The goal was to lower costs, improve clinical outcomes and actively manage towards an overall healthier population,” said VSS’ David Bainbridge.

VSS Capital Partners sold Caravan Health to publicly owned Signify Health for $250 million back in February after more than doubling the target’s revenue during just three years of ownership. PE Hub spoke with David Bainbridge, managing director at VSS, about Caravan’s growth path and the PE firm’s decision to sell when opportunity came knocking.

Founded in 2013, Caravan helps hospitals and physicians that care for underserved populations succeed in value-based care. The company aims to bring safety net and community health systems together to deliver high-quality, patient-focused care at a low cost in a culturally sensitive way.

Population health management means lot of different things to different people, but in the case of Caravan, it means helping hospitals manage their Medicare population and improving their shared savings programs.

Caravan gets paid by the government, Medicare or Centers for Medicaid and Medicare Services (CMS), based on achieving certain metrics and patient outcomes. A lot of times hospitals provide these types of services in house with their own staff, so Caravan’s business model is to outsource a lot of that, according to Bainbridge.

“We do a better job of helping [hospitals] reach clinical benchmarks and quality improvements by lowering costs as an outsourced provider,” he said. “The goal was to lower costs, improve clinical outcomes and actively manage towards an overall healthier population.”

VSS invested in Caravan initially in 2018. At that point, Bainbridge was impressed by how quickly founder Lynn Barr had grown Caravan with no outside capital.

Growth path

“We look for alignment with our management teams,” Bainbridge told PE Hub. “Lynn owned the vast majority of Caravan, and she was looking for her first institutional partner to come in as a minority investor. The capital investment went into the business to accentuate growth.”

The investment came right before covid turned the world upside down, but Bainbridge said that covid actually helped the company.
“We were helping hospitals through accountable care organizations manage their Medicare populations,” said Bainbridge. “So, for us it was all about arming the hospitals with additional training tools, resources to help support covid efforts and through vaccinations as well. Covid got us closer to our customers, and they got to see the benefit of having an outside group to help them with care management overall.”

Caravan undertook a number of organic initiatives to drive operational improvements, including making a significant investment in its sales and technology infrastructure. The company also completed one strategic acquisition with its purchase of Wellpepper, a Seattle-based health technology company, in February 2020.

When VSS first invested, most of the technology was licensed (Caravan used Lightbeam), but then VSS bought Wellpepper and developed a proprietary population health management software platform.

“That platform really became the glue that helps our services together,” he said. “Most of our capital was used to develop the software platform. That helped us track clinical outcomes and use that data to improve our processes.”

Under VSS’s ownership, the number of employees grew from 100 to 160 at the time of the exit.

Opportunistic exit

VSS was not planning on selling the business but was approached by Signify Health.

“We thought the combination of the two companies was excellent, so we ended up selling it and rolling over into Signify’s stock,” said Bainbridge.

VSS are still shareholders in the business, while Barr, who was the majority shareholder of Caravan, is now a significant shareholder in Signify.

“In the Medicare Shared Savings Plan enhanced track, Caravan was going to continue to take on more risk, so we thought a larger platform, with more resources, made sense for the business.”