage plans also grew 10.4 percent, or 450,000 people, year over year.

Despite the strong earnings report, UnitedHealth Group’s share price declined slightly following the company’s earnings call. The dip may have been investors’ reaction to the lower corporate tax rates being a major driver of the company’s earnings per share growth during the quarter, rather than operational growth, as well as higher-than-expected medical costs, according to Forbes.