A notable marriage is occurring in the world of digital health: Transcarent has claimed Accolade for $621 million. But by no means is this a marriage of equals given how the latter is being taken private after faltering in its aim to achieve profitability.
During the pandemic, care navigation company Accolade’s stock was trading at nearly $60, a far cry from all of last year when the stock formally sank into the single digits. The Seattle company offers virtual primary care and mental health, as well as expert medical opinion, in addition to care navigation, and serves primarily self-insured employers.
Transcarent, for its part, is known for its use of generative AI to simplify healthcare navigation by integrating benefits information, clinical guidance, and care delivery into a single platform — especially for people seeking surgery or oncology care. The San Francisco company has swooped in to purchase Accolade, taking advantage of its diminished stature. In 2022, Accolade lost its marquee customer, Comcast, which hit the company hard, believes Christina Farr, managing director at consulting firm Manatt Health.
In fact, Accolade’s stock has jumped 110% over its closing stock price on Tuesday, so investors are already seeing the merger as a winning move. But is that an indication of future success? After all, the transaction is being led by Transcarent’s CEO, Glen Tullman, who is perhaps best known for engineering a mega digital health deal back in August 2020, an $18.5 billion merger with Teladoc that everyone initially cheered. But since then, the combined company largely struggled to gain traction. In fact, in the first quarter of 2022, Teladoc took a whopping $6.6 billion charge to write down the value of its Livongo acquisition.
So will a similar fate befall the two companies that collectively serve 1,400 employer and payer clients? The short answer appears to be “no.”
Tullman wasn’t running Livongo after the acquisition, so “whatever happened post acquisition” can’t be “put at [Tullman’s] feet,” said Michael Greeley, cofounder and general partner of VC firm Flare Capital Partners, and a respected industry veteran.
Another industry follower echoed Greeley, explaining that the Teladoc-Livongo merger was actually a success if you were a Livongo shareholder. That deal, along with the Transcarent/Accolade deal, is another example of “Glen Tullman having the rarest strategic skill: the ability to identify when to buy or sell a healthcare asset,” said Seth Joseph, founder and managing director of healthcare consulting firm Summit Health Advisors.
Other assets bought by Transcarent recently have been successful, said Alyssa Jaffee, partner at 7wireVentures, pointing to the company’s purchase of a part of 98point6. That has done “very well, with impressive client retention and great outcomes for members and clients,” Jaffee said.
A similar infusion of new capital to turn around valuable but depressed assets is the story being repeated in the Accolade deal.
“I think something like this, that kind of provides some capital and allows them to expand into some other areas that maybe have a different margin profile, that makes sense,” Farr said of Accolade’s prospects under Transcarent.
She noted that with Transcarent’s focus on AI through its WayFinding navigation product, it will be interesting to see if AI makes its way into Accolade’s capabilities after Transcarent takes the company private.
Accolade’s interest in selling is likely an acknowledgement among Accolade’s investors that turning a business around in the public market is a challenging task.
“I think it’s a quality asset, but once you’re trading at $1 or below $1 for a prolonged period of time, it’s really hard to come out of that,” he said. “And it doesn’t mean that the assets are bad. It just is hard to do that in the public context.”
[Greeley is technically wrong — Accolade’s stock never traded at $1 or below it but the spirit of his statement stands given before the transaction was announced, it was trading around $4 — in the penny stock category as defined by the Securities and Exchange Commission]
Joseph, the healthcare consultant, noted that while it’s not accurate to call this deal a fire sale for Accolade, it is a “sign of the times.” Accolade has tripled its revenue in four years and is sitting on more than $200 million of cash, but the company’s growth has “slowed to a crawl, they lack a clear plan to profitability, and operate in an increasingly competitive market,” he said.
Ultimately, the two companies are highly complementary, Jaffee noted.
“Accolade is a leader in health advocacy, expert medical opinion, and primary care, which will now be combined with Transcarent’s AI-powered WayFinding capabilities and their care experiences (Surgery Care, Cancer Care, Weight Health) as well as pharmacy benefits. Employers and health plans are looking to simplify their benefits ecosystems and to ensure their employees and plan members actually use the services they are offering,” she said. “Today, that’s been lacking among point solutions, and clearly Transcarent believes creating a next generation platform is the answer.”
Even a competitor of Accolade and Transcarent — navigation company Included Health — is applauding the deal.
“We see Transcarent’s acquisition of Accolade as validation of the much needed personalized all-in-one healthcare approach, one that does not pivot from treating a person as a ‘patient’ for clinical needs to then treating a person as a ‘member’ for benefits’ needs; but rather, pulls together the power of clinical experts, modern technology and support to engage people across all clinical, financial, and administrative needs ongoing,” said Owen Tripp, CEO of Included Health.
When asked what the name of the combined company will be, Transcarent told MedCity News that these details will be determined through the integration process. Tullman will be CEO of the new entity, while other leadership decisions, including the fate of Accolade CEO Rajeev Singh, will also be evaluated during the integration.
Tullman told MedCity News that his ultimate goal through the acquisition is to provide members with “one place to go for instant answers about their benefits, support for their health decisions, and on-demand access to care.” They will also receive “more personalized and integrated support across a wide range of health and care needs with the addition of Accolade’s capabilities,” he added.
Singh echoed Tullman’s comments, saying in an email that by “bringing together Transcarent’s generative AI-powered WayFinding and comprehensive care experiences with Accolade’s advocacy, expert medical opinions, and primary care, we are delivering one place for health and care.”
Ultimately, the deal, which is expected to close in the second calendar quarter of 2025, is truly an indication for what didn’t occur as much as it was predicted in 2024 but may well take place this year — the continued consolidation of point solutions in the world of digital health.
Photo: designer491, Getty Images
