Doubling Down

For any of us that have ever visited a blackjack table, whether at a Las Vegas casino or a charity fund raising event, at one time or another we have been dealt an ace or a face card and immediately increased our bet, “doubling down” figuratively speaking.  Indeed, when we sense that the odds have increased in our favor, the commitment to our hand increases and added investment follows.  In short, our willingness to risk capital is highly correlated to our perceived probability of success.

During the week of August 4, 2014, the healthcare IT sector evidenced the following examples of a “doubling down” of sorts — in the form of strategic bets on acquisitions that were made, ostensibly, with the intent of increasing the odds of success, rather than capitalizing on good luck, like at the blackjack table.

  • Practice Fusion acquired Ringadoc, a provider of next-generation patient-doctor communication tools.
  • Cerner and Siemens signed a definitive agreement for Cerner to acquire Siemens’ health information technology business unit.
  • Premier reached a definitive agreement to acquire TheraDoc, a provider of clinical surveillance software.
  • TractManager acquired MD Buyline, a provider of healthcare analytics and intelligence supply chain capabilities to healthcare providers and vendors.

“Doubling down” by making investments in M&A is a good bet in an environment that is experiencing increased vertical integration by health systems, which enhances the demand for systems interoperability, and increases the preference for one-stop shopping and the need for services to optimize the use of software and analytics.    If you push a pile of chips forward at the blackjack table with the intent of increasing your odds, it’s called a bluff.    In the healthcare IT industry, however, wagering on acquisitions to create scale, enhanced resources and deepened customer relationships, should lead to a winning hand. For those competitors that choose to hold their “business as usual” cards, my advice is to consider folding.