Healthcare companies’ fear of missing out is driving big bidding wars for one of the lowest-paid specialties.

Earlier this year, Amazon and CVS Health sparred over One Medical, with Amazon in August announcing it planned to buy the primary care operator for $3.9 billion. The same month, CVS, Amazon, UnitedHealth Group and Option Care Health fought for ownership of Signify Health, the nation’s largest health risk-assessment provider. CVS announced plans to buy Signify Health for $8 billion in September. 

Now CVS is reportedly in a bidding war with Humana over Cano Health, a technology-enabled primary care practice that went public through a $4.4 billion special purpose acquisition company deal last year but its stock price has since tumbled. Humana was an early investor in Cano and has the right of first refusal if the company receives an acquisition offer. Humana declined to comment on the recent reports.

“We’re not opposed to larger transactions, but those types of transactions would need to be accretive, need to bring something that we don’t currently have,” said Renee Buckingham, president of Humana’s primary care organization. That could include “things that would open up a new geography for us, might bring a new capability to our set of capabilities. Generally, there will be fewer opportunities for large-scale versus small M&A.” 

CVS and Cano did not respond to interview requests.

Companies like CVS and Humana are playing defense, following the lead of UnitedHealth Group, which has made major investments in physician practices through its Optum healthcare services arm over the past two years, said Gary Taylor, managing director and senior equity research analyst at investment banking firm Cowen. This year, UnitedHealth has spent $7.15 billion on acquisitions, up from $4.8 billion in all of 2021, according to a June Securities and Exchange Commission filing. 

UnitedHealth, which declined to comment, did not disclose what entities it acquired in the filing. Taylor said he believes all of the company’s acquisition dollars have gone toward physician practices. 

“United leads the industry because they’re the largest and they have the highest valuation, and a lot of health plans have valuation envy. They want to be regarded as United, and United’s doing this, so they sort of bought into it,” Taylor said.

In some instances, companies are leveraging the competitive environment by putting themselves on the sales block. Signify Health, for example, received an unsolicited buyout offer for $20 per share in June and, afterward, pitched itself to 15 other parties, according to a September SEC filing. CVS submitted the top bid at $24 per share, but ultimately offered $30.50 per share for the company and paid $8 billion–more than double Signify’s per-share trading price in June.

More primary care companies could look for acquisition partners if the public markets continue to perform poorly,  said Ari Gottlieb, a principal at A2 Strategy Group. The companies need capital to sustain their businesses and, because the stock market is down, accepting an acquisition from a larger firm may be the best way to attract investment.  

“Cano is a good example,” Gottlieb said. “They don’t have that much cash in their balance sheet and funding growth of these new centers is expensive.” 

Patient care continues to transition from centralized hospital operations to ambulatory sites, a cheaper option for providers and a years-long trend accelerated by the COVID-19 pandemic. As a result, healthcare companies outside of traditional providers are looking for ways to integrate the services into their networks. Payers that partner with clinicians will be more competitive in the marketplace, said Matt Wolf, senior healthcare analyst at professional services firm RSM.

“We’re sort of at this inflection point in healthcare where we just can’t cost-share anymore. Some of these old tricks don’t work anymore, and we need to rethink some of these models and some of these practices,” Wolf said.

Companies see opportunities in primary care to add customers across a wider footprint of clinics, and provide a revenue stream not limited under insurers’ federal medical loss ratio requirements. There are also opportunities to directly engage with individual groups, such as Black women or the LGBTQ community, and invest in virtual platforms, which can play a bigger role in preventative care. It’s an attractive prospect for companies with aging members, reducing avoidable procedures and keeping patients out of higher-cost facilities.

“There’s a premium on getting closer to patients and providing them more personal service and meeting them where they are. Customers want to reduce friction. They want to have the opportunity to have more access points,” said Dr. Jay Bhatt, executive director of Deloitte’s Center for Health Solutions and Health Equity Institute.

Primary care investments tend to work better for companies like Humana or UnitedHealth, compared with hospitals and health systems. These companies, which operate insurance divisions with nationwide footprints, have access to more comprehensive data and can better navigate market dynamics such as pricing, said Brad Ellis, senior director at credit rating agency Fitch Ratings. They can also limit services to exclusive member groups–a tactic that’s not an option for hospitals. By sending their insured members to a provider owned by the same parent company, vertically integrated health insurance companies can pay themselves for providing care to members, shifting MLR costs. 

“From a Wall Street perspective, if you’re one of the large, publicly traded health insurers, and you don’t have a value-based care strategy and story that you’re telling to investors, it sounds like you’re behind the game,” Taylor said. 

The next companies on the auction block? Primary care operators Oak Street Health, Agilon Health, Privia Health and Caremax, Taylor said. Each company declined to comment on whether it had received acquisition offers or was in discussions with potential buyers.