If you want to see my eyes start rolling in separate orbits, just ask me how I managed to miss picking up UnitedHealth
A key part of the UnitedHealth strategy over time has been the acquisition of other companies -- and it's at it again. On Wednesday, it announced an agreement to acquire PacifiCare Health Systems
This will be an interesting acquisition for UnitedHealth -- buttressing the company's efforts in the West/Southwest and in Medicare. Because it's more focused on senior care than most other managed-care providers, PacifiCare gets about 40% of its revenue from Medicare programs.
This deal would also expand UnitedHealth's operations in California. To me, that's a decidedly good-news, bad-news sort of situation. True, California is a huge market and rates in the state have been catching up of late. But California can also be a bit "quirky" with state ballot propositions, and there's no telling whether or not a popular vote in any given year could ratchet up costs or regulatory burdens for managed-care providers.
What's more, the California insurance commissioner has already taken the stage and promised "close scrutiny" of the deal. Back a bit, when WellPoint
All in all, this will likely prove a successful move for UnitedHealth. Though there are some risks from even greater exposure to government and commercial underwriting, there will be cost synergies and UnitedHealth's increased size should give it even more leverage with hospitals, as well as drug and device makers.
So, does anybody lose? I'd say it certainly turns up the pressure on the likes of WellPoint, Aetna
It could also be bad news down the road for Medco
For now, though, this is a story of the big getting bigger and, hopefully, better. UnitedHealth may be upping its operating risk a bit, but that could also spell greater rewards down the line.
For more on managed care:
Are you looking for good companies at great prices? Consider subscribing to the Motley Fool Stock Advisor newsletter.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
More from The Motley Fool
Here's How Intel Corporation Crushed It in 2017
It was a breakout year in many ways for the data center first provider, and it’s just the beginning of what’s to come.
3 Things You Can Do This Year to Increase Your Social Security Benefits
Want more money out of Social Security? Here's how to get it.
These Companies Could Benefit the Most From Self-Driving Cars -- and They're Not What You Think
The biggest beneficiaries of hot new tech may be boring old memory makers.