Through Signify, CVS gets immediate access to 10,000-plus contracted clinicians. These contracted clinicians deliver comprehensive health screenings (Health Risk Assessments, 2.5M in-home visits) which help CVS (Aetna's) risk scoring for its members (higher payouts). CVS also gets Signify's Caravan ACO business (700K+ Medicare beneficiaries, acquired in Q1 2022 for $250M).
Signify will continue to function as an independent, payor-agnostic platform within the broader CVS umbrella similar to Optum. Expect to see CVS continue to build out its services base. It's still on the hunt for primary care acquisitions!
2. Amazon Acquires One Medical
Announced on July 21, 2022, Amazon is acquiring One Medical, a tech-enabled primary care platform, for $18 / share (expected to close in Q4). The all-cash offer amounted to a 77% premium to the previous day's closing price of just over $10 at the time of announcement.
With the transaction, Amazon gets access to 8,000 clinicians, a 180+ clinic footprint, custom-built EMR, 8,500 employer relationships, 16+ health system partnerships, and a tap into the growing senior market with Iora Health.
Iora, One Medical's value-based care segment focused on the Medicare Advantage and Direct Contracting beneficiaries, is a wedge into the fast growing senior care market as Boomers age into Medicare and Medicare Advantage.
3. Optum buys LHC Group
Fun fact: Before I started Hospitalogy and back when my little 'ole newsletter was known as the Healthy Muse while writing it on the side of my full time job as a healthcare consultant, The Health Care Blog team graciously posted my deal breakdown of the Optum-LHC Group on their website! Go check it out here and tune in to their content. I actually think this is one of the best deal breakdowns I've ever written.
On March 29, 2022 UnitedHealthcare's Optum announced its acquisition of LHC Group for $170/share. The transaction valued LHC at about $6.4 billion including debt.
Last year, LHC generated about $2.2 billion in revenue and $216 million in EBITDA (10%ish margin). Before the acquisition, LHC guided to $2.5 billion and $280 million in EBITDA (margin expansion to 11.2%).
LHC Group is an important acquisition for Optum. Payors are continuing to morph into 'payviders' and UHG / Optum has a huge competitive advantage given its 60k aligned physician base. Acquiring LHC Group accelerates this payvider trend but also allows UHG to catch up to Humana, who now owns all of Kindred, in the post-acute sphere.
4. Intermountain completes merger with SCL to create $14B health system
Intermountain and SCL Health finalized their merger on April 6, 2022, creating a $14 billion system in the Midwest / Mountain States region after announcing the merger late last year.
The combined system, to-be called Intermountain, will have an impressive footprint:
- 33 hospitals
- ~400 clinics
- 58,000 employees
- $14 billion in revenue
This merger comes two years after Intermountain benefited from buying the HealthCare Partners Nevada operation as a part of the planned divestitures from the larger Optum - DaVita Medical Group $4.3 billion deal. Apart from physicians, legacy Intermountain's footprint included 23 hospitals in 7 states, and around 1 million members on its insurance plan. On the SCL side, the health system generated $3.0 billion in revenue across 10 hospitals and ancillary services in 3 states.
5. Advocate Aurora merges with Atrium to create $27 billion Health System
On May 11, 2022, Advocate Aurora Health announced that it is merging with Atrium Health to create a $27 billion health system. It'll operate under a slightly new name: Advocate Health.
The new system's combined revenues puts it on par with that of Ascension & Providence at about $27 billion - good enough for the 6th largest health system in the U.S.
Advocate's new footprint will include:
- 67 hospitals
- 1,000 sites of care
- 7,600 physicians
- 150k employees
- 5.5 million patients
- 2.2 million lives through 15 ACOs and 60 value-based contracts (whatever that means)
- $5 million in annual community benefit
- Operations across Illinois, Wisconsin, North Carolina, South Carolina, Georgia, and Alabama
The deal is pending regulatory review, in which the FTC is planning to check on insurer overlap in various markets. On September 14, the Illinois Health Facilities & Services Review Board delayed the Advocate-Atrium merger, citing letters of opposition related to antitrust concern. The board will meet again on December 13, so we'll see how things go.
6. UnitedHealth-Optum-Change Healthcare
UnitedHealth's Optum subsidiary is finally buying Change Healthcare. The transaction, announced in January 2021 and valued at $13 billion, was in antitrust trouble until a federal judge stepped in and denied the DOJ's request in late September 2022 to stop UnitedHealthcare from buying Change Healthcare, ultimately giving United leave to purchase Change Healthcare.
Optum will finally get to integrate Change Healthcare into its OptumInsight (analytics, rev cycle, & data platform) arm, which did $12.2B in revenue in 2021 and ~$12.9B in the last twelve months ended June 30, 2022. Change Healthcare generated around $3.5B in revenue in its FYE March 2022 (seen above) but part of that will get divested as the judge ordered UHG to sell Change's ClaimsXten biz to TPG Capital for around $2.2B.
Bonus! CareMax dives into MSO risk model with Steward Health Care
In one of the more significant value-based deals announced in 2022, CareMax announced the acquisition of Steward Health Care's Medicare Advantage business, comprised of 171,000 lives across 8 states. Announced June 1, 2022, the deal creates one of the largest MA-focused value-based platforms in the U.S. and closed sometime in the back half of 2022.
Deal structure: CareMax acquires Steward's MA service line (Steward VBC) for $135 million in cash and stock. The value-based player will now serve as Steward's exclusive management service organization (MSO) for Steward VBC.
Steward Gets: $25 million in cash, 21% CMAX ownership immediately, and up to 41% ownership in CareMax equity (if earn-outs are achieved). Steward also offloads $72 million in VBC A/R offloaded to CareMax, a very non-significant working capital value that CareMax is now funding.
CareMax Gets: Access to 50,000 MA lives, 112,000 MSSP lives, and 9,000 direct contracting lives, along with the opportunity to convert 830k+ additional members to risk, along with some of the best ranking and performing ACOs nationally. CareMax identified the transaction as a $1.6B to $1.7B revenue and $100M to $110M EBITDA opportunity (implied 6-7% margin) by 2025. The firm's total value-based footprint would jump to 2,000 providers across 200,000 senior lives in 30 markets.
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