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$50B Acquisition Complete, Medtronic's New Avatar Launches

$50B Acquisition Complete, Medtronic's New Avatar Launches
Medtronic and Covidien consummate their $49.9 billion deal and offer a subtle but profound change in the way the combined company will do business.

Medtronic is no longer the world's premier medical device vendor.

With the Irish High Court blessing the acquisition of Medtronic and Covidien on Monday, Medtronic plc, now based in Dublin, launched it's new avatar online. Covidien's website now redirects to this new online presence.

Here's how the homepage of Medtronic looked after the $49.9 billion deal closed:

The change in message is subtle but profound.

The new Medtronic, with Covidien in tow, is now a technology and services company. This emphasizes what the old Medtronic's (and the new combined company's) CEO, Omar Ishrak, has been propounding ever since he took the reins of the device maker back in 2011. 

That the company has to get away from the transactional nature of business it conducted in the past where once the sales professional booked a sale with the preferred physician, the job was done.  

These days when the broader healthcare system is being rejiggered to reward value and keeping the patient healthy, selling a widget is good, but not good enough. Starting next year 30% of doctor's pay from Medicare will be tied to the quality of the care they deliver seen through improving patient outcomes. Medicare has already been penalizing hospitals when patients with certain conditions are readmitted to the hospital within 30 days of being discharged.

As as result, hospitals are looking for device and drug makers to partner with them, solve their problems and share in the winnings. Medtronic has already embarked on that path in Europe where it manages cath labs of hospitals in a bid to make them more efficient and share in the savings. At this year's annual J.P. Morgan Healthcare Conference in San Francisco, Ishrak declared that the hospital solutions business in Europe is growing at a nice clip and will bring in $900 million over the next five years.

Covidien has been involved in similar relationships with hospitals. In Minnesota, Covidien participated in a pilot project with Fairview Health Services, where the company's reps became utilization managers and worked with physicians to accurately forecast and manage how much commodity medical equipment should be used by the hospital.

This move away from just selling more to the hospital, to become their preferred technology and services partner is an ethos that both Medtronic and Covidien are trying to develop. 

This is why the new avatar online unveiled Monday recasts Medtronic as a "medical technology and services company."

The belief is that the path to sustained success in a shifting landscape will rely as much on technology innovation that provides true value to patients as well as service excellence that will create loyal and enduring hospital customers.  

[Image Credit: iStockphoto.com user CathyKeifer]  

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