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Our Take: CVS Health wins bidding contest with offer to acquire Signify Health for approximately $8 billion

Sep 12, 2022

During an earnings call early last month, CVS Health’s top executives indicated that the company would likely make a significant acquisition to enhance its health services before the end of the year. Last week, CVS Health outbid Amazon, UnitedHealth Group, and other contenders with an offer to buy Dallas-based home health provider Signify Health for approximately $8 billion.

The two parties have entered into a definitive agreement for CVS Health to pay $30.50 per share in cash for Signify Health. The boards of both companies have approved the acquisition, though it is still subject to regulatory approval and other customary closing conditions. It also needs to be approved by Signify Health’s stockholders. New Mountain Capital, a private equity firm, owns an estimated 60% of Signify Health’s common stock and has agreed to support the acquisition.

“Signify Health will play a critical role in advancing our health care services strategy and gives us a platform to accelerate our growth in value-based care,” said Karen Lynch, CVS Health’s CEO. “This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the health care experience. In addition, this combination will strengthen our ability to expand and develop new product offerings in a multi-payer approach.”

The companies said when they announced the acquisition that they anticipate closing the deal by mid-2023.

If the transaction is finalized, Signify Health’s CEO, Kyle Armbrester, will continue to lead the company as part of CVS Health.

“As we carefully considered our long-term strategic options, we determined that CVS Health is the ideal partner, given its focus on expanding access to health services and helping consumers navigate to the best sites of care,” Armbrester said. “We are both building an integrated experience that supports a more proactive, preventive, and holistic approach to patient care, and I look forward to executing on our shared vision for the future of care delivery.”

Our Take:  This latest proposed acquisition is further evidence that key stakeholders believe home health care will become more predominant in the years ahead.

CEO Lynch talked about CVS’ viewpoint in a joint call with Armbrester after the deal was announced:

“By acquiring Signify’s home health platform, we gain a foundation for future expansion of home health care delivery,” she said. ”We will be able to design new care models that combine CVS Health resources with Signify’s capabilities, analytics, and technology to deliver on our promise to expand our health service offerings and to help patients navigate to the best site of care.”

Signify Health has a nationwide network of more than 10,000 physicians, nurse practitioners, and physician assistants. The company conducts health risk assessments during home visits to identify any clinical and social needs patients have and then connects them to medical and/or community-based services that can address those needs. Signify provides in-home care, both virtual and in person, to 2.5 million individuals, with a focus on Medicare beneficiaries and people who live in underserved areas.

CVS Health has approximately 40,000 physicians, pharmacists, nurses, and nurse practitioners, in addition to 1,000 MinuteClinic locations in its stores. Acquiring Signify makes sense for several reasons.

For one, CVS said last year that it planned to close about 900 of its 10,000 stores over a three-year period. The pandemic changed consumer behavior, with fewer people shopping in stores — choosing instead to make their purchases online. But then when the vaccines became available, foot traffic in CVS stores and other pharmacies increased. Also, as we all know, many people tried virtual health care visits and found they liked the convenience.

Having the option of a home visit, whether virtual or in person, appeals to a broad swath of the population. For those who need or prefer to see a practitioner in person for primary care, a visit to a MinuteClinic may suffice. By adding Signify’s network of providers, along with Signify’s analytics and technology, to CVS Health’s existing infrastructure, CVS could capture a substantial share of the market.

Another reason this acquisition makes sense for CVS is that Signify contracts with  more than 50 health plans as clients, including CVS’ own Aetna. Home health care can significantly reduce costs for health plans, particularly when it can prevent costly hospitalizations.

Further, Signify acquired Caravan Health, a company that supports health systems and clinicians in accountable care organizations, earlier this year. Caravan partners with more than 170 providers in Medicare ACOs representing over 700,000 attributed lives.

CVS Health’s CFO, Shawn Guertin, said on the joint call with Signify executives, “We talked a lot through this journey about home health, the vastness, the different aspect. The value-based care capabilities that this brings us is where a lot of the power is … for the long haul. … I’m very excited about … the opportunity that Caravan could provide us for the future.”

First, though, the deal has to be completed. Right after the acquisition was announced, Reuters reported that multiple antitrust experts believe the Federal Trade Commission (FTC) and possibly the Department of Justice will take a hard look at it.

One of the experts, antitrust attorney David Balto, said this deal raises concerns similar to those surrounding UnitedHealth Group’s proposed acquisition of Change Healthcare. The judge in that case is expected to make his ruling before the end of October, and that could shed some light on how the CVS-Signify transaction will fare.

What else you need to know
ACOs in the Medicare Shared Savings Program saved Medicare $1.66 billion in 2021, according to data CMS released on Aug. 30. More than half of the 475 reporting ACOs (approximately 58%) earned a payout, 3% had shared losses large enough to warrant a penalty payment to CMS, and the remaining 39% performed at a level that called for neither a shared savings or penalty payment. The best performers, in terms of shared savings, were Baylor Scott & White Quality Alliance ($124.5 million), Palm Beach Accountable Care Organization ($84.2 million), and Caravan Health ACO ($72.1 million). The worst performers, in terms of shared losses, were Avera Prairie View ACO (-$15.8 million), UC San Diego Health Accountable Care Network (-$9.4 million), and McAuley Health Partners ACO, LLC (-$4.9 million).

In terms of shared savings per beneficiary, nearly all of the top performers were physician-led ACOs. The exception was the ACO at the top of the list: LTC ACO, which focuses exclusively on residents in long-term care facilities. It achieved shared savings of $3,502 per beneficiary. By comparison, the average savings per beneficiary among ACOs with shared savings was $709. CMS recently proposed substantial changes to the program with the intent of encouraging more ACOs to participate.

UnitedHealth Group and Walmart will begin a 10-year collaboration next year centering on valued-based care for seniors enrolled in Medicare Advantage (MA) plans. Although the partnership initially will focus on 15 Walmart Health locations in Florida and Georgia, the companies said in their announcement that they plan to expand into other markets and eventually include commercial plan members and Medicaid beneficiaries. As part of the agreement, UnitedHealth Group’s Optum will provide analytics and decision-support tools to assist Walmart Health clinicians. Starting in January, the companies will offer a co-branded MA plan in Georgia, and Walmart Health Virtual Care will be available in-network to certain UnitedHealthcare commercial plan members. Financial terms were not disclosed.

The European Commission blocked Illumina’s acquisition of Grail Tuesday, just days after Illumina prevailed in a legal challenge by the FTC. The regulatory agency had argued that Grail’s competitors rely on Illumina’s DNA sequencers and that the acquisition would likely reduce innovation and make tests like Grail’s more expensive, but an administrative law judge ruled in Illumina’s favor. Illumina completed the acquisition over a year ago despite the ongoing antitrust reviews, saying it needed to finalize the transaction before the agreed-upon terms expired. It also said that Grail would remain a separate and independent unit during the regulatory reviews. In its statement, the European Commission said, “With this transaction, Illumina would have an incentive to cut off Grail’s rivals from accessing its technology, or otherwise disadvantage them. It is vital to preserve competition between early cancer detection test developers at this critical stage of development.” The FTC said it would appeal the U.S. decision, and Illumina said it would appeal the European Commission’s decision.

Walgreens paid approximately $330 million to acquire a 55% ownership stake in CareCentrix, a Hartford, Conn.-based company that manages care for 19 million health plan members through about 7,400 provider locations. CareCentrix also uses a predictive analytics platform to connect patients with providers and sites of care after being discharged from the hospital, prioritizing care in the home when appropriate. CareCentrix will continue to operate as an independent company, with Walgreens integrating CareCentrix’s data analytics and home care expertise into its Walgreens Health segment. Walgreens said in a press release that the additional capabilities will enable the retailer to support medication reconciliation for CareCentrix patients and provide primary care options when needed, “including Village Medical physicians and advanced practice providers.” Walgreens has the option to acquire the remaining equity in CareCentrix.

Executive moves

The board of Henry Ford Health has selected Robert Riney as the Detroit-based health system’s new president and CEO. Riney, who has been with the organization since 1978 and was chief operating officer since 2003, had been serving as interim president and CEO since Wright Lassiter III left last month to take on the CEO role at CommonSpirit Health.

Dane Peterson is the interim CEO of Atlanta-based Emory Healthcare as of Sept. 1. Peterson joined the health system in 2007, taking on the role of chief operating officer in 2018 and the additional role of president in 2020 — roles that he will continue to hold, according to the news release. Dr. Jonathan Lewin announced in November that he would be stepping down as CEO and chairman of the 11-hospital health system to join the Emory University faculty.

Dr. David Brailer has been chosen as the first chief health officer at Cigna, a role in which he will “focus on bringing together the company’s products, technologies, and services in new and innovative ways,” the press release stated. He will also serve as executive vice president and be part of the enterprise leadership team. Dr. Brailer founded Health Evolution and served as the country’s first National Coordinator for Health Information Technology during the George W. Bush administration.

What we’re reading
Audit and Feedback—Optimizing a Strategy to Reduce Low-Value Care. JAMA, 9.2.22 (subscription required)
Hospitals Cut Jobs and Services as Rising Costs Strain Budgets. Kaiser Health News, 8.26.22
Comprehensive Medication Management: A Missing Ingredient In Value-Based Payment Models. Health Affairs, 9.9.22

What else we’re reading
Nine Stories, by J.D. Salinger. Continuing with our summer beach reading selections, the editor is rereading this classic collection of short stories after “A Perfect Day for a Bananafish” randomly crossed his mind. While it’s not Catcher in The Rye, it is a worthy afternoon diversion if you’re not yet ready for football season. Only $8 on Amazon.
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