A company most have never heard of is snapping up provider networks, health plans, and management services. Astrana Health, a Southern California-based value-based care (VBC) company formerly known as Apollo Medical Holdings, has agreed to acquire most of the assets of Prospect Health for $745 million:

• Prospect Health System: 3,000 primary care providers and 10,000 specialists across Southern California, Texas, Arizona, and Rhode Island. It currently has 610,000 members across Medicare Advantage, Medicaid, and commercial lines of business.
• Prospect Health Plan, licensed in California 
• One hospital, Alta Newport Hospital dba Foothill Regional Medical Center in Tustin, California (Santa Ana area), a fully accredited acute care hospital with 177 licensed beds
• Prospect Medical Systems, a management service organization (MSO) that provides administrative support to Prospect-owned affiliates and managed medical groups/independent physician associations (IPAs).
• RightRx pharmacy

FTR: “Astrana plans to leverage its proven Care Enablement platform, a set of care management tools and technology, including value-based contracting and credentialing, AI-driven population health analytics, its NCQA-certified Healthcare Effectiveness Data and Information Set gaps in care engine, care management and disease management platform, and other administrative services to further advance improvements in patient outcomes.”

According to William Blair analysts Ryan Daniels and Jack Senft, quoted in FierceHealthcare, “Prospect is expected to generate $1.2 billion in revenue and $81 million in adjusted EBITDA on an annual basis in 2024, implying a transaction value at about 9.2 times adjusted EBITDA.” The $745 million purchase was financed by cash on hand and a $1,095 million 364-day senior secured bridge commitment provided by Truist Bank and JP Morgan. It’s not expected to close until mid-2025 and is subject to the usual Federal and multi-state regulatory reviews and approvals. Sounds like a deal that evades the new premarket notifications as complementary and not competitive. But we’ll see. Release, Healthcare Finance News

One wonders about that cash on hand as Astrana previously bought Collaborative Health Systems, a 17-state MSO with 129,000 original Medicare beneficiaries managed in 10 primary care shared savings accountable care organizations (ACOs in the REACH and MSSP models), a Maryland Care Transformation Organization CMS/state primary care model, and three independent physician associations (IPAs). CHS came with Centene’s acquisition of WellCare Health Plans in 2020 and was originally organized by Universal American in 2012. That closed in October at an undisclosed price paid to Centene, continuing its divestment of what they consider ancillary businesses to maximize cash. It was also positioned as Astrana remaining a key partner in Centene’s Medicare business, now known as Wellcare (Releases 25 July, 7 Oct).

Prior to that acquisition, Astrana was a relatively concentrated California/Western States diversified health services organization with about 10,000 providers and claiming a million patients, with one ACO in the ACO REACH program and another in the MSSP model. In absorbing CHS, they also divested a substantial number of people, mostly senior managers and leadership, who managed a wide number of ACOs in demanding CMS models at scale. (Disclaimer: Editor Donna was marketing director for CHS 2018-2020). One wonders if CHS will be merged into Prospect’s MSO, though in reality they offer vastly different services.

Back in August and prior, MSO Evolent Health put itself up for sale for an estimated $4 billion, with the most interested parties being Elevance and assorted private equity organizations. Nothing has publicly moved since then. But it did confirm that major money is now interested in this decidedly unsexy corner of the healthcare business.

Veradigm’s long-drawn-out sale may be reaching a conclusion. Reports this week state that McKesson, Oracle, and private equity bidder Thoma Bravo are all bidders for the company. CVS considered it but passed. It may be finalized by Thanksgiving for an estimated price in excess of $1 billion, its current market cap.

Veradigm put itself up for sale last May. In August, reported bidders included private equity Thoma Bravo, which took NextGen EHR private in September 2023, Roche, and Vista Equity Partners, owner of the Greenway EHR. Thoma Bravo is the only carryover from this initial list. Apparently, Roche and Vista have dropped out. As reported then, the company is apparently in good shape but unwieldy, with healthcare data services and systems that make it an interesting buy for one or more companies. Though outwardly crippled by years of financial reporting problems due to a still unsorted software problem, which led to its Nasdaq delisting last February, it has been profitable (though unaudited) and is trading OTC above $11. Axios  Hat tip to HIStalk 13 Nov

Virtual MSK provider Sword Health lays off 13 physical therapists, about 17% of its clinicians, as it preps for a mid-2025 IPO. Therapists contacted by Business Insider stated that the layoffs also coincided with a doubling-plus of clinician caseload from an average 2-300 at the start of 2024 to 700 by year-end. In a statement to BI, Sword maintained the cuts were ‘performance based’ and that they had open positions.

Information obtained by BI in interviews with Sword executives clearly states that they mean for AI to be the ‘master expert’ of their virtual therapy model, vetted (of course) by humans. According to the therapists interviewed by BI, “Sword began using AI-generated messages for patient conversations in the spring. The technology allows physical therapists to accept an AI-generated message, edit it, or reject it.” The big push is to scale Sword for more employer contracts in an outcomes-based model, paralleling Transcarent’s USP. Sword in June received a jumbo round of $130 million and now is valued at around $3 billion. Profitability is projected to be at the end of 2024 to preface the mid-2025 IPO. A competitor also considering its own IPO is Hinge Health [TTA 3 Oct]. MSN  Hat tip to HIStalk 13 Nov

And finally, truly, really–Cigna is NOT buying Humana! This was evident on the investor call 31 October by their CEO David Cordani [TTA 31 Oct] but it seems that the rumors persisted until Cigna issued an official statement that yes, it’s using free cash to buy back shares, yes, it will make strategic acquisitions, and no, it’s not buying Humana as it doesn’t fall into the second category. (It also is under Federal and FTC scrutiny about their pharmacy benefit management business under Express Scripts, TTA 1 Oct.) From the Cigna release: “Additionally, in light of recent and persistent speculation, The Cigna Group expects to communicate that the company is not pursuing a combination with Humana Inc. The Cigna Group remains committed to its established M&A criteria and would only consider acquisitions that are strategically aligned, financially attractive, and have a high probability to close.” You wonder who’s been fluffing along this rumor to this extent, and why. The tale of the tape? Cigna shares are up 4.5% in the past five days, while Humana’s are down 4%. FierceHealthcare