09 January 2022 |

Vocera Strykes a Deal

By Jared Dashevsky, MD

HEALTH TECH

Vocera Strykes a Deal

Medical device company Stryker will acquire digital communications platform Vocera for $3 billion. Stryker’s acquisition of Vocera is a step outside of its typical medical device arena but may highlight a new trend of “outsider” companies buying digital health companies. 

The Deets

Vocera is a leading platform in digital care coordination and communication. The company’s software improves efficiencies, leading to better patient care and safety—which is a critical focus in hospitals given the number of medical errors every year. While Stryker mainly produces medical technology for surgical specialties, the company focuses on patient safety and improving patient outcomes. One BTIG analyst said

[Vocera] complements Stryker’s Digital Healthcare offerings and further engenders Stryker as a leader in patient safety tools that are used commonly throughout healthcare (particularly within hospitals).

Currently, over 2,300 healthcare facilities use Vocera’s solutions. Vocera was expected to drive around $230 million in revenue in 2021 (TBD).

My Thoughts

Living life as a medical student in the hospital, I hear nurses, residents and doctors using their Vocera’s nonstop. I fall asleep hearing Vocera’s notification tones (anyone else?). I believe Stryker’s acquisition of Vocera is strategic given that the company wants to advance its focus on patient safety during a time when hospitals are inundated with patients (read: a lot of room for errors). Stryker isn’t the only company that sees Vocera’s potential—in November, Amazon teamed up with Vocera to integrate the Vocera platform into Alexa to improve the patient experience. 

BUSINESS

New Data: Hospitals Show Positive Revenue Gains in November 

New hospital performance data from November show improvements in revenue and operating margins as hospitals struggle with labor and supply chain shortages. 

The Deets 

Kaufman Hall’s National Hospital Flash Report found the following: 

  • Operating Margins increased 8.1% on average this past November compared to October, but dropped 22.1% on average compared to November 2019. 
  • Discharges declined 4.8% on average this past November compared to October, while average length of stay increased 0.8%. 
  • Gross Operating Revenue declined slightly from October to November but increased nearly 15% year-over-year. The decreased revenue is likely due to lower hospital volumes in November. 
  • Labor expenses per adjusted discharge declined 1.2% from October to November but are up nearly 20% compared to November 2019, likely due to labor shortages.

My Take

I’ll denote November 2021 as “pre-omicron.” The increase in operating margins may signal that hospitals’ fiscal strength is beginning to recover from two years of struggle. However, pre-omicron is nothing like the December of omicron when hospitals operated (and still are operating) at capacities comparable to early pandemic levels. 

While I imagine hospitals will see an uptick in gross operating revenue from the influx of patients, per-patient expenses will damage hospitals’ bottom line. Labor and supply chain shortages likely account for high per-patient expenses. Furthermore, healthcare and social assistance workers accounted for 6.4% of the record-breaking 4.5 million people who quit their jobs in November. The labor shortage is a huge and expensive issue that the system is not solving quickly enough. So I’m curious to see how the December of omicron data compares to that of pre-omicron.

INSURANCE

Molina Healthcare Continues Its Acquisition Spree

Managed care organization Molina Healthcare completed its $60 million buyout of Cigna’s Texas Medicaid contracts. The buyout highlights a greater growth trend in Medicaid managed care as Medicaid programs continue to expand across states. Since the pandemic, enrollment in Medicaid/CHIP has grown by 16%

The Deets

The buyout will add around 50,000 Medicaid beneficiaries to Molina’s patient pool, a number that could bring in nearly $1 billion in additional revenue per year. Molina is no stranger to acquisitions—the company has acquired several other Medicaid companies since 2020: 

  • Magellan Health’s Magellan Complete Care line of business, which brought in 200,000 Medicaid members. 
  • YourCare, which added 47,000 Medicaid members in several New York counties. 
  • Passport, which added 315,000 Medicaid members in Kentucky. 
  • Affinity Health Plan, acquired for $380 million and added 284,000 Medicaid members in New York City, Long Island and Westchester. 

Big Picture

Medicaid enrollment is at all-time highs and Medicaid managed care organizations are trying to get a bigger piece of the Medicaid pie. At the same time, companies like Cityblock are digging deeper in the Medicaid innovation space while women’s health company Maven Clinic is expanding into Medicaid, moving beyond its focus on employer-sponsored insurance. CEO of Caremore Dr. Sachin Jain and Alyssa Jaffee, partner at 7wireVentures, think the Medicaid space is ripe for innovation.

  • Will more startups increase their focus on the Medicaid space this year? 

Join the Discussion

OUTSIDE THE HUDDLE

  • Payment startup Nomi Health acquired health analytics company Artemis Health for $200 million. The two companies have complementary skills and assets that will now combine to form one helluva company. 
  • California will be the first state to require insurers to cover at-home tests for STIs, of which cases have been skyrocketing since before the Covid-19 pandemic began.
  • United Healthcare won’t be implementing its controversial policy to deny coverage for ER visits it deems non-emergency. It had already been delayed. It had already been delayed last summer following significant backlash.
  • 4.5 million people in the US quit their jobs in November, the highest ever. The average quit rate is 3%, but healthcare specifically had a rate of 6.4%. 
  • We will have no shortage of FDA approvals to report on in 2022, here are some of the earliest decisions expected involving a handful of cancer and HIV drugs.