What is in Evernorth? Health services arm Cigna invests $2.5 billion in VillageMD-Summit

What is in Evernorth? Health services arm Cigna invests $2.5 billion in VillageMD-Summit

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Walgreens-backed VillageMD acquired medical practices firm Summit Health for nearly $9 billion earlier this week, with the help of a large minority investor — Evernorth, the health services arm of insurance giant Cigna, which invested $2.5 billion in the combined company.

The deal could have major ramifications for Evernorth’s payment for value-based care, according to Cigna executives and analysts.

Evernorth will become a minority owner in the combined company when the deal closes, Cigna Chief Financial Officer Brian Evanko said at the Credit Suisse Healthcare Conference on Tuesday, with a lower teen ownership stake. Cigna will also get a single-digit average return of $2 billion on investment each year.

But beyond the financial rationale, the investment should allow Evernorth to significantly accelerate value-based care arrangements in the commercial realm, according to Ivanko — not in Medicare, a program that hosts the brunt of payers’ shared savings arrangements.

“The savings shared through the value-based contracts that we will enter into with Village is the most strategically interesting part of this opportunity for us,” Ivanko said.

Unlike many other primary care physician groups, VillageMD focuses on the commercial market, which brings in two-thirds of its revenue. This reinforces Cigna’s strength in the employer market, as the majority of its clients are commercial employers, according to Credit Suisse analyst AJ Rice.

As part of its investments, Evernorth will develop value-based agreements with VillageMD. The two will work together to improve locations of care and patient outcomes through the network of physicians at VillageMD and health services companies in Evernorth, which includes the Pharmacy Benefits Manager Express Scripts, and Specialty Pharmacy acrido and Virtual Care Provider MDLive.

Evernorth already provides care directly to patients, including primary and tertiary care through Evernorth Care Group health centers in Arizona and home care through Accredo and Care at Home, Evernorth CEO Eric Palmer told Healthcare Dive via E-mail.

Palmer said the VillageMD partnership should allow Evernorth to create closer relationships with high-performing primary care physicians and accelerate its value-based arrangements.

And the marriage of VillageMD’s medical network—which, with the addition of the summit, will include more than 680 provider locations in 26 markets—with other Evernorth health services such as chronic condition management and a network of behavioral health providers should make the business more attractive to customers.

According to Evanko, the joint savings and risk-based contracts are expandable to Cigna’s provider partners, and will also be expanded to other health plans served by Evernorth over time. Evernorth Health Insurance’s clients include a focus on government centenand insurtech Oscar Health, and Kaiser Permanente.

In the near term, the contracts will focus on healthcare services, as opposed to Evernorth’s pharmacy capabilities. Evernorth also expects to incorporate MDLive into its joint savings arrangements, to try to push consumers into low-cost virtual care options.

but “tover here “It’s possible that over time some drugstore assets will make their way into that,” Ivanko said.

Cigna has already contracted with VillageMD in some of its medical networks. The two share roughly 30% to 40% of the geographic overlap, and as providers expand, that overlap should grow even more, according to the CFO.

Nathan Ray, head of healthcare mergers and acquisitions at West Monroe, said the expansion of the relationship reflects how payers have grown through acquisitions in non-core areas — diversification in general, rather than entering new states or serving new niche populations on the side of the plan.

For VillageMD, Ray said, “Evernorth’s overall impact on the brand here is to be in the right place to deliver scale and capital, not complexity.” “It’s more than just sharing play and being around good people who are going in the right direction.”

Cigna’s $2.5 billion bid to bolster Evernorth’s value-based offering comes after concerns from market watchers that the push It can be delayed in the M&A frenzy of an insurance company.

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