Cardinal Health Bets Big Money on Smarter Post-Acute Placements

In what could be a $410 million deal, Cardinal Health (NYSE: CAH) has purchased a company that leverages data to determine whether hospital patients would benefit most from home health care or are better suited to a different post-acute setting. 

Through a proprietary technology that analyzes what likely patient outcomes will be, naviHealth works with health plans to guide patients from acute care settings to the most appropriate levels of follow-up care—for instance, rehabilitation in skilled nursing facilities, assisted living communities or back home. The Brentwood, Tennessee-based company has partnerships with some of the nation’s largest providers, including HCR ManorCare and Golden Living.

Cardinal Health, based in Dublin, Ohio, is a $103 billion health care services company that is ranked No. 26 on the Fortune 500. The company, which announced the naviHealth acquisition Tuesday, describes its business model as working with hospitals, pharmacies and other providers to enhance efficiency and reduce costs while improving quality.

“Discharge and post-acute care coordination is critical for both hospital CEOs and their patients, as care is increasingly delivered in alternative sites and payment models shift the focus to patient outcomes rather than activity,” said Michael Petras, president of Cardinal Health at Home, in a prepared statement. “The acquisition of naviHealth aligns with Cardinal Health’s strategic priority of offering the most complete and integrated suite of services to meet the needs of our Integrated Delivery Network, hospital and other customers.”

Cardinal is acquiring a 71% stake in naviHealth, financed with cash on hand, the company has stated. Over the next four years, it plans to acquire the remaining stake, which could bring the total purchase price up to $410 million.

Currently, naviHealth is privately held; its management and principal private equity investor Welsh, Carson, Anderson & Stowe will continue to have a stake in the company. The existing naviHealth executive team will remain in place.

“Bolstered by Cardinal Health’s unmatched distribution channel and diverse suite of clinical products and services, we believe that we have the opportunity to significantly accelerate the growth of our business and expand our value proposition for our partners,” stated naviHealth CEO Clay Richards, in a press release.

Specifically, Richards believes the deal will open new sectors and growth markets for naviHealth, according to The Tennessean.

The acquisition might be seen as yet another sign of the growing importance of home health and other post-acute services as Medicare and other payors increasingly base reimbursement on how well care is coordinated. In addition to managing patients for health plans, naviHealth is a leading convener for health systems in the Centers for Medicare & Medicaid Services Bundled Payments for Care Improvement initiative.

The companies expect the deal to close later this week.

Written by Tim Mullaney