Clayton Dubilier & Rice’s recent marriage of Vera Whole Health and Castlight Health reflects the emergence of M&A that unites traditional care delivery with health tech companies and cultures.
Why it matters: CD&R partner Ravi Sachdev tells Sarah that there’s a growing recognition that traditional benefit management models don’t work without deep engagement from the provider.
- That’s fueling this M&A strategy, and driving the progression of value-based care adoption across new targeted populations beyond primary care for seniors.
- “Everybody who is creating a business today is really thinking about how they get the provider more integrated versus just being the service layer,” Sachdev says. “And for a long time, all you had to do was just create the service layer.”
- “To be sustainable and to be able to get traction, a lot of the technology companies are realizing they can’t go at it alone now, which is a very different change in attitude,” adds Sandi Peterson, CD&R operating partner.
- Another great example: is the three-way merger of Fresenius Health Partners, InterWell Health and Cricket Health aimed to disrupt kidney care.
Zoom in: Vera-Castlight marks CD&R’s fourth iteration of value-based care, following investments in naviHealth (now an Optum business), agilon health and Millennium Physician Group.
- Sachdev this time around says the aim is to redesign the under-65 pocket of employer-sponsored primary care in a way “that hasn’t really existed before.”
- “When we started in Medicare, while we were bringing a global risk model, people understood capitation,” Sachdev says. “Here, we’re actually trying to invent the payment model too.”
- Vera’s partnerships with Anthem and JPMorgan Chase make that possible, he says.
- So is the digital health tech that Castlight brings. Connecting directly to a provider for the first time, Castlight can support Vera’s doctors by equipping them with tools to engage with patients more effectively.
Between the lines: After UnitedHealth’s Optum and Humana, Sachdev says that CD&R is “probably the biggest primary care lives aggregator in the country in risk.” That he thinks will give CD&R continued differentiation.
- “Capabilities that we could leverage across our ecosystem is something we’re going to think about and the home could be an interesting part of that,” Sachdev says.
Yes, and: This fusion of tech and health care services has culture implications.
- “As we’ve really switched to people recognizing that there’s a lot of value in outcome versus just more utilization, that’s why you see this merging happening of technology and care delivery,” Sachdev says.
- That’s a big culture change for tech companies, which he says have historically focused on selling a product versus being an input to how you create outcome.
Separately, CD&R is participating in the convergence of health care and Big Tech as it relates to pharma services, Peterson says.
- Peterson points to M2GEN, an oncology data and informatics company that recently partnered with Microsoft to build up a more robust tech stack.
- CD&R didn’t participate in the first wave of CROS, but on the pharma side, “we’re still in the early stages of getting smarter about the body, and a lot of things are enabled by tech,” Peterson says.
What’s next: As the health and tech worlds keep colliding, so will the types of firms working together.
- Sachdev suspects CD&R and other large funds will keep mining for value creation opportunities down market, while smaller funds (like Oak HC/FT) play in other (larger) segments of the market.
- “I think that people are going to start to attack the innovation opportunity beyond venture capital in a pretty meaningful way.”
Clayton Dubilier & Rice’s recent marriage of Vera Whole Health and Castlight Health reflects the emergence of M&A that unites traditional care delivery with health tech companies and cultures. Why it matters: CD&R partner Ravi Sachdev tells Sarah that there’s a growing recognition that traditional benefit management models don’t work without deep engagement from the provider. That’s fueling this M&A strategy, and driving the progression of value-based care adoption across new targeted populations beyond primary care for seniors.“Everybody who is creating a business today is really thinking about how they get the provider more integrated versus just being the service layer,” Sachdev says. “And for a long time, all you had to do was just create the service layer.” “To be sustainable and to be able to get traction, a lot of the technology companies are realizing they can’t go at it alone now, which is a very different change in attitude,” adds Sandi Peterson, CD&R operating partner.Another great example: is the three-way merger of Fresenius Health Partners, InterWell Health and Cricket Health aimed to disrupt kidney care.Zoom in: Vera-Castlight marks CD&R’s fourth iteration of value-based care, following investments in naviHealth (now an Optum business), agilon health and Millennium Physician Group.Sachdev this time around says the aim is to redesign the under-65 pocket of employer-sponsored primary care in a way “that hasn’t really existed before.”“When we started in Medicare, while we were bringing a global risk model, people understood capitation,” Sachdev says. “Here, we’re actually trying to invent the payment model too.” Vera’s partnerships with Anthem and JPMorgan Chase make that possible, he says.So is the digital health tech that Castlight brings. Connecting directly to a provider for the first time, Castlight can support Vera’s doctors by equipping them with tools to engage with patients more effectively.Between the lines: After UnitedHealth’s Optum and Humana, Sachdev says that CD&R is “probably the biggest primary care lives aggregator in the country in risk.” That he thinks will give CD&R continued differentiation. “Capabilities that we could leverage across our ecosystem is something we’re going to think about and the home could be an interesting part of that,” Sachdev says.Yes, and: This fusion of tech and health care services has culture implications.”As we’ve really switched to people recognizing that there’s a lot of value in outcome versus just more utilization, that’s why you see this merging happening of technology and care delivery,” Sachdev says.That’s a big culture change for tech companies, which he says have historically focused on selling a product versus being an input to how you create outcome.Separately, CD&R is participating in the convergence of health care and Big Tech as it relates to pharma services, Peterson says. Peterson points to M2GEN, an oncology data and informatics company that recently partnered with Microsoft to build up a more robust tech stack. CD&R didn’t participate in the first wave of CROS, but on the pharma side, “we’re still in the early stages of getting smarter about the body, and a lot of things are enabled by tech,” Peterson says. What’s next: As the health and tech worlds keep colliding, so will the types of firms working together. Sachdev suspects CD&R and other large funds will keep mining for value creation opportunities down market, while smaller funds (like Oak HC/FT) play in other (larger) segments of the market. “I think that people are going to start to attack the innovation opportunity beyond venture capital in a pretty meaningful way.”