Illustration: Aïda Amer/Axios
Amazon, CVS, Option Care Health and United Health are among the reported bidders for Signify Health (NYSE: SGFY), a Dallas value-based care company that could fetch up to $8 billion.
Why it matters: After emerging as a health care player over the past several years, the new reports — combined with Amazon's recent One Medical buy — cement the tech giant as a major player in health-related M&A.
- Amazon's proposed ONEM deal would grant it major scale — helping shore up its expertise in consumer preferences, expand existing efforts in primary care and gain a foothold in Medicare Advantage.
Yes, and: Amazon has made moves in the value-based care space before via its failed cost-savings venture with JPMorgan and Berkshire Hathaway.
Yes, but: Amazon's potential Signify bid could also give antitrust regulators new avenues to pursue — and the retail giant is already fending off the FTC with its proposed acquisition of Roomba.
- Speaking of, while UNH is a prolific health care buyer, its ongoing antitrust trial on its proposed merger with Change Healthcare casts a cloud on a potential Signify deal.
Of note: Sources say private equity has been circling Signify as well, but many financial sponsors have been cut from the process — even at strong valuation levels.
- Goldman Sachs and Deutsche Bank are advising Signify on the process, Axios previously reported.
How (Signify) works: The company helps health systems and health plans move to VBC arrangements by creating risk contracts where it shares in both upside and downside risk.
By the numbers: New Mountain Capital holds a 54.7% stake in Signify and the company has a reported market value of $5 billion, per the WSJ yesterday.
- Shares of Signify jumped more than 39% Monday morning on the latest reports.
Flashback: Signify last year raised $564 million in its IPO.
- A year later, it bought ACO builder Caravan Health for $250 million.
- Last month, however, Signify unveiled plans to wind down its episodes of care business arm and exit a bundled payment program to focus on its more profitable home and community services division.
Prime threat level: Amazon already has access to roughly 44% of U.S. residents through Prime, according to a recent Trilliant Health report.
- In comparison, the largest health system in the country is HCA, which serves just 1% of Americans.
- "No health system can match Amazon's ... scale in terms of the next interaction," Trilliant Health president and CEO Hal Andrews previously told Axios.
Between the lines: Signify would give Amazon access to yet another clinical network alongside the one it's gaining with One Medical — plus a mound of extra data from what Signify gathers to identify and prioritize patients who need care.
- "Amazon's interest would seem to be about Signify's clinical network and data," write Cowen analysts Gary Taylor, Charles Rhyee, and others in a Monday note.
The intrigue: As disclosed in a recent SEC filing, Amazon previously indicated it would terminate conversations with One Medical if its interest was leaked. Does it care this time around? TBD.
💭 Our thought bubble: Now that Amazon has cast its health care anchor with ONEM, we suspect the retail health giant could look at buying a TPA in a bid to enter the health insurance market (particularly after Haven failed to take off).
- Independent TPAs include the likes of VC-backed Collective Health, and scaled PE-backed players such as New Mountain's HealthComp and Water Street Capital's EMBS.
- "They don't need it to be a big [TPA] — they can scale it themselves," one industry banker tells us. "They need to pay for know-how."