Exclusive: Signify Health buys Caravan

Almost a year to the date of its public market debut, Dallas-based Signify Health has agreed to acquire Caravan Health, Signify CEO Kyle Armbrester tells Axios.

Why it matters: The deal suggests that there's still interest in value-based care (VBC) arrangements that pay providers for quality, not quantity.

• Value-based players have faced pandemic-era struggles, including reimbursement hurdles and higher costs resulting from delays in care.
• Caravan brings together accountable care organizations (ACOs) in an effort to take on risk and curb Medicare spend.

The details: Signify is paying $250 million for Caravan using a combination of $190 million in cash and $60 million in Signify stock, plus additional payments of up to $50 million based on Caravan's future performance.

• "We found an asset we think hits the bullseye of our mission," Armbrester said. "It helps connect health data and technology and helps drive outcomes for patients."
• The deal adds more than 200 health systems and 100 Federally Qualified Health Centers to Signify’s current network of over 3,000 contracted VBC providers.
• The combined companies will support roughly $10 billion in total medical spend, Armbrester said.
• The deal boosts the percentage of VBC-covered patients in providers' panels, potentially boosting the appeal of the approach.

How it works: Signify works with health systems and health plans to help them move to VBC arrangements by creating risk contracts where Signify shares in both upside and downside risk. It also helps:

• Organize health data and use it to identify and prioritize patients who need care.
• Facilitate bundled payments and manage provider travel to homes and health care facilities.

Reality check: While there's continued momentum behind VBC approaches, the models still face basic hurdles, including getting a patient's medical claims history and complying with lengthy reporting requirements. Plus:

• Signify's stock hasn't performed so well since New Mountain Capital took them public last year, with shares falling from a high of $39.44 in Feb. 2021 to a low of $13.44 pre-Caravan acquisition on Feb. 9, 2022.

Driving the news: VBC isn't a new concept, but startups, health care groups and the pandemic are all contributing to a slow but steady rise in momentum for value-focused models.

• Startups: A crop of fresh venture-backed companies is focusing on the Medicaid and Medicare markets, such as Circulo Health and Waymark Health.
• Health care organizations: Last week, a group of eight health care groups including the American Medical Association and the National Association of ACOs asked Congress to boost its work promoting value-based care adoption.
• The pandemic (sort of): The health crisis turned more eyes towards the money snowball that is U.S. health care and, at least in its early months, highlighted some of VBC's strengths, such as its flexibility in implementing telemedicine and its more preventive approach to care.

Erin Brodwin co-authors the Axios Pro Deals newsletter on health tech. Subscribe at AxiosPro.com.