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In the first move of its kind by a VC firm, General Catalyst will buy an entire healthcare system. The acquisition target was not announced.
At the HLTH conference in Las Vegas on Sunday, the firm introduced Health Assurance Transformation Corporation, a new subsidiary with which the firm will make the acquisition. Dr. Marc Harrison, the former CEO of Intermountain Healthcare who joined General Catalyst in August 2022, will lead HATCo.
It will provide services to other healthcare systems and help General Catalyst's portfolio companies integrate with the health system, the firm said in a blog post, where it also addressed the unusual nature of the move.
"[It] is another step in GC's move to 'transcend' venture capital. We've said that achieving HATCo's mission will require a long-term orientation that existing fund structures cannot support."
General Catalyst has invested in healthcare startups including Ro, a telemedicine provider; Devoted, a Medicare planning tool startup; and Olive, a healthcare automation platform. The firm has partnered with health systems before—notably HCA Healthcare, one of the largest in the US—but this move marks the first time it will buy one outright.
"It's unprecedented in the VC ecosystem," said Rebecca Springer, PitchBook lead healthcare analyst. "This is not a common VC strategy."
In the broader healthcare industry, health system M&A is common. Healthcare giant Kaiser Permanente created subsidiary Risant Health with the purpose of acquiring other health systems. In April, Risant entered an agreement to purchase Geisinger Health, a Pennsylvania-based system.
While still in the early stages of the deal, there are plenty of challenges for General Catalyst, Springer pointed out. She said PE firms, which are no strangers to purchasing and restructuring health systems, now seldom do so because of the thin financial margins and regulatory concerns. The last major deal of this type was Apollo Global Management's 2018 buyout of LifePoint Health.
"It will be interesting to see if the firm can derive enough incremental value to justify the capital and operational outlay that will be required," said Springer.
Correction: An earlier version of this article incorrectly described the relationship between General Catalyst and HCA. The two entities are strategic partners. (Oct. 10, 2023)
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This article originally appeared on PitchBook News