Evolent Health Inc. is taking steps to expand its arsenal of services for health care providers, starting with an acquisition that will move it into the lucrative area of musculoskeletal care.
The Arlington company, which helps health systems and insurance companies manage their costs and improve care, charges into the second half of 2022 on the cusp of closing its purchase of Alpharetta, Georgia’s IPG. That deal, worth up to $462 million, would give the local firm a foothold in a business line that Evolent co-founder and CEO Seth Blackley said is crucial to its long-term success.
The 11-year-old Evolent (NYSE: EVH) helps providers and payors shift their business models from getting paid per procedure to getting paid based on good health outcomes. It operates in two areas: primary and specialty care. The latter includes oncology and cardiology, as well as the end-of-life period for patients.
Evolent “scanned the landscape” for a company doing similar work in the musculoskeletal space “because it was a big-cost area that we weren’t addressing,” Blackley said.
U.S. patients and insurers spend more money on musculoskeletal care each year — $253 billion — than on all other care except cardiology. That’s because spine, back, knee and hip surgeries are often complicated and expensive and require specific coordination for each patient.
IPG arms insurance companies with data analytics and expertise to ensure each patient gets the right type of procedure at the lowest cost in the best place, based on the case. That, in turn, reduces costs for both the patients and the health plans that insure them.
Evolent’s customers currently serve more than 20 million patients — and those numbers stand to substantially increase once Evolent brings IPG into the fold, Blackley said. UnitedHealthcare and Anthem, the nation’s two largest health insurers, are IPG clients.
With IPG on board, Evolent’s specialty care business will cover the areas that account for more than half of health care costs. The company isn’t looking to expand into other service lines at the moment, but might consider “interesting” areas such as kidney care in the future, Blackley said.
In the short term, Evolent plans to focus on what Blackley calls “consumer patient innovation,” he said. “Increasingly, it is about helping vulnerable patients navigate the health care system.”
Evolent is starting that work by tapping experts in other science disciplines outside of medicine; for instance, the company has a team of more than 100 behavioral therapists who work with patients, their families and their doctors to create their ideal care plans. It could mean something as simple as facilitating a Zoom call with all of those people, to better ensure the best outcome for the patient.
“We’re seeing a huge impact,” Blackley said of that example, based on “the ability for the patient and the family to clearly document what their wishes are and what their goals are — and that then often translates to significant quality improvements and lower costs.”
This type of work, he added, will be “a big theme for the company over the next year or two.”
Evolent, which has been growing revenue by about 30% to 35% a year for the last three years, expects to generate more than $1 billion in revenue this year. IPG is on track to exceed $100 million, Blackley said.
The company has seen major growth through the past couple of years, as the Covid-19 pandemic put massive pressure on the health care industry. Demand for the firm’s products continues, as providers and insurers face exorbitant labor costs, supply chain issues, inflation and other economic challenges that make controlling costs even more crucial.
“Even if inflation comes back down, I think the underlying forces in health care, the cost trends have been unsustainable for a long time,” Blackley said. “So we expect [the growth] to be a long-term trend.”
Evolent has about 4,000 employees and is hiring for positions in software engineering, data analytics, sales and account management. The company has more than 180 openings on its website.
Its deal for IPG is expected to close later this quarter. IPG’s staff and platform will become part of New Century Health, a specialty care management company Evolent scooped up in 2018.
Evolent has several acquisitions under its belt, most recently purchasing New Jersey-based Vital Decisions. In 2020 it sold subsidiary True Health New Mexico and previously sold its stake in Louisville, Kentucky’s Passport Health Plan after it was sued over the purchase of that company.
Blackley, previously president of Evolent, assumed the top slot in October 2020 after then-CEO Frank Williams stepped down and shifted to executive chairman.
