Digital Health Startup Health sign will pay $250 million to acquire consulting firm Caravan Health, creating one of the largest healthcare provider networks in the country.
The deal, which must be approved by regulators, will consist of $190 million in cash and $60 million in common stock for Caravan, which aims to help accountable care organizations achieve greater savings, often through consolidation. . Caravan could also raise an additional $50 million from the merger based on its future performance, although Signify was unable to comment on how it would define success in this area.
The merger will add more than 200 healthcare systems and 100 federally compliant medical centers to Signify’s existing network of more than 3,000 contract providers. The companies expect the acquisition to be completed within the first quarter of this year.
“We don’t really know of anyone with such a combined portfolio,” said Francois de Brant, senior vice president of commercial business development at Signify Health. “This really creates a much broader platform to support both payers and providers in their transition to various forms of value-based payment.”
Signify, a five-year-old company, works with service providers to improve patient care through comprehensive payment programs, thereby increasing their reimbursement. Their technical platform identifies the preventive and social determinants of health needs for individual patients, reminding clinicians of necessary ultrasounds, referrals, etc. for, for example, group pregnancy models. The startup is also working with commercial, Medicaid and Medicare Advantage payers to structure risk-based or shared savings programs with healthcare systems. Signify also provides home visit counseling, an area in which it claims to help Medicare Advantage payers artificially inflate risk estimates. The company said it strongly disagrees with the allegation.
“We know that the path to accessibility is through improved outcomes, for example, increasing the number of visits for patients with chronic diseases is a good thing, not a bad thing,” de Brant said. “It means getting better care, and that better care results in patients being healthier and not going to the hospital. This combination gives us the ability to do this on an even larger scale than we could have before.”
The combined company will work with payers and service providers to promote cost-based payment models by promoting advance payments for primary care, specialized care packages, and cost-of-service contracts. Businesses are focusing on increasing the participation of health care providers in commercial risk-based care programs. De Brantes said value-based payments have the potential to address disparities in access and disparities in coverage, promoting inclusive care. The combined company will manage about $10 billion in total medical expenses.
“Episode contracts are really like peeling onions,” de Brant said. “The second or third layer of the bulb becomes something that, if you can really get providers to focus on optimizing those episodes, they are de facto optimizing the overall cost of treatment. This is a really exciting part of what we can do now for providers that are already participating in ACO Caravan.”
This announcement came just a year after Signify went public with a $564 million offer. Its share price has fallen 56% to $13.87 since the IPO. The company was unable to comment on why it believes its share price has fallen. But the fall mirrors that of other value-driven startups, especially those focused on Medicare Advantage, which went public in 2021 with a high valuation but whose share price has since declined.