Medtronic Makes Smart Move In Buying Disease Management Firm For $200M

More than a year ago, this article I wrote about Medtronic speculated whether one day the device maker would be known as a population management, patient monitoring and diagnostics company.

The Minnesota firm, with a storied history in implantable heart devices, took a step in that direction Monday when it announced that it had completed the acquisition of disease management firm Cardiocom, a telehealth services firm, for $200 million in cash. Medtronic did not have to look far to make the acquisition - in fact Cardiocom is based in Chanhassen, Minnesota. It makes products like the Telescale, which is used to remotely monitor patients with heart failure.

The acquisition, while not that large, is an important one because it underscores that management fully recognizes the inexorable path on which healthcare reform and the Affordable Care Act has placed them. In a world, where hospitals are going to be rewarded for keeping people healthy and costs down, a business model that largely is based on providing a complex widget to fix the person when they fall sick, and charges a premium for it, is unsustainable. 

In order to be relevant in that future, Medtronic needs to be A player in the continuum of care. Ishrak himself admitted as such in the news release announcing the acquisition.

The following sentence in the press release is also notable in the way it demonstrates the philosophical core that Medtronic is shifting toward.

Medtronic's first focus in using Cardiocom's expertise will, not surprisingly, be in heart failure. Heart failure readmissions is a thorny problem that hospitals are facing nationwide. The Centers for Medicare and Medicaid have been penalizing hospitals where patients - including those treated for heart failure - are readmitted for treatment within 30 days of discharge.

Cardiocom's expertise appears to be in reducing that readmission rate.

"The synergy between our technologies and Medtronic's large presence with hospitals, physicians and payers will dramatically increase our distribution channels for the Cardiocom patient management technologies and services. Our approach to care coordination and telehealth services has allowed customers to reduce the overall cost of care, primarily through reduced hospitalizations," said Daniel L. Cosentino, vice president and general manager of Cardiocom at Medtronic, and former CEO of Cardiocom, in the news release.

 -- By Arundhati Parmar, Senior Editor, MD+DI
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