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Q3 M&A Roundup: TripleTree’s Take on Select Recent M&A Activity

OCT 9

Healthcare M&A remained highly active in the third quarter of 2015, with several high-profile transactions taking place, led by Emdeon’s acquisition of Altegra Health. As you will see from our analysis of a few significant transactions below, the emergence of value-based payment models is a consistent theme that is driving industry participants to reevaluate their capabilities and close solution gaps in order to help customers manage the transition.


Emdeon Acquires Altegra Health

Target Description:

Altegra Health (Altegra) provides technology and intervention platforms that serve as the underlying infrastructure necessary to enable health plans and other risk-bearing organizations to transition from fee-for-service to value-based payments. Altegra combines data aggregation and analytics with unique, multi-channel engagement capabilities to drive enhanced clinical and financial outcomes by optimizing risk-adjusted reimbursement, ensuring accurate payment and data submissions, managing quality measurement and reporting, and identifying, engaging, and assisting health plans’ highest-value members. These capabilities are extremely important for any risk bearing organization that is responsible for reimbursement, especially as they transition from fee-for-service to fee-for-value payment models. (Disclosure: TripleTree advised Altegra Health in its acquisition by Emdeon.)

TripleTree Perspective:

Emdeon recognizes that the market is shifting to value-based care and believes that its tremendous data capabilities, built through its vast network and connectivity, provide a platform through which it can help payers and providers make that transition. Altegra represents a significant expansion of Emdeon’s capabilities and offerings for health plans and risk-bearing organizations. The combined capabilities of the two businesses enhance their existing solutions, while creating significant opportunities to develop new products and offerings, particularly in leveraging the data Emdeon possesses through its connectivity with 700,000 physicians, 1,200 payers, as well as many other healthcare organizations.

With its new leadership, investments, and acquisitions (e.g., Change Healthcare, AdminiSource Communications, and Capario), it’s clear that Emdeon has a roadmap to remain relevant in a rapidly changing industry. The Company recently announced its name modification and rebranding under the “Change Healthcare” banner to further signify to the marketplace that it sees itself as an industry leader and change agent for its customers.


Cardinal Health Acquires NaviHealth

Target Description:

NaviHealth partners with health plans, health systems and providers to manage the post-acute segment of the care continuum. The Company was an early pioneer in bringing to market an offering to manage post-acute care for its clients, starting prior to CMS’s launch of the Bundled Payments for Care Improvement (an initiative for payment arrangements that include financial and performance accountability for episodes of care). While it initially gained traction with Medicare Advantage and Medicaid plans in controlling their post-acute spend, it has since emerged as a leading convener in the CMS-led bundled payment efforts with health systems and providers. NaviHealth possessed a technology framework that enabled it to work with its client partners to increase the yield and efficiency of their post-acute care network as well as to support its clients (and their network participants) with adequate decision support technology and analytics.

TripleTree Perspective:

Cardinal Health has significantly invested in the post-acute space, primarily through its $2.1 billion acquisition of AssuraMed. This strategy is fitting with the shift to value-based payment models, which extends from hospitals and health systems into post-acute care. This puts Cardinal in an interesting spot as it now sits at both ends of the care continuum (acute and post-acute) and increasingly has integrated capabilities to potentially serve as a facilitator to help health systems improve quality of care and transition to value-based payment models. NaviHealth gives Cardinal expertise around bundled payments which is one of the fastest growing alternative payments models and one that has significant impact on the supply chain, which Cardinal is obviously heavily invested in. NaviHealth utilizes technology-enabled services and proven best practices to align and manage payers and providers throughout the continuum of the post-acute setting, providing Cardinal with broader solutions to be highly relevant under value-based reimbursement arrangements – capabilities that Cardinal’s customers desperately need.

NaviHealth is assuming large blocks of spend from its clients. This is appealing to Cardinal as this can quickly become a large business as the bundled payment program grows.


Inovalon acquires Avalere Health

Target Description:

Avalere Health (Avalere) provides advisory and business intelligence solutions to the pharmaceutical and life sciences industry, as well as managed care companies, provider organizations and other healthcare-related organizations.

TripleTree Perspective:

Recently taken public, Inovalon provides data and analytics technology and services aimed at improving clinical quality and outcomes for payers and providers. For Inovalon, the rationale for its Avalere acquisition is clear. Avalere provides a beachhead into the pharma / life sciences market that can leverage Inovalon’s clinical analytics and data integration capabilities.

Avalere has an established presence in over 200 pharma / life sciences clients, including 13 of the top 15 companies. Inovalon, as indicated in its public filing, has targeted entering the pharma / life sciences market as a growth opportunity given the end-market’s size and perceived linkages to the Company’s data-driven service offering.

Avalere’s business model utilizes research and publication material to identify opportunities to sell targeted business intelligence solutions to its clients. The high-touch, strategic nature of its solution offering delivers access to C-suite and strategy-level personnel within its client base. With Avalere, Inovalon will be able to capitalize on these pharma relationships by offering a broader, more extensive menu of services that address contemporary challenges within Avalere’s existing client base (pharma / life sciences and beyond). In addition, Avalere’s presence within managed care companies creates an opportunity for cross-selling within shared clients given the combined breadth of pain points the two organizations are working to address.

Avalere has always positioned itself as a data-intensive advisory partner, in comparison to other major consulting / advisory firms that serve the same client base, and the combination with Inovalon gives it further validation to substantiate this claim.


Qualcomm Life (Qualcomm) acquires Capsule Technologies

Target Description:

Capsule Technologies (Capsule) delivers a suite of medical device integration and clinical data management solutions to hospitals. The Company’s solution offering translates data from various medical devices and integrates it with the requisite clinical information systems to facilitate more efficient care decisions by enabling a more robust set of critical patient information for providers to access in real-time.

TripleTree Rationale:

Qualcomm has always believed it has a significant opportunity to improve connectivity and communications across healthcare. Within its healthcare division, QualcommLife, the acquisition accelerates Qualcomm’s healthcare connectivity strategy and provides a pathway into playing a more significant role within the industry. The combination possesses natural synergies between Qualcomm’s wireless expertise, existing device integration hub (2net), and care collaboration workflow technologies (Qualcomm HealthyCircles) and Capsule’s leadership in clinical data connectivity and integration.

Qualcomm recognizes that care episodes extend beyond an acute care interaction and that care continuity requires consistent patient connectivity in both the acute care and the post-acute care setting. Having already established a presence in post-acute / home-care settings with 2Net and HealthyCircles, Capsule provides a natural bridge into the acute care setting. Interestingly, now with the capabilities acquired from Capsule, QualcommLife possesses perhaps the largest connected network to support hospitals and health systems in managing care across multiple settings along the care continuum. As this occurs, Qualcomm has a unique competitive position as a vendor-neutral resource for connectivity, integration and analytics.

TripleTree will be actively monitoring these (and other) moves given their disruption potential. There are many well-capitalized firms chasing several large, unfolding market opportunities in healthcare (e.g., value-based care, expansion of managed government programs, heightened compliance requirements). Therefore, we anticipate that the pace of M&A activity will continue amid a relatively healthy capital market environment.

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Nick Wardell
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Caitlin Green