🔒Hartford’s CareCentrix, a ‘First Five’ company, has new majority owner

One of Hartford’s fastest-growing private companies last decade has a new majority owner.

In a deal that got little attention locally, Walgreens Boots Alliance Inc., parent to Walgreens pharmacy, recently bought a controlling stake in CareCentrix, a healthcare technology company focused on post-acute and home care that received $24 million under former Gov. Dannel P. Malloy’s “First Five” program.

The Walgreens deal preceded another similar transaction, when Hartford health insurer Aetna’s parent company, CVS Health, announced on Sept. 5, it would pay about $8 billion for Signify Health, a provider of analytics and technology to home healthcare providers that has its executive offices in Norwalk.

CareCentrix, founded in 1996, uses advanced analytics and technology to coordinate at-home care for about 19 million patients. It coordinates care on behalf of health insurers and health systems, and has a network of companies that provide nursing, social work and other services.

According to Walgreens, CareCentrix has reduced total cost of care for members by 20%, including a reduction of more than 11% in emergency department use and a 23% reduction in skilled nursing costs.

In an interview with the Hartford Business Journal, CareCentrix CEO John Driscoll said the new Walgreens connection will allow his company to add prescription management to the home-care services it manages.

“The opportunity from a CareCentrix perspective, to actually work with a trusted pharmacy partner that has a trusted local presence, is a win for our patients and our health plans,” Driscoll said. “The Walgreens investment in CareCentrix allows us to extend coordination and optimize access to the right prescription drugs.”

The deal

According to Walgreens Boots Alliance, the company invested $300 million for its 55% stake in CareCentrix at an $800 million valuation that is net of debt. It also has an option to acquire the remaining equity interests later.

Boston-based equity firm Summit Partners and affiliated investors sold the 55% stake to Walgreens, and still maintains 45% ownership in the company, according to Driscoll.

While the majority shareholder has changed, CareCentrix will continue as an independent company under its current leadership, according to Walgreens Boots.

“We created Walgreens Health to re-imagine local health care and well-being for all,” said Roz Brewer, CEO of Walgreens Boots Alliance, a drugstore and pharmaceutical company based in Illinois. “Our collaboration with CareCentrix is one of the many ways we are expanding on our pharmacy and patient expertise to surround individuals with care when and how they need it.”

CareCentrix took a major blow with the loss of its biggest client – Bloomfield-based insurer Cigna – in February 2021. That roughly cut in half the company’s revenue to about $1 billion, Driscoll said. But CareCentrix rebounded quickly, with revenues reaching $1.5 billion by the close of 2021, according to the company.

“We are well on track to exceed $2 billion in the next year or so,” Driscoll said.

Cigna announced plans to terminate its contract with CareCentrix as a third-party administrator in February 2020. A year later, Cigna moved that work to eviCore, a data-fueled care manager operating under Cigna’s own Express Scripts service.

Embracing remote work

The state and City of Hartford have staked a great deal of hope in CareCentrix.

It started in the 1990s as a division of New York-based Gentiva Health Services, before being spun off on its own and moved to East Hartford in 2008, backed by a healthcare-focused private equity firm.

In 2012, CareCentrix became the fifth company to participate in former Gov. Dannel P. Malloy’s “First Five” program, a somewhat controversial job-creation initiative administered by the Department of Economic and Community Development.

CareCentrix received $24 million in grants and moved its headquarters from East Hartford to Hartford. In exchange, the company was to keep its headquarters in Hartford until 2023, rebuffing relocation offers from lower-cost states, including Kansas and Florida. CareCentrix also pledged to retain 213 jobs and create another 290 by the end of 2017.

CareCentrix created and retained 535 jobs, exceeding its target by 32 jobs, as of Sept. 30, 2017, according to DECD.

Today, CareCentrix said it has 1,877 employees nationally, 346 of whom live in Connecticut. The company has offices in Hartford and Stamford, as well as in Missouri and Florida.

CareCentrix currently leases 73,941 square feet in the Stilts Building, at 20 Church St. in downtown Hartford.

CareCentrix has been an eager adopter of the work-from-home model. While it will continue to grow its employee rolls in Connecticut and elsewhere, the amount of square footage it occupies in the Stilts Building and at other locations is probably going to shrink, Driscoll acknowledged.

“We are continuing to review our plan, but with a conscious bias toward work from home,” said Driscoll, noting remote work allows the company to hire talent from across the country. “We will keep office space in our key locations like Hartford and Stamford, but I trust they will be smaller.”

The pandemic didn’t just reveal the potential of distance working to CareCentrix and many other companies. According to Driscoll, it widened the appeal of at-home medical services, which is his company’s forte. That has led to rapid and continuing growth in the industry, as well as other big corporate purchases, he said, including CVS Health’s purchase of Signify Health.

“I think COVID really opened people’s eyes to the possibilities of more care at home,” Driscoll said. “What you are seeing in Walgreen’s investment in CareCentrix, (CVS’) investment in Signify, and others is that the world of health care is embracing post-acute providers like CareCentrix.”