Veritas Capital Management has made some aggressive moves into the digital health space in recent years. Its investment focus is on companies that provide critical products and services, not just in healthcare, but also in aerospace and defense, communications, energy and education. So its recent activity is interesting, and expensive.
In April 2016, Veritas paid $820 million to acquire Verisk Health from its parent, Verisk Analytics, Inc. (NASDAQ: VRSK). Verisk Health provides data services, analytics and advanced technology to support value-based healthcare delivery and payment systems. At the time of the sale, it had 350 clients in the United States. The price consisted of $720 million in cash and $100 million in a long-term subordinated promissory note.
Two years later, in April 2018, the private equity firm acquired the Value-based Care division of GE Healthcare (NYSE: GE) for $1.05 billion. The division included GE’s Enterprise Financial Management (Revenue cycle, Centricity Business); Ambulatory Care Management (Centricity Practice Solutions) and Workforce Management (formerly API Healthcare).
Veritas intended to revitalize the portfolio and pursue complementary acquisitions. And that, it did. In March 2018, Verscend Technologies Inc. (formerly Verisk Health) bought the commercial health insurance business of General Dynamics Information Technology for an undisclosed price. The payer-focused portfolio included program integrity, medical quality, payment accuracy, risk adjustment, and quality and performance solutions.
Two months later, on June 19, Verscend announced it was acquiring Cotiviti Holdings, Inc. (NYSE: COTV) for $4.9 billion. Cotiviti provides payment accuracy and analytics-driven solutions that help payers, other risk-bearing healthcare organizations and retailers achieve their business objectives.
The combined businesses will operate as a private healthcare information technology company with unique, data-driven capabilities. Their aim is to increase affordability, reduce waste and improve patient outcomes, as well as to create new opportunities and substantial value for clients.
Cotiviti shareholders will receive $44.75 in cash per share of Cotiviti common stock (92.94 million outstanding) and Vescend will assume all of Cotiviti’s outstanding debt of $765 million.The offer represents a 32% premium to Cotiviti’s unaffected share price as of June 4, 2018.
That’s a lot of dry powder spent in the digital health space. But there’s plenty more where that came from, we know.
