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Signify Health to Acquire Caravan Health for $250M

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Healthcare platform Signify Health, Inc. (NYSE: SGFY) will acquire Caravan Health in a deal that will create one of the largest networks of at-risk providers, helping patients while lowering costs and it will also “accelerate the movement to value-based healthcare.”

Pursuant to the deal, Signify Health will acquire Caravan Health for $250 million, consisting of $190 million in cash and $60 million in Signify Health common stock. Furthermore, there is also the potential to add another $50 million based on Caravan’s future performance.

According to the filings, Signify Health is a healthcare platform using “advanced analytics, technology and nationwide healthcare provider networks” and Caravan Health is “a leader in enabling accountable care organizations (ACOs) to excel in population health management and value-based payment programs.” The strategic and financial benefits to the transaction, according to the companies, are the acceleration of a diversification strategy, creating an end-to-end suite of value-based care enablement capabilities, advancing value-based care to drive growth, and expanding the addressable market by creating new opportunities and providing more services to existing customers.

As noted in the Feb. 10 filing, Caravan will join Signify to support a wide variety of advanced payment models, thus allowing “providers to assume various levels of risk and collaborate in ways that support their goals to improve health outcomes while lowering costs across the care continuum.” The transaction combines two value-based payment model companies, covering a variety of risk-based and shared savings models, including primary care or specialty care bundles to care contracts.

“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,” Kyle Armbrester, CEO of Signify Health, said in a press release. “We are thrilled to welcome Caravan Health’s team as we build the infrastructure and payment models that are needed to achieve patient-centric, holistic care and better outcomes for everyone, especially the underserved.”

Combined, these will have one of the largest national networks of providers using risk-based payment models. Specifically, Signify has more than 3,000 provider facilities using its platform and Caravan has 200 health systems and 100 Federally Qualified Health Centers with more than 10,000 primary care providers and 50,000 patients. Accordingly, Signify will help to further assist these health care providers, such as through its virtual care network and its commercial value-based care programs. Reportedly, they will support approximately $10 billion in total medical spend under management.

“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,” Lynn Barr, Founder and Chairwoman of Caravan Health, said in a statement.

Upon the consummation of the deal, Barr will become Chief Innovation Officer of Signify Health and Tim Gronniger, CEO of Caravan Health, will become EVP, Accountable Care and CEO of Caravan Health.

The indemnity cap is $20.75 million or 8.3%; there is also an indemnification basket.

The reverse triangular deal is subject to customary closing conditions and is anticipated to close in Q1 2022.

Caravan Health is represented by Polsinelli PC and Signify Health is represented by Davis Polk & Wardwell LLP.

Before the announcement, Signify’s stock was valued at $13.71; when it was announced on Feb. 10, the stock closed at $13.82; and approximately a week later, stock is valued at $12.69.

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