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The Week That Was: Crises In Healthcare Communications

The Week That Was: Crises In Healthcare Communications

May 4, 2016 1 Comment

HOW BILLION DOLLAR DEALS WILL IMPACT YOUR HOSPITAL BILL

Last Thursday, we all learned that big deal making in healthcare is not dead, as Abbott acquired St. Judes Medical and Sanofi made a hostile offer for Medivation. Abbott’s acquisition of St. Jude (if approved) will allow it to bulk up its device business, by bringing St. Judes’ pacemaker and cardiac devices under its umbrella. The Wall Street Journal reports that as insurance companies aim to reduce health-care costs by paying less for physician, and hospital services, they are putting greater discounting pressure on device makers like Abbott. So last week’s deal will allow Abbott to have greater size and negotiating power in the marketplace. It may also better position Abbott for a future when bundled payment for services may be commonplace.

Our Take: Abbott’s move reflects a future in which bundled payments could become a “new norm.” In other words, imagine you go to the hospital for a pacemaker procedure and the physician, the hospital stay, the devices and medicines you received are a ‘bundled’ package all appearing on one bill. The New York Times reported that last month, the Centers for Medicare and Medicaid Services mandated such bundled payments for knee and hip replacements in certain cities. CV and oncology could be next. And if they are, Abbott will be on stronger footing.


 

FRIENOMIES TURNED FRIENDS FOREVA?

An unusually bold move occurred in the hallways of tech sector giants Alphabet and Microsoft last week (No, they are not co-marketing the next iPhone). The bold move was…(drumroll here)… a truce! Newish Microsoft CEO Satya Nadella and Alphabet CEO Sindar Pinchai said in a joint statement, “Our companies compete vigorously, but we want to do so on the merits of our products, not in legal proceedings.” With a simple gesture, the two CEOs, who have a cordial relationship, undid a sweepingly complex series of regulatory complaints around the world. The move comes on the heels of another recent commitment between the two, to cease 20 patent litigations and expensive lobbying campaigns previously aimed at each other. The olive branch efforts are a far cry from the days when former Microsoft CEO Steve Ballmer threw a chair across the room when Google’s Eric Schmidt, stole a member of his executive team. Yikes!

Our Take: In an era marked by more discord than accord, the move by Nadella and Pinchai is a stroke of brilliance. It allows them to put to rest overwhelmingly expensive litigation efforts around the world. But the real takeaway is the power of the conversation and openness. Taking a page from Larry Bird and Magic Johnson, the two CEOs saw an opportunity to forge a relationship and act differently – daring to erase hard lines in the sand for the betterment of their companies. In the end, negotiation trumps litigation.


 

MAYER’S WRESTLING MATCH ENDS…FOR NOW

Last Wednesday, Yahoo CEO Marissa Mayer and Starboard’s Chief Executive Jeffrey Smith ceased their wrestling match for control of the Board. Yahoo reached an agreement with Starboard, committing to add Smith and three of his director nominees to the board. While any activist proxy fight is painful, the concession could’ve been worse –Starboard had originally pushed to replace the whole Board – arguing that Yahoo’s leadership was not pursuing a sale of its assets quickly enough. In giving up majority control of her Board, Mayer ended a proxy fight, kept her job and may potentially be able to follow through on her vision for auctioning Yahoo’s core web assets and determining what to do with the company’s stakes in Alibaba.

Our Take: It is highly unusual to form a successful negotiation in situations when an activist investor seeks to throw out the entire board. But somehow, Yahoo and Starboard did. But now, the two sides face the challenge of working together. Starboard has had a good track record in past shareholder activist adventures, finding ways to ameliorate former enemies. Time will tell if the same pattern will bear out at Yahoo.

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One comment

Chupacabras
2 years ago

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