Digital Health M&A Through the Years

2018: The Biggest Year Yet for Digital Health M&A

Digital Health is rapidly transforming Traditional Healthcare. You could see it in this year’s M&A tally recently announced by MobiHealthNews – and at ABL’s 20th ABBY Awards last week. The 54 acquisitions announced this year, were the largest number ever, with highest collective price tag – $7.6 billion for just 13 of them.

And why? It’s incredibly difficult for companies with deep domain expertise – and market share – in traditional markets to segue into another – particularly when it could cannabalize their existing business. A classic example is Kodak burying the first digital camera one of their engineers developed, in 1989.

So it becomes simply a matter of buy vs. make, for companies like:

  • Pharma giant Roche acquiring six year-old oncology EHR software firm Flatiron Health for $1.9 billion – on top of the millions Roche previously had invested a couple of years ago.
  • For traditional retailer Best Buy, purchasing GreatCall’s suite of connected safety products and services for seniors aging in place made perfect sense. So they paid $800 million for it.
  • ResMed, a leading manufacturer of devices for patients with sleep apnea, COPD and other chronic respiratory diseases, bought Propeller Health’s mobile platform that offers sensors, mobile apps, analytics, and services to support respiratory health management, particularly for patients with asthma and COPD.
  • And, some enlightened companies were already committed to digital, like Amazonacquiring five-year-old PillPack – for just under a billion dollars. For Amazon, it was a natural line extension to get into the online pharmacy business.

Four of ABL’s most recent ABBY Award Finalists – at our San Francisco event on December 12th – are still start-ups or early-stage companies. Yet, since all of them are addressing serious healthcare needs – in our increasingly value-based environment, no doubt they’ll likely be Digital Health M&A targets, too.

Founder & CEO David Williams’ Care3 enables team-based care programs – particularly for PACE and Medicaid Managed Long Term Services & Supports organizations – to generate better outcomes, while reducing costs. The Care3 app enables providers andcaregivers to improve collaboration as they track and measure care delivered in patients homes – not just by clinicians, but by the patient themselves, and their family members – all on their phones.

Co-Founder/CEO Jenny Gallagher’s Help-Full addresses the loneliness experienced by 22 million U.S. seniors. Help-Full is a web-based, trusted community network that empowers older adults to thrive as they give and get help, using “time tokens.” Typically, younger members of the community are the “helpers,” being rewarded with a sense of purpose and personal fulfillment as they help seniors with everyday tasks, from cooking to cleaning, to car rides.

Modio’s CEO, Kirk Heath, MD, is a surgeon himself, and ran surgery centers. In both situations he confronted the time-consuming, and repetitive task of credentialing himself and other practitioners. Modio’s OneViewTM is a cloud-based credentialing and career management solution for healthcare providers and organizations. In just four years, it has emerged as a leader in the provider management arena, being named the top-performer in the KLAS 2018 Credentialing Report.

CEO Scott Kim brought both his career in the mobile gaming software industry and his personal experience as a rehab patient to NEOFECT. NEOFECT’s RAPAEL Smart Glove for Home is a high-tech rehab training device. As the patient “plays” games on a tablet, his or her rehab data is uploaded, analyzed, and the training becomes more customized for each patient’s rehab needs. The eight-year-old rehab anytime, anywhere company has already gone public in Korea.

Our fifth ABBY Finalist represents one of those rare companies that was able to innovate inside: George McGregor founded McGregor & Associates 10 years ago. And, based on over 20 years of managing employee Trusts, concurrently became the General Manager of California Schools VEBA – a Voluntary Employees’ Beneficiary Association serving 62 employers, 128 bargaining units, and 132,000 lives, primarily teachersIn recent years, George has established a Performance Network, responsible for saving the Trust $52 million – or 11% of their spend, annually. Yet, an even more impressive innovation was establishing the VEBA Resource Center, to identify and address the behavioral health issues – often first acquired with “adverse childhood experiences” at home – that are frequently the root cause of a medical problem. This Center – both actual and virtual – provides holistic nurses and social workers, in person and online, to address each member’s unique behavioralhealthcare needs, so they can achieve sustainable lifestyle changes, that in turn reduce their medical spend. It was primarily for this innovation in healthcare that George took home the ABBY Award. And, the only reason McGregor & Associates isn’t an M&A candidate nowis that it was acquired this past March by publicly-traded Arthur J. Gallagher & Co.

No doubt we’ll be hearing about even bigger M&A deals in the months and years ahead as Digital Health transforms Health.

by Mimi Grant, President, Adaptive Business Leaders (ABL) Organization – Round Tables and Events for CEOs of Technology and Healthcare Companies