Anthem in late-stage negotiations to buy CareCentrix, but deal is far from certain

Customer concentration issues have weighed on the process for CareCentrix, a home- and post-acute care benefits manager backed by Summit Partners.

Anthem is in late-stage talks to buy Summit Partners-backed CareCentrix, but the odds that a transaction will be signed remain iffy, according to people familiar with the matter. 

The healthcare insurer is the last standing payor engaged in conversations with CareCentrix, a home- and post-acute care benefits manager, after customer-concentration concerns weighed on the sale process, three sources said. A fourth source close to the deal contended that there remains more than one bidder in the mix. 

While a deal is close to being signed, there’s no guarantee an agreement will be consummated, sources cautioned. Another healthcare payor close to signing recently walked away from a potential deal, two of the people said. 

PE Hub wrote earlier this month that CareCentrix was evaluating options, having engaged Morgan Stanley for financial advice after receiving inbound interest from strategic buyers. 

While CareCentrix originally hoped to command a $1 billion value in a potential transaction, price talk has come down to the $600 million to $700 million range, some of the sources said.

One of the sources disagreed, commenting that if there is a deal at all, it will be at a significantly higher range due to the strength of the business. 

CareCentrix produces normalized EBITDA of approximately $80 million, accounting for the loss of its Cigna contract (effective January 2021) plus new business, sources previously told PE Hub. Cigna, its largest client, contributed more than 50 percent of the company’s earnings and cash flow, according to Moody’s.

Leading up to now, a variety of strategic buyers have looked at CareCentrix in addition to the healthcare payors, including everyone from DME (durable medical equipment) players to global distributors of dental and medical products, some of the sources said.

In fact, the company sought a buyer back in 2017 in a process conducted by UBS and Allen & Co, sources previously told PE Hub.

For Anthem, CareCentrix would present a means to expand its healthcare services business, DBG (Diversified Business Group), as well as an opportunity to sell to other independent Blue Cross customers, one source noted. 

Interest from the payer universe was in part influenced by Optum’s May acquisition of CD&R’s naviHealth, which commanded a $2.5 billion enterprise value. Less than two years into its investment, CD&R generated a 2.5x multiple of invested capital on naviHealth, people told PE Hub at the time. 

In May 2019, Anthem bought Beacon Health Options from sellers Bain Capital Private Equity and Diamond Castle Holdings in a bid to expand its behavioral-health business

Led by John Driscoll, CareCentrix manages care for 26 million members through over 8,000 provider locations.

The company uses analytics to determine the appropriate site for post-acute care, providing support and coordination for patients and their families throughout care transitions, including to and from skilled nursing facilities (SNFs) and through home health, home durable medical equipment, home infusion and sleep services.

Boston’s Summit completed its growth equity investment in CareCentrix in 2011.

Representatives of Anthem, Summit Partners and Morgan Stanley did not return PE Hub‘s requests for comment on Tuesday. CareCentrix declined to comment.

Action Item: Read more about CD&R’s sale of naviHealth to Optum