Astrana Health, headquartered in Alhambra, California, and formerly known as Apollo Medical Holdings, has taken a significant step in solidifying its position in the healthcare industry by acquiring key assets of Prospect Health System for $745 million (Business Insider). The company operates across three main segments—Care Partners, Care Delivery, and Care Enablement—and serves over 1.1 million patients in value-based care arrangements, making it a key player in the U.S. healthcare sector (Fierce Healthcare; Telecare Aware)

Acquisition Details

The transaction involves the acquisition of Prospect Medical Holdings (target) by Astrana Health Inc. (acquirer). The seller in this deal is Leonard Green & Partners, a private equity firm. The deal, announced on November 8, 2024, is valued at $745 million USD. This acquisition falls within the Health Care Facilities and Services sector, indicating a strategic move by Astrana Health to expand its healthcare services portfolio.

Under the terms of the agreement, Astrana Health will acquire several integral components of Prospect Health, including:

• Prospect Health Plan: A California-licensed healthcare service plan.
• Medical Groups: Operating in California, Texas, Arizona, and Rhode Island, encompassing 3,000 primary care providers and 10,000 specialists.
• Management Service Organization (MSO): Prospect Medical Systems, providing administrative support to Prospect-owned affiliates and managed medical groups/independent physician associations (IPAs).
• Pharmacy Services: RightRx, enhancing pharmaceutical care within the network.
• Acute Care Hospital: Alta Newport Hospital, operating as Foothill Regional Medical Center in Tustin, California, a fully accredited facility with 177 licensed beds.

This acquisition is expected to close by mid-2025, pending regulatory approvals and customary closing conditions.

Strategic Rationale

Astrana’s acquisition of Prospect Health aligns with its broader strategy to expand its VBC network and enhance service delivery. By integrating Prospect’s established presence, particularly in regions like Orange County, California, Astrana aims to improve access, quality, and value of care for its members (Telecare Aware). The deal adds another 610,000 value-based care lives to Astrana’s platform, increasing its total to more than 1.7 million members (Fierce Healthcare).

Brandon K. Sim, President and CEO of Astrana, emphasized the strategic importance of this acquisition, stating, “We believe this acquisition continues to solidify Astrana as our nation’s leading healthcare delivery platform, enabling us to deliver technology-driven, longitudinal, and patient-centered care to an estimated combined 1.7 million members across the country” (Astrana Health). Expanding on Astrana’s mission, this move aligns with the company’s long-term goal of leveraging advanced analytics and care management technologies to improve patient outcomes while driving operational efficiencies.

Financial Considerations

The $745 million purchase price will be financed through cash on hand and a $1.095 billion 364-day senior secured bridge commitment provided by Truist Bank and J.P. Morgan (Telecare Aware). Prospect Health is projected to generate approximately $1.2 billion in revenue and an adjusted EBITDA of about $81 million for the twelve months ending December 31, 2024, implying a transaction value at approximately 9.2 times adjusted EBITDA (Telecare Aware; Fierce Healthcare).

Expected Synergies and Operational Enhancements

Astrana plans to leverage its Care Enablement platform, aiming to enhance its value-based contracting and care management capabilities. By integrating these technologies with Prospect’s assets, Astrana aims to enhance patient outcomes and operational efficiency. Management anticipates achieving at least $12 million in synergies by 2027, though some analysts suggest this may be a conservative estimate (Telecare Aware).

Industry Implications

This acquisition marks another milestone in Astrana’s aggressive expansion strategy. It follows the recent purchase of Collaborative Health Systems (CHS) from Centene, a move that significantly enhanced Astrana’s operational capabilities and geographic reach by incorporating 17 states and 129,000 Medicare beneficiaries under accountable care organization (ACO) models (Telecare Aware). With these acquisitions, Astrana’s pro forma revenue is expected to surpass $3 billion in 2024, solidifying its position as one of the largest integrated care delivery and VBC providers in the United States (Fierce Healthcare).

Market Reactions and Challenges

Following the announcement, Astrana’s stock experienced volatility, reflecting both investor excitement and caution regarding the integration risks and regulatory hurdles. On December 24, 2024, Astrana’s shares dropped 2.7%, trading at $32.58 with a significant decline in trading volume.

Nevertheless, analysts from firms like TD Cowen and BTIG Research remain optimistic, highlighting Astrana’s ability to transition enrollees from partial to full risk and its diversified payor contracts as critical growth drivers. Furthermore, Astrana’s previous acquisitions of Collaborative Health Systems, Golden Triangle Physician Alliance, and Heritage Physician Networks have significantly expanded its client base and operational scale, positioning the company for sustained growth (Investor Hangout).

Financial institutions such as Truist Securities and Stifel have also revised their outlook on Astrana Health, reflecting confidence in the company’s trajectory. Truist upgraded its rating from Hold to Buy and increased its price target to $50.00, while Stifel raised their price target to $48. Both firms recognize Astrana Health’s strong performance indicators and growth potential in the evolving landscape of value-based care (Investor Hangout).

Conclusion

Astrana Health’s acquisition of Prospect Health is a transformative move to expand value-based care and improving patient outcomes. The deal offers significant growth opportunities, including a larger patient base, enhanced care management capabilities, and potential cost savings through operational synergies. However, the success of this acquisition will depend on Astrana’s ability to integrate Prospect’s assets seamlessly while navigating regulatory and operational challenges. As the healthcare landscape continues to evolve, this acquisition positions Astrana as a formidable player in delivering innovative, patient-centered care.

---

Work Cited

“Astrana Health Acquires Prospect Health for $745 Million.” Markets Insider, 8 Nov. 2024. https://markets.businessinsider.com/news/stocks/astrana-health-acquires-prospect-health-for-745-million-1033983730.

“Astrana Health Announces Definitive Agreement to Acquire Certain Businesses and Assets of Prospect Health System.” Astrana Health, 8 Nov. 2024. https://ir.astranahealth.com/news-events/press-releases/detail/249/astrana-health-announces-definitive-agreement-to-acquire-certain-businesses-and-assets-of-prospect-health-system.

Cusano, Donna. “M&A Action News: Astrana Health Buys Up Prospect Health for $745M after Centene MSO Unit Buy.” Telehealth and Telecare Aware, 13 Nov. 2024. https://telecareaware.com/ma-action-news-astrana-health-buys-up-prospect-health-for-745m-after-centene-mso-unit-buy-veradigm-nears-1b-sale-sword-health-lays-off-17-of-clinicians-prepping-for-ipo-using-ai-instead-cigna/.

Landi, Heather. “Astrana Plots to Expand Its Footprint with $745M Deal for Prospect Health Businesses.” Fierce Healthcare, 11 Nov. 2024. https://www.fiercehealthcare.com/providers/astrana-plots-expand-its-footprint-745m-deal-prospect-health-businesses.

Turner, Henry. “Astrana Health Strengthens Market Position with Recent Acquisitions.” Investors Hangout, 7 Oct. 2024, https://investorshangout.com/astrana-health-strengthens-market-position-with-recent-acquisitions-60960-/#ixzz8whIMzHfP.