Over the years, Glen Tullman’s disdain for healthcare players like payers, care navigators and benefits consultants has been well documented. Tullman founded Transcarent in 2020 with the notion that good software eliminates all the friction in the middle, bringing providers and consumers together efficiently thereby reducing employer costs and improving the patient experience. He has declared over and over that Transcarent is not a navigator, likening navigators to obsolete travel agents.
Despite this history, Tullman — ever the savvy marketer — made a rather stunning announcement in January. Perfectly timed with the annual J.P. Morgan Healthcare conference in San Francisco — when healthcare reporters are primed to report on deals big and small — he revealed that Transcarent was buying care navigation company Accolade for $621 million and taking it private.
Wait, whaaaat?!!!
This article will examine how Transcarent has fared in the marketplace since its founding and what could have possibly led to this unlikely marriage between Transcarent, based in Denver and Accolade, based in Seattle. Through a representative, Tullman declined to be interviewed for this article, even after being made aware of the nature of the story. Neither did the company agree to provide a Transcarent customer for an interview. Tullman did not respond to a text. [For those, who don’t want to read this long article, here is a video synopsis]
How can you get from “You can’t navigate a broken system” to buying the largest, if struggling, care navigator? There is irony and a certain kind of hypocrisy in this 180-degree turn. Back in 2021, Tullman, a celebrated digital health serial entrepreneur, provided a detailed rationale for why he didn’t value care navigation. In a joint panel discussion with the big-name healthtech disruptor – Jonathan Bush of athenahealth fame – at the annual HLTH conference in Boston, Tullman said the following [slightly edited for clarity]:
I am not as kind to navigators because I think navigators are yet another step in this process and you can’t navigate a broken system. When we were at Livongo, people would say, ‘We have a navigator and instead of going directly to our people, we go through the navigator.’ When we went directly to people, we got 35, 40% of the people to opt in and when we went through the navigator it was like 12%. It was yet another step and people want simplicity. So the first thing is – you can’t navigate a broken system. If you break glass in a room, if you are in healthcare you’d say ‘I want to clear a little space and then I will hire somebody when I want to walk through the room, [and] they can remind me of the way.’ Most of us outside of healthcare would just sweep up the glass. So that’s what we have to do – sweep up the glass.
[Livongo refers to the diabetes and chronic disease management company that Tullman ran and that he successfully sold to Teladoc for an eye-popping $18.5 billion. It was a historic deal in digital health. What happened to Livongo, thereafter, is a travesty in the world of digital health, though opinions vary on who is to blame. More on that later.]
When Rajeev Singh, the CEO of Accolade, who was also at HLTH in 2021, heard of Tullman’s characterization of navigation, he was emphatic in his opposition to this vision:
“You need navigation teams,” he told MedCity News. “They need to be powered by primary care physicians and mental health specialists who can actually deliver the care and we’ve done so in a virtual model that says, ‘You are going to see a primary care physician, they are going to stay with you through your journey.’”
Singh took exception to the Transcarent model (at least at that time) that charged only when people used the service as opposed to having employers pay for the entire population. It was shortsighted, he felt. He added:
“I think what’s wrong with Glen’s model of only charging for the people who need the help is that people don’t know where to go when they need the help. Glen’s model is after the fact, and that after-the-fact-call-me-if you-need-me model has been proven time and time again to not improve outcomes and not control costs in healthcare. We do charge for the whole population. Models like Glen’s say – ‘I am going to give you a better outcome on that episode of care’ [but the employer is thinking] ‘I bought all these services to improve my episodic care and yet my trend line is going up’ and that’s been true for buyers for the last 25 or 30 years.”
In November 2021, when Singh explained the above to MedCity News, Accolade was in better shape, though the stock slide to near oblivion had begun.
Fast forward to 2024 and Accolade had lost large clients like Comcast, cut its workforce and closed offices to contain costs in a bid to satiate Wall Street. But the company had still devolved to a penny stock. By the end of summer last year, people in the know learned that Morgan Stanley was shopping the company around for a buyer. Tullman swooped in to take the company private in what is largely viewed as a fire sale.
Why would someone who openly denigrated navigation as a legitimate category within the healthcare ecosystem buy the most well-known, although struggling, navigation company? Why buy it for even a penny if it is so outside your vision of healthcare disruption and patient empowerment, let alone for $621 million?
There are two possible reasons:
1) The Transcarent model has utterly failed.
2) Those benefit brokers and consultants, HR professionals and health plan middlemen are so powerful that they shut out Transcarent entirely for making pejorative statements against them, thereby making Tullman a victim of the system he tried to disrupt, forcing him to find his way into the arms of care navigator Accolade.
“The sales team sold very little organically“
Interviews with several people – former employees of Transcarent and Livongo, healthcare executives who have known Tullman a long time, competitors — reveal that Transcarent has fallen well short of the ambitious goal outlined in its tagline: “One Place for Health and Care.”
A former Transcarent employee said that Transcarent’s new business sales target for 2024 was $175 million from self-insured employers and channel partners combined. But the person bets they didn’t achieve that last year.
“I would say that they will have finished out 2024 anywhere between $55 million to $60 million, which is 30 percent to their new business sales goal,” said the former employee, who didn’t know what Transcarent’s total 2024 revenue was and didn’t want to speak on the record because of a nondisclosure agreement.
Leslie Krigstein, vice president of communications and government affairs at Transcarent, declined to provide revenue figures for 2023 and 2024, stating that it is a private company. She noted that the company covers 4.5 million lives and has more than 400 employees.
Transcarent has raised $424 million and has a valuation of $2.4 billion as of March 2024, according to Pitchbook. Fundraising is one of Tullman’s key strengths. Meanwhile, in digital health especially, valuation is quite nebulous, driven by some hard data but also infused by an estimation of future market potential, which in turn is fed by the entrepreneur’s storytelling capability. Anyone who has followed Tullman, especially from his Livongo days, knows that his fundraising and marketing capabilities are legendary.
“Glen raising money is not an issue,” said one former associate. “I mean he could pick up the phone and raise money. He is an amazing storyteller and amateur magician. But like any story and magic trick, sometimes it’s hard to tell what is real and the trick doesn’t work. ”
A former Transcarent employee who left in January 2024, countered this characterization.
“I have heard over many years – ‘Glen’s arrogant, Glen’s this, Glen’s that,’” recalled Jeff Dobro, who was the chief innovation officer of Transcarent. “He’s an aggressive CEO like any successful CEO, but I would tell you personally, I think he’s fundamentally a good person and a good leader. Especially at this point in his career, he’s in it as much for the mission as for making another $18 billion.”
To get anywhere close to that figure in the future, Transcarent needs to demonstrate success in the marketplace today. But the former employee said that the $175 million sales target for 2024 was completely unrealistic and none of the products Transcarent sells has been very successful.
The company’s products include:
- “care experiences,” as referred to by Transcarent, which focus on muscle and surgery care, cancer, weight management and mental health.
- a pharmacy benefit app launched in 2022 in partnership with Prescryptive Health. Another partner is Mark Cuban’s Cost Plus Drugs.
- the AI WayFinding tool, a chat-based software tool launched in May, which is meant to provide answers to employee questions on benefits and can also navigate users to care based on their needs.
Within those diseases mentioned above, any virtual care is powered by a telemedicine platform Transcarent acquired when it bought some assets of 98point6 for about $100 million in 2023. The Surgery Centers of Excellence network, the core Transcarent business around which Tullman has added other products and services over the years, was also acquired. It navigated employees to cheaper places to obtain surgery. This came from Transcarent’s Bridge Health acquisition in 2020.
Despite the variety of products, not much new business was coming in through the doors, the former employee said. The three biggest self-insured clients of Transcarent are Allstate, Apple and Boeing, and Boeing was inherited from 98point6, according to the former employee. An Apple spokesperson did not respond to an email confirming the relationship. The company was not on the list of customers that Transcarent provided.
“They sold very little organically. Most of Trancarent’s clients are from companies Glen acquired and the rest were deals influenced by Glen and/or his friends and investment partners,” the employee said.
This narrative conflicts with what Tullman has said publicly. In the January 8 press release announcing the purchase of Accolade, Tullman was quoted as saying that in January alone, Transcarent added “more than 500,000 members to our platform including some of the most innovative, and respected employers in the world….”
However, no new employer was named in the announcement. Krigstein, Transcarent’s spokeswoman, said UPS, Pilot|Flying J, Navistar, Allstate, Banner|Aetna, Boeing, Chipotle, Chubb and Walgreens are current customers that Transcarent is allowed to name publicly.
Transcarent is excluded from RFPs
While Transcarent flexed its January membership numbers, others shared the perspective of the former employee — Transcarent is performing poorly in the marketplace. They are not getting in front of self-insured employers through RFPs, a key way to win new business.
“There were over 70 RFPs last year in the employer navigation market – they were not in any single one of them,” said a former business associate.
In other words, Transcarent did not even have the opportunity to bid for the business in each of those instances. But even when they were included, they had few wins.
“Of the RFPs they were involved in, they won only 2-3 and those had less than $1 million revenue potential,” said a senior leader at a competing company.
Why were they excluded from RFPs? Here are some possible reasons:
- Tullman has described benefit managers as unnecessary middlemen who are only in it for the fees and not looking out for the interests of employers. Often leveraging his C-suite connections, Tullman would bypass HR and benefits professionals and sell directly to senior executives, upsetting the benefit brokers intensely. They responded by shutting Transcarent off from RFPs.
- Transcarent has multiple products and none of them is great. There’s no singular focus on creating anything best-in-class, making the job tough for sales people.
- The company does not provide advocacy resources for consumers. For instance, if employees or health plan members get a bill they don’t understand, they can’t call a Transcarent customer service representative for help. Unlike larger players in navigation like Accolade, Included Health or Quantum, Transcarent doesn’t have call centers that can help the average Joe.
- Transcarent does very little utilization management on behalf of employers and plans. Let’s say an employee is recommended for back surgery. Companies like Accolade, Quantum and Included Health can perform the analysis to see if the procedure is medically necessary and determine whether all the rules set forth by employers to obtain coverage have been followed. Those companies can work with the employee’s physician and the third party administrator hired by the self-insured employer to reach a decision and communicate that to the employee. Transcarent, if required, can do utilization management but only on an ad hoc basis. It has no formal infrastructure — no team of clinicians who can work with a plan’s claims department and employee’s provider — in place.
The former employee said that of the benefit brokers — the Aons and Mercers of the world — WTW (Willis Towers Watson) had the most animus against Transcarent.
“There was one senior person at WTW. He was the main blocker of Transcarent nationally,” the former employee said.
A WTW representative declined to comment, citing a policy of not commenting publicly on specific companies.
Another former Transcarent employee confirmed such exclusions.
“It’s very true that in 2021 and 2022 it was quite a job to just get included in the RFPs,” the person said. “By the beginning of the 2023 selling season, going into 2024 we were included in every relevant RFP with the six or seven major broker-consultants out there.”
However if the RFPs had requirements asking for the vendor’s ratio of number of employees it would cover to the total number of navigation professionals it had, Transcarent would get “disqualified” because that wasn’t the business model. That repeated disqualification led this former employee to bring up the value of navigation to Tullman, but those concerns did not change the CEO’s mind.
“Glen emphasized, ’We don’t want to be navigators, we want to find a different way to help people.’ But around the beginning of ’24, maybe the end of ’23, employers were telling the C-Suite and Glen that, ‘Our members really are kind of lost out there,’” the person said.
That healthcare, indeed, is riddled with folks in the middle benefiting from opacity in the system is not disputed. In a manner, Tullman was gutsy in calling out the establishment. So, the fact that the benefit consultants routinely blocked Transcarent – if this is true across the board for all major brokers in the country – seems to reinforce the idea that Tullman took on entrenched interests, which had a negative business impact on Transcarent. In other words, he is a victim of the system he aimed to disrupt.
But sources interviewed for this article did not agree with that characterization. Tullman declined to sit for an interview.
“If Transcarent had the best products, the benefit consultants wouldn’t care about what Glen has said and would be more open to battling their health plans and PBMs,” one former employee said. “They’d buy the products at scale.”
The source added that in the surgical centers of excellence arena, competitors like Carrum Health did a much better job than Transcarent when it came to helping employers hold down their surgery-related costs, especially in cancer. A CEO who has known Glen for over a decade similarly said Carrum, Lantern and Contigo Health are all superior to Transcarent in the surgical COE (Centers of Excellence) business. Contigo Health counts Walmart as a client.
A competitor put it like this:“In many deals they’re not even brought in, but when they’re brought in, I mean their total number of wins in 2024 was two-to-three and in almost every single case, the reason they won that deal is because Glen either knew the C-suite or a board member. It wasn’t won because the merit of the solution helped them in the deal.”
The person noted that Transcarent is pursuing too many things and does not have a “best-in-class” product in any of them – they are stretched too thin.
Take a chance on Transcarent
The lack of new business was so worrisome that salespeople were apparently directed to offer performance guarantees in exchange for new business.
“He told all prospective employer clients that if you take a chance on Transcarent, you won’t lose any money on the program, and if you do, there would be financial guarantees on the backend,” said one former employee.
In exchange for the ROI guarantees, the sales people often asked clients for permission to use their names and/or logo in external-facing communications and marketing, this person said.
Meanwhile, Tullman would leverage his business contacts to try and sell directly to customers. The CEO who has known him for more than a decade paints the strategy of selling directly to executives in harsh terms.
“I think Glen preys on the benefits buyers who do not have a ton of resources to understand that there is nothing under the veneer that he is presenting. There is no Transcarent model. They have no NCQA designation, no URAC designation. They have no hard standard accreditation for care management,” the executive said. “He invests a lot of money in political connections and in being part of CEO clubs that give him access to board members that don’t know much about benefits. He is very charismatic and a great marketer.”
The former associate said that lack of a compelling business model is one of the reasons why Tullman tries to bypass benefits professionals.
“He does not like dealing with benefit consultants like Mercer or Willis, who employers often use to vet new technologies and can ask questions that can stop the employer from taking the risks or selecting a vendor or do due diligence on whether something works,” the person said.
The Transacrent-Livongo parallel: “Two turds…”
Leveraging business connections for a successful sale is routine in sales. So, there could be an element of jealousy in what the naysayers say about Tullman’s tactics. He certainly commands attention in the marketplace. He has taken two companies public in healthcare — Allscripts and Livongo — which in themselves are not a mean feat, and has invested in many companies through 7wire Ventures, the venture capital firm he co-founded with Lee Shapiro. He also achieved what no other CEO has — selling a disease management platform for $18.5 billion in the deal that brought Livongo to Teladoc in 2020, a historic deal in digital health.
But it’s what happened to Livongo thereafter — the writedown that Teladoc had to take to offset the purchase given that sales never truly panned out — that irks associates and competitors. Livongo was built bit by bit by cobbling together assets that were not revolutionary by any means, sources said. They argue that the same thing is happening at Transcarent. Take the AI-powered software and telemedicine business of 98point6, which Transcarent bought for roughly $100 million in 2023.
“They were losing 60 cents for every dollar of revenue they made,” said the healthcare CEO who reviewed 98point6 finances before passing on it. “Glen has a pattern of taking distressed, low-quality assets and then slapping a bunch of tech together.”
The “pattern” comment is clearly a reference to Livongo and that overall sentiment was shared by another executive – Jonathan Bush, the straight-talking, potty-mouthed healthtech disruptor. Bush founded athenahealth, was forced out years later, and now leads Zus Health. Ever the garrulous personality, here’s how he described Livongo.
“What was Livongo? It was a fricking [glucose monitoring] company and a coaching company and Glen put it together and said,’No, it’s a diabetes company.’ This company was out there trying to sell these monitors and lumbering along and nobody cared. And it was put together with this big marketing thing [and the story became] ‘No, we’re going to manage pre-diabetes. We’re going to sell it right to the employer,’” Bush said. “Just brilliant. That was a great way of taking two turds and making a chocolate cake.”
Livongo was created out of EosHealth, which made a glucose monitoring device able to connect the user to a diabetes nurse, in which 7wire Ventures had invested. It was renamed Livongo when 7wireVentures acquired it and Tullman became CEO.
Bush said the same story is playing out at Transcarent.
“You buy a surgical center chain and you say it’s not a surgical center chain. It’s Transcarent. Like no, it’s not. It’s a f-ing surgical center chain,” he declared.
When Bush was reminded that he complimented Tullman onstage at HLTH in 2021 for his success in taking two companies public, selling Livongo to Teladoc and for his vision at Transcarent, Bush countered:
“Yeah, I think it’s very important that you write down in your article, ‘Glen Tullman is a really, really successful entrepreneur because he is a really, really good salesman. He’s organized and disciplined and relentless.’ I’m not sure he would mind me saying he’s not particularly interested in building really transformative products.”
But was the failure of Livongo after Teladoc acquired it Tullman’s fault? Some, like Bush, believe “Livongo was a lemon disguised as a Ferrari.” Others put the blame squarely on Jason Gorevic, the then Teladoc CEO who negotiated the deal. Gorevic resigned from the company last April.
“Teladoc grossly overpaid for a company that had $300-plus million in revenue,” said one former employee of Livongo. “They should not have paid more than a few billion. Shame on Teladoc for overpaying. There was no provision in the agreement for senior leadership to be retained. In a few months, key executives were all gone and Teladoc had no idea how to sell the product. Livongo didn’t change or innovate the product for years, and when Teladoc bought it, they didn’t innovate either. The competitors morphed and caught up. Livongo was a good product but it was the same product for six years with little innovation.”
Gorevic didn’t respond to an email requesting comment.
“Glen did a bank heist with the Teladoc deal,” said the healthcare CEO. “Good for him, but people have seen that Livongo was a house of cards. They are not going to be fooled again.”
The senior leader at a competing firm expressed a similar sentiment.
“From my standpoint, I absolutely do not want another Livongo disaster,” this person declared. “I mean, digital health was set back by what happened with Livongo.”
While the above may well be true, it’s important to note that should the deal between Transcarent and Accolade be approved, Transcarent could become a headache for competitors – those interviewed and not interviewed for this article – given Accolade’s footprint in the employer world.
“He is holding his nose and swallowing the deal”
No one disputes that working with employers is hard and that it’s a long sales cycle. It’s much harder for smaller companies like Transcarent to beat incumbents because to get traction you need to show scale. As one former Transcarent employee said, both Quantum Health (founded in 1999) and Included Health (founded in 2011) have been at it for a while and underwent different iterations to morph into what they are today. Accolade, which is more a services-heavy, people-heavy business rather than one powered by tech like Transcarent, was founded in 2007. By contrast, Transcarent was founded only in 2020. So it’s not surprising that Transcarent hasn’t been super successful in the marketplace.
What is surprising is Tullmans’ 180-degree turn on navigation.
It turns out that Transcarent needed Accolade so much that Tullman called Singh, Accolade’s CEO, out of the blue in late July of last year to express his interest in buying Accolade. That was roughly five months before the final deal was publicly announced.
“Glen felt insurance companies needed to go, benefit brokers needed to go and navigators needed to go,” said one healthcare CEO. “There’s some intellectual dishonesty around buying Accolade.”
So, Transcarent clearly wanted to buy Accolade and then presumably do what it has tried with other companies — cross-sell its own products to Accolade’s client base. One such product is the chat-based WayFinding solution. Wall Street analysts noted that WayFinding is doing well in the marketplace, although one former employee and competitor cast doubt on its success.
Transcarent needed Accolade to get scale, to be included more broadly in navigation RFPs. But did Accolade find its way to Transcarent with open arms? Did its board feel the love?
The proxy statement that Accolade filed with the SEC earlier this week shows how Accolade shopped around its business unsuccessfully for months — at one point receiving a bid for $10.30 a share from a company that Accolade itself was initially hoping to acquire. This offer was more than $3 per share higher than what it finally sold for, although by that time Accolade’s share price had declined further. Representatives of Accolade’s board contacted nearly 30 companies and private equity firms but never considered Transcarent as a worthy match. Tullman’s interest was wholly unsolicited.
In fact, Accolade’s board rejected the initial bid of Transcarent, which offered to pay $6 per share for Accolade. Not only was the bid not high enough, but they didn’t have confidence in Transcarent’s financial wherewithal to complete an all-cash deal.
According to the proxy:
“The Accolade Board, including the members of the Special Committee, discussed Parent’s [Transcarent’s] September Proposal, including concerns with respect to Parent’s ability to finance a potential transaction, committed interest, and lack of history successfully completing transactions of the proposed size and nature, determined not to move forward with Parent as a potential counterparty at that time, and directed Morgan Stanley to communicate to Evercore that Parent’s proposal was insufficient for Accolade to engage further regarding a potential transaction.” [Evercore was the financial advisor of Transcarent in this deal]
Ultimately, after a couple of back and forths, the price settled at $7.03 per share for a total deal value of $621 million, the amount Transcarent would pay to take Accolade private. General Catalyst and Tullman’s 62 Ventures are forking over the money in exchange for more equity in the combined company.
“He is holding his nose and swallowing the deal,” said the healthcare CEO referring to Accolade’s Singh. “He does not like Glen.”
After agreeing to an interview through LinkedIn messaging, Singh never responded when directly emailed. Neither did an Accolade public relations professional. As mentioned previously, Transcarent’s Krigstein was made aware of the nature of this article with repeated requests for an interview with Tullman, which were all declined. Tullman did not respond to a text message sent to his mobile phone.
The deal is expected to close pending a vote from Accolade shareholders in the second quarter of this year.
Will the Transcarent + Accolade succeed if the deal is approved?
Regardless of how Transcarent and Accolade ended up in each other’s arms, the real question is this: Will they succeed as a combined entity? Here’s an emailed statement from Krigstein, Transcarent’s vice president of communications and government affairs: “On a combined basis, we are on a path to $1B ARR and double-digit EBITDA margin profitability in three years time.” ARR refers to annual recurring revenue and EBITDA is earnings before interest tax depreciation and amortization.
The responses from outside the company were mixed.
“From the point of view of building a large profitable business, hoping two negatives make a positive is a challenge. The thesis is …one, that you can do a lot of cross-selling because Accolade especially has a very large book of business. And two, you can also cut costs using technology. Yes, the logic is there, but it’s very hard to execute,” said the competitor’s senior executive. “We have examples of Teladoc and Livongo just based upon the same thesis, but it did not work out. I mean what technology does Transcarent have or how can they be much more efficient in bringing Accolade’s costs down when independently both Transcarent and Accolade are bleeding money?”
A former employee echoed the competitor.
“Hard to tell if it will succeed, but I’d bet ‘no.’ Glen has traditionally been very bad at integrating companies, and why would putting together two struggling companies all of a sudden make one successful company?”
Bush said it could be positive for Accolade.
“I mean, Accolade has got a lot of customers and no real leverage. At least now they’ve got a chain of surgical centers that are much cheaper than the big hospitals that they navigate to. Now, I don’t know what percentage of the lives actually sit in a place where you could use that, but it’s an idea. It’s better than what they had.”
Others see the transaction as a natural and smart evolution for Transcarent. The combined company will have anywhere from 10 million to 15 million covered lives, estimated Ryan MacDonald, an analyst with Needham. Another analyst also pointed to that golden word in achieving commercial success in healthcare: scale
“I think with Accolade, the number one thing is that Glen gets this immediate expansion to a lot more lives and clients. And then once you have that scale, I think everything else follows,” said Jailendra Singh, an analyst with Truist Securities. “I am not going to bet against his wisdom.”
Fair enough, but what about the wisdom of betting against navigation and then convincing yourself and an investor to shell out $612 million for it?
Dobro, Transcarent’s former chief innovation officer, put it neatly:
“Markets change, people change. Even though you start with an idea, sometimes it’s not really the right one.”
Quoting economist John Maynard Keynes, he added, “When the facts change, I change my mind. What do you do, sir?”
Looks like Tullman did the same — he couldn’t beat the navigation companies at their game quickly enough, so he changed his mind and joined them.
