Monday, August 2, 2021
Digital health companies are going through a steady consolidation. Startups are merging with other startups. Bigger tech firms are acquiring smaller ones. PE firms are swooping in, not wanting to miss out on all the action. The bottom line seems to be this: the incredible valuations for digital health today are too good an opportunity to pass up if you’re on the sell side of the transaction. The Steve Miller Band has provided me with the perfect tagline for this week’s newsletter.
This past week, Amwell announced it will pay $320 million in cash and stock to acquire Conversa and Silver Cloud, two companies with combined revenues of less than $15 million. The transaction looks small relative to the multi-billion dollar transactions such as Grand Rounds-Doctor on Demand, Teladoc-Livongo or Microsoft-Nuance. However, the pace of M&A and the valuations implied for the purchases of these firms are raising questions among healthcare organizations. Vendor governance has become significantly more challenging for digital health executives in health systems trying to make long-term bets. Many wonder who is going to pay for these inflated prices for startup acquisitions. Is it eventually going to be patients, and are the costs of care going to go up? Or is it all just a bubble? Jessica Kim Cohen of Modern Healthcare interviewed me for this piece on the dizzying rate of M&A in digital health.
Speaking of governance, the success of large-scale digital transformation programs depends on it more than anything else. This article by Nathan Eddy in Healthcare IT News speaks about how Geisinger Health made governance a key to digital transformation. In my upcoming featured session at HIMSS21, I will be presenting along with Karen Murphy, Chief Innovation Officer at Geisinger Health, on their multi-year transformation journey underway.
An emerging trend is healthcare organizations spinning off internally developed capabilities into standalone businesses. Providence Health has led this trend with spinouts of Xealth and Dexcom (I expect more on the way). The latest is Avera Health spinning off their telehealth capability into a carve-out acquisition for a PE firm. Highmark in Pennsylvania has even launched a digital transformation consulting firm to commercialize its internal capabilities with implementing automation. I guess a rising tide lifts all boats.
Have a great week.
Podcast of the Week
In this episode, McKinsey partners Oleg Bestsennyy and Jenny Rost discuss the findings of their recently published report – ‘Telehealth: A quarter-trillion-dollarpost-
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This Week in Digital Health Markets
We are selectively featuring guest posts in our newsletter from senior leaders in healthcare and technology. Reach out to us if you would like to contribute a blog to one of our upcoming newsletters.
Our CEO Paddy Padmanabhan and Geisinger EVP and CIO Karen Murphy to present best practices and learnings from how a large integrated health system is driving a multi-year digital transformation roadmap at HIMSS21 on August 10, 2021 | 1:00PM – 2:00 PM PDT in Room Alliance 315, The Caesars.
Mark your calendar! Event
Damo Consulting Thought Leadership and Research
A booming digital health market, and an elusive trifecta
Health system CIOs are reducing their tech footprint and consolidating their IT systems for agility and efficiency. For digital health startups to succeed in this space, they must get three factors right: cost, scale and quality. Blog
The Digital Health Solution Selection Process
When health systems look for solution partners to execute their digital priorities, the decision process typically looks like this. Infographic
AI-enabled physicians: rethinking care delivery
While traditionally deeply skeptical of artificial intelligence in clinical settings, in today’s fast-changing care delivery landscape many physicians are thinking more proactively about how how AI can improve quality and patient experience. Blog