A notable marriage is happening on the earth of digital well being: Transcarent has claimed Accolade for $621 million. However under no circumstances is that this a wedding of equals given how the latter is being taken non-public after faltering in its purpose 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 12 months when the inventory formally sank into the only 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 info, 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 any case, the transaction is being led by Transcarent’s CEO, Glen Tullman, who is probably greatest 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 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 an analogous destiny befall the 2 corporations that collectively serve 1,400 employer and payer shoppers? The brief reply seems to be “no.”
Tullman wasn’t working Livongo after the acquisition, so “no matter occurred publish acquisition” can’t be “put at [Tullman’s] toes,” stated Michael Greeley, cofounder and common accomplice 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 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 power to determine when to purchase or promote a healthcare asset,” stated Seth Joseph, founder and managing director of healthcare consulting agency Summit Well being Advisors.
Different property purchased by Transcarent not too long ago have been profitable, stated Alyssa Jaffee, accomplice at 7wireVentures, pointing to the corporate’s buy of part of 98point6. That has finished “very nicely, with spectacular shopper retention and nice outcomes for members and shoppers,” Jaffee stated.
An analogous infusion of latest capital to show round invaluable however depressed property is the story being repeated within the Accolade deal.
“I feel one thing like this, that form of offers some capital and permits them to increase into another areas that possibly have a special margin profile, that is smart,” Farr stated of Accolade’s prospects beneath Transcarent.
She famous that with Transcarent’s give attention to AI by means of its WayFinding navigation product, will probably be fascinating to see if AI makes its means 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 process.
“I feel it’s a high quality asset, however when you’re buying and selling at $1 or beneath $1 for a protracted time period, it’s actually arduous to come back out of that,” he stated. “And it doesn’t imply that the property are dangerous. It simply is difficult 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 guide, 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 progress has “slowed to a crawl, they lack a transparent plan to profitability, and function in an more and more aggressive market,” he stated.
Finally, 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 want to simplify their advantages ecosystems and to make sure their workers and plan members really use the providers they’re providing,” she stated. “At present, 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 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 somewhat, pulls collectively the facility of scientific consultants, trendy know-how and help to interact folks throughout all scientific, monetary, and administrative wants ongoing,” stated Owen Tripp, CEO of Included Well being.
When requested what the identify of the mixed firm can be, Transcarent informed MedCity Information that these particulars can be decided by means of the mixing course of. Tullman can be CEO of the brand new entity, whereas different management selections, together with the destiny of Accolade CEO Rajeev Singh, can even be evaluated in the course of the integration.
Tullman informed MedCity Information that his final aim by means of the acquisition is to offer members with “one place to go for immediate solutions about their advantages, help for his or her well being selections, and on-demand entry to care.” They can even obtain “extra personalised 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 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.”
Finally, 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 nicely happen this 12 months — the continued consolidation of level options on the earth of digital well being.
Photograph: designer491, Getty Pictures