Dive Brief:

• Sleep apnea company ResMed announced Monday it has signed a definitive agreement to buy MatrixCare, a private long-term post-acute care software company. The deal, worth $750 million, will be funded "primarily with [ResMed's] credit facility," and is expected to close by the end of the second quarter of ResMed's FY 2019.
• ResMed believes the acquisition will augment its existing software-as-a-service (SaaS) offerings such as Brightree and HEALTHCAREfirst. 
• A Jefferies analyst note suggests that $750 million price tag is "not cheap," adding that ResMed is paying the price for cost of entry into the market. 

Dive Insight:

ResMed SaaS sales jumped 25% in the company's first quarter compared to the previous year off of growth for Brightree and the acquisition of HEALTHCAREfirst. CEO Michael Farrell said on the company's fourth quarter 2018 earnings call that the two in tandem help ResMed expand into a swiftly growing home health and hospice market.

"The combination of Brightree and HEALTHCAREfirst capabilities will allow us to drive further enhancements and innovation for home health and hospice customers, ultimately increasing the business efficiency of our provider customers and improving outcomes for our patients," Farrell said.

It appears that MatrixCare is the latest addition in the company's build out into the space, even though the synergies between a sleep market device player and SaaS may not be immediately apparent. Currently, devices and masks contribute more than 90% of its sales despite the SaaS growth. But Jefferies has a guess as to how ResMed plans to utilize its software unit. 

"The answer in our mind is to build a connected device ecosystem around Mobi, the co's recently launched portable oxygen concentration, similar to how Brightree/AirView/myAir is structured around the co's sleep therapy solutions (AirSense/ AirCurve). More specifically, MatrixCare will likely serve as a beachhead for the co's various respiratory offerings (Mobi/Astral/Stellar) given its expansive install base (13k facilities, 2.5k home settings)," the Jefferies note states.

The MatrixCare software includes an electronic health record that includes "point of care, lead and referral management, claims processing, payroll and nutrition management."

"By establishing a technology footprint across these major care settings, ResMed will drive an integrated ecosystem of solutions, such as maintaining single-patient records across multiple care settings, generating analytics and insights that can be applied to individuals and whole populations, and streamlining processes for healthcare providers across the care continuum," ResMed SaaS president Raj Sodhi said in a press release.

ResMed said MatrixCare will operate as a standalone business once the transaction is completed, with no changes to its management.