Signify Health, a value-based healthcare platform with a network of over 3,000 physician practices and facilities, has signed an agreement to acquire Caravan Health, a company that helps hospitals and health systems with value-based care arrangements maximize 340B savings, the two companies announced last week.
Dallas-based Signify initially will pay $250 million in a combination of cash and Signify Health common stock for Caravan, a 340B Report sponsor. The transaction also includes contingent additional payments of up to $50 million based on the future performance of Caravan, which is based in Kansas City, Mo., the companies said in a Feb. 10 news release. The deal is expected to close by the end of next month.
The two companies have distinct focuses, with Signify specializing in episodes of patient care and bundled payments both in the hospital and post-discharge settings, while Caravan specializes in management of chronic disease and wellness initiatives. Combined, they will manage about $10 billion in healthcare spending that flows through value-based payment models, including accountable care organizations, shared savings initiatives, and specialty care payment bundles.
Caravan Founder and Chair Lynn Barr told 340B Report that drug costs play a significant role in value-based healthcare programs.
“Total cost of care is heavily impacted by pharmaceuticals, even when drug costs are excluded” from accountable care initiatives like the Medicare Shared Savings Program, Barr said.
In May 2021, Caravan added a 340B component to its accountable care organization (ACO) management platform, Caravan Coach, to help 340B covered entities further expand their capture of discounts under the program. The company, which got its start helping rural providers benefit from value-based payment systems, has a long history of helping clients maximize their 340B participation.
Under the terms of the transaction, Barr will serve as Signify chief innovation officer. Caravan Health CEO Tim Gronniger, a former senior health policy official who worked in the Obama administration and for former Chairman of the House Energy and Commerce Committee Rep. Henry Waxman (D-CA), will retain that title but also serve as Signify executive vice president of accountable care.
“We are thrilled to welcome Caravan Health’s team as we build the infrastructure and payment models that are needed to achieve patient-centric, holistic care and better outcomes for everyone, especially the underserved,” said Signify CEO Kyle Armbrester.
