A notable marriage is going on on the planet of digital well being: Transcarent has claimed Accolade for $621 million. However on no account is that this a wedding of equals given how the latter is being taken personal after faltering in its goal to attain profitability.
In the course of the pandemic, care navigation firm Accolade’s inventory was buying and selling at almost $60, a far cry from all of final yr when the inventory formally sank into the only digits. The Seattle firm affords digital main care and psychological well being, in addition to knowledgeable 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 info, medical steering, and care supply right into a single platform — particularly for individuals searching for surgical procedure or oncology care. The San Francisco firm has swooped in to buy Accolade, benefiting 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 successful 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 maybe 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 put in writing down the worth of its Livongo acquisition.
So will the same destiny befall the 2 corporations that collectively serve 1,400 employer and payer shoppers? The quick 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 normal companion of VC agency Flare Capital Companions, and a revered trade veteran.
One other trade follower echoed Greeley, explaining that the Teladoc-Livongo merger was really a hit in the event you had 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 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 just lately have been profitable, stated Alyssa Jaffee, companion at 7wireVentures, pointing to the corporate’s buy of part of 98point6. That has achieved “very effectively, with spectacular consumer retention and nice outcomes for members and shoppers,” Jaffee stated.
The same infusion of recent capital to show round worthwhile however depressed belongings is the story being repeated within the Accolade deal.
“I believe one thing like this, that type of supplies some capital and permits them to increase into another areas that perhaps have a distinct margin profile, that is smart,” Farr stated of Accolade’s prospects below Transcarent.
She famous that with Transcarent’s give attention to AI by way of its WayFinding navigation product, it will likely be attention-grabbing to see if AI makes its method 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 under $1 for a protracted time period, it’s actually exhausting to come back out of that,” he stated. “And it doesn’t imply that the belongings are unhealthy. It simply is tough to do 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 advisor, famous that whereas it’s not correct to name this deal a hearth 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 development 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, knowledgeable 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. “At the moment, 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 customized all-in-one healthcare strategy, one that doesn’t pivot from treating an individual as a ‘affected person’ for medical must then treating an individual as a ‘member’ for advantages’ wants; however fairly, pulls collectively the ability of medical consultants, trendy expertise and help to have interaction individuals throughout all medical, monetary, and administrative wants ongoing,” stated Owen Tripp, CEO of Included Well being.
When requested what the identify of the mixed firm will likely be, Transcarent informed MedCity Information that these particulars will likely be decided by way of the mixing course of. Tullman will likely be CEO of the brand new entity, whereas different management choices, together with the destiny of Accolade CEO Rajeev Singh, may also be evaluated throughout the integration.
Tullman informed MedCity Information that his final objective by way of the acquisition is to offer members with “one place to go for fast solutions about their advantages, help for his or her well being choices, and on-demand entry to care.” They may also obtain “extra customized and built-in help 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 electronic mail that by “bringing collectively Transcarent’s generative AI-powered WayFinding and complete care experiences with Accolade’s advocacy, knowledgeable medical opinions, and first care, we’re delivering one place for well being and care.”
In the end, the deal, which is anticipated 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 yr — the continued consolidation of level options on the planet of digital well being.
Picture: designer491, Getty Pictures
