A outstanding marriage is going down on the planet of digital well being: Transcarent has claimed Accolade for $621 million. However that is under no circumstances a wedding between equals, provided that the latter is taken non-public after faltering in its aim of attaining profitability.

Throughout the pandemic, shares of healthcare navigation firm Accolade traded at practically $60, a far cry from final 12 months, when shares formally fell into the only digits. The Seattle-based firm affords digital major care and psychological well being care, in addition to knowledgeable medical recommendation, along with care navigation, and primarily serves self-insured employers.

Transcarent, in flip, is understood 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 these in search of surgical procedure or oncology care. The San Francisco firm jumped in to purchase Accolade, profiting from its diminished standing. In 2022, Accolade misplaced its main buyer Comcast, which hit the corporate arduous, based on Christina Farr, managing director at consulting agency Manatt Well being.

The truth is, Accolade's inventory is up 110% from the inventory's closing 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 CEO Glen Tullman, who is maybe greatest identified for closing a mega digital healthcare deal in August 2020, an $18.5 billion merger with Teladoc that everybody initially cheered. However since then, the mixed firm has largely struggled to realize traction. Within the first quarter of 2022, Teladoc took a whopping $6.6 billion to jot down down the worth of the Livongo acquisition.

Will an analogous destiny befall the 2 firms that collectively serve 1,400 employers and payers? The quick reply appears to be 'no'.

Tullman didn’t handle Livongo after the takeover, so “no matter occurred after the takeover” can’t be mentioned [Tullman’s] ft,” mentioned Michael Greeley, co-founder and common accomplice of enterprise capital agency Flare Capital Companions, and a revered trade veteran.

One other trade follower echoed Greeley, explaining that the Teladoc-Livongo merger was finished was really a hit for those who had been a Livongo shareholder. That deal, together with the Transcarent/Accolade deal, is one other instance of “Glen Tullman possessing that rarest of strategic abilities: the power to find out when to purchase or promote a healthcare product,” mentioned Seth Joseph, founder and director from a healthcare consultancy agency. Summit Well being Advisors.

Different belongings not too long ago bought by Transcarent have been profitable, says Alyssa Jaffee, accomplice at 7wireVentures, noting the buying a part of 98point6. That has “finished very properly, with spectacular buyer retention and nice outcomes for members and clients,” Jaffee mentioned.

An analogous infusion of recent capital to show round useful however careworn belongings is repeated within the Accolade deal.

“I believe one thing like it will present some capital and permit them to broaden into different areas which may have a unique margin profile, that is smart,” Farr mentioned of Accolade's prospects below Transcarent.

She famous that given 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 means into Accolade's capabilities after Transcarent takes the corporate non-public.

Accolade's curiosity in promoting is probably going a recognition amongst Accolade's traders that turning round an organization within the public markets is a difficult activity.

“I believe it's a top quality asset, however for those who're buying and selling at $1 or under $1 for an prolonged time frame, it's very troublesome to get out of there,” he mentioned. “And that doesn't imply the belongings are unhealthy. It's simply troublesome 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 sellout for Accolade, it’s a “signal of the instances.” Accolade has tripled its income in 4 years and has greater than $200 million in money, however the firm's progress has “slowed to a crawl, they lack a transparent plan to develop into worthwhile and are working in an more and more aggressive market ” he mentioned.

In the end, the 2 firms are extremely complementary, Jaffee famous.

“Accolade is a frontrunner in healthcare advocacy, knowledgeable medical recommendation and first care, which can now be mixed with Transcarent's AI-powered WayFinding capabilities and their healthcare experiences (surgical care, most cancers care, weight well being) and pharmacy advantages. “Employers and well being plans wish to simplify their advantages ecosystem and be certain that their workers and enrollees really use the companies they provide,” she mentioned. “At this time that’s lacking amongst level options, and Transcarent clearly believes that making a next-generation 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 much-needed personalised all-in-one method to healthcare, one which strikes from treating an individual as a 'affected person' for medical must then treating an individual as 'member' for advantages wants; however moderately brings collectively the ability of medical consultants, fashionable expertise and assist to have interaction individuals throughout all medical, monetary and administrative wants,” mentioned Owen Tripp, CEO of Included Well being.

When requested what the identify of the mixed firm can be, Transcarent instructed MedCity Information that these particulars can be decided through the integration course of. Tullman will develop into CEO of the brand new entity, whereas different management choices, together with the destiny of Accolade CEO Rajeev Singh, will even be evaluated through the integration.

Tullman instructed MedCity Information that his final aim with the acquisition is to offer members with “one place they’ll go instantly for solutions about their advantages, assist for his or her well being choices and on-demand entry to care.” They will even obtain “extra personalised and built-in assist for 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 healthcare experiences with Accolade's advocacy, knowledgeable medical opinions and first care, we’re offering a single place for well being and care.”

In the end, the deal, which is anticipated to shut within the second calendar quarter of 2025, is admittedly indicative of what didn't occur as a lot in 2024 as predicted however may very properly occur this 12 months: the continued consolidation of level options. on the planet of digital healthcare.

Photograph: designer491, Getty Photographs