American VC to buy a healthcare system to help its portfolio companies

In the first move of its kind by a VC firm, General Catalyst will buy an entire healthcare system, though the acquisition target was not announced yet.

The firm recently introduced Health Assurance Transformation Corporation (HATCo), 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 the up-and-coming venture.

Once launched, it will provide services to other healthcare systems and help General Catalyst's portfolio companies integrate with the health system.

"[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," the firm explained in a blog post.

General Catalyst has invested in a number of 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, such as HCA Healthcare, but this move marks the first time it will buy one outright.

In the broader healthcare industry, health system M&A is common, with Kaiser Permanente creating subsidiary Risant Health to acquire other health systems, and Risant entering an agreement to purchase Pennsylvania-based Geisinger Health in April.

For what it matters, PE firms have been purchasing and restructuring health systems in the past, but these days - they seldom make such moves because of the thin financial margins and regulatory concerns.

That being said, it will be interesting to see what General Catalyst will do with its own health system and whether other VCs in the U.S. and elsewhere will follow with similar deals of their own. We'll be watching this space, so stay tuned.