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QUALITY/INDUSTRY: Healthways buys Lifemasters

Over in the disease management world, a little piece of consolidation late yesterday. Healthways is buying Lifemasters for some $307m. Healthways is running at a $400m annual revenue rate and has a $1.75 billion market cap, so that suggests that Lifemasters is less than one fifth of its size, even though it’s apparently been growing fast the last couple of years. (It’s private so there are no official numbers). It’s also been around a long long time (I met the first founder in 1995!) waiting for DM as a market to take off. You can tell that in part from its funders:

LifeMasters Supported SelfCare, Inc. is privately held. Financial backing is provided in part by Intel Corporation, Lightspeed Venture Partners, Pacific Venture Group, Knotty & Co., VantagePoint Venture Partners, SightLine Partners, National Healthcare Services, The Northwestern Mutual Life Insurance Co., J. and W. Seligman & Co., Landmark Partners, ORIX Venture Partners, Siemens, Pacific Life Insurance Company, Cove Investments, Comerica Bank and Lion Investments Limited.

Sixteen different venture investors suggests that a lot of money has gone in over the years, and most of those investors must be tired enough that they are taking the rather thin bird in the hand than the fatter one which apparently was not hiding behind the IPO bush. Still with Medicare getting interested in DM, and the whole market belatedly taking off (Lifemasters is advertising over 60 vacancies on its website), it’s a little curious that they decided to take the offer rather than soldier on alone. Still Healthways stock is down some 5% on the news, so its investors aren’t exactly thrilled.

Anyone know more or have any thoughts?

 

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Larry CoffmanCP Recent comment authors
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Larry Coffman
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Larry Coffman

Healthways has changed its name several times to avoid public scrutiny for its earlier mis-steps as American Healthcorp, and Diabetes Treatment Centers of America. Healthways, in its former identities, allegedly committed significant Medicare fraud and abuse in paying kickbacks to its numerous “Medical Directors” at its Diabetes Treatment centers throughout the US, in order to induce them to increase patient admissions at its client’s hospitals. A “whistleblower” lawsuit was filed over ten years ago by a former manager there and the case is still in litigation. I checked this out and Healthways includes potential liabilities for this in its current… Read more »

CP
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Having worked directly for Ben (back in the days of DTCA), he’s extremely sharp and so far (as would be expected) his batting average is pretty damn good as far as strategic direction and execution. As you may be inferring, there obviously is more there than meets the eye. We’ll just have to wait to see how it unfolds, but don’t be surprised if it exceeds everyone’s expectations as the Healthways continues to diversify and develop a broader reach across Payors AND service-lines
cp