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CVS Health (CVS) to Buy Signify Health, Grow in Home Healthcare

CVS Health CVS recently announced a colossal $8-billion agreement to acquire Signify Health SGFY. Per the definitive deal, CVS Health will acquire Signify Health for $30.50 per share in cash, which will add up to the total transaction value.

According to CVS Health, Signify Health, as a leading healthcare platform, will play a critical role in advancing the company’s healthcare services strategy. It will also provide a platform to accelerate CVS Health’s progress in value-based care. Both companies expect the transaction to close in the first half of 2023.

Following the news release, shares of CVS Health dropped 0.49%, while Signify Health stock was up 1.3% at yesterday’s close.

More About Signify Health

Signify Health combines technology, analytics and networks to power and create value-based payment programs, driving better outcomes and experiences. Signify Health works particularly in Health Risk Assessments, value-based care and provider enablement.

It has a network of more than 10,000 clinicians across 50 states as well as a nationwide value-based provider network combined with its proprietary analytics and technology platforms. Based on these, Signify Health is improving patient engagement, patient outcomes and care coordination for stakeholders across the health care system.

Importance of the Deal

According to management, both companies hold a common goal of building an integrated experience that supports a more proactive, preventive and holistic approach to patient care.

Signify Health's network of clinicians utilize home-based visits to identify a patient's clinical and social needs. After that, they connect them to appropriate follow-up care and community-based resources to provide a more connected, effective care experience. In 2022, Signify Health's clinicians expect to connect with nearly 2.5 million unique members in the home, virtually and physically. On average, they expect to spend 2.5 times longer with a patient in the home than providers spend in the average primary care office visit.

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This apart, following the acquisition of Caravan Health in March 2022, Signify Health has further expanded its focus on value-based care and population health. Caravan currently serves as a partner to over 170 providers participating in accountable care organizations (ACOs) serving Medicare beneficiaries.

Signify Health recently announced that its ACOs generated more than $138 million in gross savings in 2021. In 2023, the Caravan business is expected to serve ACOs representing over 700,000 people – rivaling many standalone platforms.

Post the acquisition, as part of the CVS Health business, Signify Health will be able to make further progress with extensive primary care enablement capabilities, including turnkey analytics, network, and practice improvement solutions, to help providers transition to value-based reimbursement and improve the quality of care. CVS Health believes that this acquisition will enhance CVS Health’s connection with consumers in home care and enable providers to address patients better. In addition, this combination will also strengthen CVS Health’s ability to expand and develop new product offerings in a multi-payor approach.

Financial Significance

CVS Health expects the acquisition to be meaningfully accretive to its earnings and expects to achieve its long-term adjusted EPS goals as outlined at its Investor Day in December 2021.

Share Price Performance

Over the past year, CVS Health has outperformed its industry. The stock has gained 13.7% against a 1% decline of the industry.

Zacks Rank and Key Picks

Currently, CVS Health carries a Zacks Rank #3 (Hold).

Two better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN and McKesson Corporation MCK.

AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry in the past year. AMN has lost 12.8% against the industry’s 38.3% fall.

McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2 (Buy).

McKesson has outperformed its industry in the past year. MCK has gained 76% against the industry’s 14.5% fall.

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Signify Health, Inc. (SGFY) : Free Stock Analysis Report
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