Value-based healthcare platform Signify Health announced its plans to buy Caravan Health, a startup focused on helping providers transition into accountable care organizations, for $250 million. 

The payment will include $190 million in cash and $60 million in stock. The deal will also include a contingent additional payment of up to $50 million based on performance. 

Both companies use technology to help facilitate value-based payment models. Caravan's business model revolves around assisting hospitals and provider groups implement a value-based care model. In February 2020, Caravan expanded its digital efforts by acquiring patient engagement tech vendor Wellpepper.

Similarly Signify Health works with both payers and providers to help build value-based payment programs. It uses technology and analytics to develop financial incentives around outcomes. Customers can also use the tool to help manage risk.

WHY IT MATTERS 

Signify Health said that the acquisition will help it diversify its strategy, create an "end-to-end suite of value-based care" tools, drive growth and bring financial benefits through expanding the addressable market. 

"A strategic focus for Signify Health has been driving more participation and success in value-based payment arrangements in alignment with our commercial payor clients. This focus also supports critical imperatives from the Centers for Medicare and Medicaid Services (CMS) to improve health equity and have everyone in Medicare fee-for-service aligned to an accountable relationship by 2030," Kyle Armbrester, CEO of Signify Health, said in a statement.

“We are thrilled to welcome Caravan Health’s team as we build the infrastructure and payment models that are needed to achieve patient-centric, holistic care and better outcomes for everyone, especially the underserved.”

THE LARGER TREND

Signify Health went public in February 2021. However, since coming onto the public market, the stock has taken a tumble. Share prices have dropped nearly 50% since the company debuted on the New York Stock Exchange. 

Caravan isn't Signify Health's first acquisition. In 2020, it purchased blockchain company PatientBlox, which helps facilitate contracts and payments in healthcare.