Medtech companies focused on acquiring firms that save hospitals money

Hospitals and healthcare providers are focused on cutting costs--to the point that it is driving mergers and acquisitions (M&A) in the tech sector, according to Bloomberg BNA.

Medtronic, Abbott Laboratories and Stryker Corp., all have entered into deals to acquire companies that focus on improving efficiency and cutting costs in healthcare delivery, according to the article. Medtronic acquired Bellco, which manufactures systems that can spot sepsis for undisclosed terms; Abbott acquired laboratory test platform maker Alere for $5.8 billion; and Stryker acquired Sage Products, which manufactures products that help reduce surgical mistakes, for $2.8 billion.

The pressures in the hospital sector are numerous, but include a movement toward value-based payments, and group purchasing for hospitals causing consolidation among suppliers. Nearly 60 percent of medical practices currently accept at least one alternative payment model. Meanwhile, the Centers for Medicare & Medicaid Services is pushing hospitals and other providers to accept bundled payments to perform joint replacement surgeries.

"There is no coincidence that big players are looking to do deals like this," Dan Shoenholz, managing director and co-head of the healthcare practice at EY's Parthenon unit, told the publication. "The short-term financial environment makes this an attractive point in time, but the fundamental strategic rational is an ongoing and inexorably evolving trend. Virtually any company that's in medical products has to think about where this is going. They need to be evolving their own business model to influence the value of healthcare."

Some of the larger companies have had their eyes on businesses that could save money for providers for many years. In 2009, Stryker acquired a company that assisted hospitals in recycling medical devices.

To learn more:
- read the Bloomberg BNA article