The deal for the Chanhassen firm will help Medtronic expand into a market that’s expected to grow because of new health care rules.
Medtronic executives have said they want to begin transitioning the medical technology giant into more of a health care service provider, using technology to help manage patient care from admission to outpatient follow-up visits.
On Monday, the company announced that it has taken a $200 million step in that direction, buying Cardiocom, a privately held firm in Chanhassen, to expand into remote monitoring of patients with chronic diseases.
In the area of heart failure alone, which affects 7.5 million people in the United States, only about 13 percent of those patients receive an implantable device, according to Medtronic, which is based in Fridley. Connecting to the broader patient population is an attractive new area for growth, said Mike Genau, Medtronic senior vice president and president of its U.S. region.
“Look at the macroeconomics of health care right now,” he said, pointing to pressure for improving quality while decreasing costs associated with hospital readmissions. “We, as a leading medical device company, really pride ourselves on not only understanding the marketplace but leading the marketplace. This will allow us to extend our reach.”
Medtronic anticipates that it will eventually extend its reach in providing such services on a global scale, Genau said. “We will be able to identify, treat and manage patients through a continuum, regardless of where they are — hospital or home,” he said.
Jeff Windau, an analyst with Edward Jones, said the new direction for Medtronic is a sound strategy for its future.
“It’s great that Medtronic is trying to expand beyond just the world of implants,” he said Monday. “It gets them more involved with patient care. It gets [the company] more involved with the end consumer. This gets them to be a part of the equation to help reduce costs.”
The Cardiocom acquisition is a small step in that direction. According to Medtronic, Cardiocom has about $40 million to $50 million in revenue. But the move will help get Medtronic acclimated to the world of remote patient management, Windau said.
“This will provide lessons to be learned,” Windau said. “But it will take some time.”
Cardiocom’s technology and patient services were initially developed for people with diabetes, but the firm now offers support and technologies to remotely monitor and manage a range of diseases — from cardiac to high blood pressure to respiratory. The market for home monitoring is expected to grow as new rules intended to lower health care costs place pressure on hospitals to reduce the number of patients who return within a month of treatment.
Last August, Medtronic CEO Omar Ishrak told investors that the company’s future success will not only rely on the launch of new products, but will also depend on increasing the value of Medtronic services for a base of customers that includes the people who pay the bills, buy devices and manage patient care — all while reducing overall health care costs.
On Monday, he reiterated that focus in the context of the Cardiocom purchase.
“Health care systems in every region of the world are striving to continuously improve outcomes, increase access, save cost and improve efficiency of health care delivery,” Ishrak said. “The acquisition of Cardiocom is one step we are taking toward providing a combination of products and solutions that can help.”
Medtronic shares closed down slightly, off 15 cents, at $55.22 Monday on the New York Stock Exchange.
James Walsh • 612-673-7428