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CVS buys Signify Health

Signify Health’s bankers did NOT get Labor Day off in the Hamptons. News dropped on Labor Day that CVS successfully won the bid for Signify Health and is acquiring SGFY for $30.50 per share – a valuation right around $8 billion ($7.6B equity, $8B EV). With the acquisition, CVS apparently managed to fend off the likes of Amazon and UnitedHealth.

Madden’s Musing: By acquiring Signify, CVS gets immediate access to 10,000-plus contracted clinicians that deliver comprehensive health screenings (Health Risk Assessments, 2.5M in-home visits) as well as Signify’s small but mighty care platform business, Caravan (700K+ Medicare beneficiaries, acquired in Q1 2022 for $250M).

Signify’s biz model is a key piece in the cog for an insurer that can immediately leverage its operations to enhance risk-scoring and add touch-points with patients, connecting patients with the rest of CVS’ and Aetna’s network. It’ll continue to function as an independent, payor-agnostic platform within the broader CVS umbrella similar to Optum, and I can’t imagine that CVS stops here with the acquisitions and buildout of its services platform.

This is a major win for CVS. I mean, just look at the rhetoric it put out in the deal presentation: “The transaction is expected to be accretive to Adjusted EPS and significantly increases our confidence in delivering on our 2024 financial targets”

The Signify acquisition is extremely synergistic to CVS as it’ll allow the healthcare behemoth to capitalize on risk scoring and assessments as well as provide it with a growth engine for the future of healthcare – a la, value-based care enablement platform.

Expect to see CVS continue to build out its services base and continues to vertically integrate ops – perhaps by snatching up regional primary care players or making an acquisition in the home health services business. Obviously Optum is well ahead in this terrain and you’re seeing similar activity from Humana with CenterWell heading down a similar vertically-integrated path.

I also have to wonder where this leaves Amazon. Its interest in Signify really signified (HA! you thought I couldn’t sneak that in!) its interest in the senior care and value-based care space especially with the potential synergy there with AWS. I can’t imagine that its ambitions with healthcare and acquisitions end here as it continues to be an active player.


Atlanta Medical Center and the fate of Hospitals

This week, Wellstar announced its intention to shut down Atlanta Medical Center by November 1st. As pointed out on social media, the closure leaves Grady Memorial Hospital as the only level one trauma center in Atlanta which could lead to major access issues for the area. A sticky situation is brewing in Atlanta as a vast number of citizens and employed clinicians will find themselves without access to a hospital that historically supplied some critical care to the community.

Wellstar is being criticized for the move as well as an earlier move in closing its Atlanta Medical South campus given that both of these hospitals are/were apparently located in low-income, high-need areas. In the update release, Wellstar disclosed that the hospital was bleeding cash, losing $100M+ over the past year despite investing $350M+ over the past few years.

In addition, the health system disclosed that it had approached “government agencies, healthcare providers and local organizations in search of partnerships and solutions to improve the overall health and well-being for the community” but had failed to find a partner.

Madden’s Musing: the happenings here are a microcosm for what is happening at hospitals – especially rural hospitals – nationwide. These hospitals are losing patient volumes and serving low income populations – AKA, heavy Medicaid or unfavorable payor mixes. As a result, hospitals are closing and health systems are bleeding cash.

I understand Wellstar’s decision from a financial and business standpoint. Your location is losing money and the economics aren’t favorable, so you bail.

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That being said, the stakes are way higher in healthcare.

The closure puts immense pressure on Grady and the rest of the community. While cherry-picking the commercial market and suburban communities of Atlanta sounds like a dominant, rosy strategy in 2022, a nonprofit institution shouldn’t be allowed to simply shut down a 460-bed level one trauma hospital, upend residencies, and I’m sure plenty of other effects I fail to even realize – all in 90 days.

What happens next here?

Market Movers

Business and Strategy:

  • Oscar is losing up to $60M in revenue this year after Florida-based insurer Health First Shared Services terminated the contract for its +Oscar platform implementation (administrative services agreement). Given that HFSS seemed to be Oscar’s only major customer for the segment, it seems as if the Oscar technology platform has lost a ton of steam after once being touted as a high-growth potential engine for the organization. As others have noted, I have to wonder how Oscar gets to profitability from here and the insurtechs have their work cut out for them.
  • In one of the weirder investment announcements, Pure Health, the largest health system in the UAE, invested $500M in Ardent Health Services, the fourth largest private for-profit health system in the U.S.
  • SOC Telemed significantly expanded its behavioral health telehealth biz by purchasing Forefront Telecare. In addition to the acquisition, SOC is also rebranding!! Going forward, SOC Telemed will now be known as…Access TeleCare. No comment.
  • Speaking of rebrands, Humana completed the rebrand of Kindred at Home to CenterWell Home Health. Humana is leaning in big-time to the CenterWell name and has 350 home health agencies across 38 states.
  • CAMC Health and Mon Health System have merged to create an integrated health system now known as Vandalia Health.
  • Trinity Health finalized its acquisition of the previous JOA MercyOne in Iowa.

Regulations and Rates:

  • CMS and CMMI will continue to lean into the Medicare Shared Savings Program, echoing the rhetoric of big players like Aledade, Privia, and others – this week, CMS announced that MSSP saved Medicare $1.66 billion compared to spending targets. There’s a ton of interesting info in the presser and data that I might dive into at a later date!
  • For some odd reason, the briefs in the United and Change Healthcare court case are sealed as we await a verdict in the antitrust case by October.
  • In another creative way to waste taxpayer dollars, the FTC is asking for more information on the Amazon-One Medical deal


Miscellaneous Maddenings

  • So we’re hot on the scene in New York exploring the city with no real agenda when Emily mentions that she’s got something in her eye. Well, this turns into a real saga. She can’t get the thing out of her eye and she’s laying on the streets of New York in pain from whatever it is. So I rush over to CVS and get some good ole Visine (shout out J&J) and after what seems like an eternity, we finally flush it out of her eye. Anyway, it really gave us a great sense for the culture of New York because not one person gave us a second glance!
  • Story 2 from New York – we were on our way to visit Emily’s cousin when all of a sudden, a woman shrieking on the phone rounds the corner and starts sprinting down the street. Meanwhile a man was chasing her and recording her, and this scene was rowdy enough to distract the attention of passersby. Anyway I hope she’s alright because moments later we saw police on the scene looking for the situation. Wild times.
  • In the final saga of Blake’s Trip to the Big Apple, we decided to rent some bikes and bike the loop in Central Park. Well, what we did NOT realize was that there are some quite hilly spots along this route so we experienced quite the workout and rewarded ourselves with some well-earned ice cream.

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Blake Madden
Blake Madden
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