Dive Brief:
- Privia Health is acquiring a value-based primary care business from Evolent Health as the physician enablement company continues to expand its care delivery network into new geographies.
- Evolent has agreed to sell its accountable care organization business, called Evolent Care Partners, for $100 million in cash, the companies announced aftermarket Tuesday. Another $13 million is contingent on the ACO’s performance in traditional Medicare’s largest value-based care program in 2025.
- The transaction is expected to close in the fourth quarter and positively contribute to Privia’s adjusted earnings next year. Analysts said the deal is favorable for both parties.
Dive Insight:
Privia Health is one of the biggest physician enablement companies in the U.S., with a footprint in 15 states and Washington, D.C. The company, which went public in 2021, helps medical groups, hospitals and other providers implement value-based care arrangements in which financial payouts are tied to patient outcomes, care quality and other metrics instead of being based on the volume or complexity of services provided.
Through the acquisition, which Privia is financing with cash on hand, Privia is adding Evolent Care Partners’ more than 120,000 lives in the Medicare Shared Savings Program, various commercial programs and Medicare Advantage. The deal brings Privia’s total number of attributed lives in value-based care arrangements to 1.5 million across both new and existing states, the Virginia-based company said.
Analysts estimate roughly 70,000 to 80,000 of those lives are in MSSP, a program that represents a significant earnings contributor for Privia. Participating ACOs, or groups of providers that link up to take on financial risk, are paid a portion of the savings they generate for Medicare, with the goal of improving outcomes while lowering costs by incentivizing providers to better manage patient care.
Outperformance in MSSP was behind Privia’s decision to raise its guidance for 2025 results in August.
Bringing Evolent Care Partners onboard gives Privia a chance to hike the ACO’s shared savings rate to its own level, analysts said. Evolent Care Partners had a shared savings rate of 5.9% in 2024, which — although decent — is lower than Privia’s 9.3% savings rate across its ACOs, according to a CMS database and company data.
“We see potential for [Evolent Care Partners] to generate additional earnings through [Privia] improving MSSP performance over time,” TD Cowen analyst Ryan Langston wrote in a note on the acquisition.
Evolent Care Partners is also affiliated with more than 1,000 doctors, so the deal includes access to a large potential customer base for Privia’s technology and services platform.
Overall, Evolent estimates that the assets being sold to Privia represent roughly $10 million in adjusted earnings before taxes and other accounting adjustments.
As for Evolent, the company, which provides care management and health plan administrative solutions, plans to use proceeds from the deal to pay down debt. Offloading its ACO business will also allow Evolent to refocus on its core specialty care management business, the company said.