Amwell, a telehealth company which went public recently, is following the well-trod path to try to convince investors it has a business which justifies the valuation by buying two other companies with iffy futures. One is Conversa Health, which helps providers with health messaging and visits, and the other is SilverCloud health, which does virtual mental health visits. To show you how desperate these newly public companies are, Amwell is paying $320 million for businesses which have a combined $15 million in revenue this year. That's right, lets pay over 20 times revenue.
More indications of M & A froth. Health Catalyst, a database and analytics firm, is buying Twistle, which offers patient engagement software, for $104 million. Health Catalyst, which has generally floundered since going public, and still loses lots of money, clearly is trying to find some way to add sizzle to its business.
Primary care has been all the rage for several years, with a slight interruption by the epidemic. We are beginning to see more deals for primary care businesses, as Cano Health, which offers care to Medicare patients and recently went public, says it is buying University Health, a primary care network in South Florida, for $600 million.
Now this merger makes a little more sense. One Medical, which offers primary care services through clinics and contract arrangements, is buying Iora Health which operates primary clinics for commercial and Medicare patients. The transaction is all stock, $2.1 billion worth, so no cash to Iora owners, which is interesting. The primary care market is getting competitive.
Remember what I said about these times when too much capital is floating around and valuations get absurd, so you see a lot of companies who know they can't grow into their valuation starting to all merge together. Here is an example. Carbon Health, which offers in-person and virtual primary care, is buying Steady Health, a vendor of disease management services.
Gastro Health is a rollup of gastroenterology practices across the country by a private equity group. This is a common practice which contributes to consolidation, high prices, high utilization and no improvement in quality. These private equity groups then sell the entity to another PE group to provide a lucrative exit and on we go. In this case the Ontario Employees pension plan is the buyer. I am sure they care a lot about health care in the US.
Not the best name for a company given the epidemic, but Ro, which basically sells health products over the internet, is acquiring Modern Fertility. Here is the insanity of current investing. Ro raised an astounding $500 million earlier this year. It is spending $225 million to buy Modern Fertility which offers fertility tests. So the Modern Fertility shareholders are happy because they took their crappy investment and made money, but the Ro shareholders should be livid, because there is no way you get a return on either the $500 million or the $225 million.
Health care is a fifth of the economy. Everyone wants a piece, including Walmart, which just purchased a telemedicine company, MeMD, for an undisclosed sum. Walmart has increasingly added health care services to its original pharmacy business, including in-store clinics. At least with Walmart, health care probably is made more affordable.
R1 RCM, a vendor of provider revenue cycle management software and services, is paying a healthy $300 million to buy VisitPay, which helps patients figure out to pay what they owe for health care services.
Yikes, another non CV item. Change Healthcare, which offers a variety of health care analytics and administrative services, is buying an e-prescribing business for $213 million and selling one analytics unit to Kaufmann Hall.
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].