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August 24, 2022

The Signify Health bidding war includes some very big names

Daily Briefing

    There appears to be a bidding war over Signify Health, with several prominent companies, including CVS Health, UnitedHealth Group* (UHG), and Amazon, submitting offers. According to industry experts, the growing competition for Signify suggests that "the home is the next clinical battlefront."

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    Inside the bidding war for Signify Health

    Earlier this month, the Wall Street Journal reported that CVS planned to enter a bid for Signify Health, a home health company that uses analytics and technology to help health plans and providers with in-home care.

    Since then, the Journal has reported that several other large companies, including Amazon, UHG, and Option Care Health, have submitted their own bids for Signify. Currently, UHG has submitted the highest bid at more than $30 a share, with Amazon's offer coming in close behind, sources told Bloomberg News.

    According to people familiar with the situation, Signify, which has a current market value of roughly $5 billion, could be valued at more than $8 billion in the auction. Signify's board is expected to meet Monday to discuss the bids, and final bids are due on Sept. 6.

    Although it's possible that Signify Health could reach an agreement and sell before the deadline, there is no guarantee that any of the bidders will reach a deal with the company, which is also exploring other strategic moves.

    'The home is the next clinical battlefront'

    According to Modern Healthcare, Signify is the largest home health risk assessment provider in the United States and could be an advantageous acquisition for several companies.

    "The home is the next clinical battlefront—who's going to own it, and who's going to play in it," said Tom Kiesau, who leads the digital transformation practice at health care consulting firm Chartis Group.

    For Amazon, which last month announced a multibillion dollar deal for One Medical, the bid for Signify is the latest step in its expansion into health care. Nathan Ray, a partner in the health care and life sciences practice at West Monroe, said that acquiring Signify could help strengthen Amazon's relationships with different health care organizations in its customer base.

    "Amazon is arguably the most deep pocketed of possible acquirers in the healthcare space, and their involvement could push acquisition prices higher and/or create a more competitive bidding environment," said A.J. Rice, an analyst at Credit Suisse.

    For insurers, such as UHG, CVS's Aetna, and Humana, acquiring Signify could help them expand their clinical care offerings. According to Modern Healthcare, offering treatment in patients' homes is a cheaper alternative to in-hospital care, and having a care delivery provider would give insurers a new revenue stream that is not limited by federal medical loss ratio requirements.

    "M&A can be very fluid," said CVS Health CEO Karen Lynch. "You don't necessarily design exactly how these deals go and what gets announced. We are committed to extending our health services in categories, and we are very encouraged and confident that we’ll take the next step on this journey by the end of this year."

    Overall, Signify Health could be a "nice Lego in a number of groups' different strategies," Ray said. (Cooper, Wall Street Journal, 8/21; Tepper/Cohen, Modern Healthcare, 8/22)

    *Daily Briefing is published by Advisory Board, a division of Optum, which is a wholly owned subsidiary of UnitedHealth Group.

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