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

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Medtronic Makes Smart Move In Buying Disease Management Firm For $200M
Medtronic buys telehealth product and services firm Cardiocom for $200 million and steps into the world of disease management.

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.

With broad healthcare reform initiatives focused on growing economic challenges, healthcare systems in every region of the world are striving to continuously improve outcomes, increase access, save cost, and improve the efficiency of healthcare delivery. The acquisition of Cardiocom is one step we are taking toward providing a combination of products and solutions that can help address those challenges. With our first integration of this technology focused on heart failure, we will have the unique opportunity to combine our leading diagnostics, therapies and patient management solutions. This combination will strengthen our ability to partner with providers and payers to help them reduce cost and improve quality.

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

As the global medical technology leader in the chronic disease areas of cardiovascular, pain, and diabetes, Medtronic is extending its market-leading technology portfolio to include focused, complementary services and solutions that treat patients beyond those who solely rely on or need implanted medical devices.

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
arundhati.parmar@ubm.com
 

So what does it take to get acquired by a company like Medtronic? Hear from Medtronic's corporate director Conrad Wang at UBM Canon's MEDevice San Diego Conference & Showcase Sept. 
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