Physician enablement company Privia Health Group plans to buy Evolent Health's accountable care organization business, which would significantly expand its value-based care footprint.
Through the deal, Privia Health will add Evolent Care Partners' more than 120,000 attributed lives in the Medicare Shared Savings Program (MSSP) as well as various commercial and Medicare Advantage (MA) programs. With the deal, Privia Health will now serve approximately 1.5 million attributed lives in VBC arrangements across commercial, Medicare, MA and Medicaid.
Evolent Care Partners works with more than 1,000 physicians.
The acquisition increases VBC-attributed lives in existing Privia states, adds lives in new states, and also offers a compelling synergy opportunity for ACO-participating providers to join Privia’s Medical Groups for a full suite of services and technology platform, the company said in a press release.
Privia Health has a presence in 15 states plus the District of Columbia—the Evolent deal will expand its footprint to 11 additional states, the company said.
The company will pay $100 million in cash at closing and up to an additional $13 million, subject to final MSSP performance for 2025, according to a press release.
The deal is expected to close by the end of this year. Privia anticipates that the acquisition will positively contribute to adjusted EBITDA in 2026. The deal is expected to add roughly $10 million in adjusted run-rate EBITDA and will be financed with cash on hand.
“The addition of Evolent Health’s ACO business to our existing national network of ACOs reaffirms Privia Health’s ability to replicate our highly differentiated and flexible operating model with new provider partners across the U.S.," Sam Starbuck, senior vice president and president of Privia Care Partners at Privia Health, said in a statement. “We look forward to collaborating with the physicians and their practices, and leveraging our population health and value-based care expertise to enhance the patient experience, improve outcomes and lower costs.”
Evolent Health, a company that offers software solutions to help providers and insurers transition to value-based care, said the deal will enhance its focus on specialty condition management.
"This strategic divestiture will allow us to focus on our core specialty business while accelerating our path to reducing leverage and improving cash flow. We plan to use all net proceeds to repay borrowings on our senior credit facility," Evolent co-founder and CEO Seth Blackley said in a statement. "With the resulting lower interest burden, we expect this transaction to improve our annual cash flow by more than $7 million annually net of the reduced cash generation from ECP."
Analysts view the deal as favorable to both companies.
William Blair analyst Ryan Daniels estimates that out of the 120,000 attributed lives that Privia will gain through the deal, roughly 80,000 lives are MSSP lives, "where Privia has proved to be an industry leader in cost and quality performance," he wrote in an analyst note.
Evolent Health will obtain $100 million in cash to be used to pay down high-cost debt, reducing the company’s overall leverage by roughly 0.3x, Blair wrote. The deal will also allow the company to focus on its core specialty care management business and should improve annual cash flows by $7 million or more post-close.
"This deal makes sense in our view, mainly because Privia is in the business of primary care and managing risk for those members regardless of the services they receive, and Evolent is in the business of managing specialty care, in particular oncology, cardiology, MSK and other more intense disease states. The ACO business fits better with Privia, in our view," David Larsen, managing director and digital health analyst at BTIG, wrote in an analyst note.
The key rationale for both parties is to streamline operations, allowing each to focus on what they are good at, Larsen noted.
"In our view, the ACO business fits in nicely with Privia, who already serves various payers, and it brings Privia's total attributed lives to around 1.5M in VBC arrangements across Commercial, Medicare, MA and Medicaid. For Evolent, the firm can now focus on its areas within specialty care, including oncology, cardiology and MSK, which are highly complex," he wrote.
There are already several players on the primary care side for VBC, such as Agilon, P3 and Astrana. "What differentiates Evolent in our view has always been its ability to manage some of the most complex and high-cost conditions," Larsen wrote. "Overall, we like the transaction—we believe it contributes to both companies' strengths, and the financial terms seem appropriate."
Evolent reiterated its outlook for third-quarter revenue between $460 million and $480 million and adjusted EBITDA to range between $34 million and $42 million. For the full year, the company expects revenue of $1.85 billion to $1.88 billion and adjusted EBITDA between $140 million and $165 million.