Will 3M’s Health Care Division Again Drive Growth In The Third Quarter?

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3M (NYSE:MMM) is set to report its third quarter results on October 25, 2016. While the revenue growth is expected to be flat over the same period last year, an over 4% gain is anticipated in the EPS.

3m Q3 Pre Earnings

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The most important news to come out of 3M in the third quarter is its acquisition of Semfinder, a Switzerland-based medical coding technology company, and its agreement with Verily Life Sciences (formerly Google Life Sciences), an Alphabet company, to develop new population health measurement technology for managing clinical and financial performance. This reflects the company’s focus on the Health Care segment to drive growth  in the future.

Semfinder is a leading developer of precise semantic coding of medical services, which will enable 3M to accelerate the availability of its 3M 360 Encompass System in countries adopting electronic medical records. While the financial details of the deal remain undisclosed, it will help the company to expand its healthcare portfolio, and enhance its revenues going forward. The computer-assisted physician documentation market is a $4 billion opportunity, which the 3M 360 Encompass System serves. This involves the creation of documentation to support the transition to value-based care, and ensuring the documentation accurately reflects the quality of care provided.

3M 360 Encompass

Hospital miscoding costs the country $11 billion in expenses, while missing diagnosis details results in a cost of $5 billion. Hence, this is an important market for the company. According to JaeLynn Williams, vice president and general manager, 3M Health Information Systems Division, the acquisition will build on 3M’s expertise in healthcare records coding and applied population analytics, and accelerate the development of next generation solutions for healthcare records coding.

The joint technology platform, between 3M and Verily,  will be used to analyze population-level data sets, with the aim of aiding hospitals to get meaningful information, which can be used to improve healthcare quality, while at the same time reduce costs. It combines 3M’s health data coding, classification, and risk-stratification tools, which are used by federal agencies, hospital associations, and state Medicaid agencies, with Verily’s data analytics, software tools, and algorithms, the two companies said. JaeLynn Williams, vice president and general manager of 3M’s health information systems division, stated that this joint technology platform could deliver benefits to clinicians worldwide. This platform also reflects the company’s commitment to driving innovation in this market.

PHM 2015-2020

The platform will aid clinicians to address numerous healthcare challenges, including those associated with maintaining the security and privacy of health data. Furthermore, the platform would also help clinicians to evaluate performance metrics across multiple departments and procedures, as per 3M. It would also include quality and cost measurements, enabling clinicians to be better equipped to gauge trends and make better informed decisions, based on the data at their disposal. The population health management market, a hot topic these days, was estimated at $8.5 billion in 2015 in the US, or 77% of the total global market, according to research firm MarketsandMarkets. It is expected to grow at a compound annual growth of 23.2% till 2020, reaching $31.63 billion worldwide.

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Notes:

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