Under the terms of the agreement, the initial purchase price of approximately $250 million will be paid in cash and Signify shares. The Dallas-based company will also make additional contingent payments of up to $50 million based on Caravan's future performance.
Consolidation in the world of digital health continues.
Value-based healthcare platform Signify Health announced Thursday that it will acquire Kansas City, Missouri-based company Caravan Health, which supports responsible care organizations.
Under the terms of the agreement, the initial purchase price of approximately $250 million will be paid in cash and Signify shares. (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.
Acquisition brings together two value-based payment models that cover a wide range of risk-based and shared savings approaches for everything from basic care and specialty care packages to full-care cost contracts, according to Signify.
In addition to Signify's current network of more than 3,000 medical practices and facilities contracted in value-based agreements, Caravan brings together more than 200 healthcare systems and 100 government-qualified healthcare centers with more than 10,000 primary care providers who collectively manage more than 500,000 patients, most of whom are are medically underserved and have difficulty accessing medical care.
"A strategic focus for Signify Health has been to drive the participation and success of value-based payment arrangements in alignment with our commercial customers," said Kyle Armbrester, CEO of Signify, in a statement. He noted that Signify's approach also supports the critical imperatives of the Centers for Medicare & Medicaid Services, which aim to improve equity in healthcare and bring all Medicare beneficiaries into an accountable care relationship, quality and total cost of care up 2030
Other companies are also taking a technologically advanced approach to transform healthcare into a value-based model of care. These include companies like Aledade, which focuses on helping primary care providers do this, and Change Healthcare, which offers analytics and automation to accelerate healthcare organizations' transition to value-based care.
Signify's latest move is hoped to add scale and additional technological capabilities and insights to Caravan to help customers make this transition.
Signify uses analytics, technology and nationwide networks of healthcare providers to develop and sustain value-based payment programs with the goal of transforming the way care is paid for and delivered, the company says. According to Signify, Caravan helps community hospitals, medical practices and clinics successfully implement responsible care and other business risk regulations.
Caravan employs 160; and those employees will transfer to Signify, which will employ a total of 2,160 people after the acquisition closes.
Caravan Founder and President Lynn Barr joins Signify as Chief Innovation Officer. Tim Gronniger, CEO of Caravan, will become Signify's Executive Vice President of Responsible Care and will remain at the helm of Caravan as it becomes a Signify company.
"This is an exciting opportunity to leverage the combined technology, tools and expertise of Caravan and Signify to deliver better patient care while helping providers achieve financial sustainability," Barr said in a statement.
While Signify Health aims to improve its clients' financial sustainability, the markets have not been kind to its own financial performance. In the year since the IPO, the share has more than halved. The stock closed at $13.71 on Thursday. While most analysts rate Signify's stock a "buy," analysts at Deutsche Bank and Piper Sandler recently lowered the company's 12-month price target.