UPDATED: Sunday, Aug. 7, at 7:00 p.m.
As CVS looks to become a bigger provider of medical services, the drugstore giant is eyeing a potential deal to buy Signify Health, according to media reports.
Signify Health is exploring strategic alternatives including a sale, The Wall Street Journal reported this past week. Initial bids are due this coming week and CVS is planning to enter one, according to people familiar with the matter, the WSJ reported Sunday. Others also are in the mix, the people said, and CVS could face competition from other managed-care providers and private-equity firms, the WSJ reported.
Signify uses analytics and technology to help health plans, employers, physician groups and health systems with in-home care. The company launched in December 2017 as the result of a merger between CenseoHealth and Advance Health. Signify went public in February 2021 but its shares are below their $24 IPO price. Earlier this year, the company acquired accountable care organization builder Caravan Health for $250 million.
CVS plans to make a big move in primary care by investing or acquiring a provider by the end of this year.
The play comes as competition heats up with Amazon's nearly $4 billion bid for One Medical and Walgreens' tie-up with VillageMD.
There were reports earlier this month that concierge primary care company One Medical was looking at potential suitors for a takeover deal. The company reportedly attracted and then rejected preliminary acquisition interest from CVS Health. The drugstore giant's loss was Amazon's gain as it scooped up One Medical for nearly $3.9 billion.
CVS, which operates 9,900 locations across the country, is looking to enhance its health services in primary care, provider enablement and home health, CVS CEO Karen Lynch said during the company's second-quarter earnings call Wednesday morning.
M&A will be a key part of that strategy, she said.
"We are being very disciplined, both strategically and financially, as we pursue kind of our M&A strategy," Lynch said.
CVS is looking for providers with a strong management team and a robust tech stack. "Obviously, the ability to scale, given the size of the company that we are and a pathway to profitability," she said.
Lynch noted, "And we are very encouraged and confident that we'll take the next step on this journey by the end of this year."
Beyond its drugstores, CVS has a deep reach in healthcare as it owns health insurer Aetna and pharmacy benefits manager Caremark.
CVS' size also gives it a competitive edge, Lynch noted. Nearly 4.8 million customers engage with the company every day at retail locations. The company also operates MinuteClinics inside its stores, conducting 2.8 million patient visits a year to date, up 12% from last year, Lynch said.
CVS will make an acquisition in the next 3-6 months (maybe faster) in order to compete in the hybrid care arena.
— Jeff Gamble (@jeffgamblephd) July 26, 2022
This year, the retail drugstore giant also rolled a virtual care service that gives consumers access to primary care, on-demand care, chronic condition management and mental health services.
Rival Walgreens is doubling down on primary care and home health. The company invested $5.2 billion in primary care company VillageMD last year, boosting its stake in the company as it looks to open hundreds of new clinics across the U.S.
Walmart also has ambitions in healthcare. The retailer operates about 20 in-person clinic locations across Georgia, Arkansas, Illinois and now Florida, with locations attached to its supercenter stores. These health centers offer a slew of services at a flat fee, including primary care and dental care as well as labs and imaging.
During an investor day in December, CVS executives said the company planned to add new health products, subscription models and home health care options, CNBC reported. Lynch said CVS' ambitions to provide more primary care will require the company to strike partnerships or acquire or merge with another company, according to CNBC's reporting.
There are a number of public primary care providers that could be takeover candidates including Oak Street Health, Cano and Agilon Health.
In a recent Twitter thread, Jeff Gamble, the founder of concierge primary care provider Rezilient Health, said he expected CVS to make an acquisition in the next three to six months to compete in the hybrid care space. One option, he said, is for the company to acquire a mid- to late-stage hybrid care startup and integrate it into its thousands of retail locations.
He also floated the idea of CVS buying telehealth giant Teladoc to create hybrid solutions for in-person and virtual care. Teladoc already is the exclusive telehealth provider for Aetna.
"But whichever way CVS goes, it’s going to accelerate a cascade of retailers pursuing an acquisition strategy to rapidly enter the hybrid care space," Gamble tweeted.
Stay tuned, this will be one to watch.