Healthcare technology company Commure plans to merge with Athelas, a provider of healthcare workflow automation software, to grab a bigger piece of the health system market.
The companies expect the merger to close by the end of October.
As part of the deal, announced Wednesday, the combined company will retain the Commure name and will be led by Athelas co-founder and CEO Tanay Tandon.
Commure’s current CEO Ashwini Zenooz, M.D. will transition into a nonexecutive director role on Commure’s board and will act as a senior adviser to the company. Hemant Taneja, CEO and managing director at General Catalyst and co-founder of Commure, will remain in the role of executive chair of Commure.
Financial details of the deal were not disclosed.
To help boost its growth, Commure is banking a $70 million investment from General Catalyst at a reported valuation of $6 billion for the combined entity, Tandon told Fierce Healthcare in an interview to preview the deal.
"As far as digital healthcare companies go, this is one of the biggest and fastest growing. We're excited to hopefully become one of the central players in the space," he said.
The merger will combine Athelas’ large language model expertise and Commure’s scaled software and hardware solutions, according to executives. The combined company will be able to accelerate the integration of language models and workflow automation technology into larger health systems, Tandon said.
The combined company will have about 800 employees—roughly 300 Commure employees and 500 from Athelas—and will be "hiring aggressively" as it looks to scale up, he noted.
Language models are "transformational" technology with the potential to bring innovation to healthcare and streamline tasks for the industry's massive workforce, Tandon said.
"It's clear that there's going to be definitive, enduring businesses built during this time that transform the economy. At its core, healthcare is about treating Americans, the sickest and most chronically ill patients. But on the flip side, there's also a story of American labor. I think with language models, for the first time, we have a chance to go superpower those clinicians and back office administrators," he said.
Commure, a company hatched by General Catalyst in 2017, was created to establish a common healthcare infrastructure, and its hardware and software solutions include its Strongline workforce badging system to improve staff safety and AI-enabled workflow and revenue integrity solutions. Commure has built a unified platform that aims to connect a range of point solutions, provides clinicians with access to data at the point of care and optimizes the efficiency and effectiveness of healthcare businesses, according to the company.
In 2021, Commure bought physician workflow software maker PatientKeeper from HCA Healthcare. That solution touches about 30 million patient appointments a year, according to Tandon.
The company currently reaches more than 160,000 clinicians and staff across more than 500 care facilities. With Athelas in the portfolio, Commure will add thousands of clinicians and over 100,000 patients to its national network.
Commure reported 550% growth in annual recurring revenue and is on track to achieve $100 million in contracted ARR in the fiscal year ending Jan. 31, 2024, executives said.
Athelas, launched in 2016, develops software and sensor products to improve healthcare workers and has focused more on small and medium-sized healthcare practices.
"Athelas has, from the get-go, been focused on applying the latest advances in computer vision and machine learning language processing into healthcare. Athelas' core focus is a revenue cycle platform combined with a series of modules for remote monitoring and internet-connected devices for telehealth," Tandon said.
Athelas aims to develop the next generation of medical products at the intersection of hardware and software, including LLM-powered tools that drive efficiency in health systems by streamlining the revenue cycle and transcription process for medical professionals. The company also has developed two FDA-cleared medical devices.
The company reports 450% revenue growth over the last three years.
Commure will have a $110 million "run rate" post-merger and is on track for a $150 million "run rate" by the end of the year, Tandon said.
"Both companies have north of five years of runway," he said. "What's exciting is that these are businesses that were on track to independently go public in the next two years."
Commure has its sights set on an IPO, Tandon said.
"Going public is the right outcome for this business. When you think about a workflow automation and a healthcare AI business, it's unique enough that it deserves to be a standalone company to achieve its ambitions," he said. "If I was to give a timeline right now, I'd say it's two to three years away. It could be faster. We have the numbers to go faster but you want to obviously take into account the market timing, you want to take into account when the business and its personnel are ready for that challenge, but two or three years feels like we're ready to go."
As a combined company, Commure aims to drive long-term value for hospitals and healthcare systems by building enduring, scalable solutions for customers driven by automation, executives said. The company plans to pursue strategic, organic and inorganic growth opportunities.
“This is a critical inflection point in the life-cycle of Commure and for the healthcare industry at large – this brings together two thriving companies that can speed up the process of introducing healthcare innovations to healthcare providers and patients in the United States,” said Zenooz, departing CEO and now senior adviser at Commure, in a statement.
Combined, Commure and Athelas are backed by General Catalyst, Sequoia, Lux, Human Capital, 8VC, Greenoaks Capital and Elad Gil.
Cooley LLP served as legal adviser to Commure while Belcher, Smolen & Van Loo LLP served as legal adviser to Athelas.