Health IT

Cardiocom acquisition shows Medtronic is serious about expanding from devices to data

merger acquisition word cloudWhen Medtronic announced its acquisition of Cardiocom  earlier this week,  it was a big (and loud) move in shaping the company’s “now we’re a healthcare service provider”  strategy.

But Cardiocom  only makes $40 to $50 million in revenue, relatively small potatoes for a titan like Medtronic.

What does this announcement mean, really, then?  “The importance of continued expansion and evolution of the device companies in how they’re interacting in healthcare, how they’re delivering healthcare,” Daniel Ruppar, Frost & Sullivan Connected Health Global Research Director, said.

That expansion makes Cardiocom, a leader in telehealth, a natural buy. Cardiocom is a population health management telehealth company with heart failure, hypertension and diabetes focus; population management of heart disease particularly makes sense for the company that started with the pacemaker.

“With Cardiocom, Medtronic takes its first step toward building core services and solutions with a company that is established, profitable and rapidly growing,” Cindy Resman, director of public relations for corporate communications at Medtronic, said.

Plus, policies are changing in favor of Cardiocom and companies like it, Ruppar said, specifically telehealth reimbursement requirements.

As population management becomes more and more important, healthcare companies are trying  to stay competitive by investing in technologies and services that  follow the patient across the care continuum, Ruppar said.

Medtronic certainly isn’t the first to jump on this trend. Honeywell HomMed, DaVita-Healthcare Partners, Philips Lifeline–they’ve all been there, done that.

“It’s increasingly important to provide solutions that can transition with the patient from the hospital to home,” Ruppar said. “Remote monitoring space is a key facet of that, and we see the leading business opportunity in the telehealth space overall.”

Medtronic’s (and others’) focus on remote health’s impact on readmissions isn’t just Obamacare buzz. Ruppar said this strategy fits into the company’s overall data strategy to look at effectiveness: it’s a way to manage patients’ health and disease progression while collecting data on both.

The big players are searching for companies to help them bring their current product lines into a cost-conscious, tech-savvy 21st century.

Presumably, Medtronic would use expertise from the Cardiocom team to design telehealth services that work with their many wireless devices. Or, as Resman puts it: “In the near term, Cardiocom will continue to operate independently as it does today, while we begin to explore opportunities for integration with current Medtronic technologies and services.”

More important than the acquisition itself, the trend it symbolizes: the device industry, slow and conservative as it may be, is taking steps toward shifting its business model.

Medtronic’s most recent acquisition shows that the company is taking the shift to effectiveness seriously.

As Daniel Shaywitz  said  at Forbes:

“In my mind, the great thing about medical product companies contemplating getting into the services business–specially if they start owning some of the risk (initially for aspects of chronic disease management, say)–is that this will radically impact the way they view innovation. Rather than asking themselves whether they can convince an external party of the monumental value the latest product, they’ll have to convince themselves–presumably early in a product’s development–that a particular idea truly makes economic sense.”

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