A notable marriage is going on on the earth of digital well being: Transcarent has claimed Accolade for $621 million. However in no way is that this a wedding of equals given how the latter is being taken non-public after faltering in its purpose to attain profitability.
Throughout the pandemic, care navigation firm Accolade’s inventory was buying and selling at almost $60, a far cry from all of final 12 months when the inventory formally sank into the one digits. The Seattle firm presents digital main care and psychological well being, in addition to professional medical opinion, along with care navigation, and serves primarily self-insured employers.
Transcarent, for its half, is understood for its use of generative AI to simplify healthcare navigation by integrating advantages data, scientific steerage, and care supply right into a single platform — particularly for folks looking for surgical procedure or oncology care. The San Francisco firm has swooped in to buy Accolade, making the most of its diminished stature. In 2022, Accolade misplaced its marquee buyer, Comcast, which hit the corporate arduous, 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 buyers 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 identified 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 achieve 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 an analogous destiny befall the 2 firms that collectively serve 1,400 employer and payer purchasers? The quick reply seems to be “no.”
Tullman wasn’t operating Livongo after the acquisition, so “no matter occurred put up acquisition” can’t be “put at [Tullman’s] toes,” mentioned Michael Greeley, cofounder and basic associate 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 successful in case 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 ability: the power to determine when to purchase or promote a healthcare asset,” mentioned Seth Joseph, founder and managing director of healthcare consulting agency Summit Well being Advisors.
Different property purchased by Transcarent lately have been profitable, mentioned Alyssa Jaffee, associate at 7wireVentures, pointing to the corporate’s buy of part of 98point6. That has finished “very effectively, with spectacular shopper retention and nice outcomes for members and purchasers,” Jaffee mentioned.
An identical infusion of latest capital to show round worthwhile however depressed property is the story being repeated within the Accolade deal.
“I believe one thing like this, that form of offers some capital and permits them to develop into another areas that possibly have a special margin profile, that is sensible,” Farr mentioned of Accolade’s prospects below Transcarent.
She famous that with Transcarent’s give attention to AI by means of its WayFinding navigation product, it is going to be attention-grabbing to see if AI makes its method into Accolade’s capabilities after Transcarent takes the corporate non-public.
Accolade’s curiosity in promoting is probably going an acknowledgement amongst Accolade’s buyers that turning a enterprise round within the public market is a difficult activity.
“I believe it’s a high quality asset, however when you’re buying and selling at $1 or under $1 for a protracted time period, it’s actually arduous to return out of that,” he mentioned. “And it doesn’t imply that the property are dangerous. It simply is difficult 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 marketing consultant, famous that whereas it’s not correct to name this deal a fireplace sale for Accolade, it’s a “signal of the instances.” 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 mentioned.
Finally, the 2 firms are extremely complementary, Jaffee famous.
“Accolade is a pacesetter in well being advocacy, professional medical opinion, and first care, which is able to 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 mentioned. “Right now, that’s been missing amongst level options, and clearly Transcarent believes making a subsequent era 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 strategy, 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 facility of scientific specialists, fashionable expertise and assist to have interaction folks throughout all scientific, monetary, and administrative wants ongoing,” mentioned Owen Tripp, CEO of Included Well being.
When requested what the identify of the mixed firm might be, Transcarent advised MedCity Information that these particulars might be decided by means of the combination course of. Tullman might be CEO of the brand new entity, whereas different management choices, together with the destiny of Accolade CEO Rajeev Singh, may also be evaluated in the course of the integration.
Tullman advised MedCity Information that his final purpose by means of the acquisition is to offer members with “one place to go for fast solutions about their advantages, assist for his or her well being choices, and on-demand entry to care.” They may also 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, professional medical opinions, and first care, we’re delivering one place for well being and care.”
Finally, the deal, which is predicted to shut within the second calendar quarter of 2025, is actually a sign for what didn’t happen as a lot because it was predicted in 2024 however could effectively happen this 12 months — the continued consolidation of level options on the earth of digital well being.
Picture: designer491, Getty Photos
