Signify Health acquiring Caravan Health for up to $300M

According to the terms of the deal, the initial purchase price of about $250 million will be paid in cash and Signify stock. The Dallas-based company will also make additional contingent payments totaling up to $50 million based on Caravan’s future performance.

Consolidation continues apace in the digital health world.

Value-based healthcare platform Signify Health announced Thursday that it’s acquiring Kansas City, Missouri-based Caravan Health, which supports accountable care organizations.

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According to the terms of the deal, the initial purchase price of approximately $250 million will be paid in cash and Signify stock. (The company went public in February last year.) The Dallas-based company will also make contingent payments of up to $50 million based on Caravan’s future performance.

The acquisition brings together two value-based payment models covering a broad range of risk-based and shared savings approaches for everything from primary care and specialty care bundling to total cost of care contracts, according to Signify.

Beyond Signify’s current network of over 3,000 physician practices and facilities contracted in value-based arrangements, Caravan adds more than 200 health systems and 100 Federally Qualified Health Centers with more than 10,000 primary care providers that collectively manage over 500,000 patients, most of whom are medically underserved and struggle to access care.

“A strategic focus for Signify Health has been driving more participation and success in value-based payment arrangements in alignment with our commercial payor clients,” said Kyle Armbrester, CEO of Signify, in a statement. He noted that Signify’s focus also supports critical imperatives from the Centers for Medicare & Medicaid Services that aim improve health equity and have all Medicare fee-for-service beneficiaries in a care relationship with accountability for quality and total cost of care by 2030.

Other companies are also taking a technologically advanced approach to shifting healthcare into a value-based care model. Among them are companies like Aledade, which focuses on helping primary care providers do this, and Change Healthcare, which offers analytics and automation to speed healthcare organizations’ transition to value-based care.

With Signify’s latest move, it hopes to gain scale and additional technology savvy and insights through Caravan to assist customers in making that shift.

Signify leverages analytics, technology and nationwide healthcare provider networks to develop and sustain value-based payment programs, with an aim to change how care is paid for and delivered, according to the company. Caravan helps community hospitals, physician practices and clinics succeed in accountable care and other commercial risk arrangements, according to Signify.

Caravan employs 160; and those employees will join Signify, which will have a total workforce of 2,160 employees after the acquisition is complete.

The founder and chairwoman of Caravan, Lynn Barr, will become chief innovation officer at Signify. The CEO of Caravan, Tim Gronniger, will become executive vice president of accountable care for Signify while remaining at the helm of Caravan when it transitions to being a Signify company.

“This is an exciting opportunity to leverage the combined technology, tools and expertise of Caravan and Signify to all move forward toward better patient care while helping providers achieve financial sustainability,” Barr said in a statement.

While Signify Health aims to improve financial sustainability of its customers, the markets have not been kind to its own financial performance. In the one year since the company went public, its stock has been cut by more than half. The stock closed at $13.71 on Thursday. Though most analysts rate Signify’s stock a “buy,” analysts from Deutsche Bank and Piper Sandler have recently lowered the company’s 12-month price target.

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