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Kaiser Permanente to acquire Group Health Cooperative

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Kaiser Permanente, the California integrated delivery system with one of the largest U.S. health plans, announced Friday that it will acquire the Seattle-based Group Health Cooperative.

It's one of a fast-growing list of huge health care deals made this year by companies moving aggressively to enter new markets and gain scale.

The deal allows Oakland, California-based Kaiser to expand into an eighth market and add Group Health's more than 590,000 members. Nearly four dozen primary care and behavioral health clinics, four specialty medical centers and one hospital in Washington and northern Idaho would also be added to Kaiser Permanente's $56.4 billion operations.

“This agreement is a natural extension of our long, successful working relationship with Group Health and it provides us with the opportunity to expand access to high-quality, affordable care and coverage,” said Bernard J. Tyson, chairman and CEO, Kaiser Foundation Health Plan and Hospitals, said in a news release.

Kaiser Permanente's appetite for new markets is growing, according to reports. Kaiser is also eyeing Michigan, Crain's Detroit Business reported in October. Kaiser spokesman Ted Carr responded to the reports by saying the company regularly looks for deals.

“As part of our ongoing operational improvement work and our efforts to improve the quality of health care, we regularly evaluate opportunities to engage with other health care organizations. This work can range from informal collaboration around a narrow scope to more broad, structured and cooperative affiliations,” he said. “Our overall, long-term goal is to make our integrated model of high-quality, affordable care and coverage even better, and available to more people, as part of our mission to improve the health of our communities.”

The new Kaiser market will be managed locally, the organizations said. In addition to California, Kaiser also operates in Colorado, Georgia, Hawaii, Virginia, Maryland, Washington D.C., and Oregon.

“After an exhaustive process, we recognized that there was a unique opportunity to accelerate our growth and potential through a vastly deepened relationship with Kaiser Permanente by tapping into their exceptional resources, skills, track record and reach,” said Scott Armstrong, president and CEO, Group Health Cooperative, in a news release. “Through this acquisition, we'll better be able to tackle rising health care costs and implement even more powerful technologies to serve our members.”

Group Health Cooperative ended 2014 with revenue of $3.7 billion and operating income of $80.1 million.

Group Heath ended last year tied with the Community Health Plan of Washington for the state's second-largest managed care plan, each with one-quarter of the market. Molina is the state's biggest managed care player with 35% of the market.

Melanie Evans writes for Modern Healthcare, a sister publication of Business Insurance.