ACO Update September 2012 – Accelerating Vendor Consolidation and Capital Formation

SEP 30

As regular watchers of the ACO market we noted some meaningful developments over the past few weeks.  First, a recent survey by Black Book Rankings gave one of the first estimates that we’ve seen of a market size for ACO enabling technology, pegging the market at $500m in spending in the first year.  This survey was based on responses from over 300 ACOs in 46 states, suggesting that Leavitt Partners June 2012 estimate of 221 ACOs in the U.S. is already out of date.

In truth, estimating the market size for this opportunity will continue to be a challenge.  While there is a measurable number of true “ACOs” – CMS has named a total of 154 organizations covering 2.4m lives as Medicare ACOs – the acronym is quickly morphing to include everything from the formal Shared Savings designated ACOs to various shades of “ACO-Like” risk-sharing relationships between all types of provider and payer organizations.  We’ve continued to watch with interest the various ways that commercial insurers are approaching this market, with Blue Shield of California stating just this week that they intend to collaborate in 20 ACOs in California by 2015.

As we have noted previously, there are many small to medium-sized technology vendors that rebranded in 2012 to capitalize on the ACO opportunity.  And while it’s difficult to separate what is real traction from the flurry of press releases, we can certainly point to a few recent news items as proof of a “there” there.   DiagnosisOne’s recent acquisition by Alere as well as Medventive’s acquisition by McKesson are markers of real activity.

In fact, the ACO opportunity has already driven meaningful capital raising activity and consolidation via M&A.  While many interesting specialty vendors dot the landscape, if we assume that the IT vendors mentioned in that Black Book survey are the market leaders, what is striking is how few of the vendors mentioned remain independent.  For example:

  • AdvancedMD (acquired by ADP)
  • DiagnosisOne (acquired by Alere)
  • Lumeris (well over $100m raised)
  • Medicity (acquired by Aetna)
  • MedVentive (acquired by McKesson)
  • Phytel (over $20m raised)
  • Practice Fusion (over $70m raised)
  • Valence Health (over $30m raised)



This market is one of the most fastest-developing in the healthcare industry, and we’re working on new research that brings to light some of the key business attributes that may emerge as benchmarks for ACO success.

Let us know what you think.

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Conor Green
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