AdaptHealth makes diabetes play, with emphasis on tech

PLYMOUTH MEETING, Pa. - AdaptHealth execs say recurring revenue streams and a focus on connected health care made a recent pair of acquisitions doubly attractive.

The provider last week announced it would pay $425 million for Solara Medical Supplies and $62 million for ActivStyle, extending its reach further into the diabetes and incontinence supplies markets, respectively.

The Chula Vista, Calif.-based Solara, a national supplier of continuous glucose monitors, insulin pumps and diabetes supplies, with annual revenues of about $225 million, was especially attractive, says AdaptHealth CEO Luke McGee.

“This establishes AdaptHealth as a leader in the high growth diabetes market, while continuing to diversify the company's revenue streams and increase its exposure to recurring supply sales,” he said on an investor call announcing the deals. “This aligns squarely with our long-term strategy of delivering connected care solutions in the home.”

AdaptHealth expects to see 20% growth annually in CGMs over the next couple of years, say executives.

“The diabetes market is rapidly adopting CGM and connected devices driven by easier-to-use products and expanding reimbursement,” said Solara CEO Steve Foreman, who will join AdaptHealth. “Over the past several years, Solara has worked to deepen its relationship with Abbott, DexCom, Tandem and the other major diabetic stakeholders, while also building out a national sales force.”

CGMs are also a natural fit in AdaptHealth's strategy to meet the rising demand for increased care in the home, particularly in the wake of the COVID-19 pandemic, says McGee. The company already remotely monitors thousands of sleep apnea patients.

“Why can't we do that across more products?” he said. “We can (eventually) start pairing some of the CGM data with the CPAP. There's an increased demand to put other types of connected technologies like pulse oximeters and blood pressure cuffs in the home—all things that are natural in our supply chain.”

Both acquisitions dovetail nicely with AdaptHealth's growing supplies platform, which it launched when it acquired McKesson's Patient Care Solutions business, and offer cross-selling potential for patients with multiple co-morbidities, says McGee.

“We are in regular monthly contact with sleep apnea patients,” he said. “We'll ask them whether they are diabetic. It's a significant opportunity to make our patient base more aware.”

While ActivStyle's portfolio of incontinence and urological supplies, with an estimated $60 million in annual revenues, is a lower profile business, it will benefit from AdaptHealth's broad reach, says McGee.

“The market is lower- to mid-single digit growth, but if we can use our payers and referrals to diversity their source of inbound customers, we can drive higher growth,” he said.

The deals are expected to close in the third quarter of 2020.