CVS Health gains capabilities in home healthcare and value-based care with massive deal to buy Signify Health

• CVS Health’s announced acquisition of Signify Health is a key step in the company’s efforts to establish a comprehensive healthcare platform.
• The deal would add home healthcare and value-based payment services to a portfolio that already includes a vast network of retail clinics.
• The transaction is unlikely to be the last big move CVS makes in the near future.

CVS Health’s recently announced $8 billion purchase of Signify Health represents a potentially formidable combination of a large healthcare retailer and a major player in value-based payment.

Having established itself in retail primary care settings with its chain of 1,100 MinuteClinics, CVS Health plans to use the acquisition to expand its operations into home health assessments and services, as well as accountable care arrangements.

Karen Lynch, president and CEO of CVS Health, noted the company’s long-term merger-and-acquisition strategy is focused on three areas: primary care, home health and provider enablement.

“This basically checks off two of those boxes,” Lynch said during an investor call, referring to home health and provider enablement.

Karen Lynch, president and CEO, CVS Health

And the deal is “highly complementary to the third box,” meaning primary care, added Shawn Guertin, executive vice president and CFO.

CVS Health envisions a cohesive cycle in which patients are seen in the home and then guided as necessary to settings such as a MinuteClinic for basic follow-up care or a physician practice that participates in a Signify Health accountable care organization (ACO).

The deal “brings CVS closer to their goal of managing more lives through value-based care relationships,” J.P. Morgan analysts Lisa Gill and Calvin Sternick wrote in a research note that was shared with HFMA.

Branching into home healthcare

Signify Health will continue to operate as a distinct business, serving the members of more than 50 health plan clients.

Between in-home and virtual visits, Signify Health is projected to engage with 2.5 million patients this year, giving CVS “the opportunity to truly bend the cost curve in a value-based care environment” and “close gaps in care,” according to the J.P. Morgan analysis.

“This transaction is a significant step forward in our strategy to enhance our care delivery for consumers and to be able to meet their needs when and where they want care, and the home is increasingly part of that choice,” Lynch said.

Signify Health has a network of more than 10,000 clinicians spanning all 50 states, according to a news release. It has access to the homes of roughly 80 million Medicare Advantage (MA) and Medicaid managed care beneficiaries, according to J.P. Morgan.

Kyle Armbrester, CEO of Signify Health, who will remain in that role after the transaction is complete, said Signify Health’s clinicians spend 2.5 times longer with a patient in the home than physicians spend during the average primary care office visit.

“There’s a renaissance going on with the house call, and we’re really pushing it across the market and making a real impact in individuals’ lives,” Armbrester said during the investor call. “And we’re going to be doing that really at scale with this partnership with CVS.”

J.P. Morgan’s analysis notes that Signify’s in-home evaluations are geared toward patients who have been identified as high-risk, with the assessments aiding in the code capture needed for MA risk scoring. The assessments also are a vehicle for the creation of a patient record that encompasses social and behavioral needs, allowing for a holistic care plan to be developed.

Bolstering value-based care delivery

Early this year, Signify Health announced a $250 million acquisition of Caravan Health, which supports safety net and community health systems in providing value-based care. Caravan’s ACOs are projected to encompass 700,000 beneficiaries through the Medicare Shared Savings Program in 2023.

“Caravan has a payer-agnostic EMR capability,” CVS Health’s Guertin said. “They have, and are on track to have, volume that rivals a lot of the stand-alone platforms.”

Shawn Guertin, CFO, CVS Health

Armbrester said the acquisition of Caravan helped Signify achieve the second part of a two-pronged organizational strategy, the first being to solidify care delivery in alternative sites of care through home health assessments.

The second component “was to support the existing infrastructure across the country [that is] trying to propel value-based care forward, and particularly provider organizations,” he said.

“When we go into these organizations, we’re going in with data and technology and spending time helping them to understand when and where to focus on patients who have needs. But beyond that, we are physically there doing genuine care redesign, boots on the ground inside these facilities, doing healthcare the way it should be.”

“The value-based care capabilities that this [acquisition] brings us is where a lot of the power is,” Guertin added.

Customers or competitors?

The payer-agnostic approach means Signify Health will look to continue to serve health plans that compete with CVS’s Aetna business.

Armbrester said he spoke with many of Signify’s biggest customers after the deal was finalized, and “they were all very supportive of the transaction.”

He added, “They’re asking us frankly to do two things: do more when we’re inside the home to bring more resources to bear and help solve more problems to drive better health outcomes. And then number two, return folks to care [after pandemic-related disruptions]. And I view this partnership with CVS and their nationwide network of MinuteClinics as a real strategic asset for us to make sure that individuals are getting the appropriate level of care efficiently and effectively.”

Guertin said it is “always prudent to make some customer-loss provisions in your modeling” for any transaction that affects services delivered to large health plans.

“We’ve maintained that practice here, but nothing should be construed from that that there’s a high degree of worry,” he added.

More to come

The J.P. Morgan analysis states that the deal supports CVS’s efforts to evolve into “a vertically aligned, all-payer primary care delivery platform. … We believe the Signify Health acquisition is the first of multiple acquisitions/investments to attain their goal.”

Indeed, a Credit Suisse analysis notes that CVS previously indicated it would spend at least $5 billion to $7 billion per year over a three-year period to expand its menu of healthcare services. Primary care companies appear to be targets: CVS reportedly has been negotiating to buy Cano Health, a primary care disruptor that focuses largely on the MA market, although according to the Wall Street Journal, Humana has the inside track to win a bidding contest that could amount to $4 billion.

“There’s actually a lot of logic to starting where we are right now with home [health assessments],” Guertin said. “The strategy was never going to be a one-and-done, but this gives us a profitable and highly strategic base from which to start the journey.”