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CVS Health Corp. is on the
verge of making a bid on home health care provider Signify Health, Inc.,
according to an Aug. 7 report from the Wall Street Journal. Health care insiders tell AIS
Health that CVS’s rumored move — part of a planned $25 billion transaction
spree — accelerates an existing trend of diversifying health care firms
buying their way into home care, even as the rate of transactions in the
space slows.
Home care transactions
have slowed down
- Of national
carriers, Humana Inc. has spent the most in the home care space, with
the Medicare Advantage-focused insurer acquiring Kindred at
Home at a valuation of $8.1 billion in 2021 and, later
that year, adding Onehome in a
separate deal with undisclosed terms. Both entities have been folded
into the firm’s CenterWell brand,
which enters network agreements with other payers.
- Ashraf Shehata,
national sector lead for health care and life sciences at KMPG, tells
AIS Health that the market for home care providers is less frothy
than it had been a few quarters ago.
- “Right after
the first year of COVID, after we saw everything moving to the home and
moving away from post-acute, it [home health] started getting quite a
bit of attention.” However, he does not expect a bidding war for
Signify.
- “This category
of asset has been a little more tame over the last three to six months.
So I would say, if you’d asked me [whether there would be other bidders]
maybe a year ago, I’d have said there will be a lot of competition for
these assets….Overall, the momentum has continued in this asset
category, but maybe not at the massive multiples that we saw a year
ago,” Shehata says.
Home care purchases offer
clear advantages to insurers
- Shehata thinks
that there is a clear appeal for carriers in the home health space.
- “If you’re an
insurer, if you have a retail environment, if you have a PBM, it’s a
natural part of that continuity of care,” he says.
- “It’s becoming
increasingly clear, by virtue of what everybody else is doing, that if
you don’t offer meaningful continuity of care, then you can’t really do
the kind of job that you’re saying you’ll do,” adds Michael Abrams,
principal at Numerof & Associates.
- That’s
increasingly true as competition in the MA space heats up: “Over time
it’s going to be table stakes,” Abrams says.
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