What is the purchase of Signify Health by CVS Health Signify?

The significance of any trade deal is in the eye of the beholder, and CVS Health’s (NYSE:SGFY) $8 billion purchase of Signify Health (NYSE:SGFY) is no different.

CVS Health executives frame acquisition of Dallas-based home healthcare company as part of strategy to expand beyond its famed MinuteClinics and expand the care CVS provides into people’s homes . CEO Karen Lynch said on an investor call this morning that the purchase will allow CVS to meet the needs of consumers “when and where they want care, and the home is increasingly part of that. choice”.

During the call, in a press release, and in a deck of slides, CVS officials also frequently referred to Signify’s value-based care business. The company purchased Responsible Care Organization (ACO) company Caravan Health for $250 million in cash and common stock from Signify in March this year.

Related: Lynn Barr of Caravan Health Talks Direct Contract Template, ACO

“The value-based care capability that this brings to us is where a lot of the power is, sort of, in the long run,” said Shawn Guertin, chief financial officer of CVS Health. “I’m very excited about the opportunity Caravan could give us for the future.”

“The recent announcement of CVS’s purchase of Signify Health for $8 billion is unprecedented,” said Doug Chaet, president of Value Evolutions, a consulting firm and member of Managed Health Framework® Editorial Advisory Board. “It confirms that value-based care is here to stay and that progressive insurers are committed to investing in its success.”

But there were other views on the case in the media today. CVS announced in November that it would close 900 stores over the next three years. As the company retreats from physical locations, it has had to look for other ways to have customers besides people coming to its outlets.

The Wall Street Journalwhich reported last week that CVS was in advanced talks to buy Signify Health, described CVS Health as “struggling” to cope with slowing prescription drug revenue and looking for ways to fend off Amazon in the quest for sales dollars. by retail.

Modern healthcare said the deal would add health risk assessment to CVS Health’s portfolio, which the publication said is an area in which UnitedHealthcare and Humana have invested.

However, home care is core to Signify’s business. Yesterday’s joint CVS-Signify press release says Signify clinicians expect to “connect” with 2.5 people this year, either in person or virtually.

CVS Health and Signify Health announced the agreement yesterday. According to the press release, CVS Health will acquire Signify for $30.50 per share in cash. Since Log and other outlets began reporting in August that Signify was going up for sale, the company’s stock price soared and the price nearly doubled since the start of this year. In contrast, CVS Health’s stock price has fallen about 5% this year.

As it prepared for the sale, Signify Health announced in July that it was closing the portion of its value-based care business that dealt with episodes of care and leaving the Bundled Payments for Care Improvement program- Advanced (BPCI-A) from CMS. . The change affected 500 employees, or about 20% of the company’s workforce, who were either laid off or reassigned to other jobs. In a press release, the company said closing the unit would mean between $25 million and $35 million in severance and other costs, but about $85 million in costs would be eliminated.

At the end of August, CMS announced the financial and qualitative results for 2021 of its main ACO program, the Medicare Shared Savings Program (MSSP). Signify and Caravan said the Caravan ACOs generated $138 million, against financial benchmarks set by the MSSP, and the ACOs received a total of $59 million in shared savings – money that, in fact, rewards CCOs for spending less than their financial benchmarks while meeting quality of care goals.

Kyle Armbrester, CEO of Signify Health, will remain in this role following the acquisition. During this morning’s call, Armbester talked about Signify’s hands-on approach to working with ACOs. “We are physically

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