A notable marriage is going on on the earth of digital well being: Transcarent has claimed Accolade for $621 million. However not at all is that this a wedding of equals given how the latter is being taken personal after faltering in its goal to attain profitability.
Through the pandemic, care navigation firm Accolade’s inventory was buying and selling at practically $60, a far cry from all of final yr when the inventory formally sank into the one digits. The Seattle firm presents digital major care and psychological well being, in addition to skilled medical opinion, along with care navigation, and serves primarily self-insured employers.
Transcarent, for its half, is thought for its use of generative AI to simplify healthcare navigation by integrating advantages data, scientific steering, and care supply right into a single platform — particularly for individuals in search of surgical procedure or oncology care. The San Francisco firm has swooped in to buy Accolade, profiting from its diminished stature. In 2022, Accolade misplaced its marquee buyer, Comcast, which hit the corporate exhausting, believes Christina Farr, managing director at consulting agency Manatt Well being.
In reality, Accolade’s inventory has jumped 110% over its closing inventory worth on Tuesday, so traders are already seeing the merger as a profitable transfer. However is that a sign of future success? In spite of everything, the transaction is being led by Transcarent’s CEO, Glen Tullman, who is probably finest recognized for engineering a mega digital well being deal again in August 2020, an $18.5 billion merger with Teladoc that everybody initially cheered. However since then, the mixed firm largely struggled to realize traction. In reality, within the first quarter of 2022, Teladoc took a whopping $6.6 billion cost to write down down the worth of its Livongo acquisition.
So will the same destiny befall the 2 corporations that collectively serve 1,400 employer and payer purchasers? The brief reply seems to be “no.”
Tullman wasn’t working Livongo after the acquisition, so “no matter occurred submit acquisition” can’t be “put at [Tullman’s] toes,” stated Michael Greeley, cofounder and basic companion of VC agency Flare Capital Companions, and a revered business veteran.
One other business follower echoed Greeley, explaining that the Teladoc-Livongo merger was really a hit when you have been a Livongo shareholder. That deal, together with the Transcarent/Accolade deal, is one other instance of “Glen Tullman having the rarest strategic talent: the flexibility to establish when to purchase or promote a healthcare asset,” stated Seth Joseph, founder and managing director of healthcare consulting agency Summit Well being Advisors.
Different belongings purchased by Transcarent not too long ago have been profitable, stated Alyssa Jaffee, companion at 7wireVentures, pointing to the corporate’s buy of part of 98point6. That has performed “very effectively, with spectacular consumer retention and nice outcomes for members and purchasers,” Jaffee stated.
The same infusion of latest capital to show round beneficial however depressed belongings is the story being repeated within the Accolade deal.
“I believe one thing like this, that form of gives some capital and permits them to broaden into another areas that possibly have a unique margin profile, that is smart,” Farr stated of Accolade’s prospects below Transcarent.
She famous that with Transcarent’s deal with AI by its WayFinding navigation product, it is going to be attention-grabbing to see if AI makes its means into Accolade’s capabilities after Transcarent takes the corporate personal.
Accolade’s curiosity in promoting is probably going an acknowledgement amongst Accolade’s traders that turning a enterprise round within the public market is a difficult activity.
“I believe it’s a top quality asset, however when you’re buying and selling at $1 or beneath $1 for a protracted time frame, it’s actually exhausting to return out of that,” he stated. “And it doesn’t imply that the belongings are dangerous. It simply is tough to try this within the public context.”
[Greeley is technically wrong — Accolade’s stock never traded at $1 or below it but the spirit of his statement stands given before the transaction was announced, it was trading around $4 — in the penny stock category as defined by the Securities and Exchange Commission]
Joseph, the healthcare guide, famous that whereas it’s not correct to name this deal a fireplace sale for Accolade, it’s a “signal of the occasions.” Accolade has tripled its income in 4 years and is sitting on greater than $200 million of money, however the firm’s progress has “slowed to a crawl, they lack a transparent plan to profitability, and function in an more and more aggressive market,” he stated.
In the end, the 2 corporations are extremely complementary, Jaffee famous.
“Accolade is a frontrunner in well being advocacy, skilled medical opinion, and first care, which can now be mixed with Transcarent’s AI-powered WayFinding capabilities and their care experiences (Surgical procedure Care, Most cancers Care, Weight Well being) in addition to pharmacy advantages. Employers and well being plans need to simplify their advantages ecosystems and to make sure their workers and plan members really use the companies they’re providing,” she stated. “Immediately, that’s been missing amongst level options, and clearly Transcarent believes making a subsequent technology platform is the reply.”
Even a competitor of Accolade and Transcarent — navigation firm Included Well being — is applauding the deal.
“We see Transcarent’s acquisition of Accolade as validation of the a lot wanted personalised all-in-one healthcare method, one that doesn’t pivot from treating an individual as a ‘affected person’ for scientific must then treating an individual as a ‘member’ for advantages’ wants; however quite, pulls collectively the ability of scientific consultants, trendy know-how and assist to interact individuals throughout all scientific, monetary, and administrative wants ongoing,” stated Owen Tripp, CEO of Included Well being.
When requested what the title of the mixed firm will likely be, Transcarent advised MedCity Information that these particulars will likely be decided by the combination course of. Tullman will likely be CEO of the brand new entity, whereas different management selections, together with the destiny of Accolade CEO Rajeev Singh, will even be evaluated through the integration.
Tullman advised MedCity Information that his final objective by the acquisition is to supply members with “one place to go for fast solutions about their advantages, assist for his or her well being selections, and on-demand entry to care.” They will even obtain “extra personalised and built-in assist throughout a variety of well being and care wants with the addition of Accolade’s capabilities,” he added.
Singh echoed Tullman’s feedback, saying in an e-mail that by “bringing collectively Transcarent’s generative AI-powered WayFinding and complete care experiences with Accolade’s advocacy, skilled medical opinions, and first care, we’re delivering one place for well being and care.”
In the end, the deal, which is predicted to shut within the second calendar quarter of 2025, is really a sign for what didn’t happen as a lot because it was predicted in 2024 however might effectively happen this yr — the continued consolidation of level options on the earth of digital well being.
Picture: designer491, Getty Photographs