The meaning of any business 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 officials are framing the acquisition of the Dallas-based home health care company as part of a strategy to go beyond its famous MinuteClinics and extend the care CVS provides to people’s homes. CEO Karen Lynch said during an investor’s call this morning that the purchase will CVS enable to meet consumers’ needs “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 slide deck, CVS officials also referred often to Signify’s value-based care business. The company purchased Caravan Health, an accountable care organization (ACO) company, for $250 million in cash and Signify common stock, in March of this year.
“The value-based care capability that this brings us is where a lot of the power is, sort of, for the long haul,” said Shawn Guertin, the chief financial officer of CVS Health. “I am very excited about the opportunity that Caravan could provide 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 company, and a member of Managed Healthcare Executive®’s editorial advisory board. “It validates that value-base care is here to stay, and that progressive insurers are committed to investing in their success.”
But there were other takes on the deal in the media today. CVS announced in November that it was closing 900 stores over the next three years. As the company retreats from bricks-and-mortar locations, it has had to look for other ways of having customers besides people who walk into its retail locations.
The Wall Street Journal, which reported last week that CVS was in advanced talks to buy Signify Health, described CVS Health as “struggling” to cope with slowing revenue from prescription drugs and seeking ways to fend off Amazon in the quest for retail dollars.
Modern Healthcare said the deal would add health-risk assessment to CVS Health’s portfolio, which the publication said is area that UnitedHealthcare and Humana have been investing in.
However, home-based care is a central part of Signify's business. The joint CVS-Signify press release yesterday says Signify's clinicians expect "to connect" with 2.5 people this year, either in-person or virtually.
CVS Health and Signify Health announced the deal yesterday. According to press release, CVS Health will acquire Signify for $30.50 per share in cash. Since the Journal and other media outlets started reporting in August that Signify was putting itself up for sale, the company’s stock price has soared, and the price has almost doubled since the beginning of this year. In contrast, CVS Health’s stock price has dipped by about 5% this year.
As it was readying itself for sale, Signify Health announced in July that it was shuttering the part of its value-based care business that dealt with episodes of care and was leaving CMS’ Bundled Payments for Care Improvement-Advanced (BPCI-A) program. The change affected 500 employees, or about 20% of the company’s workforce, who were either laid off or assigned to other jobs. In a press release, the company said the closing of the unit would mean between $25 and $35 million in severance and other costs but that costs of about $85 million would be eliminated.
In late August, CMS announced financial and quality results for 2021 for its main ACO program, the Medicare Shared Savings Program (MSSP). Signify and Caravan said the Caravan ACOs produced $138 million, relative to financial benchmarks set by the MSSP, and that ACOs received a total of $59 million shared savings — money that, in effect, rewards the ACOs for spending less than their financial benchmarks while satisfying quality-of-care goals.
Kyle Armbrester, CEO of Signify Health, will remain in that position after the acquisition. During this morning’s call, Armbester spoke of Signify’s hands-on approach to working with ACOs. “We are physically