Cardinal Health‘s move to acquire three year-old business naviHealth underscores the interest by healthcare organizations in businesses that eliminate waste in Medicare and make post acute care coordination more efficient as companies seeks to fulfill the demands of healthcare reform. Cardinal Health purchased a 71 percent stake in naviHealth for $290 million in the first step of its acquisition, which will be integrated into its Medical business.
In a statement Cardinal Health explained why it took this approach:
“We believe that this structure allows the existing owners to continue to participate in — and contribute to — the future of the business, while benefiting all of our stakeholders by creating alignment for the continued growth of the business. In the medium-term, it is Cardinal Health’s intent to own the entire company.”
The deal stands out among for Cardinal Health’s recent acquisitions because its a service, not a medical equipment or medical device company, such as Harvard Drug Group and Cordis. It reflects a broader trend among medical device and pharmaceutical companies to invest and acquire businesses that help them provide services to healthcare organizations.
Companies that make it possible to significantly lower readmissions for Medicare patients through a combination of patient contact and analytics tools are generating a lot of interest.
NaviHealth partners with health plans, health systems, accountable care organizations and post-acute providers to monitor patients as they make the transition from hospital settings to either return home or be handed off to another facility. It combines a technology platform with services in which clinicians conduct patient evaluations to make sure they’re sent to an appropriate post-acute care setting.
In a statement about the deal, Cardinal Health laid out its reasons for acquiring naviHealth, including.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
- “naviHealth aligns with our strategic priority of offering the most complete and integrated suite of services to our Integrated Delivery Network, hospital and other customers. You’ve heard us speakmany times about where we see healthcare moving, and how important it is to get closer to the patient. naviHealth helps health plans and health systems better manage patient care across post-acute settings, with a goal of improving patient outcomes and lowering overall healthcare system costs.
- naviHealth pioneered a “high-tech, high-touch” model to manage post-acute care, matching local market clinicians with proprietary best-in-class decision support technology and analytics.
- naviHealth has experience and know-how in achieving savings in hundreds of thousands of patient encounters, with touch-points in thousands of hospitals and post-acute settings (home, skilled nursing
facilities, inpatient rehabilitation facilities and long-term acute care hospitals) nationwide. On behalf of health plans during the past year, naviHealth achieved a significant reduction in post-acute spend
across the Medicare Advantage lives they managed.”
The company officially got its start in 2012 — it was co-founded by Tom Scully, a former Centers for Medicare and Medicaid Administrator under George W. Bush’s administration, and is led by Clay Richards. One of the things that makes the company interesting is that it puts its own skin in the game. In an interview with Modern Healthcare last year Richards said:
“We started with the premise that we want to have skin in the game and we want to be risk partners, whether we’re working with Medicare Advantage partners or whether we’re doing a bundled demonstration…We will guarantee a savings below their current spend and then share in that value with our customers.”
Highmark, Hospital Corp of America, Kaiser Permanente, and Dignity Health are among its partners.
A Cardinal Health report from June last year estimates that the post-acute care market generates $200 billion with an estimated growth rate of more than 6% annually. An April 2014 Agency for Healthcare Research and Quality report estimated that avoidable readmissions cost the healthcare system between $30 billion and $40 billion annually.
The push to curb these costs has spurred the development of several different startups but one that bears the most similarity to NaviHealth is RightCare Solutions.
Modern Healthcare noted that there have been a few blockbuster deals in the post acute care space, particularly for facilities. But none are focused on aligning technology with clinician contact.
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