Today, I’m so excited to share with you all that the Healthy Muse has been acquired by Workweek, and I’ll be writing full-time as a creator on the incredible Workweek team covering the business of healthcare! Here’s my announcement thread.

Even bigger news: After an amazing 4-year run, the name “the Healthy Muse” will be sunset and has been officially rebranded to…Hospitalogy!

Just look at this amazing logo I never could have dreamed of as a solo creator:

Here’s what you need to know: Hospitalogy will be delivered to your inboxes every Tuesday morning and Thursday around noon.

• The Tuesday morning send will be a news-based send very similar to what I already provide – just more in depth on the biggest stories in healthcare.
• The Thursday send will be a deep dive into current healthcare trends and events, similar to the LHC-Optum story I dropped a couple of weeks ago.

Current Healthy Muse subscribers don’t have to re-subscribe – I’ll make sure you’re taken care of.

Along with the regular Hospitalogy content above, I’m super excited to share that current Hospitalogy subscribers will also receive a Sunday newsletter.

The weekly Sunday newsletter will be a joint send between me and Jared Dashevsky, the creator of Healthcare Huddle – a weekly newsletter that curates need-to-know news across the broader healthcare ecosystem.

You may know of him already, but if not, Jared holds a Masters in Healthcare Systems Engineering, is a 3rd year medical student at the Icahn School of Medicine at Mt. Sinai, and I know you’ll love this additional Sunday update.

I really enjoy reading Jared’s perspective. I’ve known Jared for a while now, and he provides thoughtful insights into the clinical, policy, and provider side of healthcare. He sees and writes things through a lense I could never offer.

• For instance, Jared’s criticism of the wearables startup Levels, or his opinion on the decreasing levels of independently employed physicians are written from a point of view that I can’t find anywhere else. I really enjoy reading his thoughts – it’s a unique cross between the business of healthcare and how it affects clinicians.

I can’t tell you guys how excited I am to officially share this news with you. I have one final ask for my readers – bear with me as I figure out the best approach and format for the newsletter editions moving forward. There will be plenty of iterations, kinks, and improvements along the way!

To my OG Healthy Muse subscribers who have stuck with me over the past 4 years – thank you. We’re just getting started.

If you want to show some love for Hospitalogy and this new journey, I’d love it if you shared the newsletter with a colleague or friend! The new link to subscribe is below. 

Subscribe to Hospitalogy here.

Thanks for reading the 143rd – and LAST – edition of the Healthy Muse. I consider it a wonderful privilege to have your readership. You guys are the reason I am where I am today.

Thanks for everything. This is just the beginning!

-Blake Madden
Hospitalogy Creator and Workweek friend

The post The Healthy Muse is now Hospitalogy appeared first on The Healthy Muse.

Happy tax day, you procrastinators.

• Last week in healthcare: Breaking down the Intermountain merger with SCL Health, Optum continues its buying spree in purchasing Kelsey-Seybold, Hims & Hers partnership with Carbon Health, a 7 hospital health system merger in West Virginia, Aveanna’s bad Q4, CMS payment updates, and Memorial Hermann’s urgent care JV with GoHealth. (Link to Last Week’s Edition)
• This week in healthcare: UnitedHealthcare earnings, Carbon Connects with Froedert Health, NPs get full practice authority in New York, Bright Health is exiting 6 markets after a dismal 2021, public health emergency gets extended, and DaVita gets acquitted.

UnitedHealthcare’s Q1

Everyone’s favorite diversified healthcare behemoth reported earnings this week in typical leading fashion for healthcare. UnitedHealthcare posted revenues of $80 billion, double-digit growth for both Optum and UHG. Revenue per consumer grew 33%, and the primary growth driver here continues to be value-based care arrangements as noted by management on the call.

• In fact, Optum expects to add 600k patients under VBC arrangements during 2022, significantly higher than their initial expectation of 500k.

Other notable tidbits I found interesting:

• UHG is on track to grow by 800k more members in its MA segment and 350k more members in its commercial segment
• UHG is seeing popular growth in its virtual-first offerings, as more than 30% of individual market participants are choosing that option. Expect to see a big expansion of virtual-first plans in 2023.
• United is already steering members away from certain post-acute settings like SNFs. In VBC arrangements in Ohio and New York, management touted its ability to decrease admits into these settings by 25%. United’s continued and growing ability to steer members into lower cost settings is good AS LONG AS that patient doesn’t need a more intense care setting that UHG denies. I really hope that isn’t the case here, and this type of trend has significant downstream effects on post-acute providers like Kindred, Select, and Encompass. This is only going to continue as United integrates its recent purchase of LHC Group.
• Notably, United lost 3 customers on the commercial side. Even though everything else is running full-steam ahead for UHG, its commercial book of business seems to be stagnant and a slower growth segment. Is this a chink in the armor, or just part of a broader trend related to Medicare enrollee and individual market growth?
• United is still optimistic and remains committed to its acquisition of Change Healthcare. If you recall, it’s caught up in antitrust review after the AHA called foul.
• As far as overall healthcare utilization is concerned, United echoed similar sentiments to what hospital operators and other providers mentioned – big spike in hospitalizations from Omicron, then fizzled out in Feb/March. UHG mentioned that utilization typically returns to normal 2-3 months after a spike in cases.

Resources:

• UNH Q1 earnings press release (Link)
• UNH Q1 transcript (Link)
• Home Health Care News (Link)

NPs get full practice authority in New York

Physicians hate this one thing! The public health emergency loosened healthcare regulations in several states. One of the more interesting rollbacks relates to practice authority of mid-levels (AKA, nurse practitioners and physician assistants). Historically, NPs had to sign a contract with a physician in order to prescribe medications and were limited in other ways.

• Now, states like Kansas, Massachusetts, Delaware, and most recently New York, have vastly expanded the NP’s ability to practice with full authority outside of the watchful eye of a physician. In total, 26 states hold legislation related to Full Practice Authority much to the chagrin of physicians who think the move infringes on their territory and hurts patient care.

My thoughts: I can definitely see both sides of the argument here, but overall view the move as a net positive. We’re all well versed in how big of a physician shortage is looming with the double whammy of retiring MDs and Baby Boomers aging into Medicare. Since most (75%) of NPs work in primary care, states consider it a way to expand primary care access to these groups.

The question is whether or not NPs can provide an adequate level of care. Will they be able to catch the more subtle, complex cases presented to them that a physician might have managed to diagnose?

Resources:

• New York grants nurse practitioners full practice authority (Link)

public market update.

Big Winners: LifeStance, InnovAge, Aveanna

Big Losers: Accolade, GoHealth, Pear Therapeutics

Full List: (Link)

Bright Health is exiting 6 markets after losing $1.2 billion in 2021 related to faulty claims processing. (Link)

Ironically, Bright Health’s services division Neue Health is participating in CMS’ direct contracting model in 6 markets as well. (Link)

Aveanna Healthcare is participating in an interesting new caregiving model in Arizona. The Family Licensed Health Aide Program will train ordinary family caregivers (staying at home taking care of loved ones) to operate and get reimbursed in their homes as Licensed Health Aides and get reimbursed for that care.

Another one of Centene’s board members resigned. Between its CEO transition, activist board fight, and now this, the managed care Medicaid giant has seen a ton of turnover at the top. (Link)

DaVita was acquitted on all three counts related to an antitrust suit brought by the government accusing DVA of antitrust practices by making arrangements with other healthcare orgs ‘not to poach’ certain executives and employees. (Link)

Encompass Healthcare opened up a new 85-bed (MASSIVE) inpatient rehab facility in Huntsville – North Alabama, continuing its rapid building and deployment of IRFs throughout the US. (Link)

UpHealth is transitioning its CEO. lmao. (Link)

Biz Hits

Trend Watch:

Disputes: You heard it here first: 2022 will be the return of the nurse / labor strike and out-of-network spats between payors and providers. In fact, Stanford is the fun recipient of a 4,000-nurse strike, and MaineHealth terminated its contract with Anthem. So far so good!

In a move that surprised no one, HHS renewed the public health emergency for 90 more days. Democrats are under heavy political pressure and I imagine they’ll use healthcare to bolster their platform for the upcoming election cycle. Still, at some point we’re going to have to figure out how to unwind the PHE – what de-regulation should stay, and how best to make them permanent. (Link)

• Related, here’s a good article on wind-down for Medicaid coverage when PHE ends (Link)

The 340b Program now accounts for 15% of all pharmaceutical sales in what is fast becoming a hot battleground between hospitals, big pharma, and the government. (Link)

CMS proposed a 3.9% payment increase for SNFs offset by PDPM payment adjustments of 4.6%, resulting in a net decrease in funding to SNFs of about $320 million. I told you guys – SNFs don’t seem to be having any fun right now, and they’re only facing more headwinds amidst the growth of at-home programs and home health – which I covered in my LHC-Optum analysis. (Link)

Strategy & Partnerships:

Carbon Health announced a partnership with Froedert. In what I imagine is similar to an expanded version of a urgent care management model, Froedert Health will join Carbon Health’s management platform called Carbon Health Connect. Carbon Health will manage new and existing primary care and urgent care clinics while expanding into other markets in Froedert’s footprint in the greater Milwaukee area. (Link)

• Carbon Health also launched a diabetes program. (Link)
• In general, Carbon has been making tons of moves and is emerging as a big player in healthcare on multiple fronts. Theirs is a name to continue to watch and I love hearing about the plays being made.

BSHS System (yes, I was confused too – it’s the new name for Beaumont Health and Spectrum Health) invested in Grand Valley State’s nursing program in a $19 million play (Link)

Thirty Madison launched a virtual dermatology platform. (Link)

Kidney care co. Strive Health partnered with Evolent Care Partners in Michigan and North Carolina to care for chronic kidney disease patients as a part of Evolent’s ACO. (Link)

Insur-tech co. Sidecar Health launched a new commercial plan in Ohio. (Link)

M&A:

Hackensack sold its long term care facilities to Complete Care. (Link)

Option Care Health completed its acquisition of Specialty Pharmacy Nursing Network. (Link)

Fundraising & VC:

Northwell Health and Aegis Ventures launched a JV planning to invest up to $100 million in seed-stage AI startups for healthcare. (Link)

Enhanced Healthcare Partners, a PE group, invested in VBC firm Vytalize Health. Vytalize raised $53 million. (Link)

Iris raised $40 million. Series B. Virtual psychiatry. (Link)

Real raised $37 million. Series B. Behavioral Health. (Link)

Season Health raised $34 million. Series A. Food-as-Medicine. (Link)

9am.health raised $16 million. Series A. RPM / diabetes virtual clinic. (Link)

DUOS raised $15 million. Series A. Aging-in-Place provider. (Link)

Forge Health raised $11 million. OP mental health and substance abuse. (Link)

Nudj Health raised $10 million. Series A. Virtual Care behavioral something or other. (Link)

Data, Studies, & Resources

KFF unveiled its Managed Medicaid Tracker, which provides Medicaid enrollees and membership by state. Pretty cool. (Link)

VMG published its annual ASC Intellimarker, giving a ton of operating and financial stats on everything ASCs (Link)(Beckers)

The Urban Institute published a report related to marketplace premiums. Because of subsidies and increased competition in the individual market, premiums fell by about 2.0%. (Link)

Blake’s Musings

My hometown of Plano, TX had an…extremely interesting guest during its city council meeting. “I’m a Zelensky Stan”

I shot an 84 at Pebble this week. The short game was working for me! Here’s a pic.

What do you make of the whole Elon Musk-Twitter-Poison Pill saga? Pretty insane stuff going on if you ask me. (Link)

Hot Takes

PBM practices are not ethical nor sustainable. (Link)

Robert Pearl and Brian Wayling argue in HBR that telehealth is just beginning and lay out several opportunities for why it can continue to expand. (Soft Paywall)

In Forbes, Sachin Jain wrote a critical piece on value-based care, how not all VBC arrangements are patient driven, and other pitfalls of the model that we need to work through. (Soft Paywall)

Healthy Muse Top Picks

This was a really great overview of insurer profits from Wendell Potter. (Link)

For any NY Times readers out there, they did a profile of recently passed former CEO Michael Neidorff and how he grew Centene into an Obamacare juggernaut. (Soft Paywall)

Ari Gottlieb wrote an overview of Devoted Health, the next up and coming insur-tech with $2 billion in funding, and compared the company to Oscar and Clover. (Link)

Morgan Cheatham wrote a super interesting piece providing insights into payor contracting best practices for virtual care companies. (Link)

The post The mid-level takeover edition appeared first on The Healthy Muse.

We all kind of know what inflation is. Expenses go up, purchasing power goes down, and asset prices in general increase.

• But how do those dynamics affect healthcare provider organizations?
• How do healthcare services businesses stave off intense expense margin pressures while also increasing top-line revenue in a high inflation environment where costs increase by 8%, but reimbursement from payors lags?

Let’s dive in.

Inflation background

Inflation happens when the purchasing power of a dollar falls over time. Normal inflation (at least, normal in my past life’s consulting financial excel models) for all goods hovers between 2-3% annually, which accounts for labor salary escalators, increase in food prices, and other demand related effects.

Because of current world events, supply shortages, red hot demand from high government spending, and vastly low interest rates, the economy is on fire.

As a result, inflation is skyrocketing.

• Prior to seasonal adjustment, general inflation rose about 8.0% according to the Bureau of Labor Statistics.

In general, most healthcare providers cringe at the smallest change in expenses. So when expenses increase by 8.0% AND they’re experiencing a labor shortage, this change is a pretty big deal.

Inflation in Healthcare always Lags

Oddly though, the BLS report only showed modest inflation for medical services of 2.4%, which is actually in-line or close to historical norms for healthcare inflation. At least thru the first part of the year.

Just take a look at how this tracks as compared to yearly CMS market basket increases:

Source: CMS and BLS

How can that be? Because healthcare always lags behind other industries.

You have to think about healthcare industry dynamics. When are prices, market basket updates, and premiums set for the following year?

• That’s right – a little after halfway through the year, meaning providers, CMS, and insurers were kind of flying blind around escalators for 2023 when thinking about inflation.

For context, CMS issues its finalized ruling for fee for service providers and hospitals around the August timeframe. And employer plan prices are locked in / negotiated closer to the end of the year, before anyone really had hard data on what was happening to prices behind the scenes.

• Because providers lock in their contracts with Medicare, state Medicaid plans, and commercial plans, healthcare isn’t really experiencing ANY topline inflation this year in revenue or prices – just their normal, run of the mill reimbursement escalators that typically sit between 2%-3%.

So, Providers literally cannot charge higher prices, because those rates are locked in for the year, or even multiple years if the insurance contract was a multi-year negotiated in 2021.

• I’m actually shocked that these contracts don’t have some sort of inflation or ‘extraordinary events’ clause where providers rand insurers must renegotiate given a certain event outside of a certain standard deviation and whatnot. If anyone knows of a contract that contains such clauses, feel free to give me a shout.

TL;DR. MAJOR topline headwinds for healthcare services this year.

• Insurance rates for HC providers are locked in at 2-3%. Medicare sequestration is on the horizon, and other public health emergency provisions will soon end (20% hospital rate bump for COVID cases, compensation for uninsured patients, etc.)

Recent CMS updates aren’t helping either. For 2023, CMS proposed a 2.7% basket rate increase for hospice and a 2.8% increase for inpatient rehab facilities.

Meanwhile MedPAC is going crazy by proposing 5% reimbursement cuts for certain providers. In THIS economy?! How can providers possibly expect to keep up? CMS better hope that this inflation is largely transitory and will phase out by the end of the year because if not…providers are going to struggle.

Expense Inflation Kills Provider Margins

Okay great, so consumers and employers aren’t going to experience exorbitantly higher prices this year. We’re a year off from that. That doesn’t mean provider margins won’t suffer.

There are still inflation dynamics at play on the expense side, which is going to kill provider margins this year while rates are locked in.

Even health systems, which have huge scale and purchasing power, should expect to see a 1.0% – 3.0% margin decline in 2022 stemming from expense headwinds according to McKinsey.

Kaufman Hall February Hospital Flash Report

Here are just a few ways expense are rising this year, most present in labor and supplies growth:

• Labor shortages. 33% of nurses are apparently planning to leave their current position. Turnover is costly as hell, so hospitals will be focused on retaining staff through signing bonuses and other initiatives. Treat ya people right.
• Labor salary escalators. The clinical and support staff that DO stay will be requesting some major salary escalators next year. Just ask my wife, who’s a speech therapist and wants to secure that bag.
• Drugs & Medical supply escalators. Yeah, you think drug & equipment distributors are gonna accept lower margins? Nah, they’re passing on the cost to providers to maintain their already-low margins. Not to mention the supply chain challenges hospitals are facing in general – almost all hospitals in the U.S. reported facing procurement issues.
• G&A escalators. You can bet your bottom dollar that professional firms aren’t cutting margins either. Hourly rates from lawyers, consultants, and other professionals will reflect the full 8% (or higher) increase. Any travel costs, insurance expenses, utility bills, and more will reflect higher expenses.

Source: Gist Healthcare

How Providers are combating inflation

So, how can providers stave off margin decay?

They’re going to have to LEAN UP, run ops more efficiently, boost productivity, and reconfigure their supplies purchasing.

Streamline Ops. Health systems will continue to collaborate (almost out of necessity) to share resources. We’ve already seen in the past certain systems partnering on data exchange and generic drug shortages (Civica Rx) among other partnerships. Now, a coalition of hospitals is forming a staffing partnership called Evolve. UPMC even created its own internal staffing agency.

Boost Productivity. Given shortages, providers have the opportunity to replace existing processes with tech enabled solutions (ambient documentation like Augmedix, scheduling services like Phreesia) to free up clinical time and save $$$.

• In a way, these challenges might be a blessing in disguise – as support staff & personnel quit, providers may be forced to pursue tech-enabled options to cover the gaps, which may in turn reduce some administrative spend in healthcare overall.

Supplies Savings. Providers will likely have to streamline and centralize purchasing decisions, take a hard look at their group purchasing organizations and purchasing power, and figure out the best way to plan for future procedure needs in order to prioritize what’s most important for them. I mean, there’s really only so much you can do in this bucket.

Conclusion

We’re going to see EXACTLY how inflationary pressures and rising costs play out over the next couple of years.

• Will inflation last? If so, these pressures will continue, premiums will rise, and everyone is gonna get hit hard
• If inflation resets back to 2-3%, we’re good. Valuation analysts everwhere can jump for joy as short-term inflationery margin pressures are normalized out of Adjusted EBITDA.

Hopefully the Fed can get it under control quickly so that employers and consumers aren’t hit with constant annual spikes in healthcare premiums and providers aren’t constantly looking over their shoulders, cringing at the next expense hike from suppliers and travel staffing agencies.

Bottom line. The operators who can’t handle inflation and are no longer getting bailed out by relief dollars will struggle. Others will continue consolidate to have better purchasing power on the bottom end and more negotiating leverage on rates. Survive and thrive.

Resources:

Consumer prices are rising fast, and healthcare isn’t far behind – McKinsey (Link)

Rethinking the Post-COVID Supply Chain – Gist Healthcare (Link)

The post Why Inflation Destroys Provider Margins appeared first on The Healthy Muse.

In case you missed it: I published two long pieces last week, which might not have reached your inboxes (deliverability probs). If you missed them, check ‘em out below:

• Healthy Muse Q1 in review – my picks for the biggest stories from Q1 2022. (Link)
• Breaking down the LHC-Optum deal – everything you need to know about the future of home health. (Link)

Be on the lookout for another write-up of mine. Subscribers will get it first – it’ll hit your inbox on Thursday at 11 CST, where I’ll be breaking down why inflation kills provider margins, and the dire state of provider finances if inflation persists. Subscribe to the Healthy Muse here

• This week in healthcare: Breaking down the Intermountain merger with SCL Health, Optum continues its buying spree in purchasing Kelsey-Seybold, Hims & Hers partnership with Carbon Health, a 7 hospital health system merger in West Virginia, Aveanna’s bad Q4, CMS payment updates, Memorial Hermann’s urgent care JV with GoHealth, and lots of fundraising announcements. Also, great news. I connected with Ari Gottlieb on LinkedIn. Great guy.

Let’s get after it.

Intermountain completes merger with SCL

Get used to a new giant in the Mountains. Intermountain and SCL Health finalized their merger on April 6, creating a $14 billion system in the Midwest / Mountain States region after announcing the merger late last year.

The combined system, to-be called Intermountain, will have an impressive footprint:

• 33 hospitals
• ~400 clinics
• 58,000 employees
• $14 billion in revenue

Just look at the footprint here!!

Intermountain is one of the savviest hospital operators around and has a huge 3,000+ physician base to bolster its value-based care initiatives. I love reading about the way they operate and how the health system is pushing the envelope forward when it comes to population health management. In fact, ~50% of IM’s ~$11.0 billion in 2021 revenue came from premiums & capitation, putting its money and strategy where its mouth is.

• This merger comes two years after Intermountain benefited from buying the HealthCare Partners Nevada operation as a part of the planned divestitures from the larger Optum – DaVita $4.3 billion deal.

Apart from physicians, legacy Intermountain’s footprint included 23 hospitals in 7 states, and around 1 million members on its insurance plan.

On the SCL side, the health system generated $3.0 billion in revenue across 10 hospitals and ancillary services in 3 states.

Although the Biden Administration loves to crack down on antitrust particularly in healthcare, this health system merger managed to pass through scrutiny.

Why?

• Insanely enough, the two health systems had minimal overlap in services & geographic footprint, creating a perfect storm for combining – there’s no local market power / monopoly argument to be made here.
• SCL Health will not materially change its charitable missions as a result. As a historically Catholic nonprofit, this would have created some problems had SCL changed anything related to charity care provisions or type of care.
• The combined org isn’t planning on laying any employees or or downsizing / combining clinic locations or other synergies you would expect from a for-profit entity (AKA, fire the excess personnel).
• When discussing merger motivations, Intermountain stressed the desire to advance value-based care and population health initiatives with the scale rather than JUST use that scale to negotiate favorable pricing. In a fee for service world, Intermountain would theoretically have much better pricing power with insurers post-merger.

In summary, this is a pretty impressive combination throughout the Midwest / mountain region if you ask me. I’ll be really excited to watch how Intermountain pioneers value-based care initiatives at scale within a health system strategy.

Optum buys 500-physician group Kelsey-Seybold in Houston

What the hell is United’s M&A budget? After buying LHC Group in a $6 billion + deal, Refresh Mental Health for likely $1 billion +, Change Healthcare in a $13 billion deal (pending), Landmark Health for $3.5 billion, and plenty of other under-the-radar acquisitions, Optum has tacked on another acquisition, this time in the physician space.

On April 5, Axios reported that Optum has purchased Kelsey-Seybold (”KS”), a 500-physician, multispecialty practice with a huge footprint in the greater Houston area. (Link)

About KS: Talk about another slam-dunk acquisition for Optum fresh off the LHC Group news. Not only does KS provide Optum with yet another huge physician base in a large market, KS also runs its own ~40k member, 5-star MA plan – KelseyCare Advantage – and operates a consortium of ancillaries, including:

• Two ASC’s, one of which is among the largest operating ASC’s in Texas
• 19 pharmacies
• After-hours clinics (urgent care)
• Radiation therapy & Infusion centers
• Imaging centers

Back in January 2020, private equity firm TPG purchased a minority stake in KS’s management company (not the medical group) at an alleged $1.3 billion valuation at the time. The injection helped fund KS’s expansion, and I’m sure TPG is making a nice chunk of change back from this acquisition. Just a casual 2-year flip.

Perspective: Don’t forget – in March 2021, Optum made a very similar acquisition in that of Atrius Health in Boston, a 715-physician, 30-clinic multispecialty group at the time. Based on those two acquisitions alone you can see the strategy Optum is deploying in large markets. Optum is keenly focused on expanding its physician base and has said so on multiple earnings calls over the years.

BIG PICTURE TIME: So…why are these large, financially successful practices cashing out now?

It points to the larger trend of consolidation in the physician space caused by a perfect storm of dynamics. Private equity players, strategic buyers (payors), and hospitals are prioritizing expanding their physician footprint as the front door to downstream opportunities.

• Couple this red-hot demand for physicians with current healthcare dynamics: the average physician (especially shareholder physicians) is nearing retirement. Selling the practice is a great way for them to monetize what they’ve built to achieve a succession plan.
• Along with the retirement trend, physicians are also facing margin pressures from supply inflation, labor shortages, and reimbursement headwinds from payors. Whether these headwinds are temporary or not, they’re probably not fun to deal with.
• Finally, rising interest rates will ding valuations in the near future (I suspect) and private multiples are ridiculous. Heck, I probably would’ve sold, too.

UnitedHealthcare’s stock hit all-time highs today while the S&P is down around 6%. Investors know what policymakers don’t – that United is creating an unprecedented vertically integrated TITAN in healthcare unmatched by other payors. I wouldn’t be surprised if lawmakers force a spin-off of Optum someday.

public market update.

Top 3: Change Healthcare, Augmedix, Definitive

Bottom 3: Oscar, Accolade, Cano. I mean, almost all of healthcare was down this week amid a broader market selloff.

Full List: (Link)

$UNH: As if you haven’t gotten enough United news from me lately lol, they’ve extended their merger agreement with Change Healthcare as the DOJ reviews the case. In related news, Change Healthcare is expected to sell its payments integrity business, ClaimsXTen, to New Mountain Capital for a reported $2 billion + price tag. I wonder if the divestiture will appease antitrust concerns? (Link)

$AVAH: Home health operator Aveanna had to recognize a $117.7 million goodwill impairment charge, leading to a $117 million net loss for 2021. As a result, the stock dropped 26%. I’m somewhat surprised it fell so much given that the Optum/LHC news was announced that same day, leading to all of the other home health and home care providers (Chemed, Addus, Amedisys, Pennant Group) to outperform other services biz’s that day. (Link)

$PEAR: Pear Therapeutics Q4 earnings (Link)

$CNVY: Convey Health Solutions Q4 earnings (Link)

$UPH: UpHealth dropped Q4 earnings and also dropped 30+%, down 50% on the year.

• Here are some fun UpHealth SPAC stats: At the time of its SPAC, UpHealth estimated revenues of $194 million and went public at a $1.4 billion valuation. Per its Q4 press release, the firm is filing a delayed 10-K with the SEC. Uphealth posted revenue of ~$150 million, resulting in a 22% miss in 9ish months. It’s now worth $260 million. (Link)

$HLTH: Cue Health dropped its Q4 earnings (Link)

$SLHG: Skylight Health dropped 10% after posting its Q4 earnings (Link)

$PHR: Phreesia dropped 9% after posting a bad outlook for 2022. Q4 earnings (Link)

Biz Hits

Trend Watch:

MaineHealth terminated its contract with Anthem, in what I’m sure will be the first of MANY spats this year between payors and providers. (Link)

Governmental free COVID coverage is ending. Implications include no more free vaccinations, tests, and treatment, which also affects providers who won’t get reimbursed if the patient is uninsured and can’t pay. Back to the new old new normal!! (Link)

Regulatory authorities are increasingly meddling in hospital operators’ strategic plans. In Boston, a state regulatory body rejected Mass General Brigham’s plans to develop a few surgery centers in the suburbs. Yet another example of the ‘free’ healthcare market!! (Link)

Payment Updates:

CMS proposed updating the hospice basket rate by 2.7%. Based on current labor shortages and inflation, CMS is also looking at ways to update the wage rate index portion of reimbursement to appropriately adjust to match future conditions. (Link)

CMS published a 2.8% pay bump for IRFs. (Link)

CMS will increase MA payments by 5% and won’t make any changes to controversial risk adjustment practices. In addition, MA plans are expected to see an 8.5% revenue bump in 2023.

• What the hell? If anyone can explain the disparity here between CMS basket updates for providers and MA plans, please reach out. Is it baked into the wage adjustment? Are we thinking the inflationery / labor pressures are transient? (Link)

CMS issued a permanent delay to the implementation of the mandatory radiation oncology payment model. (Link)

Strategy & Partnerships:

More Houston activity! Memorial Hermann and GoHealth, a large national operator of urgent care clinics, announced a joint venture to develop urgent cares throughout Houston. Memorial Hermann will contribute 10 of its existing urgent cares to the JV while I’m sure GoHealth provided a capital investment and will manage the operations, including new site development, I imagine.

Hims & Hers announced a partnership with Carbon in California to hand off any patients with more complex needs to Carbon’s facility footprint. You’re going to start seeing more partnerships and even mergers between virtual care providers and those with physical footprints to fill in care gaps. (Link)

After slowing its roll a bit on healthcare, Walmart Health is opening 5 new health superstores in Florida. (Link)

M&A:

Hospital M&A hit its lowest point in the last 5 years. According to Kaufman Hall, only 12 transactions were announced in Q1 2022, which continues the trend of very limited activity during Q1. Honestly I would chalk this up to 1) Omicron, and 2) the fact that most hospitals are budgeting for the year in Q1 and don’t have their strategies prioritized quite yet. Just a theory, though. Anyway, the report is a good read on the space headed into Q2. (Link)

Trinity is in LOI with North Ottawa Community Health System to purchase its $52 million operation, an 81 bed acute care hospital along with any outpatient ops. (Link)

Ascension and AdventHealth completed their JOA breakup in Chicago, formally disbanding Amita Health. AdventHealth will continue to operate the four legacy Amita Health hospitals under its brand. (Link)

Mon Health and Charleston Area Medical Center merged into one health system, announced on March 31. The two will operate under a new brand, Vandalia Health, in the West Virginia market, creating a 7-hospital system pending CON approval. (Link)

Publicly traded lifestyle and nutrition company Tivity Health was acquired by Stone Point Capital for around $2 billion, or $32.50 per share. (Link)

PE firm Thomas Lee Partners bought health data enablement firm Intelligent Medical Objects in a $1.5 billion deal. (Link)

Fundraising, Execs, & VC:

AmerisourceBergen launched a $150 million venture fund on April 7 focused on early and mid-stage healthcare startups. (Link)

Clarify Health raised $150 million. Cloud analytics and value-based care enablement platform. (Link)

ConcertAI raised $150 million at a $2 billion valuation. Data analytics firm. (Link)

IntelyCare raised $115 million at a $1.1 billion valuation. Staffing firm that matches nurses to openings in post-acute settings. (Link)

Brightline raised $105 million at a $705 million valuation. Pediatric behavioral health (which is a huge need, might I add) (Link)

Viz.ai raised $100 million. ‘AI’ powered disease detection and care coordination platform. (Link)

Neuron23 raised $100 million. Parkinson’s clinical drug development. (Link)

Brightside raised $50 million. Virtual mental health platform. (Link)

Eleanor Health raised $50 million. Value-based mental health firm. (Link)

Qure.ai raised $40 million. Medical imaging AI platform. (Link)

Evernow raised $28.5 million. Telemedicine for menopause. (Link)

VivoSense raised $25 million. Integrates wearable sensors into clinical trials, a nuanced use of remote patient monitoring. (Link)

Future Family raised $25 million. Fertility financing and care support firm. (Link)

Apploi raised $25 million. Staffing support firm. (Link)

AmplifyMD raised $23 million. Specialist telemedicine platform (Link)

Eleos Health raised $20 million. Behavioral health startup with ‘AI’ voice tech. (Link)

VideaHealth raised $20 million. ‘AI’ enabled dental care startup. (Link)

Zephyr AI raised $18.5 million. Drug discovery analytics firm. (Link)

PocketHealth raised $16 million. Medical image sharing platform. (Link)

Jeenie raised $9.3 million. Medical interpretation company. (Link)

Data, Studies, & Resources

Fair Health dropped its hospital pricing index report, showing how prices have trended over Covid. (Link)

VC: Hospital venture capital deals are increasing. (Link)

Spending: Axios jumped in to CMS’ actuarial predictions for national healthcare spending over the next decade. In summary, spending is expected to increase around 5% per year til 2030. (Link)

FQHCs: Great overview of Federally Qualified Health Centers and their payment models. (Link)

Vax: This was a good breakdown from TCWF on the impact of ‘Rona vaccination efforts and averted deaths, hospitalizations, and healthcare costs as a result. (Link)

Costs: According to the Health Action Council and UnitedHealthcare, 5 general health conditions make up 50% of all spending: cancer, MSK, cardio, GI, and neuro. (Link)

Blake’s Musings

Elon Musk is now Twitter’s largest shareholder. Wild.

Donald Trump claims he hit a hole in one in front of several tour pros, including Ernie Els. A smooth 181 yard 5 iron with a 5 foot cut!! (Link)

Walmart is offering starting pay of $110k for truck drivers, which is on par with like…investment bankers. (Paywall)

By the time you’re reading this, I’ll be on vacation in Carmel, playing Pebble on Thursday. Wish me luck, the putting has NOT been fixed. I’m just there for a good time, anyway!

Hot Takes

THCB published a series on MedPAC’s data reporting and why the PAYMENT ADVISORY COMMISSION may have it wrong on Medicare Advantage. I’m not really a policy guy but I love the spice.

MedPAC got it wrong. (Link)

MedPAC got it wrong, Pt 2 (Link)

MedPAC got it wrong, Pt 3 (Link)

Healthy Muse Top Picks

Consolidation: I enjoyed this read in not-really-my-wheelhouse digital health players and consolidation by Brendan Keeler, Ben Lee, and Megh Gupta. Writers Guild joins forces. (Link)

Olive: It’s behind a paywall, but Axios Pro dove into highly touted revenue cycle, $4 billion, AI enabled operator Olive and how the firm is allegedly misleading clients on its capabilities. (Link – Paywall)

The post The Unstoppable Optum Edition appeared first on The Healthy Muse.

In case you missed it: I wrote about every major healthcare story in 2021 in one long-form read.

This write-up is a continuation of that, but covers all of the major Q1 2022 stories.

• You can find the 2021 version here: (Link)

Welcome back to the Healthy Muse’s round up of healthcare headlines. If you enjoy the content and find it valuable, there’s plenty more where that came from – subscribe to my newsletter here, where I break down healthcare strategy.

• Or, you can follow me on Twitter here
• Or LinkedIn here

Let’s dive in to the Q1 2022 top healthcare news stories!

Optum Buys LHC Group in $6 Billion deal

• Read my deep dive here: (Link)

On March 29, UnitedHealthcare’s Optum (the massive, $40 billion services arm) announced the acquisition of LHC Group for $170/share, valuing LHC at over $6 billion.

• Optum acquisitions are confirming that we’re all going to one day work for United. The inevitability confirms their brand name, don’t you think?

This is a great acquisition for Optum.

Payors are continuing to morph into ‘payviders’ and UHG / Optum has a huge head start here. Acquiring LHC Group accelerates the payvider trend. Optum is deploying its grand vision of integrated care delivery right before our eyes. It’s happening whether you like it or not.

I dove in to the deal in much greater detail (3,000 words), breaking down why this acquisition is so important for Optum and fits them so well strategically. Check it out here. (Link)

United – Change Healthcare $13 Billion Deal Stalls to a halt as the DOJ gets involved

Antitrust: After what seems like an eternity since the transaction was announced, the DOJ is allegedly planning to sue to block the $13 billion United / Change Healthcare deal.

• Background: The merger announcement brought intense opposition from the AHA and other provider interest groups, claiming that an acquisition of Change would give UNH unprecedented access to data that would cause anticompetitive practices. The DOJ is sympathetic toward those concerns and has a keen eye on M&A in general across most industries. (Link)

Health Systems Form Staffing Alliance to Combat Shortages, and Earnings Round-ups

Six health systems (and I’m soon many more will join soon) are partnering to create a staffing agency called Evolve Health Alliance. Since staffing shortages have been SO bad, these health systems, which include giants like AdventHealth and Intermountain, will share their resources with one another in the instance that one of them is dealing with a COVID surge while the other systems aren’t. (Link)

• It’s a pretty smart and effective way of addressing shortages while largely getting around travel nursing fees – essentially cutting out the middleman agencies. (Thread)

Along with the staffing news, here’s your one-stop shop for everything hospital related to 2021 earnings.

• HCA: Heavy battle-tested hospital titan HCA released earnings in late January:
  • HCA is building 5 acute care hospitals in Texas in areas with hot population growth and 3 others in Florida.
  • Amid broader staffing issues, HCA is still slowly integrating post acute assets into its portfolio, including Brookdale’s home health biz that HCA bought last year for $400 million
  • For 2022, HCA is expecting revenue just north of $60 billion and EBITDA around $13 billion, a consolidated margin north of 21%. (Link) (Presentation)
• UHS: Universal Health execs had a lot of interesting context to say around COVID and recovery. For one, while some other hospital operators shrugged off staffing challenges, UHS sees the staffing shortage and unwind happening more gradually over time than being a singular event. Secondly, UHS execs expect discharge rates for patients to other post-acute care settings to right-size as skilled nursing, long-term care, nursing homes, and other sites of care get back on their feet.
  • Overall, UHS expected muted growth for 2022 given the staffing and ‘Rona headwinds but noted optimisim as cases and outbreaks become less severe. UHS also signalled on the call that they’re only going to allocate capital to M&A where it makes sense strategically in their two fundamentally strong segments. (Link) (Transcript – soft paywall) (Presentation)
  • 2022 Guidance: $13.5bn in revenue, $1.9bn in EBITDA
• Tenet: Tenet finished the quarter and year in a really solid spot, beating 2021 estimates. Its build-out of USPI continues to scale quickly through acquisitions. The hospital and outpatient giant announced the acquisition of 30 more ASCs from SurgCenter Development expected to take place this year.
  • Here’s a fascinating point from the transcript – in his opening remarks, Ronald Rittenmeyer noted that he’s perplexed by the market’s and analyst’s decisions to continue to value Tenet as a hospital-based company despite their deleveraging and the growth of USPI. He thinks they’re worthy of a higher multiple. Do you? By reporting very clear, transparent segmented financial statements publicly, it’s clear what Tenet wants.
  • Despite prior announcements to spin off Conifer, Tenet disclosed in early March that it intends to retain the revenue cycle management arm – AKA, kinda sounds like there were no sellers. Hmm…(Link) (Transcript – soft paywall) (Presentation)
  • 2022 Guidance: $19.7bn in revenue, $3.45bn in EBITDA
• CHS: Community Health initially dropped after releasing Q4 earnings that showed weak same-store admissions growth and the expected challenges from ‘Rona. Interestingly, the hospital operator did signal expectations for lower travel / contract staffing costs later on in 2022.
  • Community finished the year with $12.4bil in revenue and adjusted EBITDA of 16%, or $1.97bil.
  • For 2022, CHS expects revenue around $13 billion and EBITDA around $1.9 billion, or consolidated margin just shy of 15%.
  • The operator noted its main avenues for growth included increasing market share and bed capacity in existing markets, further investment into ACOs, and enhancing provider outreach programs.
  • CHS also wants to crack down expense management related to its supply chain, purchased services, and nurse staff pipeline. Overall, though, it seems as if CHS has really turned things around and it’s full steam ahead for the operation. Now, to get to HCA’s level might take some time (Link) (Presentation)

Not for profit health systems round-up:

• Baylor Scott & White (Link)
• Providence (Link)
• Ascension (Link)
• CommonSpirit (Link)
• Cleveland Clinic (Link)
• UPMC (Link)
• Trinity (Link)
• Mayo Clinic (Link)

The largest health systems by revenue – (Link)

Optum buys Refresh Mental Health

Rounding out the Optum news, the services arm of United is in talks to buy Refresh Mental Health (as of this writing), an outpatient provider of behavioral health services, for a yet-undisclosed sum. According to Axios, Refresh, founded in 2017, “operates a network of more than 300 outpatient mental health, substance abuse and eating disorder centers spanning 37 states.”

Refresh was rumored to be generating $40 million in EBITDA and was owned by private equity firm Kelso, which bought the mental health co back in 2020 for $700 million. At the time, Refresh operated in 28 states and 200ish facilities. Assuming UNH bought Refresh for around $1B+ (pure speculation), that’s close to a 25x multiple and you can see why there’s so much activity in the space when strategic buyers like United are shelling out cash to scoop up behavioral health assets.

• For context, LifeStance Health, which went public on June 15 last year, currently operates 534 centers in 32 states through 4,790 employed clinicians. They’re currently valued publicly around $3.5 billion and generated $668 million in revenue in 2021, which is about 5.5x trailing or 4.2x forward expected sales of ~$871 million. Applying that multiple to Kelso’s purchase price probably means Refresh was generating revenue of around $150-200 million in 2020.
• Meanwhile, I’m sure Acadia Healthcare, which operates 238 behavioral health centers profitably, is wondering why its multiple isn’t 10 turns higher (probably related to growth). Sigh.

There’s also a real incentive for insurers to continue to build out mental health networks & coverage – Biden and lawmakers are starting to feel pressure to pass mental health legislation and address mental health insurance parity.

Related: This news around Refresh – and mental health tailwinds in general – shows how red hot the behavioral health market is between facility-based providers (who have better prospects IMO) and more virtual-based providers like Lyra, Cerebral, Talkspace, and others.

HCA snags 59 Urgent Care Centers in Florida

Diversification: HCA, the large publicly traded hospital operator, announced on January 4 its intention to purchase Florida-wide urgent care operator MD Now. The purchase price was not disclosed, but you can imagine it was a platform-level multiple to acquire such a large footprint. (Link)

• Details: MD Now operates 59 urgent care centers throughout Florida at a time when urgent cares are performing extremely well since they’re basically COVID test beacons. Free foot traffic. I guarantee we see more activity in the urgent care space among PE, health systems, and now CVS and Walgreens entering the convenient clinic setting so popular with millennials.
• The acquisition also helps HCA to continue to diversify its offerings throughout the spectrum of care delivery. Don’t forget that HCA purchased Brookdale Senior Living’s home health operations last year as well.

Humana shares plummet after reporting bad Medicare Advantage Growth

HUM: Here’s a super notable, interesting trend: Humana shares collapsed early in Q1 after guiding significantly lower Medicare Advantage growth than initially expected. The consensus from most folks is that increased competition on pricing from the new insur-tech gang and others is crowding the MA space, while others attribute some of the attrition to…well…Covid related deaths and fewer members to go around.

• Humana led all managed care providers lower this week. And here I thought managed care was impervious to bad news. I guess this is what happens when you stop hitting your growth projections, even at the very top of the food chain. (Link)

Partnerships: Humana is expanding its partnership with PE firm Welsh-Carson over its primary care senior clinics into 12 more states. I feel as if this partnership, announced in 2020, is somewhat in the radar, but it’s gaining serious traction. (Link)

After shaky Medicare Advantage membership numbers and its worst performing day ever in the stock market post-earnings, Humana bent the knee to an activist investor group, Starboard Value. Humana finally gave in to adding two directors to its board, including one from Starboard. (Link)

• Humana isn’t the only struggling managed care firm dealing with activist investors – keep in mind that Centene is also implementing certain expense improvements and c-suite transitions as a result of its deal with Politan Capital Management. Centene has really struggled to integrate WellCare and more recently, Magellan, in addition to being marred with scandal & settlements in its state PBM practices. (Link)
• Side note – I always find it hilarious when news like this is dropped and the company’s stock price immediately jumps. If I were at the C-suite I’d be thinking ‘damn, am I really doing that bad of a job?’

Privia Health Partners makes major moves

Strategy: Surgery Partners announced a strategic partnership with Privia Health on February 3rd.

• How it works: Privia will buy into Great Falls Clinic, a physician practice wholly owned by SGRY. The buy-in will give Privia the ability to expand in the Montana market, acting as Privia’s ‘anchor practice’ in the state (65 providers, 24 specialties). The two companies will also establish a management company, of which Privia will be the majority owner.
• Bigger picture: Privia’s primary pursuit is to transition traditional fee-for-service practices into value-based arrangement in order to take on risk. Surgery Partners is a significant partner to have, so keep an eye on future announcements between the two firms. (Link)

Privia Health also announced some good news on Jan. 5th – the firm entered into a few value-based risk arrangements through two of its ACOs, adding 23k members and $230 million in incremental revenue…do the math there! (Link)

Privia Health also jumped slightly after posting its Q4 earnings on March 22, near the end of the quarter. (Link) (My Breakdown) (Transcript)

For 2022, Privia is expecting:

• 30% revenue growth to around $1.25B, 3700 providers, 875k lives, ~23% care margin (AKA, 77% MLR if I’m interpreting that correctly), and a ~4% adjusted EBITDA margin

Encompass plans to spin off its home health biz into Enhabit Home Health

Breaking up: Encompass announced its plans to spin off its home health and hospice business into a separate publicly traded company called Enhabit.

• The details: If interested, I wrote a quick thread on Twitter breaking down the high points of what this means for Encompass. TL;DR, each segment’s management will be able to focus more wholeheartedly on their specific strategy. (Link)
• Link to Encompass’ announcement: (Link)

After the spin-off news dropped, rumors swirled around Enhabit and several headlines dropped related to a potential buy-out of Enhabit prior to the spin-off. Suitors including strategic buyers like Aveanna, and financial buyers like Advent International, appear to have big-time interest in buying the segment valued at around $3 billion.

• If Aveanna buys Enhabit, the purchase would put Aveanna on par with the likes of Amedisys and LHC Group in terms of scale. Given Aveanna’s current size (around $1.6 billion), the firm would likely need to split the cost with an interested financial party to foot the entire bill – similarly to how Humana purchased Kindred along with Welsh Carson (WCAS).

Enhabit would be a major get for Aveanna or any strategic buyer. Immediate scale and access to new markets while multiples have compressed down a bit over the last 12 months during ‘Rona headwinds makes sense for a timely buy. Although I wonder whether Encompass shareholders think more value would be unlocked via a public spin-off. Time will tell, but my money’s on the spin-off. (Link)

Chamath to take ProKidney and Akili Labs Public

SPAC Daddy: Chamath is taking biotech kidney firm ProKidney public at a $2.6 billion valuation. The deal will give ProKidney a pretty decent chunk of change to continue its phase 3 trials in the kidney and dialysis space. Chamath wrote up a quick one-pager on the deal. Let’s hope this one fares a bit better than Clover (lol). (Link)

• Cool tech: ProKidney is developing some tech to treat chronic kidney disease and kidney failures by repurposing the patient’s own cells to restore kidney function. Pretty amazing stuff if it ends up working.

Anotha One: On the heels of taking ProKidney public at a $2.6 billion valuation, one of Chamath’s many SPACs is taking Akili Labs, a pre-revenue digital therapeutics firm, public, at around a $1.1 billion valuation. (Link)

• About Akili: The digital therapeutics firm will become the second of its kind on the public markets. Pear, a close peer, went public in December at a $1.6 billion valuation. These companies are highly speculative in nature, similar to clinical stage biotech firms, as their products are largely unproven and they don’t have recurring cash flows. Akili’s claim to fame is its video game product that helps kids with ADHD gain focus. (Honestly they should just play Runescape instead).

More: Here’s a link to Chamath’s write-up on reasoning for the transaction. (Link)

Analysis: This was a hard assessment from Scott Xiao’s In Silico related to Akili’s FDA clearance as he displayed skepticism related to the endpoints used in Akili’s study. (Link)

Bigger picture – there haven’t been too many go-public announcements for digital health or services businesses this year. I’d expect a slight uptick over the summer and fall as geopolitical events play out and the economy (hopefully) stabilizes.

Mark Cuban gets into Affordable Drugs

Drugs: Mark Cuban just announced the launch of Mark Cuban Cost Plus Drug Company. Yeah. That’s the name of the company. Pretty amazing marketing when you can just put your first name in front of a firm and it’s instantly recognizable. #mediagoals

• Details: Through help from Truepill, MCCPDC will target the generics market and offer a flat 15% mark-up to every drug they can possibly get a hold of. It’s a cool play on transparency, and while the jury is still out as to whether or not it can make an impact when Wal-Mart’s generic list and GoodRx type players exist, I can always applaud an effort like this.
  • Link to press release (Link)
  • Check the site out yourself here: (Cost Plus Drugs)

Digital Health Funding hits all-time high in 2021, and the trend continues in 2022

Credit: Rock Health

Funding Secured: Let the EZ money flow…according to the latest Rock Health digital health funding report, total U.S. based funding among digital health startups topped $29 billion in 2021. That’s up BIG time from 2020’s $15 billion investment estimate.

• Details: Funding is mainly being driven by larger deals rather than number of transactions, which seems to mirror the rest of healthcare deals in that regard as the industry consolidates. I’d expect this to follow a similar trend in 2022, but because of tightening money policies, funding will likely come down a bit. (Link)

Funding Secured: Digital Health unicorns Transcarent and Lyra Health both successfully raised $200 million and $235 million respectively in recent fundraising rounds.

• Lyra has raised $915 million to date, the vast majority of which has been raised in the past 12 months. The company must be absolutely trailblazing through cash to grow internationally and through acquisitions (Link):
  • August 2020 ($110 million raised) – $1.1 billion valuation
  • January 2021 ($187 million raised) – $2.3 billion valuation
  • May 2021 ($200 million raised) – $4.6 billion valuation
  • January 2022 ($235 million raised) – $5.9 billion valuation
• Related: Lyra also announced its acquisition of ICAS World to continue to expand globally. If it wasn’t the largest mental health player before, it likely is now. (Link)

Transcarent raised $200 million at a $1.6 billion valuation. The firm specializes in patient navigation for employers as an Accolade-type player. (Link)

Wheel raised $150M in to continue its investments in virtual-first care. (Link)

Funding: SoftBank led health tech unicorn Alto Pharmacy’s $200 million series E this week, joining other unicorns in raising hundreds of millions of dollars. (Link)

Kidneys: Joining the likes of Strive, value-based kidney care company Somatus raised $325 million in a Series E, putting the startup in unicorn territory ($2.5bil valuation). We’re just handing out that status these days, but kidney care is in sore need of competition so I’ll let it slide. (Link)

Livongo’s half-brother: Omada Health, another chronic care management firm, raised $192mil also coincidentally in a Series E. I wouldn’t be surprised if this capital were used to make a few acquisitions.

• Omada will hurdle the $1bil valuation mark with the raise and you can see why Teladoc has a limited timetable – Virta Health, also in the RPM space, raised $133mil at a $2bil valuation in early 2021. (Link)

Doctolib: Not really U.S. focused, but Doctolib raised $550 million at a $6.4 billion valuation. It’s one of the largest digital health unicorn outside of the U.S. and is basically another Doximity. (Link)

Minneapolis based Nice Healthcare raised $30 million. The firm wants to primarily use the funds to invest in expanding into new markets and other growth initiatives. (Link)

House Rx just secured $30 million in Seed + Series A financing. Founded by two former Flatiron Health executives, Ogi Kavazovic and Tesh Khullar, House Rx’s health technology platform empowers oncology and rheumatology physician practices to offer medically integrated dispensing. (Link)

• Shortly after their funding announcement, HouseRx also announced a partnership with Northwest Medical Specialties to offer medically integrated dispensing to all 7 locations in Washington state. (Link)

Embold Health raised a $23 million Series B led by Echo Ventures and joined by Morgan Health, the healthcare arm of JP Morgan Chase.

• Embold’s platform offers providers, employers and payers real-time, actionable data on provider quality tracked through practice patterns and appropriateness metrics. (Link)

Remote patient monitoring oncology platform Canopy raised $13m. RPM for oncology patients makes a WHOLE lot of sense and I’m excited for the applications here. (Link)

Osso VR raised $66 million. (Link)

Podimetrics raised $45 million. (Link)

TimeDoc raised $48 million. (Link)

Antidote Health raised $22 million. (Link)

Alife Health also raised $22 Million. (Link)

Recora raised $20 million. (Link)

SOC Telemed Goes Private for $300 Million

The first domino: After going public via SPAC at about a $720 valuation 15 months ago, SOC Telemed will be bought out and taken private by Patient Square Capital.

• Details: The healthcare investment firm announced its intention to purchase SOC Telemed at a 366% premium to its share price on February 3rd, or about a $300 million enterprise value at $3.00/share. For all you smart folks out there, that’s a 60% decay in value in one year.
• SOC’s stock price had tumbled from $8.33/share one year ago to $0.64/share prior to the announcement and is now trading just under the take-private price. It makes sense that the board unanimously jumped on the opportunity to go private in the market’s current state.
• The firm still has attractive assets, so it makes sense why someone wanted to buy them out. SOC Telemed bought Access Physicians, a specialty telemedicine provider, for $194 million or 2/3rds of its take private price (lol) back in April 2021.

Bigger Picture: If you’ve been following the Health Tech Index for any period of time, SOC Telemed isn’t the only publicly traded digital health company suffering in the markets. We’re going to see some more activity here in 2022 & 2023 or I’ll sell my newsletter. (Link)

Amazon Care isn’t going away.

Scaling: After reshuffling some of its executive team on the pharmacy side and naming a former head of Amazon Prime to grow its healthcare biz, Amazon announced this week that the retail giant is expanding its virtual care services nationwide. (Link)

• Details: Amazon Care will also offer a hybrid service offering (AKA, in-person and virtual) to 20 more cities this year. Basically all of the big ones. Amazon is also growing its contracted employer base by tacking on Silicon Labs and Hilton Hotels. No, I’m not counting Whole Foods in there. Amazon putting that in their press release as a badge of honor is essentially the same thing as saying that I sold my car to my wife…who happened to need a car.

Steady: Amazon is slowly scaling its health operation outside of its existing employee base and seems to be hyper focused on the consumerization of healthcare, which is the retail giant’s bread and butter. I wouldn’t be surprised to see a Pharmacy-Care-future health related offering as a tack-on to your normal Prime subscription within the next few years.

Teladoc’s Struggles continue post ’Rona

Since maxing out at almost $300 a share in early 2021, Teladoc is down bad at around $60 at last glance.

What went wrong: After its run as one of the hottest ‘Rona stock trades on the planet, Teladoc used its newfound capital to panic-buy Livongo for $18 billion. I’d consider this move more of a defensive play than anything since Livongo was courting other telehealth suitors.

• Still…if you break it, you buy it. Post-merger, Teladoc has failed to unlock Livongo’s real value during its first year at the helm. To be fair, doing so is objectively a tough ask – AKA, convincing employers and others to pay for a somewhat unproven solution. Did I mention they way overpaid?

What’s Next for Teladongo.

As one of the first true ‘whole person care’ conglomerates, Teladoc needs to take better advantage of that first-mover edge. Teladoc will 100% lose market share over the coming years if they can’t get their shit together.

Promising tailwinds I’m eyeing:

• Teladoc’s products are slowly gaining traction. There’s a clear runway toward growth in taking on more risk and cross-selling services. Really, execution and sales is the bottleneck at this point. A decent number of Teladoc’s Q4 bookings were multi-program which is a step in the right direction.
• The firm is launching new programs in Chronic Care Complete and I’m super bullish on BetterHelp (mental health, super hot space) and Primary360 (whole person care) as those programs expand.
• New programs and solutions are super easy to pilot given Teladoc’s scale and existing membership platform.
• Customer acquisition costs are shrinking.
• Valuation-wise, Teladoc sits in an interesting spot. On one hand, I’m seeing digital health unicorns like Ro ($7 billion), Cerebral ($5 billion), Lyra ($5.6 billion), and Hinge ($6.2 billion) that are likely burning through cash yet valued crazy high. Teladoc is sitting at around an $11 billion enterprise value with vast scale compared to some of its private counterparts. Where’s the disconnect? Plus, competition with firms like Amazon are likely overblown.

Concerns with Teladoc:

• They lost almost the entire executive suite from Livongo post-merger. Bad signal.
• If permanent telehealth legislation doesn’t pass prior to the end of the public health emergency, virtual care as a whole will take a step back. Also, Medicaid will lose a ton of members which is something that Jared covered recently.
• Competition is brimming beneath the surface as other virtual care operators slowly consolidate.
• I’m speculating that morale is super low after recent stock price action.

Resources:

• TDOC Q4 earnings release. (Link)
• TDOC Q4 call transcript. (Link)
• TDOC launches its chronic care program. (Link)

Bright Health’s no good, very bad quarter

$BHG: Bright dropped 30% after posting extremely disappointing Q4 and full year 2021 earnings. Based on what I read in the transcript, Bright experienced a mass influx of members but wasn’t able to process member claims with the appropriate coding and risk adjustments, leading to an absolutely catastrophic loss in the quarter.

• What’s even worse in investor minds – and maybe almost borderline fraudulent – was the fact that this apprently occurred BETWEEN Bright’s investor presentation on January 10th and today. Bright management was sober during the call but noted that most of the claims processing issues should now be rectified.

agilon announces a major partnership with MaineHealth

Agilon is partnering with MaineHealth, an integrated nonprofit health system with at least 9 hospitals and plenty of other outpatient care settings, to transition MaineHealth’s primary care delivery system to agilon’s platform.

• We’ve seen a handful of partnerships form between these tech-enabled care platforms and health systems. Privia Health and Surgery Partners partnered in the Montana marketplace earlier this year.
• These care platforms are now reaching a pretty solid scale. Agilon expects to reach 80k additional MA lives with the partnership and will now expand to 12 states, 25 markets, 23 physician groups, and 2200 primary care physicians. (Link)

More: Agilon just held its investor day too, chock full of interesting information about the business model. Give it a glance here. (Link)

Activist Investors push Cano Health to consider a public-to-private sale

• P2P: After SPAC’ing back in June 2021 and poor public performance since (down 60%), activist investor group Third Point bought a pretty decent-sized stake in Cano Health and is pushing the firm to consider a sale. (Link)

The week the activist news dropped, Cano finished up 26% on the week alongside CareMax, which finished up 30%. The obvious takeaway here is that private investors think there’s serious value to unlock in these businesses.

Despite the poor stock performance, these facility-based operators are executing on their fundamental operations JUST fine. In fact, Cano released its earnings today, providing strong 2022 guidance for the business despite some accounting irregularities related to Medicare Risk adjustments. (Link)

• I’m positive that there’s serious private equity and insurance company interest in assets like CareMax and Cano Health.
• Healthcare companies are kind of notorious for public-to-private transactions. Why is that? Are public investors too antsy / impatient to see the long-term fundamentals in healthcare companies? Do they get disappointed in how hard it is to scale operations in healthcare? Is it just easier to be a private company?

Anthem Rebrands to Elevance Health

Since we all love managed care organization rebrands, I figured “why not?” and dropped this here. Anthem is rebranding to Elevance Health to symbolize the fact that it’s …hair flip… not just another health insurer – Anthem is now a vertically aligned behemoth with investments and segments in provider orgs and other initiatives outside of the traditional insurer footprint.

Just like every company is now a software / tech company, every healthcare company is becoming a payor these days.

• Link to press release (Link)
• Check out the new Elevance site here: (Link)

Fresenius, InterWell, and Cricket merge into a $2.4 billion Kidney Care value-based giant

Big news dropped on March 21 related to a new value-based care kidney merger. Fresenius Health Partners (a value-based subsidiary of the larger Fresenius), InterWell Health (a nephrology network), and privately held startup Cricket Health are merging to form a $2.4 billion VBC kidney care company. (Link)

Here’s what’s happening: The newly merged company will operate under the InterWell brand (too bad, I liked Cricket) and manage 100k covered lives currently. The combined entity has a $170 billion TAM and $6 billion in costs under management.

• To go along with the above scaled operation, InterWell 2.0 will benefit from great financial support & access to capital from the larger Fresenius org as well as several financial & healthcare investors including Cigna Ventures and Blue Cross.

Bigger picture: This is a pretty dang big deal for the VBC push in the end-stage renal disease world. Even though the $2.4 billion merger is a drop in the bucket in the context of the larger ESRD market, it’s a sign of things to come as CMS is experimenting around with alternative payment models in the space, & Fresenius is the largest participant in the new APM for kidney care.

• I have to wonder what DaVita execs are thinking right now. I mean, these are such small dollars at present but the merger really has the potential to succeed at a high level.

Resources:

• H/T to Fierce Healthcare who nabbed the exclusive interview related to the merger. (Link)
• Conspicuously published on the same day was an interview with DaVita’s CEO, Javier Rodriguez. (Link)
• THCB interviewed Cricket Health’s CEO, Bobby Sepucha. (Link)
• More insights on the merger from a well-crafted article out of MedCity News. (Link)

Komodo Preps Summer IPO

Komodo Health is prepping a summer IPO. Komodo is a data analytics firm that houses a number of actionable data points for big pharma and other research based organizations to leverage. Should be a software platform valued akin to Definitive or Doximity. (Link)

Health Tech Index Update

Health tech SPACs and IPOs continued their dry spell after inflation headwinds and turmoil in Ukraine during the first quarter of 2022.

Given the broader market sell-off in Q1, the S&P 500 finished down about 4.6% while the Healthy Muse Health Tech Index finished down 14%.

Top YTD performers included SOC Telemed (bought out at a 300% premium, returning 133% thru Q1), Signify Health (up 30% after buying ACO provider Caravan and performing well YTD), and Oscar (really just rebounding from a very dismal 2021)

Worst YTD performers included Aveanna Healthcare (down 53.8% after a poor Q4 earnings showing, labor struggles, and growth decay), Cue Health (down 54.7% after free Covid testing reimbursement from the government ended), and GoHealth (down 67.3% after horrible earnings and general selloff)

If you want to follow the Health Tech Index in real time, you can find the free resource here: (Link). It also includes links to all investor relations websites for companies included. Nifty, eh?

Digital Health Consolidation is just getting started.

Tremors in the Water: As we’re now well underway into 2022, deal-making is just getting started. Several digital health and other mergers have been announced in recent weeks, all between players making strategic acquisitions. Firms are now realizing that offering one specialized endpoint solution isn’t enough anymore:

Specialized telehealth firm Thirty Madison and remote prescription drug firm Nurx are merging into one platform caring for about 750k ‘active’ patients and $300 million in revenue.

• There doesn’t seem to be much overlap between the two as far as patients are concerned, so I imagine the combined co now has a much larger patient base to cross-sell, larger scale to negotiate with payors, and a more attractive offering to sell to employers. (Link)

Doximity bought Amion for $82.5 billion, continuing to offer lots of useful products for physicians to bolster its ridiculously profitable advertising biz

Signify Health bought Caravan Health for $250 million (including payout incentives) to help it create an “end-to-end suite of value-based care” tools (notice a theme here?). Caravan will give SGFY access to 200 health systems and 3k providers. (Link)

Bottom Line: Digital health is no longer immune to the wave – or, rather, tsunami – of consolidation happening widespread in healthcare. This trend is just getting started as frothy private valuations fall apart, rates rise, and savvy competitors snap up the strategic pieces to create attractive offerings. (Link)

Something you’ll probably read at least 20 times over the next few years: “This acquisition is just the beginning of our evolution toward a holistic, end-to-end care model…”

Under the Radar M&A deals & partnerships

M&A: IBM finally sold Watson Health to a private equity firm for about a billion. (Link)

Partnerships: Humana is expanding its partnership with PE firm Welsh-Carson over its primary care senior clinics into 12 more states. I feel as if this partnership, announced in 2020, is somewhat in the radar, but it’s gaining serious traction. (Link)

Hospital M&A: NorthShore and Edward-Elmhurst completed their merger to create Illinois’ 3rd largest health system at 9 hospitals. (Link)

It’s Over: Providence is ending its affiliation with Hoag at the end of January. (Link)

M&A: Revenue cycle operator R1 RCM is acquiring Cloudmed, a fellow revenue cycle management platform, for $4.1 billion, or about 2.5 Transcarent’s. Chump change. (Link)

M&A: Convey Health Solutions is acquiring HealthSmart International, a home health supplemental benefits company, for $77.5 million. (Link)

M&A: Circulo, a startup focused on the Medicaid population, acquired Huddle for an undisclosed sum. (Link)

Partnerships: Here’s an interesting little announcement – HCA Healthcare is partnering with Diana Health – a maternal health startup – to open a location inside of one of HCA’s facilities. Women’s health space is heating up. (Link)

$AMEH: ApolloMed, a value-based care company you really should be paying a lot closer attention to (I mean check out this spiffy investor deck), acquired Orma Health, a value-based care tech company focused on risk stratificatio and identifying patients for clinical programs. As a part of the transaction, two top execs from Orma Health will transition over to AMEH’s leadership team. (Link)

Partnerships: Big partnership news in Texas – GI Alliance and USPI are forming a partnership to expand their joint gastroenterology presence in Texas. Like I mentioned before, Texas is a hotbed for population growth and all these millennials have plenty of digestive issues (lol). (Link)

Digital Health M&A: This acquisition had the whole #healthtwitter world rockin’ Vera Whole Health is acquiring healthcare navigation company Castlight Health in a $370M deal. (Link)

SPAC: Interesting little tidbit here…Healthcare Merger II, a SPAC, withdrew its plans to go public. The folks behind this SPAC also took SOC Telemed public…so I wonder if there’s a connection there or if nothing is attractive enough valuation wise to take public. (Link)

Hospice: Another interesting tidbit from this week – Humana is looking to offload Kindred’s hospice segment and fetching a multiple reportedly up to 12x EBITDA, implying around $3 billion purchase price. (Link)

Physician staffing firm US Acute Care Solutions acquired Alteon Health – forming a huge practice of post-acute care providers (9 million patients, 500 programs, 25 states). My bet is on at least a handful of PE backed physician practice platform co’s going public in 2022/2023 and my guarantee is that the multiple here was in the double digits. (Link)

Spectrum Health and Beaumont Health completed their 22-hospital merger on February 1st. The new system will be temporarily named BSHS Health until they spend an ungodly amount of marketing dollars on a spunky new name likely ending up with a circular logo and a sans serif font. (Link)

Dialyze Direct bought Compass Home Dialysis to add 9 SNFs to its portfolio. Did you know that Dialyze is the ‘leading SNF dialysis provider’ in the US with 130 SNFs in its portfolio? I truly had no idea. (Link)

Rhode Island health systems Lifespan Health and Care New England just straight up cancelled their previously announced merger plans after they caught wind of a potential FTC intervention amid local provider concerns. It’s like they got caught with their hands in the cookie jar, backed up and said “haha, my b.” (Link)

$AMED: Amedisys acquired a couple of home health biz’s in the mid-Atlantic region, including AssistedCare Home Health and RH Homecare Services.

Ro acquired male fertility company Dadi (c’mon guys) for about $100 million. Ro’s DTC fertility strategy is shaping up nicely. Couple this acquisition with its Modern Fertility acquisition back in May 2021 for a rumored $225 million, and you have a pretty significant footprint in the fertility space. (Link)

$HCAT: Health Catalyst announced a partnership with Tallahassee Memorial HealthCare to scale its data analytics platform across TMHC’s entire system. (Link)

Virtual Care: MVP Health Care, a Medicaid plan in NYC, created a sweet partnership with virtual care platform Galileo. The model will provide MVP’s Medicaid members with a bilingual offering for specialty and primary care. (Link)

• Why this matters: According to MVP, a wild 40% of its Medicaid members “have not seen a primary care provider in the past 18 months due to various barriers, including transportation and language barriers.” Virtual care – especially a Spanish/English one – does a much better job of meeting these folks where they’re at and can provide whole-person care across a variety of services (AKA, hospitals, specialists, lab tests, imaging, etc.)

Bigger trend: More people than EVER are on Medicaid, and there’s a real opportunity to reach these people groups through bilingual apps and virtual care options. New virtual care capabilities will reduce care costs and expand access for these types of members. From the outside, it looks like the partnership is working – MVP is expanding the program to all of its Medicaid members including those in Vermont. (Link)

Policy Headlines I’m Watching.

Medicaid: Georgia sued the Biden Administration this week, saying CMS pulled a bait and switch on them after previously approving their proposal for Medicaid work requirements (under Trump) and then revoking that proposal (under Biden). (Link)

CMS: After a long, drawn out saga, Medicare has decided to limit the coverage of Biogen’s controversial Alzheimer’s treatment Aduhelm to JUST clinical trial patients (AKA, only if patients are enrolled in ongoing trials). As a result of the significant coverage decrease, lawmakers are now pressing CMS to reduce Part B premiums. (Link)

Fact Sheet: CMS released its 2023 proposed MA fact sheet this week. Based on a risk score trend increase of 3.5% and general reimbursement increase of 4.75%, among other items, the total adjustment for 2023 is expected to be around 8% (inflation am I right). (Link)

Telehealth Waivers: Lots of different organizations are requesting for Congress to extend the current telehealth waivers through 2024. Current telehealth waivers only exist as part of the public health emergency

• Senators this quarter introduced a bipartisan bill to expand telehealth access thru 2024, and also introduced a separate bill to allow those with high deductible health plans to permanently have access to telehealth. (Link)

Mental Health: In the first hearing in more than a decade on mental health, Congress is tackling behavioral health inequities and other mental health related topics. Makes you wonder if mental health funding will be part of a future stimulus package. (Link)

• Related: A somewhat unfortunate side effect of the No Surprises Act – mental health providers are asking to be exempt from the bill, since the price transparency provision surrounding Good Faith Estimates disproportionately affects mental health providers over most other providers. (Link)

ACA: A Record 14.5 million people signed up for ObamaCare. (Link)

Settlement: JnJ and other distributors finalized a $26 billion opioid settlement. (Link)

Surprise Billing: In a win for providers related to surprise billing, a judge threw out part of the No Surprises Act related to arbitration, saying that it favored insurers. That’s because it does – the arbiter was directed to resolve disputes by referencing the median in-network rate for that service in that region. Which side do you think has thousands of data points of claims data to set those rates?

• This whole thing is so very messy, but I’m not surprised this provision was struck down. (Link)

SOTU: Here’s a thread of mine which broke down Biden’s State of the Union (Link)

Sutter: Sutter Health BEAT its antitrust lawsuit this week, alleging that the health system engaged in monopolistic practices in its markets. I’m sure Sutter is extremely relieved with the result given its recent history. (Link)

• Last August, Sutter settled a monopoly lawsuit for over $500mil
• A year before that, Sutter settled a False Claims lawsuit for $90mil

HaH: Hospital at home operators are hoping for a waiver extension for the program once the public health emergency ends. From a larger perspective, I’ll be very keen to see what Congress decides to keep or change related to all of the deregulation stemming from the public health emergency – AKA, what’s next for telehealth? Mental health and prescriptions? LTACH/IRF admittance guidelines? And more. (Link)

HHS Extends ‘Rona Health Emergency & SCOTUS Halts Vaccine Mandates

Emergency: HHS extended the Covid-19 health emergency for another 90 days. The emergency was about to expire on January 16 so this news was pretty expected. In fact, I was frantically Googling ‘public health emergency extended’ since I hadn’t seen anything come through yet.

• What this means: All of the loosened healthcare regulations and flexibilities around telehealth, waivers, Medicaid enrollment freezes, and stipulations in the CARES act, will remain in place for another 90 days. Set to expire April 15 as of this writing. (Link)

Mandate: The Supreme Court struck down OSHA’s vaccine mandate on 100+ employee-count employers nationwide earlier in January, ruling that OSHA, under the executive branch, doesn’t have that scope of authority.

• They argued that such a national public health measure should be implemented via an act of Congress
• Here’s a good summary of the mandate positioning (Link) and here’s a link to the full opinion. (Link)

Direct Contracting Controversy and CMS Revamps DCE to ACO REACH

Disarray: All of a sudden, Medicare’s Direct Contracting (”DC”) program, a new risk-based capitation model for primary care unveiled by the Center for Medicare and Medicaid Innovation (CMMI) in 2020, is under attack by a progressive consortium of policymakers.

• What’s DC? At a high level, the program allows primary care providers operating in Direct Contracting Entities (’DCEs’) to take on risk voluntarily – through monthly lump sum payments – for their Medicare fee-for-service patients. So, CMS and the DCE get to streamline administrative $$$, the DCE pockets a bit more cash if risk is successfully managed, and the patient stays on traditional Medicare as opposed to MA. The program is only open to about 50 of these direct contracting entities so far while kinks are ironed out and public commentary is received.
  • TL;DR: CMS contracts with PCP providers. Seniors on traditional Medicare keep traditional Medicare insurance while the primary care provider entity (the DCE) gets paid per member per month for that beneficiary behind the scenes. Goal of the program = reduce costs, increase quality of care, move toward value-based arrangements.

The Attack: The cohort of progressives, including Elizabeth Warren, sent a letter to HHS accusing the payment model of catering to ‘corporate profiteers.’ They assert that the DC model will only serve to further privatize Medicare, which might result in reduced choice for traditional Medicare beneficiaries.

• There’s some other nuanced concerns in there too, like taking advantage of risk score adjustments (fair) and that the entities are able to pocket more $$$ if care is managed effectively. Here’s a good write-up of the specific grievances from Fierce: (Link)

The Defense: Of course, the letter attracted a frenzied response. Over 200 healthcare entities ranging from Intermountain, agilon, Babylon, a multitude of ACOs, and more, signed a letter urging HHS to ‘Plz fix, thx’ the program instead of ending the program altogether, arguing that ending any sort of pioneering program like this would severely affect the value-based movement as a whole. (Read the Letter Here)

Hot Take: I find the take by progressives pretty perplexing considering DCE is one of the largest tailwinds powering value-based care in the U.S. – a model that has at least shown promise in predictable cost control for a nearly bankrupt Medicare trust fund.

• Progressives of all people should want to test out new things in healthcare, even if there are kinks in the model currently.

Still, this rhetoric is not going to go away – I’m seeing headlines all over the place, like ‘Medicare privatization experiment puts Ohio seniors at the mercy of for-profit entities.’ As if damn, they forgot the entirety of healthcare is already for-profit. Let’s do some research here folks and at least attempt to align profits with quality incentives.

• This is a pioneering program in Medicare and one that needs to continue forward in some form. The progress of value-based care and related payment models depends heavily on CMMI and Medicare. There’s too much momentum (and funding) in the space to back out now.
• Keep an eye on the tweaks and mutations of the direct contracting model, because it heavily affects the prospects of companies like Privia, Oak Street, One Medical, and health systems who manage large Medicare populations or are in the value-based care space.

Handy resources & perspectives:

• Olivia Webb wrote a solid overview of the direct contracting program here. She does the best job possible explaining all of the relevant nuances. (Link)
• Here’s a viewpoint in opposition to direct contracting. (Link)
• What do you think? If you have a perspective, I’d love to hear it.

CMS Revamps Direct Contracting to ACO REACH

As if on cue, on Friday, CMS dropped a next-gen program slated to replace the current Direct Contracting starting in 2023.

• Details: CMS is replacing all direct contracting programs (Global/Professional/Geo) with a re-skinned model called ACO REACH. The new program is essentially DC with some extra bells & whistles.

ACO REACH aims to continue to move traditional Medicare toward risk-based and capitation payment models through…

• Allowing mainly provider-controlled groups into the program. 75% of applicant boards have to be provider-controlled. Non-provider groups have to demonstrate a certain level of direct patient care to be included in REACH.
• Addressing health equity (SDOH) – Every entity has to identify & determine ways to address health disparities in specific markets & geographies – dope
• Preventing the abuse of risk score adjustments. CMS is capping adjustments based on population trends & traditional Medicare risk score trends among other more specific items.
• Maintaining a similar PMPM payment structure to DC by keeping the professional and global payment tracks, but ditching the controversial geographical track.
• Alleviating Progressive concerns about ‘corporate profiteering’ and ‘getting rid of Medicare’ – Beneficiaries will keep all provider choice freedom that traditional Medicare provides. This is in contrast to Medicare Advantage programs that typically create narrower networks.
• Providing greater transparency into the program. AKA, more reporting on how entities are doing, how health equity is being addressed regionally, etc.

ACO REACH will start accepting new applicants in Jan. 2023. It’ll run thru 2026 and by that point I’m sure we’ll have some new acronym and the next iteration of VBC payments.

• Companies expected to leverage the new ACO REACH model include all of the normal VBC names – ApolloMed, Privia, agilon, Alignment, Clover, and plenty of others. I’ll personally be reading management commentary at investor days to see what the general sentiment is for each company specifically.

Resources:

• Link to CMS announcement. (Link)
• A link to the actual RFP if you’re interested in checking that out. (Link)
• A recent Aledade podcast discussing ACOs, payment models, and the future of Medicare. (Link)

Takeaways from a 604 page MedPAC report.

Everyone’s favorite payment advisory committee MedPAC dropped its 600 page report related to all of the healthcare services verticals and fee-for-service reimbursement recommendations given the current dynamics in each of those industries. If you have the time and are interested in how policymakers shape reimbursement decisions for Medicare, give the executive summary a read (about 30 pages).

My general takeaway: it seems as if MedPAC is treating the public health emergency as a one-time thing and approached the report from a business-as-usual perspective (and/or they said “we have no effing clue so we’ll just report based on previous methodologies).

• That’s fine, but do we have any finance people in there? They’re using 2020 data for payment policy decisions while every headline in America is screaming about inflation, labor shortages, and supply chain issues. I get that the committee is limited by lagging data but man…some of these recommendations are way out of touch.

I am physically ill at the fact that they recommended reimbursement cuts of 5% for some verticals while inflation sat at 8% in 2021. Physically ill.

• I mean, even if Medicare’s wage adjustment index accounts for some of the inflation, there’s still inflation in other expenses…AKA, supplies? G&A? And you can bet your bottom dollar that consultants and lawyers aren’t planning on making any less either.
• If MedPAC had its way, providers would get destroyed financially next year.

Anyway, here are 2 sentences on each vertical based on what I thought was relevant from the MedPAC report:

• Acute Care Hospitals
  • Costs per hospital stay grew at almost 4% higher than revenues / payments for those stays indicating what we all already knew: hospital margins on Medicare patients are negative and according to MedPAC, hover around -10%.
  • MedPAC Rec: Maintain the current updates – IPPS basket increase of 2.5% and OPPS basket increase of 2.0%
  • LTACHs: MedPAC Rec: Increase the base rate by 2.0%
• Inpatient Rehabilitation Facilities
  • The supply of IRFs increased for the first time in a while from 2019 to 2020 which probably is indicative of the demographic tailwinds in the industry and Florida CON repeal. Freestanding IRFs continue to grow at a steady (3-4%) clip while hospital units are shrinking. During 2020, IRFs experienced higher than normal lengths of stay, higher labor costs, and higher supply costs / usage.
  • MedPAC Rec: Cut base payments by 5%. Rationale: MedPAC estimates that IRF Medicare margins in 2022 will be around 14%, a healthy margin in their eyes.
• Physician Practices
  • MedPAC added a big section for telehealth in this year’s physician services chapter. Total telehealth FFS spending amounted to $4.2 billion, or 5% of FFS spending, up from just $59 million the year prior. Telehealth as a % of total primary care visits sits at just under 20% today.
  • MedPAC Rec: Maintain status quo basket rate increase based on current laws (so like, 2%). MedPAC also believes that volumes will rebound to prepandemic levels, or greater, by 2023.
• Home Health
  • While the report noted the difficulties associated with 2020 data given the level of visits via telehealth, MedPAC did note that PDGM changes did NOT result in significant changes to referral patterns.
  • MedPAC Rec: Cut base payments for home health by 5%. Rationale: they think the home is a good setting for care, but Medicare payments are a bit too high right now as compared to institutionalized care settings. Medicare margin at ~20%)
• Hospice
  • MedPAC Rec: Freeze 2023 rates at the current 2022 level, and wage adjust the aggregate cap (AKA, the total amount of Medicare payments a hospice provider can receive in a year). Then reduce that aggregate cap by 20% since around 20% of hospice providers exceeded the cap in 2019.
• Dialysis
  • Dialysis patients are SUPER sensitive to COVID-19. Tragically, volumes for ESRD treatments dropped 3% as a result of excess deaths in this beneficiary segment. MedPAC wants to continue incentivizing alternative payment models for chronic kidney diseases. Interestingly, the pandemic almost forced home dialysis service adoption due to increased patient interest and general need for in-home services during the pandemmy.
  • MedPAC Rec: Maintain status quo basket increase of 1.2%
• ASCs
  • Lots of discussion in this section concerning freestanding ASCs vs HOPDs (hospital surgery departments) and how freestanding ASCs typically benefit physicians more, are run more efficiently, and incentivize lower Medicare spend. Here’s an interesting little tidbit though: MedPAC isn’t sure whether the lower cost setting of ASCs is offset by a higher volume of outpatient surgeries (AKA, more supply = more demand). MedPAC also wants ASCs to start collecting cost reporting and quality data to this end.
  • MedPAC Rec: Congress should eliminate the 2022 Medicare conversion factor update for ASCs – essentially meaning no basket increase
• Skilled Nursing Facilities
  • Median occupancy for SNFs dropped from 85% prior to the pandemic to 74% as of September 2021, an intense decline in census volumes. Despite the decline in volumes, MedPAC noted that Medicare margins for SNFs are strong at an average of 25% and that most SNF woes were related to volume drop-offs during COVID.
  • MedPAC Rec: Cut base payments for SNFs by 5%. Yes, 5%!! Rationale: SNF performance improved due to the new PDGM payment policies and federal relief bailouts. Volume dropoff is not indicative of future financial earnings potential from Medicare.

Resources:

• For all of you fellow nuts out there, here’s the full MedPAC report. (Link)
• Here’s another article with a helpful summary of the report. (Link)

My Favorite Healthcare Reads.

PE: This was a good overview from Keckley on where private equity is at headed into 2022. (Link)

Telehealth: This was a great overview of the current dynamics facing the telehealth industry. Has the bubble actually popped? What do you think? (Link)

Dialysis: This was a great deep dive by ProPublica into how the pandemic ravaged dialysis and end-stage renal disease patients, an extremely vulnerable population, and that nobody really noticed how big of an impact it made on this patient population. (Link)

Noom: This article from Inc was a fantastic deep dive into Noom, a weight-loss company with real weight and lots of momentum behind it (Ha!) Read it here. (Link)

Packy’s Not Boring took a deep dive into Oscar, albeit from more of a techy perspective. Keep in mind this is a sponsored post, so the bull case is presented pretty nicely – but no real challenges or bear case was presented. Still a good overview of what Oscar does. (Link)

Health Systems: This dive into health system incentives showed that fee-for-service, at least for the foreseeable future, is here to stay. (Link)

Headspace: This was an interesting watch from THCB about Headspace’s merger with Ginger and its go to market strategy, and where it positions against the Lyra’s of the world. (Link)

Shortages: You should be aware by now of the staffing shortages going on nationwide, but especially in healthcare. Here’s a good read from NPR on how it’s affecting nursing homes. (Link)

LifePoint and Scion: This was an insightful read into the integration between LifePoint Health and Scion Health. It sounds like all systems are a go at the combined organizations. (Link)

MA: This article from Axios highlighting the Medicare Advantage space, and all of the players, was a good brief read on the current landscape. (Link)

Substacks: I tweeted about these reads earlier this week, but I really enjoyed the following from Olivia Webb and Jan-Felix Schneider:

• A timeline of web1, web2, and web3 in healthcare (Link)
• Risk adjustment – the new revenue cycle management? (Link)

Shkreli: The annual Shkreli Awards are here (#FreeShkreli) with a list of some bad actors in healthcare from 2021. (Link)

MA: Medicare Advantage, Call Centers, Startups, and the rapidly evolving space. (Link)

Watson: A great read from Slate – How IBM’s Watson went from the future of healthcare to sold off for parts. (Link)

Shortages: This from the Atlantic (soft paywall) was a solid historical overview of the physician shortage. (Link)

Hybrid: Timely as ever, Olivia Webb walked through hybrid care models and the future of primary care. (Link)

Generics: The FDA released its annual report on generic drug approvals, noting the most significant generic drugs that hit the markets in 2021. Did you know that 90% of drugs in America are generic? (Link)

Platforms: This was a good read on Amazon’s ability to deploy platforms in healthcare. I personally believe they’re the best positioned to do so as far as Big Tech is concerned. (Link)

MA: The Commonwealth Fund wrote a great overview of Medicare Advantage, including how the risk adjustment program works for payers. Highly recommend glancing at this just to understand the inner workings of MA. (Link)

VBC: Health Affairs wrote a great 2-part series on a single-payer system that already exists in the U.S. – Maryland – and takeaways we can mirror in value-based care payment models. Very timely!(Link)

• Along with the above, I enjoyed this piece from TCHB about value-based care and lessons from the pandemic. (Link)
• Final piece on value-based stuff this week – the Keckley report also dove into what to expect for value-based care in 2022 and gives some insightful context for previous value-based initiatives in healthcare. (Link)

Oncology: Olivia Webb wrote on value-based oncology arrangements and how we define value in cancer. (Link)

Single-Payer: The New Yorker dove into the history of the AMA’s dispute related to single-payer healthcare. (Link)

Placebos: Nikhil Krishnan brought out another banger, this time writing about the power of placebos in healthcare. (Link)

Therapy: With my wife being a speech pathologist, she pointed out that the CDC published HIGHLY controversial new guidelines related to child development & autism milestones without consulting any therapists prior to releasing those guidelines. Seems like an…interesting decision? (Link)

This was a great report from SVB on healthcare investments and exits in 2021. (Link)

Nikhil had a great sponsored breakdown of Flume Health and how it’s enabling providers to take on risk. (Link)

Related, Jan-Felix dove into the value-based care tech stack and the players associated with the various steps in the VBC claims process. (Link)

This was a great overview of physician services M&A from Provident across all specialties – an extremely comprehensive report. (Link)

I really enjoyed this read highlighting Epic’s CEO Judith Faulkner at ViVe: (Link)

Bain released its global healthcare private equity and M&A report, chock full of all sorts of interesting info on the state of the private markets. Really really insightful stuff despite it being super consultant-speak. (Link)

Another JAMA study found that value-based arrangements consisting of 2-sided risk models (AKA, downside risk) were associated with lower hospitalizations among beneficiaries. So…does that mean that all risk-bearing relationships should include downside risk? Seems so, but the upside reward needs to be worth it. (Link)

PCP: The Commonwealth Fund published some data related to primary care investments and access and how the U.S. compares to other countries. I’m personally bullish and excited for the primary care space as it sees increased invvestments. (Link)

Prison: Here’s a great dive into the prison healthcare landscape and the sadly dramatic disparities that exist. (Link)

Supplies: Gist Healthcare had a great dive into how health systems and providers have dealt with, and continue to deal with, supply chain issues including strategies to circumvent challenges. (Link)

Regs: Brendan Keeler shared a recording of his related to breaking down need-to-know healthcare regulations. (Link)

Fintech x Healthtech: Probably my favorite read of the week, Jacob Effron dove into the stark parallels between Fintech funding from years ago compared to health tech funding today. Turns out, there’s some pretty similar stuff going on which is extremely exciting to think about the future of the industry. Tons of momentum in healthcare lately! (Link)

HCA: This was a great read from Katie Jennings on HCA’s Covid strategy and highlighted the machine that it is. There’s a reason why HCA generates $60 billion a year in revenue. (Link)

Personalities: This was a great profile from Stat on Will Flanary, the mastermind behind Dr. Glaucomflecken. He’s actually incredibly funny, but to see the human unveiled behind the character was really cool. 2.5 million subs across Youtube, Tik Tok, and Twitter!! (Link)

Hospitals: Here’s a great read from THCB on hospital consolidation and how we can maximize social benefit given the current landscape of health systems and providers. (Link)

The post The Healthy Muse’s Q1 2022 Top Healthcare News Round-up. appeared first on The Healthy Muse.

On March 29, UnitedHealthcare’s Optum announced its acquisition of LHC Group for $170/share. The transaction values LHC at about $6.4 billion including debt.

I know we all joke about working for UnitedHealthcare one day, but it’s terrifying when you think about their sheer scale. Even scarier when you look at Optum’s growth:

• Optum Revenue in 2012: $29.4 billion
• Optum Revenue in 2021: $155.6 billion. Like. What.

LHC Group is an important acquisition for Optum. Payors are continuing to morph into ‘payviders’ and UHG / Optum has a huge competitive advantage given its 60k aligned physician base. Acquiring LHC Group accelerates this payvider trend but also allows UHG to catch up to Humana, who now owns all of Kindred, in the post-acute sphere.

Meanwhile, Optum is deploying its grand vision of integrated care delivery right before our eyes. It’s happening whether you like it or not.

Even though I provided a first-impressions breakdown on Twitter related to the deal, I had to break this deal down into more detail and give you guys my thoughts on why the LHC acquisition is so significant.

Let’s dive in.

Investment and Deal Thesis.

LHC Group is well-positioned on a few fronts in the fast-growing home health sector:

• They’re partnered with 435 health systems, giving Optum access to hundreds of hospital joint ventures.
• Home health and at-home care is a MUCH more desirable care setting for Medicare beneficiaries. Comfort and patient experience is a huge factor.
• Of all post-acute care settings, home health is the most cost-effective. Home health costs way less than skilled nursing. Lower costs = lower medical loss ratio for United. By keeping patients out of SNFs and hospitals, these programs could disrupt facility-based care delivery in the coming years.
• From a demographics standpoint, home health benefits from an aging baby boomer population. Medicare will cover 79 million people by 2030 a major secular trend for healthcare. I’m sure you’re all WELL aware of that!
• PDGM and other headwinds for smaller agencies will run out of relief funding, resulting in consolidation. This consolidation will benefit larger home health platforms.

In summary, LHC Group is a great operator in a high-growth industry: Home Health.

First…some context on the Home Health Market.

Given increased patient desire to stay in the home for care, growing virtual care options from digital health players, the aging and growing Medicare population, the increasing negative stigma around nursing homes from COVID, and enhanced alternative payment models like the Hospital-at-Home (HaH) program, PACE, and other at-home care models, home health is just getting started.

• McKinsey estimates that $265 BILLION worth of care services conducted in clinics will shift to the home by 2025. That’s a four-fold increase over current home health care spending. Home health spending could double by 2030.

Fragmentation. LHC and other home health providers are benefiting from a fragmented market. Tuck-in acquisitions of smaller agencies are commonplace these days.

As of 2022, the top 5 providers account for about 21% of the total home health market share. This statistic indicates the significant opportunity for continued roll-up of the sector.

• Private equity has noticed this trend, too. Major PE players have entered both the home health and hospice markets to create platforms in the spaces. One recent splashy deal that comes to mind for me was Advent International’s acquisition of AccentCare in 2019.

Notable Deals in Home Health & Hospice

Home health has been one of the hottest M&A markets in healthcare services, both among large and small deals:

• The Ensign Group spun off its home health operations into the Pennant Group in about a $1 billion deal in late 2019.
• AccentCare merged with Seasons Hospice in November 2020.
• Humana purchased Kindred at Home for around $5.7 billion in August 2021 (for the remaining 60%) along with Curo Health Services in July 2018 for $1.4 billion.
• Optum purchased Landmark Health for around $3.5 billion (more on that below) in February 2021.
• Amedisys acquired Contessa Health – a major hospital-at-home provider – for $250 million in June 2021. When Amedisys made this purchase, they claimed it expanded their total addressable market from $44 billion to $73 billion. Do the math there, and that’s how big of an opportunity hospital-at-home could be! More on that below.
• HCA purchased 80% of Brookdale’s home health assets in a $400 million deal in July 2021.
• Encompass announced plans to spin off its home health assets into its own publicly-traded company. The post-acute firm rebranded the segment to Enhabit in Q1 of this year.

Not mentioned above is the plethora of home health, hospice, and home care deals taking place behind the scenes among private equity players, health systems, and publicly-traded operators alike.

It’s a great time to sell a home health and hospice agency, but it’s also a highly opportunistic time for larger operators to continue to roll up the space. Sector M&A activity is only going to accelerate from this point as platform players gobble up assets.

Background on LHC Group. Why Them?

LHC Group is one of the biggest home health agencies in the US. After its founding in 1994, LHC Group’s business grew from a single home health agency into a $6.4 billion enterprise. The firm operates in 37 states through an impressive portfolio of assets across the spectrum that Optum can now take advantage of:

• 557 Home health agencies
• 170 Hospice locations
• 136 Home care locations
• 12 LTACHs
• The most underrated asset…30,000 trained clinical employees. During a labor shortage, Optum is creating a pipeline to out-compete all other healthcare service providers on staffing and talent.

At the last check, LHC Group holds about 4-5% of national market share. That’s good enough to be the third largest national home health provider behind Amedisys and Kindred. Since its inception, LHC has grown through tuck-in acquisitions, JV partnerships, and organic market share retention from solid execution.

In 2017, LHC Group merged with fellow public home health operator Almost Family in a $2.4 billion deal at 14x EBITDA.

• For context, LHC sold to United this month for 2.4x forward revenue and around a 21.4x forward EBITDA.

More recently, LHC purchased 47 locations from Brookdale as part of the planned divestitures included in the HCA-Brookdale $400 million deal.

Yes, multiples in home health are FROTHY but justified given the coming growth. Home health & hospice boast the highest EBITDA multiples in healthcare. Of course, that excludes the slight nonsense going on in digital health.

While LHC has succeeded in its M&A strategy, its ability to integrate and operate those assets has resulted in even more success.

LHC’s Strategy and Secret Sauce.

As mentioned, LHC prioritizes partnerships with hospitals and health systems when approaching markets. These partnerships vastly increase LHC’s chances of market viability and success.

By partnering with hospitals in local markets, LHC locks in large market referral sources from affiliated facilities and leverages that captive volume to out-compete other market players. The partnership doesn’t reimbursement hurt rates, either – even though most home health recipients are on Medicare.

• As of March 2022, LHC held partnerships with 435 hospitals and health systems, receiving referrals for services from 3,600 hospitals across their geographical footprint.

The strategy results in a healthy bottom line. Last year, LHC generated about $2.2 billion in revenue and $216 million in EBITDA (10%ish margin).

Before the acquisition, LHC guided to $2.5 billion and $280 million in EBITDA (margin expansion to 11.2%). The firm is well-positioned and capitalized for growth. Given home health’s capital-light model, LHC holds a solid balance sheet slated to overcome short-term labor and inflation challenges.

• On labor issues, LHC has noted that employee turnover is well below home health industry averages, which speaks volumes (literally) about its operational excellence. More staff = more census = more cash monaaay.

I’m somewhat surprised they sold to United for a low premium (~8%) given their bullish rhetoric around short-term challenges. When discussed on the deal call, though, Optum mentioned that the initial share price premium was around 25% prior to LHC’s recent surge in pricing. Overall, LHC’s share price has suffered since July 2021. Side note – did someone know something starting in January?

Fishy.

How Optum can unleash LHC Group.

So, we’ve established that home health, home care, hospice, and other post-acute services that LHC Group offers have a growing place in healthcare in the coming years. LHC Group was already doing a great job executing its growth-through-JVs strategy from a long-term perspective.

Optum and UHG can unlock value one step further by integrating LHC’s post-acute services into Optum’s continuum of care. That continuum includes an impressive portfolio of acquired post-acute assets. In the past few years, Optum has invested HEAVILY in its at-home care programs by launching a slew of new services and aggressively acquiring key players in the home and virtual care sector:

• Launched Optum HouseCall (1.6 million visits in 2020);
• Acquired Landmark Health in 2021 for around $3.5 billion, which is a direct contracting entity and is involved in hospital-at-home and other value-based programs;
• Acquired naviHealth, a post-acute management services and care navigation platform, in an alleged $1 billion + deal;
• Launched a virtual first plan in October 2021 called NavigateNOW;
• Acquired AbleTo for just south of $500 million, a virtual therapy provider

Aside from the post-acute vertical, UHG acquiring key assets in adjacent markets as well. Some recent, notable deals:

• Bought Change Healthcare for ~$13 billion (assuming the deal goes through pending antitrust investigation. It might not given recent rhetoric, but the burden of proof is on the government)
• Rumors of the Refresh Mental Health deal for likely $1 billion+
• And now the acquisition of LHC Group for $6 billion+

Coupled with the above acquisitions, UnitedHealthcare has repeatedly echoed positive sentiment for Optum. Optum is, after all, United’s primary vehicle for growth in the coming years.

More specifically, United has grown more and more bullish on the expansion of home health services. Just take a look at UHG‘s CEO Andrew Witty touching on Optum’s bullish thesis for at-home care during United’s Q4 2021 earnings call. We should have been paying attention!

“I’ve been super impressed with the development, not just in the clinic, but also through the at-home programs, where we’re able to continue to make sure folks are looked after properly. And actually, particularly as we’ve gone through the pandemic environment, people’s preference to have care delivered in the home has become clearer and clearer.” – Andrew Witty, UHG CEO, Q4 Earnings Call

When interviewed for deal comments after the LHC Group acquisition announcement, Wyatt Decker, the CEO of Optum, doubled down on Andrew Witty’s comments, touting the demand for at-home care.

“This trend has really only just begun, of how much care can truly be delivered in the home…We can give care in the home, which is a lower-cost setting…than nursing homes or more advanced care facilities.”

Through Optum, UHG can keep patients out of costly facility-based care settings like SNFs, IRFs, and even hospitals. This care coordination allows UHG to better manage medical costs long-term. UnitedHealthcare can and will continue to offer competitive insurance plans and services by leveraging Optum’s 60k physicians and 2k sites coupled with these new post-acute and new virtual care assets. Pretty powerful synergy, if you ask me.

In addition to the above assets at Optum’s disposal for post-acute strategy, LHC also announced a huge partnership with SCP Health in mid-2021 to vastly increase SNF@ Home and HaH programs nationwide. The partnership combined LHC’s home health workforce with SCP’s 7,500 clinicians to create a widespread Advanced Care at Home program.

• Optum can leverage LHC’s existing hospital partners to scale hospital-at-home and skilled-nursing-at-home programs – value-based care programs that are just beginning to ripen. If effective, the giant could disrupt these traditionally facility-based services significantly. Take a look at LHC’s existing HaH and SaH model.

If LHC can deploy the above footprint with SCP’s 7,500 clinicians, just think how LHC Group and Optum can scale Advanced Care @ Home with 60,000+ physicians and other clinicians.

• Starting to get it? Strategies like these are how Optum will realize incredible deal synergy from this acquisition – if executed successfully.

This is just the beginning of home-based care initiatives. Other emerging home care segments include home infusions, home-based dialysis, and primary home care – all of which are future avenues of growth for Optum.

Home Health is favored positively in Congress.

Multiple legislative packages increasingly favor at-home care and new value-based programs in the home health sector. Here are just a few programs and bills that signal strongly in favor of future growth for home health:

Choose Home Care Act of 2021: The bill was introduced in Congress late last year and would allow Medicare beneficiaries to be given the option to choose to recover at home rather than in a setting like a skilled nursing facility (Factsheet)

Public Health Emergency Provisions: The PHE created a lot of positive externalities for at-home care. Currently, the PHE will expire on April 16 but will likely be extended for another 90 days, which would maintain the following provisions for post-acute care specifically:

• Medicare sequestration suspension (AKA, better reimbursement that might be permanently delayed)
• Relaxed admission rules and delayed site-neutral payment implementation for LTACHs
• Interestingly, the PHE and associated relief dollars from the CARES Act kept struggling agencies afloat during the pandemic when they otherwise would have gone out of business or sold. CARES Act relief payments, accelerated payments from Medicare, and paycheck protection program loans helped bolster small agency balance sheets during the volume dry spell.

HaH and SNF@H: Hospital and Skilled Nursing At-Home programs are receiving bipartisan support in Congress and will likely get extended another two years with widespread health system backing through the Hospital Inpatient Modernization Act or similar legislation.

• Skilled nursing may soon be on the hook for reimbursement cuts from Medicare, which would result in a double whammy for home health.

Home Health CMS Reimbursement: For 2022, CMS instituted a basket rate increase of 2.5% and no cuts; I would expect even higher basket rates for 2023 and likely an adjustment to the wage rate calculation to account for inflation trends.

• The 2022 final rule will expand the Home Health Value Based Payment demonstration from 9 states to all 50 (!!!)

PDGM: The Patient-Driven Groupings Model, AKA, PDGM, was supposed to shake up the home health industry during its implementation in 2020. Here’s what PDGM changed and why smaller operators will struggle post-’Rona:

• PDGM created a 30 day payment period and based those payments on how patients were classified into 432 distinct payment groups. These payment groups are further broken down into 5 dimensions of care, including referral source, period timing, clinical conditions, functional status, and comorbidities.
• What YOU need to know about PDGM is that the payments are no longer based on volumes, or the number of in-person therapy visits provided. Previously, the prospective payment system would INCREASE payments as the number of therapy visits for that patient increased. But no longer.
• Along with the decoupling from visit volumes, home health agencies can no longer request advanced payments (RAP) from Medicare (AKA, “pay us upfront and we’ll figure out the differences in payment later”). Before CMS phased this out, providers could receive 50-60% of total payments upfront by submitting an RAP. RAPs were replaced by Notices of Admissions (NOAs) starting in 2022.
• So now, instead of receiving that large upfront payment, home health agencies get nothing, which hamstrings cash flow quite a bit. As we say in business school, Cash is King.

As a result of current inflation headwinds, labor shortages, and cash flow changes, I’m expecting smaller home health agencies to struggle post-’Rona. These dynamics will cause them to sell to bigger players…kind of similar to how independent physicians sold to health systems and private equity given operational struggles during the pandemic.

Before the pandemic, the sentiment regarding PDGM heading into the major changes was that the program would cause unprecedented levels of consolidation, echoing my thoughts above:

“Combined with the two 30-day payment periods under PDGM, the elimination of the RAP should lead to more consolidation in the industry than we’ve experienced in the last 2 decades. It will hit cash flows hard for the smaller agencies; but for the larger agencies, such as LHC, we would expect minimal impact.” Keith Myers, Co-Founder, Chairman & CEO, LHC Group Q3 2019 Earnings Call

“We believe PDGM has the potential to accelerate an industry consolidation unlike any we’ve seen in recent memory. We will be ready” Keith Myers, Co-Founder, Chairman & CEO, LHC Group Q3 2019 Earnings Call

In summary, we haven’t seen these effects yet on smaller home health operators because of the easy money public health emergency policies. But eventually, we’ll find out if Keith was right. I bet he is.

Conclusion

There are WAY too many positive dynamics at play in favor of LHC Group’s portfolio of assets for you to ignore Optum’s acquisition:

• Regulations are supporting home-based initiatives, and reimbursement is stable. Lawmaker scrutiny is mounting on SNFs, providing further discharge opportunities and advancement for home health.
• LHC has a history of operational success in home health and is the missing link among Optum’s various post-acute and at-home initiatives. Optum needed this acquisition to keep up with Humana and others pursuing similar post-acute strategies.
• Home health is highly fragmented and PDGM creates headaches for smaller agencies, which will allow Optum to pounce on opportunistic M&A in the space.
• Along with its huge physician base, Optum can leverage LHC’s health system partnerships to drastically expand Advanced Care at Home programs combined with recent acquisitions of Landmark and naviHealth.
• By keeping patients out of SNFs and hospitals, these programs could severely disrupt facility-based care delivery in the coming years through the home.

Final thoughts on antitrust…You could argue that there are antitrust concerns related to this transaction given that UHG is essentially creating a vertical monopoly, and I get that.

• I would argue that the deal is a win for most parties involved, including patients, health systems, and keeping patients out of costlier care settings while receiving effective treatment at home. If Optum doesn’t abuse its position (which is a big if, mind you), I have no problem with the increasing vertical integration in healthcare.

Down the line, I would not be surprised whatsoever if regulators forced United and Optum to split.

But for now, watch out for this scaled healthcare titan.

Thanks to Jared Dashevsky, Brett Dashevsky, Troy Castle, and Brandon W for taking a quick read through of this breakdown!

Resources:

LHC Group’s most recent investor presentation. (LHC Investor Relations)

From facility to home: How healthcare could shift by 2025 (McKinsey)

Home Health Business: Market Dynamics & Future Opportunity (VMG Health)

CARES Act Impact on Home Health Agencies (VMG Health)

More about the Hospital at Home program (Healthcare Huddle)

Optum factsheet from UnitedHealthcare (UHG Investor Relations)

LHC-Optum proxy SEC 8-k filing on the acquisition. (LHC Investor Relations)

The post What UnitedHealthcare’s $6.4 billion LHC Group Acquisition Means for the Future of Home Health. appeared first on The Healthy Muse.

Here are the 19 largest health systems in 2022 by revenue:

• Kaiser Permanente
• HCA Healthcare
• CommonSpirit Health
• Ascension
• Providence
• UPMC
• Trinity Health
• Tenet Healthcare
• Mayo Clinic
• AdventHealth
• Advocate Aurora
• Universal Health Services
• Cleveland Clinic
• Community Health Systems
• Baylor Scott & White
• Intermountain Healthcare
• IU Health
• Christus Health
• Sanford Health

You might notice there are a few big names missing from the largest health systems list. That’s because these health systems haven’t released 2021 financial disclosures yet. Stragglers.

Once those health systems (AKA, Northwell Health, Banner Health, Sutter, SSM Health, Bon Secours Mercy Health, UnityPoint, Texas Health Resources, Atrium Health, etc.) update their financials thru 2021, I’ll be able to provide you with a full list of the largest health systems by revenue, profitability, hospital count, admissions, and more.

The post The 19 Largest Health Systems in 2022 appeared first on The Healthy Muse.

• This week in healthcare: Optum buys Refresh Mental Health, Lux Capital steals my index, Oscar’s investor day, Henry Ford Health rebrands, Privia Health’s Q4 earnings, Hackensack and Englewood hospital merger called off, and more.

Mental Health Boom: Optum buys 300-clinic mental health provider Refresh Mental Health

Optum is in talks to buy Refresh Mental Health, an outpatient provider of behavioral health services, for a yet-undisclosed sum. According to Axios, Refresh, founded in 2017, “operates a network of more than 300 outpatient mental health, substance abuse and eating disorder centers spanning 37 states.”

Refresh was rumored to be generating $40 million in EBITDA and was owned by private equity firm Kelso, which bought the mental health co back in 2020 for $700 million. At the time, Refresh operated in 28 states and 200ish facilities. Assuming UNH bought Refresh for around $1B+ (pure speculation), that’s close to a 25x multiple and you can see why there’s so much activity in the space when strategic buyers like United are shelling out cash to scoop up behavioral health assets.

• For context, LifeStance Health, which went public on June 15 last year, currently operates 534 centers in 32 states through 4,790 employed clinicians. They’re currently valued publicly around $3.5 billion and generated $668 million in revenue in 2021, which is about 5.5x trailing or 4.2x forward expected sales of ~$871 million. Applying that multiple to Kelso’s purchase price probably means Refresh was generating revenue of around $150-200 million in 2020.
• Meanwhile, I’m sure Acadia Healthcare, which operates 238 behavioral health centers profitably, is wondering why its multiple isn’t 10 turns higher (probably related to growth). Sigh.

There’s also a real incentive for insurers to continue to build out mental health networks & coverage – Biden and lawmakers are starting to feel pressure to pass mental health legislation and address mental health insurance parity.

Related: This news around Refresh – and mental health tailwinds in general – shows how red hot the behavioral health market is between facility-based providers (who have better prospects IMO) and more virtual-based providers like Lyra, Cerebral, Talkspace, and others.

public market update.

Top 3: Talkspace, Convey Health Solutions, Skylight Health

Bottom 3: Cue Health, GoHealth, Pear Therapeutics

Full List: (Link)

I have an important announcement to make.

Lux Capital stole the Healthy Muse Health Tech Index for their own personal gain.

• The proof is clear.
• Jokes aside, the VC firm has interestingly created one of the, if not the first, digital health ETFs aimed at innovative companies across healthcare. (Link)

$PRVA: Privia Health jumped slightly after posting its Q4 earnings. (Link) (My Breakdown) (Transcript)

For 2022, Privia is expecting:

• 30% revenue growth to around $1.25B, 3700 providers, 875k lives, ~23% care margin (AKA, 77% MLR if I’m interpreting that correctly), and a ~4% adjusted EBITDA margin
• If you guys can’t tell, I’m very bullish on the care platform space and their ability to partner with health systems and incumbents to unlock value-based care. At some point in the near future, I’ll do a write-up on the space.

$OSCR: Just a month after its Q4 earnings dropped and as one of the best performers in the Health Tech Index to date, Oscar Health held its investor day and has probably the slickest investor deck I’ve ever seen. Obviously that doesn’t matter but I’m a sucker for presentation aesthetic. (Link)

Anyway here are some highlights and tidbits:

• Oscar is expecting to break-even on the operations side (AKA, revenue minus medical costs minus admin costs) by the end of 2023. To achieve that break-even status, Oscar expects to cut admin spend, increase prices (despite already pricing itself higher compared to competitors), and make other operating improvements outlined in its presentation I linked above.
• Oscar’s tech stack is way ahead of everyone else’s but that doesn’t mean much when you can’t SELL it…unfortunately, Oscar is struggling to sell its +Oscar package despite historically touting the market here. Interestingly, it looks like Oscar thinks it can sell the infrastructure to new digital health entrants and virtual providers, which could actually be a pretty big market.
• 60% of Oscar’s 1 million members exist in Florida, giving the insur-tech some major operating risk. In fact, Florida is one of the most heavily competitive markets for Medicare Advantage plans, which leads me to believe that ACA plans might be similarly competitive.
• All in all, the general consensus from folks I’ve followed seems to be…underwhelmed with Oscar’s day. While I want Oscar to be given the time and capital to succeed, it’s clear that investors don’t want to be on the hook for massive losses much longer (paging Bright Health here as well).
• By the way, Ari Gottlieb on LinkedIn does a good job of breaking down the insur-tech space. He’s bearish as hell but I still respect his opinion and analysis. He refuses to connect with me though. Maybe someday. Check out his profile here: (Link)

Other resources:

• HealthEquity’s Q4 earnings results. (Link)

Biz Hits

Trend Watch:

Rebrand: Henry Ford Health System decided to rebrand to …Henry Ford Health. Nice. Personally I kind of preferred the old logo. (Link)

HaH: Hospital at home operators are hoping for a waiver extension for the program once the public health emergency ends. From a larger perspective, I’ll be very keen to see what Congress decides to keep or change related to all of the deregulation stemming from the public health emergency – AKA, what’s next for telehealth? Mental health and prescriptions? LTACH/IRF admittance guidelines? And more. (Link)

Strategy & Partnerships:

PE: This was a great read from Med City News on private equity and where investments are headed next in healthcare with the coming virtual and at-home wave. (Link)

Galileo: Following up on its recent deal news, Galileo launched its bilingual, multi-specialty, 24/7 care platform which sounds insanely cool. (Link)

Confluent partnered with IncreMedical Therapy Solutions. (Link)

Bicycle Health partnered with 5 health plans to reduce opioid addiction. (Link)

M&A:

Hospitals: The Hackensack Meridian Health and Englewood merger in the New England area was called off after major regulatory antitrust concern in the continuing stream of mergers canceled between hospitals & health systems. (Link)

FreCrickWell: There were a few more interesting articles & content that provided an inside perspective on the Fresenius/InterWell/Cricket $2.4 billion kidney care merger:

• THCB interviewed Cricket Health’s CEO, Bobby Sepucha. (Link)
• More insights on the merger from a well-crafted article out of MedCity News. (Link)

SPAC: Not necessarily in my wheelhouse, but Ligand Pharma is spinning off its antibody unit through a SPAC merger. It’s notable as one of the few SPAC / IPOs taking place right now during insane market volatility. (Link)

Fundraising, Execs, & VC:

Cityblock, the $5.7 billion care platform focused on Medicaid patients and risk contracting, has a new CEO – former President and Co-Founder Toyin Ajayi. (Link)

Centene has a new CEO – Sarah London. (Link)

The AHA invested in SteelSky Ventures, a VC firm focused on addressing health equity. Is the AHA a lobbying group or the mafia? (Link)

• Osso VR raised $66 million. (Link)
• Podimetrics raised $45 million. (Link)
• TimeDoc raised $48 million. (Link)
• Antidote Health raised $22 million. (Link)
• Alife Health also raised $22 Million. (Link)
• Recora raised $20 million. (Link)

Want to drop your fundraising announcement in? DM me on Twitter.

Data, Studies, & Resources

McKinsey featured an analysis recently related to healthcare’s shift to the home. (Link)

Orthopedic physician practice deal activity did not slow down during the pandemic despite the near cancellation of elective procedures early on. (Link)

McKinsey had another good write-up on the future of care delivery in healthcare and where we’re headed next. (Link)

Hinge Health released a study that showed remote, digital MSK programs over 12 months were indicated to reduce pain, lower depression and anxiety, and limit medical utilization. It’s great progress for the virtual MSK space and I wonder how these results stack up against in-person physical therapy care. (Link)

Blake’s Musings

HOOVES: I can’t stop watching The Hoof GP on Youtube FIXING COW HOOVES. (Link)

SciFi: Esquire dropped their list of the 50 greatest sci-fi books of all time. As an avid sci-fi reader myself, I thought it was pretty solid. I’m personally reading through the Foundation right now and am enjoying them. Drop me a rec if you have any! (Link)

Ramp: Packy wrote about Ramp again and I found it incredibly interesting the breadth and speed of Ramp’s scale. (Link)

Weather: In case you were wondering, I did in fact survive the Texas tornadoes, but this video of a truck absolutely bodying a tornado is a must-watch. (Link)

Lefty: Phil Mickelson isn’t at the Masters…I still love Phil (as a fellow lefty) but what a fall from grace. (Link)

Hot Takes

Stat dropped a First Opinion from a couple of lawyers about how private equity is killing healthcare and that patients need to be protected.

• I think their beef is more-so with the misaligned incentives in healthcare rather than private equity itself. PE is just such a fun buzzword for ignorant people to pick on, so I’m sure it got plenty of clicks. Let’s just ignore the fact that all of healthcare is for-profit and pick on private equity players specifically. (Link)

Healthy Muse Top Picks

HCA: This was a great read from Katie Jennings on HCA’s Covid strategy and highlighted the machine that it is. There’s a reason why HCA generates $60 billion a year in revenue. (Link)

Personalities: This was a great profile from Stat on Will Flanary, the mastermind behind Dr. Glaucomflecken. He’s actually incredibly funny, but to see the human unveiled behind the character was really cool. 2.5 million subs across Youtube, Tik Tok, and Twitter!! (Link)

Hospitals: Here’s a great read from THCB on hospital consolidation and how we can maximize social benefit given the current landscape of health systems and providers. (Link)

Payviders: I really enjoyed The Scroll’s recent newsletter on vertical integration in healthcare and found the below infographic extremely helpful to visualize it. Feel free to drop a sub to the Scroll as well – they’re producing great VBC content. (Link)

MA: A detailed, into-the-weeds dive into everything Medicare Advantage, comparing the program’s costs and benefits to traditional Medicare from J. Michael McWilliams and Health Affairs. (Link)

The post The Mental Health Boom Edition appeared first on The Healthy Muse.

• This week in healthcare: A huge value-based kidney care $2.4 billion merger, Komodo Health going public this summer, takeaways from MedPAC’s report, Q4 earnings, Google’s partnership with Meditech, is health tech following in fintech’s shoes? & more.

A $2.4 billion Value Based Kidney Merger

Big news dropped earlier today related to a new value-based care kidney merger. Fresenius Health Partners (a value-based subsidiary of the larger Fresenius), InterWell Health (a nephrology network), and privately held startup Cricket Health are merging to form a $2.4 billion VBC kidney care company. (Link)

Here’s what’s happening: The newly merged company will operate under the InterWell brand (too bad, I liked Cricket) and manage 100k covered lives currently. The combined entity has a $170 billion TAM and $6 billion in costs under management.

• To go along with the above scaled operation, InterWell 2.0 will benefit from great financial support & access to capital from the larger Fresenius org as well as several financial & healthcare investors including Cigna Ventures and Blue Cross.

Bigger picture: This is a pretty dang big deal for the VBC push in the end-stage renal disease world. Even though the $2.4 billion merger is a drop in the bucket in the context of the larger ESRD market, it’s a sign of things to come as CMS is experimenting around with alternative payment models in the space, & Fresenius is the largest participant in the new APM for kidney care.

• I have to wonder what DaVita execs are thinking right now. I mean, these are such small dollars at present but the merger really has the potential to succeed at a high level.

Resources:

• H/T to Fierce Healthcare who nabbed the exclusive interview related to the merger. (Link)
• Conspicuously published on the same day was an interview with DaVita’s CEO, Javier Rodriguez. (Link)

Takeaways from a 604 page MedPAC report.

Everyone’s favorite payment advisory committee MedPAC dropped its 600 page report related to all of the healthcare services verticals and fee-for-service reimbursement recommendations given the current dynamics in each of those industries. If you have the time and are interested in how policymakers shape reimbursement decisions for Medicare, give the executive summary a read (about 30 pages).

My general takeaway: it seems as if MedPAC is treating the public health emergency as a one-time thing and approached the report from a business-as-usual perspective (and/or they said “we have no effing clue so we’ll just report based on previous methodologies).

• That’s fine, but do we have any finance people in there? They’re using 2020 data for payment policy decisions while every headline in America is screaming about inflation, labor shortages, and supply chain issues. I get that the committee is limited by lagging data but man…some of these recommendations are way out of touch.

I am physically ill at the fact that they recommended reimbursement cuts of 5% for some verticals while inflation sat at 8% in 2021. Physically ill.

• I mean, even if Medicare’s wage adjustment index accounts for some of the inflation, there’s still inflation in other expenses…AKA, supplies? G&A? And you can bet your bottom dollar that consultants and lawyers aren’t planning on making any less either.
• If MedPAC had its way, providers would get destroyed financially next year.

Anyway, here are 2 sentences on each vertical based on what I thought was relevant from the MedPAC report:

• Acute Care Hospitals
  • Costs per hospital stay grew at almost 4% higher than revenues / payments for those stays indicating what we all already knew: hospital margins on Medicare patients are negative and according to MedPAC, hover around -10%.
  • MedPAC Rec: Maintain the current updates – IPPS basket increase of 2.5% and OPPS basket increase of 2.0%
  • LTACHs: MedPAC Rec: Increase the base rate by 2.0%
• Inpatient Rehabilitation Facilities
  • The supply of IRFs increased for the first time in a while from 2019 to 2020 which probably is indicative of the demographic tailwinds in the industry and Florida CON repeal. Freestanding IRFs continue to grow at a steady (3-4%) clip while hospital units are shrinking. During 2020, IRFs experienced higher than normal lengths of stay, higher labor costs, and higher supply costs / usage.
  • MedPAC Rec: Cut base payments by 5%. Rationale: MedPAC estimates that IRF Medicare margins in 2022 will be around 14%, a healthy margin in their eyes.
• Physician Practices
  • MedPAC added a big section for telehealth in this year’s physician services chapter. Total telehealth FFS spending amounted to $4.2 billion, or 5% of FFS spending, up from just $59 million the year prior. Telehealth as a % of total primary care visits sits at just under 20% today.
  • MedPAC Rec: Maintain status quo basket rate increase based on current laws (so like, 2%). MedPAC also believes that volumes will rebound to prepandemic levels, or greater, by 2023.
• Home Health
  • While the report noted the difficulties associated with 2020 data given the level of visits via telehealth, MedPAC did note that PDGM changes did NOT result in significant changes to referral patterns.
  • MedPAC Rec: Cut base payments for home health by 5%. Rationale: they think the home is a good setting for care, but Medicare payments are a bit too high right now as compared to institutionalized care settings. Medicare margin at ~20%)
• Hospice
  • MedPAC Rec: Freeze 2023 rates at the current 2022 level, and wage adjust the aggregate cap (AKA, the total amount of Medicare payments a hospice provider can receive in a year). Then reduce that aggregate cap by 20% since around 20% of hospice providers exceeded the cap in 2019.
• Dialysis
  • Dialysis patients are SUPER sensitive to COVID-19. Tragically, volumes for ESRD treatments dropped 3% as a result of excess deaths in this beneficiary segment. MedPAC wants to continue incentivizing alternative payment models for chronic kidney diseases. Interestingly, the pandemic almost forced home dialysis service adoption due to increased patient interest and general need for in-home services during the pandemmy.
  • MedPAC Rec: Maintain status quo basket increase of 1.2%
• ASCs
  • Lots of discussion in this section concerning freestanding ASCs vs HOPDs (hospital surgery departments) and how freestanding ASCs typically benefit physicians more, are run more efficiently, and incentivize lower Medicare spend. Here’s an interesting little tidbit though: MedPAC isn’t sure whether the lower cost setting of ASCs is offset by a higher volume of outpatient surgeries (AKA, more supply = more demand). MedPAC also wants ASCs to start collecting cost reporting and quality data to this end.
  • MedPAC Rec: Congress should eliminate the 2022 Medicare conversion factor update for ASCs – essentially meaning no basket increase
• Skilled Nursing Facilities
  • Median occupancy for SNFs dropped from 85% prior to the pandemic to 74% as of September 2021, an intense decline in census volumes. Despite the decline in volumes, MedPAC noted that Medicare margins for SNFs are strong at an average of 25% and that most SNF woes were related to volume drop-offs during COVID.
  • MedPAC Rec: Cut base payments for SNFs by 5%. Yes, 5%!! Rationale: SNF performance improved due to the new PDGM payment policies and federal relief bailouts. Volume dropoff is not indicative of future financial earnings potential from Medicare.

Resources:

• For all of you fellow nuts out there, here’s the full MedPAC report. (Link)
• Here’s another article with a helpful summary of the report. (Link)

public market update.

Top 3: DocGo, SmileDirectClub, GoHealth

Bottom 3: Talkspace was the only negative performer this week in a great, broad green week for the market. lmao.

Full List: (Link)

$UNH: The DOJ is crackin’ down on the $13 billion United/Change Healthcare deal. A trial will take place on August 1st for the antitrust suit. (Link)

$ANTM: Anthem is suing a former employee, alleging they shared trade secrets while bidding for a Medicaid plan in Iowa. (Link)

$GOCO: 4th quarter earnings. (Link)

$SMFR: 4th quarter earnings. (Link)

$AUGX: Augmedix popped 25% after posting its 4th quarter earnings, reporting improved gross margin, 34% revenue growth YoY, and net revenue retention of 124%. (Link)

$WRBY: 4th quarter earnings. (Link)

$OSH: Investor day. (Link)

$EHC: Investor presentation. (Link)

$AKU: Q4 earnings. (Link)

• 2 days later, Akumin announced the departure of its President & Co-CEO, Rhonda Longmore-Grund. Seems to be part of the transition plan relate to Akumin’s prior acquisition of Alliance (Link)

Biz Hits

Trend Watch:

VC: This was an interesting interview from Dr. Justin Norden, a VC who discussed the latest in digital health investing and why he’s bullish on the Medicaid tech space. (Link)

Risk: HHS is looking into Medicare Advantage risk adjustment practices. I’ll be watching to see if anything comes from all this hubbub, but I’m willing to bet it’s all talk. (Link)

Medical Debt: The three main credit reporting agencies will remove about 70% of medical debt from individual credit reports, saying medical debt is largely an uncontrollable expense. Pretty interesting development. (Link)

• This is a great breakdown from Axios on medical debt in America. (Link)

PHE: Keep an eye on the public health emergency designation, as the end of the declaration has HUGE implications across most healthcare verticals and state Medicaid memberships. Right now it’s set to expire on April 16 but will likely get extended another 90 days. Beyond that? Somewhat doubtful. (Link)

CON: Georgia is considering fully repealing its CON laws by 2025. (Link)

Strategy & Partnerships:

EHR: Google announced a majorly cool partnership to build out its Care Studio on Meditech’s EHR platform. According to Google, Meditech owns 23% of the EHR market. (Link)

Uber: This was a cool dive into Aveanna’s workforce model that works flexibly like Uber’s to manage turnover and retain their workforce. Pretty cool stuff. (Link)

M&A:

Komodo Health is prepping a summer IPO. Komodo is a data analytics firm that houses a number of actionable data points for big pharma and other research based organizations to leverage. Should be a software platform valued akin to Definitive or Doximity. (Link)

Clarify Health acquired Embedded Healthcare to bolster its analytics platform. (Link)

Fundraising, Execs, & VC:

Doctolib: Not really U.S. focused, but Doctolib raised $550 million at a $6.4 billion valuation. It’s one of the largest digital health unicorn outside of the U.S. and is basically another Doximity. (Link)

Minneapolis based Nice Healthcare raised $30 million. The firm wants to primarily use the funds to invest in expanding into new markets and other growth initiatives. (Link)

House Rx just secured $30 million in Seed + Series A financing. Founded by two former Flatiron Health executives, Ogi Kavazovic and Tesh Khullar, House Rx’s health technology platform empowers oncology and rheumatology physician practices to offer medically integrated dispensing. (Link)

• Shortly after their funding announcement, HouseRx also announced a partnership with Northwest Medical Specialties to offer medically integrated dispensing to all 7 locations in Washington state. (Link)

Embold Health raised a $23 million Series B led by Echo Ventures and joined by Morgan Health, the healthcare arm of JP Morgan Chase.

• Embold’s platform offers providers, employers and payers real-time, actionable data on provider quality tracked through practice patterns and appropriateness metrics. (Link)

Remote patient monitoring oncology platform Canopy raised $13m. RPM for oncology patients makes a WHOLE lot of sense and I’m excited for the applications here. (Link)

Moves: Amazon hired a former Providence executive. Really looks like Amazon is about to streamline and integrate its healthcare leadership / services here. (Link)

Cool Data & Resources

Bain released its global healthcare private equity and M&A report, chock full of all sorts of interesting info on the state of the private markets. Really really insightful stuff despite it being super consultant-speak. (Link)

FFS: a JAMA study confirms the fee for service world health systems live in – 90% of physician compensation is tied to productivity metrics. (Link)

Another JAMA study found that value-based arrangements consisting of 2-sided risk models (AKA, downside risk) were associated with lower hospitalizations among beneficiaries. So…does that mean that all risk-bearing relationships should include downside risk? Seems so, but the upside reward needs to be worth it. (Link)

Blake’s Musings

Momma Says: Drew Timme tried VERY hard not to cuss during his post-game interview after the Zags’ victory over Memphis.

Drugs: Doritos are basically heroine, as broken down by Trung Phan.

Golf: I played the Texas Rangers golf course last weekend and had 46 putts, which is literally atrocious. I’m actually embarrassed. Anyone have recommendations for a new putter?

Meetups: For any New Yorkers, Rohan Siddhanti is organizing healthcare folks for quarterly happy hours. The next one is this Tuesday – **RSVP here** or sign up for the NYC community here.

Hot Takes

VBC: Where are we actually when it comes to value-based care? Is it acutally more complicated after the pandemic? Some compelling thoughts in the article. (Link)

Drugs: Drug pricing reforms should focus on expanding choice, not imposing more government controls. (Link)

My Top Healthcare Picks

PCP: The Commonwealth Fund published some data related to primary care investments and access and how the U.S. compares to other countries. I’m personally bullish and excited for the primary care space as it sees increased invvestments. (Link)

Prison: Here’s a great dive into the prison healthcare landscape and the sadly dramatic disparities that exist. (Link)

Supplies: Gist Healthcare had a great dive into how health systems and providers have dealt with, and continue to deal with, supply chain issues including strategies to circumvent challenges. (Link)

Regs: Brendan Keeler shared a recording of his related to breaking down need-to-know healthcare regulations. (Link)

Fintech x Healthtech: Probably my favorite read of the week, Jacob Effron dove into the stark parallels between Fintech funding from years ago compared to health tech funding today. Turns out, there’s some pretty similar stuff going on which is extremely exciting to think about the future of the industry. Tons of momentum in healthcare lately! (Link)

The post The Value Based Kidney Merger Edition appeared first on The Healthy Muse.

• This week in healthcare: agilon announces a major partnership with MaineHealth, Cano Health might go private, Anthem rebrands to Elevance (wtf), hospital earnings round-up, and Q4 earnings roundups continue.

agilon announces a major partnership with MaineHealth

Agilon is partnering with MaineHealth, an integrated nonprofit health system with at least 9 hospitals and plenty of other outpatient care settings, to transition MaineHealth’s primary care delivery system to agilon’s platform.

• We’ve seen a handful of partnerships form between these tech-enabled care platforms and health systems. Privia Health and Surgery Partners partnered in the Montana marketplace earlier this year.
• These care platforms are now reaching a pretty solid scale. Agilon expects to reach 80k additional MA lives with the partnership and will now expand to 12 states, 25 markets, 23 physician groups, and 2200 primary care physicians. (Link)

More: Agilon just held its investor day too, chock full of interesting information about the business model. Give it a glance here. (Link)

Activist Investors push Cano Health to consider a public-to-private sale

• P2P: After SPAC’ing back in June 2021 and poor public performance since (down 60%), activist investor group Third Point bought a pretty decent-sized stake in Cano Health and is pushing the firm to consider a sale. (Link)

The week the activist news dropped, Cano finished up 26% on the week alongside CareMax, which finished up 30%. The obvious takeaway here is that private investors think there’s serious value to unlock in these businesses.

Despite the poor stock performance, these facility-based operators are executing on their fundamental operations JUST fine. In fact, Cano released its earnings today, providing strong 2022 guidance for the business despite some accounting irregularities related to Medicare Risk adjustments. (Link)

• I’m positive that there’s serious private equity and insurance company interest in assets like CareMax and Cano Health.
• Healthcare companies are kind of notorious for public-to-private transactions. Why is that? Are public investors too antsy / impatient to see the long-term fundamentals in healthcare companies? Do they get disappointed in how hard it is to scale operations in healthcare? Is it just easier to be a private company?

Health Systems Form Staffing Alliance to Combat Shortages, and Earnings Round-ups

Six health systems (and I’m soon many more will join soon) are partnering to create a staffing agency called Evolve Health Alliance. Since staffing shortages have been SO bad, these health systems, which include giants like AdventHealth and Intermountain, will share their resources with one another in the instance that one of them is dealing with a COVID surge while the other systems aren’t. (Link)

• It’s a pretty smart and effective way of addressing shortages while largely getting around travel nursing fees – essentially cutting out the middleman agencies. (Thread)

Along with the staffing news, here’s your one-stop shop for everything hospital related to 2021 earnings.

• HCA: Heavy battle-tested hospital titan HCA released earnings in late January:
  • HCA is building 5 acute care hospitals in Texas in areas with hot population growth and 3 others in Florida.
  • Amid broader staffing issues, HCA is still slowly integrating post acute assets into its portfolio, including Brookdale’s home health biz that HCA bought last year for $400 million
  • For 2022, HCA is expecting revenue just north of $60 billion and EBITDA around $13 billion, a consolidated margin north of 21%. (Link) (Presentation)
• UHS: Universal Health execs had a lot of interesting context to say around COVID and recovery. For one, while some other hospital operators shrugged off staffing challenges, UHS sees the staffing shortage and unwind happening more gradually over time than being a singular event. Secondly, UHS execs expect discharge rates for patients to other post-acute care settings to right-size as skilled nursing, long-term care, nursing homes, and other sites of care get back on their feet.
  • Overall, UHS expected muted growth for 2022 given the staffing and ‘Rona headwinds but noted optimisim as cases and outbreaks become less severe. UHS also signalled on the call that they’re only going to allocate capital to M&A where it makes sense strategically in their two fundamentally strong segments. (Link) (Transcript – soft paywall) (Presentation)
• Tenet: Tenet finished the quarter and year in a really solid spot, beating 2021 estimates. Its build-out of USPI continues to scale quickly through acquisitions. The hospital and outpatient giant announced the acquisition of 30 more ASCs from SurgCenter Development expected to take place this year.
  • Here’s a fascinating point from the transcript – in his opening remarks, Ronald Rittenmeyer noted that he’s perplexed by the market’s and analyst’s decisions to continue to value Tenet as a hospital-based company despite their deleveraging and the growth of USPI. He thinks they’re worthy of a higher multiple. Do you? By reporting very clear, transparent segmented financial statements publicly, it’s clear what Tenet wants.
  • Despite prior announcements to spin off Conifer, Tenet disclosed in early March that it intends to retain the revenue cycle management arm – AKA, kinda sounds like there were no sellers. Hmm…(Link) (Transcript – soft paywall) (Presentation)
• CHS: Community Health initially dropped after releasing Q4 earnings that showed weak same-store admissions growth and the expected challenges from ‘Rona. Interestingly, the hospital operator did signal expectations for lower travel / contract staffing costs later on in 2022.
  • Community finished the year with $12.4bil in revenue and adjusted EBITDA of 16%, or $1.97bil.
  • For 2022, CHS expects revenue around $13 billion and EBITDA around $1.9 billion, or consolidated margin just shy of 15%.
  • The operator noted its main avenues for growth included increasing market share and bed capacity in existing markets, further investment into ACOs, and enhancing provider outreach programs.
  • CHS also wants to crack down expense management related to its supply chain, purchased services, and nurse staff pipeline. Overall, though, it seems as if CHS has really turned things around and it’s full steam ahead for the operation. Now, to get to HCA’s level might take some time (Link) (Presentation)

Not for profit health systems round-up:

• Baylor Scott & White (Link)
• Providence (Link)
• Ascension (Link)
• CommonSpirit (Link)
• Cleveland Clinic (Link)
• UPMC (Link)
• Trinity (Link)
• Mayo Clinic (Link)

Anthem Rebrands to Elevance Health

Since we all love managed care organization rebrands, I figured “why not?” and dropped this here. Anthem is rebranding to Elevance Health to symbolize the fact that it’s …hair flip… not just another health insurer – Anthem is now a vertically aligned behemoth with investments and segments in provider orgs and other initiatives outside of the traditional insurer footprint.

Just like every company is now a software / tech company, every healthcare company is becoming a payor these days.

• Link to press release (Link)
• Check out the new Elevance site here: (Link)

public market update.

Top 3: Skylight Health, CareMax, Cano

Bottom 3: One Medical, Doximity, Teladoc

YTD performance: (Link)

$LFST: Lifestance Health (Link)

$TOI: The Oncology Institute (Link)

$HCAT: Health Catalyst announced a partnership with Tallahassee Memorial HealthCare to scale its data analytics platform across TMHC’s entire system. (Link)

$DCGO: After skidding more than 30% this year, DocGo reported 239% revenue growth to $318 million, which is pretty impressive. DocGo was actually profitable in 2021, but expects a slowdown in revenue growth to a more reasonable 30% clip for 2022 with adjusted EBITDA sitting around $40mil. (Link)

$CVS: CVS fired several executives after an anonymous report disclosed workplace misconduct in late 2021. Yikes. (Link)

Biz Hits

Trend Watch:

Medicare Advantage continues its insane enrollment growth as fewer seniors opt for traditional Medicare and boomers age into the program. (Link)

Strategy & Partnerships:

Telehealth operator Amwell is partnering with LG (yeah, consumer electronics LG) to create new digital health devices and tools. (Link)

Integration: As Omada continues to build out its virtual and remote patient care offerings, the firm announced its decision to integrate its behavioral health segment into its chronic care platform. AKA – members in those programs can now access mental health providers. (Link)

Blue Cross announced a partnership with Amazon to provide drug discount cards in 5 states. (Link)

M&A:

More on Akili’s plans to go public via SPAC at a more than $1 billion valuation through one of Chamath’s funds. Close peer Pear Therapeutics went public late last year – essentially as a pre-revenue company – and is down over 30% YTD. (Link)

Fundraising, Execs, & VC:

Luv: Founder of Bolt Ryan Breslow is launching Love . com, a new ‘people centered’ pharmaceutical company. Check out the tweet thread here: (Link)

Policy Hits

Opioids: 16 doctors and clinic owners were busted in a $250 million opioid scheme this week. (Link)

Fraud: The DOJ is estimating about $8 billion in fraud stemming from pandemic relief funds, which is an impressively small percentage when you think about the scope of the $2.2 trillion relief package. (Link)

Telehealth: The House is expected to pass a $1.5 trillion spending package which would fund the government through the rest of the year AND maintain current telehealth provisions in place as a result of the public health emergency.

• Hopefully that extra runway would give lawmakers time to institute a more permanent solution for telehealth and the relaxed waivers. (Link)

Sutter: Sutter Health BEAT its antitrust lawsuit this week, alleging that the health system engaged in monopolistic practices in its markets. I’m sure Sutter is extremely relieved with the result given its recent history. (Link)

• Last August, Sutter settled a monopoly lawsuit for over $500mil
• A year before that, Sutter settled a False Claims lawsuit for $90mil

Other Hits

In what might be the best story of the week, it turns out that affection from dogs has medicinal benefits. (Link)

A group of 9 physicians mostly experienced in trauma is headed to the Polish-Ukraine border with $500k in medical supplies. (Link)

A dude from Dallas jokingly sold toilet paper-based NFTs and wiped out $7 million in medical debt lmao. (Link)

Hot Takes

Here’s another slam piece related to mental health unicorn Cerebral and its allegedly aggressive prescribing practices. Is this the price you pay for scale? (Link – soft paywall)

Does Big Pharma have a duty to remain in Russia and continue to produce drugs there? It’s an interesting ethical question. (Link)

Healthy Muse Top Picks

This was a great overview of physician services M&A from Provident across all specialties – an extremely comprehensive report. (Link)

I really enjoyed this read highlighting Epic’s CEO Judith Faulkner at ViVe: (Link)

The post The Bad Rebrand Edition appeared first on The Healthy Muse.

Last week, I teased that a major announcement was coming to you guys related to the future of the Healthy Muse. While I can’t share all of the details quite yet, I didn’t want to leave my subs hanging.

I’m extremely excited to let you know that the Healthy Muse has officially been acquired!

• While this is not the official announcement drop (I’ll link that in the coming weeks – don’t hype this up too much yet), I did want to let my subscribers know first as my OG readers and a nod of my appreciation for all of you. Think of this as an open secret for now. 

What this means: I’m going from full-time consulting and transaction advisory to full-time writing and content creation – focused on what I currently cover, but 10x better because I can spend WAY more time on producing dope content – AKA, weekly deep dives and perspective pieces exploring the latest in healthcare with all of you.

• I’ll continue to cover the same segments – providers, services, the latest trends affecting them, the companies involved, and plenty more. Healthcare, but with some sauce if you will.

More details to come!
This ain’t no hobby anymore.

What I need from you – a big favor

Prior to the official announcement, we’re rebranding my newsletter. Alas, the name “The Healthy Muse” will retire soon. Sorry to anyone who loved it (Dad).

If you want to vote on a name or submit your own name, the poll is below OR you can reply to this e-mail with any thoughts. I really appreciate it!

• Click here to vote on the next name for my newsletter!

On to this week’s news!

healthy muse healthcare news.

• This week in healthcare: Encompass’ home health biz has suitors, a virtual first plan for Medicaid, State of the Union Highlights, more earnings from Bright, RadNet, Surgery Partners, Cigna expands its venture arm, Ro acquires a Dadi, and my fave HC reads.

Who’s buying Encompass’ Home Health & Hospice Biz?

M&A Rumors are swirling around Enhabit, Encompass Healthcare’s planned home health & hospice spinoff. Suitors including strategic buyers like Aveanna, and financial buyers like Advent International, appear to have big-time interest in buying the segment valued at around $3 billion.

• If Aveanna buys Enhabit, the purchase would put Aveanna on par with the likes of Amedisys and LHC Group in terms of scale. Given Aveanna’s current size (around $1.6 billion), the firm would likely need to split the cost with an interested financial party to foot the entire bill – similarly to how Humana purchased Kindred along with Welsh Carson (WCAS).

Enhabit would be a major get for Aveanna or any strategic buyer. Immediate scale and access to new markets while multiples have compressed down a bit over the last 12 months during ‘Rona headwinds makes sense for a timely buy. Although I wonder whether Encompass shareholders think more value would be unlocked via a public spin-off. Time will tell, but my money’s on the spin-off. (Link)

Virtual Care for Medicaid – a New York First

Virtual Care: MVP Health Care, a Medicaid plan in NYC, created a sweet partnership with virtual care platform Galileo. The model will provide MVP’s Medicaid members with a bilingual offering for specialty and primary care. (Link)

• Why this matters: According to MVP, a wild 40% of its Medicaid members “have not seen a primary care provider in the past 18 months due to various barriers, including transportation and language barriers.” Virtual care – especially a Spanish/English one – does a much better job of meeting these folks where they’re at and can provide whole-person care across a variety of services (AKA, hospitals, specialists, lab tests, imaging, etc.)

Bigger trend: More people than EVER are on Medicaid, and there’s a real opportunity to reach these people groups through bilingual apps and virtual care options. New virtual care capabilities will reduce care costs and expand access for these types of members. From the outside, it looks like the partnership is working – MVP is expanding the program to all of its Medicaid members including those in Vermont. (Link)

public market update.

Top 3: P3 Health Partners (+13%), Alignment (+11%), Babylon (+7%)

Bottom 3: GoHealth and Bright Health both dropped 43% in a week; Pear Therapeutics (-20%)

Full List: (Link)

Providers & Services:

Nonprofits

• Cleveland Clinic: (Link)
• UPMC: (Link)
• Trinity: (Link)
• Mayo Clinic: (Link)
  • Next week I’ll do a quick round-up of all the nonprofit operators now that most of their annual releases have dropped – be on the lookout for that.
  • Hospitals in general got destroyed by the Omicron wave in Q1 – just take a look at the latest KF flash report. Average operating margin was 3.3%.

$SGRY: Surgery Partners traded flat this week after its Q4 release despite a guidance raise for 2022, projecting $2.5 billion in revenue and $375 million in adjusted EBITDA, or about a 15% system-wide margin. (Link)

$RDNT: RadNet dropped 15% this week on disappointing earnings. Interestingly, RadNet had a lot to say about building de-novos as opposed to fueling the M&A pipeline via tuck-ins or joint ventures. (Link)

$ACHC: Acadia easily outperformed its financial expectations on the Q and is seeing strong tailwinds headed into the rest of 2022. ACHC popped 9% on the earnings drop. (Link)

$PNTG: As a home health and facility based post-acute operator, labor costs hit the Pennant Group particularly hard in Q4. (Link)

$ADUS: Addus was likewise hamstrung by the ‘Rona wave, noting a 6% reduction in hours served in January and increased labor costs. (Link)

$LHCG: LHC Group shrugged off short term challenges related to staffing and census constraints as a result of those labor challenges. All things considered, LHC was able to effectively manage labor challenges and is looking beyond the hot button issue. (Link)

$TOI: The Oncology Institute announced a joint venture with MaxHealth in California to provide medical oncology services at certain locations under risk-based contracting. (Link)

$THC: Tenet has confirmed its decision NOT to spin off its revenue cycle management arm, Conifer, which is slightly notable – they must still think there’s strategic value to unlock there as Tenet expands USPI. (Link)

Managed Care:

$BHG: Bright dropped 30% after posting extremely disappointing Q4 and full year 2021 earnings. Based on what I read in the transcript, Bright experienced a mass influx of members but wasn’t able to process member claims with the appropriate coding and risk adjustments, leading to an absolutely catastrophic loss in the quarter. What’s even worse in investor minds – and maybe almost borderline fraudulent – was the fact that this apprently occurred BETWEEN Bright’s investor presentation on January 10th and today. Bright management was sober during the call but noted that most of the claims processing issues should now be rectified. Personally, I stay bullish on the insur-tech despite the fact that we’re all going to be working for United someday.

$AGL: agilon ended the week on a positive note after posting 50% revenue growth, 82% membership growth, and a massive uptick in 2022 guidance. (Link)

$ALHC: Similarly, Alignment finished the week up 10% after posting a solid MLR and growth metrics across membership, revenue, and improving margin. (Link)

Digital Health:

$GDRX: GoodRx plummeted 30+% after releasing lower than expected revenues and 2022 guidance. The company missed estimates on monthly active users and revenue and issued weak AF 2022 guidance.

• I’m also bewildered by the company, which is currently a breakeven operation, decision to institute a $250 million buyback program. I get the ‘we’re undervalued’ signal, but there has to be better ways to deploy that capital? (Link)
• On that note, a few days after the earnings drop, GoodRx acquired vitaCare Prescription Services from TherapeuticsMD for $150mil, another firm that assists patients in finding low cost drugs and navigate other barriers for medication needs. GoodRx expects the firm to contribute ‘under 1%’ to its overall revenue and ‘reduce adjusted EBITDA margin’ by 2% in 2022…meaning that GoodRx bought vitaCare for north of 20 times…revenue. (Link)

$TALK: Talkspace traded flat over the week after posting revenues of $114 million and adjusted EBITDA of ($61) million. (Link)

$OSH: Oak Street wowed investors in its Q4 report, jumping 20+% after the announcement. The care platform has plans for profitability by 2025 but pared down facility growth expectations given current bear market conditions. All things considered, Oak Street is currently executing well on its laid out strategy. (Link)

Software:

$SGFY: Signify touted its recent acquisition of Caravan Health, an ACO manager and expects to drive a significant amount of growth through the platform. Makes sense when you think about the amount of hype ACO REACH is generating. (Link)

Biz Hits

Trend Watch:

• The mental health wave isn’t slowing down. Global mental health fundraising topped $5.5 billion in 2021. (Link)

Strategy & Partnerships:

• Cigna is injecting $450 million into its venture arm to invest on assets focused on data analytics, digital transformation of healthcare, and anything that makes them a shit ton of money. (Link)
• Civica Rx, a partnership between a consortium of hospital providers created to stop generic drug shortages, announced a plan to produce SIGNIFICANTLY cheaper insulin by 2024 assuming the firm succeeds during all the regulatory steps. (Link)

M&A:

Ro acquired male fertility company Dadi (c’mon guys) for about $100 million. Ro’s DTC fertility strategy is shaping up nicely. Couple this acquisition with its Modern Fertility acquisition back in May 2021 for a rumored $225 million, and you have a pretty significant footprint in the fertility space. (Link)

Health IT platform Allscripts is selling its EHR biz to Harris Computer Corporation for $700mil. (Link)

Fundraising & Exec Moves:

• Truepill moved co-founder Sid Viswanathan to the CEO role this week. (Link)

Policy Hits

SOTU: Here’s a thread of mine which broke down Biden’s State of the Union (Link)

• Highlights = mental health, VA care, drug pricing (insulin specifically), mandatory nursing home staffing ratios, and more.

Choice: The Commonwealth Fund continued its excellent series on Medicare Advantage with an analysis of choice in MA plans and who shops around versus who doesn’t. (Link)

Other Hits

Web3: CVS filed for NFT and virtual goods trademarks…into the metaverse we go. (Link)

Deleted: ZDoggMD deleted his Twitter account after getting into it over ‘Rona stuff. (Link)

Hot Takes

• A Supreme Court fight over when a doctor should be liable for prescribing meds is sure to draw a lot of attention in the medical community. What do you think?

Healthy Muse Top Picks

This was a great report from SVB on healthcare investments and exits in 2021. (Link)

Nikhil had a great sponsored breakdown of Flume Health and how it’s enabling providers to take on risk. (Link)

Related, Jan-Felix dove into the value-based care tech stack and the players associated with the various steps in the VBC claims process. (Link)

The post The State of the Union Edition appeared first on The Healthy Muse.

• This week in healthcare: Medicare Direct Contracting gets a rebrand to ACO REACH, Teladoc and LOTS of 2021 earnings releases, Humana shakes up its board, antitrust concerns for Lifespan and Care New England, UnitedHealthcare and Change Healthcare sued by DOJ, a healthcare REIT megamerger, and more.

CMS Revamps Direct Contracting to ACO REACH

On Friday, CMS dropped a next-gen program slated to replace the current Direct Contracting starting in 2023.

• Details: CMS is replacing all direct contracting programs (Global/Professional/Geo) with a re-skinned model called ACO REACH. The new program is essentially DC with some extra bells & whistles.

ACO REACH aims to continue to move traditional Medicare toward risk-based and capitation payment models through…

• Allowing mainly provider-controlled groups into the program. 75% of applicant boards have to be provider-controlled. Non-provider groups have to demonstrate a certain level of direct patient care to be included in REACH.
• Addressing health equity (SDOH) – Every entity has to identify & determine ways to address health disparities in specific markets & geographies – dope
• Preventing the abuse of risk score adjustments. CMS is capping adjustments based on population trends & traditional Medicare risk score trends among other more specific items.
• Maintaining a similar PMPM payment structure to DC by keeping the professional and global payment tracks, but ditching the controversial geographical track.
• Alleviating Progressive concerns about ‘corporate profiteering’ and ‘getting rid of Medicare’ – Beneficiaries will keep all provider choice freedom that traditional Medicare provides. This is in contrast to Medicare Advantage programs that typically create narrower networks.
• Providing greater transparency into the program. AKA, more reporting on how entities are doing, how health equity is being addressed regionally, etc.

ACO REACH will start accepting new applicants in Jan. 2023. It’ll run thru 2026 and by that point I’m sure we’ll have some new acronym and the next iteration of VBC payments.

• Companies expected to leverage the new ACO REACH model include all of the normal VBC names – ApolloMed, Privia, agilon, Alignment, Clover, and plenty of others. I’ll personally be reading management commentary at investor days to see what the general sentiment is for each company specifically.

Resources:

• Link to CMS announcement. (Link)
• A link to the actual RFP if you’re interested in checking that out. (Link)
• A recent Aledade podcast discussing ACOs, payment models, and the future of Medicare. (Link)

Humana Shakes up its Board

After shaky Medicare Advantage membership numbers and its worst performing day ever in the stock market post-earnings, Humana bent the knee to an activist investor group, Starboard Value. Humana finally gave in to adding two directors to its board, including one from Starboard. (Link)

• Humana isn’t the only struggling managed care firm dealing with activist investors – keep in mind that Centene is also implementing certain expense improvements and c-suite transitions as a result of its deal with Politan Capital Management. Centene has really struggled to integrate WellCare and more recently, Magellan, in addition to being marred with scandal & settlements in its state PBM practices. (Link)
• Side note – I always find it hilarious when news like this is dropped and the company’s stock price immediately jumps. If I were at the C-suite I’d be thinking ‘damn, am I really doing that bad of a job?’

What’s up with Teladoc?

Everyone’s favorite struggling virtual care firm reported full-year earnings this week. Teladoc posted solid trailing results, but I was less than impressed with the firm’s 2022 guidance. The whole earnings release was kinda…meh.

Numbers: Teladoc generated ~$268 million in adjusted EBITDA on over $2 million in revenue on a membership base of 54 million people (!!!!), seeing an average of 42.2k visits per day, which is actually nuts.

• The Good: Stock-based compensation aside, Teladoc turned a profit and generated a fair bit of cash this year. There’s also a very positive uptick in net revenue per member (a 52% increase YoY), which should continue to increase as chronic care enrollment expands and as Teladoc implements other programs.
• The Bad: SOFT 2022 guidance, which caused another steep selloff after-hours. With Teladoc’s level of scale and a platform of 54 million potential customers to cross-sell services to, investors are getting antsy. Unfortunately, it doesn’t really work like that in healthcare. Scaling is hard, and whole person virtual care is brand spankin’ new. Let’s give them a minute to figure some things out. Also, maybe hiring a COO would help.

Bigger Picture.

Since maxing out at almost $300 a share in early 2021, Teladoc is down bad at around $60 at last glance.

What went wrong: After its run as one of the hottest ‘Rona stock trades on the planet, Teladoc used its newfound capital to panic-buy Livongo for $18 billion. I’d consider this move more of a defensive play than anything since Livongo was courting other telehealth suitors.

• Still…if you break it, you buy it. Post-merger, Teladoc has failed to unlock Livongo’s real value during its first year at the helm. To be fair, doing so is objectively a tough ask – AKA, convincing employers and others to pay for a somewhat unproven solution. Did I mention they way overpaid?

What’s Next for Teladongo.

As one of the first true ‘whole person care’ conglomerates, Teladoc needs to take better advantage of that first-mover edge. Teladoc will 100% lose market share over the coming years if they can’t get their shit together.

Promising tailwinds I’m eyeing:

• Teladoc’s products are slowly gaining traction. There’s a clear runway toward growth in taking on more risk and cross-selling services. Really, execution and sales is the bottleneck at this point. A decent number of Teladoc’s Q4 bookings were multi-program which is a step in the right direction.
• The firm is launching new programs in Chronic Care Complete and I’m super bullish on BetterHelp (mental health, super hot space) and Primary360 (whole person care) as those programs expand.
• New programs and solutions are super easy to pilot given Teladoc’s scale and existing membership platform.
• Customer acquisition costs are shrinking.
• Valuation-wise, Teladoc sits in an interesting spot. On one hand, I’m seeing digital health unicorns like Ro ($7 billion), Cerebral ($5 billion), Lyra ($5.6 billion), and Hinge ($6.2 billion) that are likely burning through cash yet valued crazy high. Teladoc is sitting at around an $11 billion enterprise value with vast scale compared to some of its private counterparts. Where’s the disconnect? Plus, competition with firms like Amazon are likely overblown.

Concerns with Teladoc:

• They lost almost the entire executive suite from Livongo post-merger. Bad signal.
• If permanent telehealth legislation doesn’t pass prior to the end of the public health emergency, virtual care as a whole will take a step back. Also, Medicaid will lose a ton of members which is something that Jared covered recently.
• Competition is brimming beneath the surface as other virtual care operators slowly consolidate.
• I’m speculating that morale is super low after recent stock price action.

Resources:

• TDOC Q4 earnings release. (Link)
• TDOC Q4 call transcript. (Link)
• TDOC launches its chronic care program. (Link)

Biden’s Antitrust Hammer

Not even UnitedHealthcare is safe from Biden’s Ban Hammer. The FTC and DOJ announced their meddling in two high profile mergers this week:

• After some initial back and forth, the DOJ will in fact be suing UNH over its $13 billion takeover of Change Healthcare. The AHA and other provider groups called foul on the deal from the get-go over data sharing and IT related antitrust concerns, and the Biden Admin is VERY sympathetic to antitrust sentiments. I would expect Change Healthcare to either have to divest some assets, or UNH will have to just…beat the DOJ in an antitrust case. (Link)
• Rhode Island health systems Lifespan Health and Care New England just straight up cancelled their previously announced merger plans after they caught wind of a potential FTC intervention amid local provider concerns. It’s like they got caught with their hands in the cookie jar, backed up and said “haha, my b.” (Link)

Health Tech Index Update.

Top 3: Hims & Hers (20%), Clover (19%), The Pennant Group (15%)

Bottom 3: ATI Physical Therapy (-18%), Cano Health (-15%), Skylight Health (-14%)

• Full List YTD performance: (Link)

Providers & Services:

Nonprofit Earnings Releases:

• Baylor Scott & White. (Link)
• Ascension. (Link)
• CommonSpirit. (Link)

$ONEM: One Medical released Q4 earnings delivering a 34% increase in membership as the struggling primary care subscription operator continues to integrate its $2 billion acquisition of Iora. The firm also announced a partnership with Connecticut-based system Hartford Healthcare (Link)

• Revenue: $623mil, up 64% YoY
• Members: 736k; 33; are risk-bearing (AKA, from Iora)
• Full-Year MLR: 92%
• Adjusted EBITDA: -$40.6mil – are we ever getting to profitability?

$AMEH: ApolloMed reported strong beats on both top and bottom line analyst estimates. The firm jumped in after hours trading, but fell 9% the next day, which surprised me given management’s upbeat tone on the call and revised upward guidance. (Link)

• Revenue: $774 million – guided for $1.05 billion for 2022
• Adjusted EBITDA: $174.2 million (23% margin)

$CANO: Care platform Cano delayed its Q4 filling today, causing the stock to drop over 10%. The delays are related to non-cash Medicare risk accounting adjustments. Honestly, I can imagine being an accountant and having to accrue / guess on risk adjustments for VBC companies isn’t fun.

• Delaying a quarterly filing – especially full year 2021 – is never good news, but Cano is saying the delay is a ‘technical’ difficulty and not related to the underlying business’ operations, which I’m inclined to believe until they prove me wrong. (Link)

$AMED: Amedisys acquired a couple of home health biz’s in the mid-Atlantic region, including AssistedCare Home Health and RH Homecare Services. They don’t report earnings til Thursday. (Link)

$ATIP: ATI Physical Therapy once again unfortunately sold off after reporting its 2021 earnings. The therapy operator is trying to turn it around in 2022 by investing early on in increasing its clinical headcount and higher marketing spend. It might be 2023 til ATI gets back to normal operations considering management is projecting a 3% ADJUSTED EBITDA margin in ‘22. (Link)

$SEM: Select Medical experienced staffing woes in its LTACH and inpatient rehab segment due to a shift in operational protocols, increased turnover, and general staffing shortages nationwide. Select now fully owns Concentra after buying the remaining piece from investment partners. Despite a solid earnings beat, dividend declaration, and share repurchases, Select’s shares are down 20% on the year. (Link)

• Select expects $6.2 to $6.4 billion in revenue but retracted its EBITDA guidance given the uncertainty around staffing. I don’t blame them at all.

$CHE: Despite the ugliest company website in history (which I kind of love), Chemed reported largely in-line earnings. In its hospice segment though, Chemed’s volume numbers left me wanting – a 4.8% decline in revenue, 4.2% decline in census, and a 9.5% in admits resulted in big profitability declines. I feel like nobody is really discussing the impact of COVID on post-acute volumes given the sensitivity of the topic, but this is a real issue affecting these businesses. (Link)

$LHCG: LHC reported upbeat guidance and continued interest in the home health M&A pipeline post-’Rona in its Q4 report. (Link)

Managed Care:

$CLOV: Clover popped 30% after hours after an impressive revenue beat. Those losses though…another story. (Link)

• Revenue: $1.47bil, up over 115% YoY
• MLR: 106% (!!!) – the growth is clearly coming at a cost and I’m wondering if investors have the stomach to bear Chamath’s cesspool of a company for much longer. I’m personally pulling for Clover to turn it around.

Digital Health:

$HIMS: DTC virtual care firm Hims posted a solid Q4 earnings and impressive growth metrics, jumping 13%. (Link)

• Revenue: $272mil, up 83% YoY
• Subscriptions: 609,000, up 95% YoY
• Adjusted EBITDA: ($7.1)mil but that don’t matta, we in growth mode.

$AMWL: Amwell reported an adjusted EBITDA loss of $41mil in Q4 2021 which is insane considering the company tailwinds. Management chalked it up to strategic investments in key assets so we’ll see if Amwell can turn some profit after posting a full-year loss of $123mil (Link)

Biz Hits

Trend Watch:

IP → OP: This was a good write-up from Healthcare Dive on health system shifts to outpatient strategies, a trend that has, and will continue, to happen. (Link)

Strategy & Partnerships:

Cerner: If Oracle wants to turn the Cerner boat around, they have a long road ahead of them – this article dove deeper into the strategic acquisition that I’m personally extremely bearish on. (Link)

Primary Care: This Bloomberg (soft paywall) deep dive discusses the hottest physician market, which is currently primary care due to CMS’ new ACO payment models and the emergence of risk-based contracting in the space. Highly recommend a read to understand the massive land grab going on in the space! (Link)

M&A:

HC REIT: Healthcare Trust of America and Healthcare Realty Trust are rumored to be merging in what would create an $18 billion healthcare REIT and one less generic-sounding healthcare company. That’s a win in my book. (Link)

Fundraising:

• Kidneys: Joining the likes of Strive, value-based kidney care company Somatus raised $325 million in a Series E, putting the startup in unicorn territory ($2.5bil valuation). We’re just handing out that status these days, but kidney care is in sore need of competition so I’ll let it slide. (Link)
• Livongo’s half-brother: Omada Health, another chronic care management firm, raised $192mil also coincidentally in a Series E. I wouldn’t be surprised if this capital were used to make a few acquisitions.
  • Omada will hurdle the $1bil valuation mark with the raise and you can see why Teladoc has a limited timetable – Virta Health, also in the RPM space, raised $133mil at a $2bil valuation in early 2021. (Link)
• Ro lost a couple key executives after announcing its most recent fundraising round. Sounds like they were waiting to cash out and move on. (Link)

Policy Hits

Settlement: JnJ and other distributors finalized a $26 billion opioid settlement. (Link)

Public Option: Color me shocked that Washington state’s public option has failed to get off the ground after struggling to get in network with hospitals. (Link)

Maskless: The CDC published new guidelines letting people ditch masks if hospitalizations remain low. (Link)

Surprise Billing: In a win for providers related to surprise billing, a judge threw out part of the No Surprises Act related to arbitration, saying that it favored insurers. That’s because it does – the arbiter was directed to resolve disputes by referencing the median in-network rate for that service in that region. Which side do you think has thousands of data points of claims data to set those rates?

• This whole thing is so very messy, but I’m not surprised this provision was struck down. (Link)

Other Hits

#FreeShkreli: Martin Shkreli has been banned from running public companies (Link)

Hot Takes

This was a good interview between Christina Farr and former Livongo exec Lee Shapiro on the future of digital health, and valuation bubbles. Seems pretty qualified to discuss bubble valuations lmao (Link)

Healthy Muse Top Picks

Oncology: Olivia Webb wrote on value-based oncology arrangements and how we define value in cancer. (Link)

Single-Payer: The New Yorker dove into the history of the AMA’s dispute related to single-payer healthcare. (Link)

Placebos: Nikhil Krishnan brought out another banger, this time writing about the power of placebos in healthcare. (Link)

Therapy: With my wife being a speech pathologist, she pointed out that the CDC published HIGHLY controversial new guidelines related to child development & autism milestones without consulting any therapists prior to releasing those guidelines. Seems like an…interesting decision? (Link)

The post The ACO REACH edition appeared first on The Healthy Muse.

• This week in healthcare: Direct contracting gets controversial, the DOJ targets United/Change deal, Teladoc unveils a new chronic care program, VillageMD’s expansion, Q4 earnings releases, and more

The Direct Contracting Debacle and a Value-Based Setback?

Disarray: All of a sudden, Medicare’s Direct Contracting (”DC”) program, a new risk-based capitation model for primary care unveiled by the Center for Medicare and Medicaid Innovation (CMMI) in 2020, is under attack by a progressive consortium of policymakers.

• What’s DC? At a high level, the program allows primary care providers operating in Direct Contracting Entities (’DCEs’) to take on risk voluntarily – through monthly lump sum payments – for their Medicare fee-for-service patients. So, CMS and the DCE get to streamline administrative $$$, the DCE pockets a bit more cash if risk is successfully managed, and the patient stays on traditional Medicare as opposed to MA. The program is only open to about 50 of these direct contracting entities so far while kinks are ironed out and public commentary is received.
• TL;DR: CMS contracts with PCP providers. Seniors on traditional Medicare keep traditional Medicare insurance while the primary care provider entity (the DCE) gets paid per member per month for that beneficiary behind the scenes. Goal of the program = reduce costs, increase quality of care, move toward value-based arrangements.

The Attack: The cohort of progressives, including Elizabeth Warren, sent a letter to HHS accusing the payment model of catering to ‘corporate profiteers.’ They assert that the DC model will only serve to further privatize Medicare, which might result in reduced choice for traditional Medicare beneficiaries.

• There’s some other nuanced concerns in there too, like taking advantage of risk score adjustments (fair) and that the entities are able to pocket more $$$ if care is managed effectively. Here’s a good write-up of the specific grievances from Fierce: (Link)

The Defense: Of course, the letter attracted a frenzied response. Over 200 healthcare entities ranging from Intermountain, agilon, Babylon, a multitude of ACOs, and more, signed a letter urging HHS to ‘Plz fix, thx’ the program instead of ending the program altogether, arguing that ending any sort of pioneering program like this would severely affect the value-based movement as a whole. (Read the Letter Here)

Hot Take: I find the take by progressives pretty perplexing considering DCE is one of the largest tailwinds powering value-based care in the U.S. – a model that has at least shown promise in predictable cost control for a nearly bankrupt Medicare trust fund.

• Progressives of all people should want to test out new things in healthcare, even if there are kinks in the model currently.

Still, this rhetoric is not going to go away – I’m seeing headlines all over the place, like ‘Medicare privatization experiment puts Ohio seniors at the mercy of for-profit entities.’ As if damn, they forgot the entirety of healthcare is already for-profit. Let’s do some research here folks and at least attempt to align profits with quality incentives.

• This is a pioneering program in Medicare and one that needs to continue forward in some form. The progress of value-based care and related payment models depends heavily on CMMI and Medicare. There’s too much momentum (and funding) in the space to back out now.
• Keep an eye on the tweaks and mutations of the direct contracting model, because it heavily affects the prospects of companies like Privia, Oak Street, One Medical, and health systems who manage large Medicare populations or are in the value-based care space.

Handy resources & perspectives:

• Olivia Webb wrote a solid overview of the direct contracting program here. She does the best job possible explaining all of the relevant nuances. (Link)
• Here’s a viewpoint in opposition to direct contracting. (Link)
• What do you think? If you have a perspective, I’d love to hear it.

DOJ brings down the hammer on UnitedHealth – Change Healthcare Deal

Antitrust: After what seems like an eternity since the transaction was announced, the DOJ is allegedly planning to sue to block the $13 billion United / Change Healthcare deal.

• Background: The merger announcement brought intense opposition from the AHA and other provider interest groups, claiming that an acquisition of Change would give UNH unprecedented access to data that would cause anticompetitive practices. The DOJ is sympathetic toward those concerns and has a keen eye on M&A in general across most industries. (Link)

public market update.

Top 3 weekly performers: GoHealth (+16%); P3 Health Partners (+15%); LifeStance (+11%)

Bottom 3 weekly sandbaggers: Clover (-19%); Oak Street Health (-18%); Augmedix (-17%). Lots of volatility in the market. I’d expect that to stay for a while.

• Full List YTD performance: (Link)

Digital Health:

$TDOC: Teladoc unveiled a new chronic care primary care program this week. Called Chronic Care Complete, the offering will help patients with conditions like diabetes and high blood pressure. Say what you will about the stock performance, Teladoc is still the top dog in virtual care. (Link)

$HIMS: Hims announced a partnership with GNC Wellness this week to offer certain wellness products inside of GNC stores. (Link)

Medical Devices:

$OM: Dialysis at-home device maker Outset Medical shot up after posting its Q4 earnings and a solid revenue beat as well as an upbeat 2022 forecast. (Link)

$HLTH: Remember that one Super Bowl commercial about the at-home COVID test? Cue Health is partnering with Cardinal Health on distribution of that bad boy. (Link)

Services:

$CYH: Community Health dropped after releasing Q4 earnings that showed weak admissions growth. Interestingly, the hospital operator did signal expectations for lower travel / contract staffing costs later on in 2022. (Link)

$EHC: Encompass opened a new inpatient rehab facility in Southern Illinois as it continues its quest to gobble up IRF market share. (Link)

$MD: Despite a seemingly solid Q4, Mednax shares dropped this week after reporting earnings. (Link)

Biz Hits

Trend Watch:

• VillageMD: Not only is Walgreens’ VillageMD planning to open 200+ co-branded clinics this year, the primary care operation just bought chronic care management company Healthy Interactions. Look for an IPO from VillageMD in 2022 or 2023 as the company benefits from COVID testing and direct contracting tailwinds. (Link)

Strategy & Partnerships:

• St. David’s Healthcare in Austin is planning a nearly $1 billion expansion to fund new hospitals and other initiatives as the city outgrows its current infrastructure. (Link)

M&A:

• Antitrust: The FTC is now trying to block the previously announced merger between Care New England and Lifespan Health after the Rhode Island attorney general noted market power concerns related to the tie-up. (Link)

Fundraising:

• Ro: Everyone’s favorite DTC ED company Ro completed a $150 million internal fundraise and is now valued at $7 billion. Would love to see some financials here. (Link)

Policy Hits

Masks: The CDC is expected to update its mask guidance soon to focus on hospitalizations rather than case numbers. (Link)

Reimbursement: After discussing mental health in recent weeks, Senators are now mulling the idea of increasing reimbursement rates to alleviate mental health provider shortages. Amazing what some money can do to increase the workforce supply. (Link)

Other Hits

Shortage: The national guard is now filling in as nursing assistants amid nationwide shortages. Is there an end in sight here? (Link)

FDA: Biden finally managed to get an FDA nominee through Congress – Robert Califf. (Link)

Hot Takes

They’re all above

Healthy Muse Top Picks

Platforms: This was a good read on Amazon’s ability to deploy platforms in healthcare. I personally believe they’re the best positioned to do so as far as Big Tech is concerned. (Link)

MA: The Commonwealth Fund wrote a great overview of Medicare Advantage, including how the risk adjustment program works for payers. Highly recommend glancing at this just to understand the inner workings of MA. (Link)

VBC: Health Affairs wrote a great 2-part series on a single-payer system that already exists in the U.S. – Maryland – and takeaways we can mirror in value-based care payment models. Very timely!(Link)

• Along with the above, I enjoyed this piece from TCHB about value-based care and lessons from the pandemic. (Link)
• Final piece on value-based stuff this week – the Keckley report also dove into what to expect for value-based care in 2022 and gives some insightful context for previous value-based initiatives in healthcare. (Link)

The post The Direct Contracting Debacle Edition appeared first on The Healthy Muse.

• This week in healthcare: Digital health deal-making begins with several suitors, Amazon Care expands nationwide, Doximity, Oscar, CVS, and more earnings, Tenet continues its outpatient expansion, telehealth expansion in Congress gets major progress, and more.

The Digital Health Consolidation Tsunami.

Tremors in the Water: As we’re now well underway into 2022, deal-making is just getting started. Several digital health and other mergers have been announced in recent weeks, all between players making strategic acquisitions. Firms are now realizing that offering one specialized endpoint solution isn’t enough anymore:

Specialized telehealth firm Thirty Madison and remote prescription drug firm Nurx are merging into one platform caring for about 750k ‘active’ patients and $300 million in revenue.

• There doesn’t seem to be much overlap between the two as far as patients are concerned, so I imagine the combined co now has a much larger patient base to cross-sell, larger scale to negotiate with payors, and a more attractive offering to sell to employers. (Link)

Doximity bought Amion for $82.5 billion, continuing to offer lots of useful products for physicians to bolster its ridiculously profitable advertising biz

Signify Health bought Caravan Health for $250 million (including payout incentives) to help it create an “end-to-end suite of value-based care” tools (notice a theme here?). Caravan will give SGFY access to 200 health systems and 3k providers. (Link)

Bottom Line: Digital health is no longer immune to the wave – or, rather, tsunami – of consolidation happening widespread in healthcare. This trend is just getting started as frothy private valuations fall apart, rates rise, and savvy competitors snap up the strategic pieces to create attractive offerings. (Link)

Something you’ll probably read at least 20 times over the next few years: “This acquisition is just the beginning of our evolution toward a holistic, end-to-end care model…”

Amazon Care isn’t going away.

Scaling: After reshuffling some of its executive team on the pharmacy side and naming a former head of Amazon Prime to grow its healthcare biz, Amazon announced this week that the retail giant is expanding its virtual care services nationwide. (Link)

• Details: Amazon Care will also offer a hybrid service offering (AKA, in-person and virtual) to 20 more cities this year. Basically all of the big ones. Amazon is also growing its contracted employer base by tacking on Silicon Labs and Hilton Hotels. No, I’m not counting Whole Foods in there. Amazon putting that in their press release as a badge of honor is essentially the same thing as saying that I sold my car to my wife…who happened to need a car.

Steady: Amazon is slowly scaling its health operation outside of its existing employee base and seems to be hyper focused on the consumerization of healthcare, which is the retail giant’s bread and butter. I wouldn’t be surprised to see a Pharmacy-Care-future health related offering as a tack-on to your normal Prime subscription within the next few years.

public market update.

Top 3 weekly performers: Doximity (+23%); Augmedix (+21%); Agilon (+20%)

Bottom 3 weekly sandbaggers: GoHealth (-22%); Convey (-9%); Aveanna (-9%)

• Full List YTD performance: (Link)

Health Tech:

• $DOCS: Along with its announced acquisition of Amion, Doximity blew its earnings out of the water. The digital pharma advertising firm is expecting revenues of $450 million (which is probably conservative) and adjusted EBITDA margins north of 40%. Amazing what you can do when you have a highly valuable audience (like you guys!) (Link)
• $TRHC: Ironically, Tabula Rasa is divesting its non-core assets, including DoseMeRx. (Link)

Services:

• $THC: Tenet continues to build out its outpatient ambulatory surgery center biz through USPI and is scaling quickly through acquisitions. The hospital and outpatient giant announced the acquisition of 30 more facilities from SurgCenter Development expected to take place this year. (Link)

Payers:

• $CVS: CVS, the diversified healthcare behemoth, reported its full-year 2021 earnings this week. While ACA enrollment was lower than expected, CVS shed light on several new services initiatives, including a more intentional move into home health, potential acquisitions or build-outs of management services for primary care, and more. (Link)
• $OSCR: On Oscar’s 2021 earnings call, analysts seemed to be pleased with the G&A expense management. Also lots of conversation related to the +Oscar platform and the opportunity there with Medicare Advantage. (Link)
• $BHG: Bright Health’s CEO is stepping down next month. Current CEO Simeon Schindelman will resign effective March 11 and will be replaced in the interim by CFO Jay Matushak. (Link)

Biz Hits

Trend Watch:

• Sky High: Record high valuations are causing deal-makers to get creative in how firms are getting acquired…earn-out provisions? More? Exits are getting out of hand. (Link)
• Competition: Larger managed care players are losing Medicare Advantage market share to smaller challengers like Oscar, Devoted, and Bright. This is a good thing. (Link)
• Plastic: Remote work and social media are creating a plastic surgery boom…those damn filters, eh? (Link)

M&A:

• ChristianaCare is planning to purchase Crozer Health from Prospect Medical Holdings. The two have signed a letter of intent and assuming it’ll pass regulatory checks, will create a strategically focused health system in Delaware. (Link)
• Dialyze Direct bought Compass Home Dialysis to add 9 SNFs to its portfolio. Did you know that Dialyze is the ‘leading SNF dialysis provider’ in the US with 130 SNFs in its portfolio? I truly had no idea. (Link)

Strategy:

• Ops: Here’s a solid dive into Henry Ford Health System’s 100% virtual behavioral care program and its inner workings. (Link)
• Labs: Ascension and Labcorp partnered on laboratory testing this week – Ascension will contribute around 10 of its hospital-based labs (usually a cost center for hospitals), and Labcorp will scale its presence through Ascension’s national 142-hospital footprint. (Link)
• Enhabit: This was a good conversation from HHCN with Encompass’ new home health (Enhabit) CEO, Barb Jacobsmeyer, on the current landscape for home health and her expectations moving forward with the spun-off company. (Link)

Policy Hits

Telehealth: Current telehealth waivers are set to expire as soon as the public health emergency designation ends. Senators this week introduced a bipartisan bill to expand telehealth access thru 2024, and also introduced a separate bill to allow those with high deductible health plans to permanently have access to telehealth. (Link)

Granny: Elizabeth Warren is not a fan of Medicare’s direct contracting program and discussed reforms to the MA risk adjustment payment structure. I’m personally a fan of innovation in payment models – any change or end to these models would likely need a replacement in order to continue the value-based care movement. (Link)

ACA Enrollees: Similarly to the telehealth waivers, certain ACA subsidies and enrollment freezes are set to expire after this year or after the public health emergency, which would cause a lot of folks to lose their health coverage. (Link)

Other Hits

Euphoria High: The Commonwealth Fund highlighted overdose deaths in the first half of 2021 – too many. (Link)

Hot Takes

Mental Health: A good read from the Atlantic (soft paywall) on what we need in mental healthcare. This quote was pretty cool: “Current [mental health] treatments work; mental illness is not a life sentence; people can recover.” (Link)

Healthy Muse Top Picks

Shortages: This from the Atlantic (soft paywall) was a solid historical overview of the physician shortage. (Link)

Hybrid: Timely as ever, Olivia Webb walked through hybrid care models and the future of primary care. (Link)

Generics: The FDA released its annual report on generic drug approvals, noting the most significant generic drugs that hit the markets in 2021. Did you know that 90% of drugs in America are generic? (Link)

The post The Digital Health Consolidation Tsunami Edition appeared first on The Healthy Muse.

• This week in healthcare: SOC Telemed goes private, Privia closes a major partnership with Surgery Partners, Humana starts its hospice sale process, hospital staffing issues, Athelas raises $132 million, and more.

SOC Telemed Goes Private for $300 Million

The first domino: After going public via SPAC at about a $720 valuation 15 months ago, SOC Telemed will be bought out and taken private by Patient Square Capital.

• Details: The healthcare investment firm announced its intention to purchase SOC Telemed at a 366% premium to its share price on February 3rd, or about a $300 million enterprise value at $3.00/share. For all you smart folks out there, that’s a 60% decay in value in one year.
• SOC’s stock price had tumbled from $8.33/share one year ago to $0.64/share prior to the announcement and is now trading just under the take-private price. It makes sense that the board unanimously jumped on the opportunity to go private in the market’s current state.
• The firm still has attractive assets, so it makes sense why someone wanted to buy them out. SOC Telemed bought Access Physicians, a specialty telemedicine provider, for $194 million or 2/3rds of its take private price (lol) back in April 2021.

Bigger Picture: If you’ve been following the Health Tech Index for any period of time, SOC Telemed isn’t the only publicly traded digital health company suffering in the markets. We’re going to see some more activity here in 2022 & 2023 or I’ll sell my newsletter. (Link)

Privia Health becomes a Surgery Partner

Strategy: Surgery Partners announced a strategic partnership with Privia Health on February 3rd.

• How it works: Privia will buy into Great Falls Clinic, a physician practice wholly owned by SGRY. The buy-in will give Privia the ability to expand in the Montana market, acting as Privia’s ‘anchor practice’ in the state (65 providers, 24 specialties). The two companies will also establish a management company, of which Privia will be the majority owner.
• Bigger picture: Privia’s primary pursuit is to transition traditional fee-for-service practices into value-based arrangement in order to take on risk. Surgery Partners is a significant partner to have, so keep an eye on future announcements between the two firms. (Link)

public market update.

Top 3 weekly performers: SOC Telemed (+366%); Skylight Health (+26%); GoodRx (+20%)

Bottom 3 weekly sandbaggers: The Pennant Group (-8%); Babylon (-7%); GoHealth (-7%)

• Full List YTD performance: (Link)

Health Tech:

$HIMS: Hims & Hers launched a new line of mental wellness supplements this week. (Link)

SPAC: Interesting little tidbit here…Healthcare Merger II, a SPAC, withdrew its plans to go public. The folks behind this SPAC also took SOC Telemed public…so I wonder if there’s a connection there or if nothing is attractive enough valuation wise to take public. (Link)

Payors:

$HUM: Humana finished up on the week after announcing its intention to invest $1 billion into its Medicare Advantage biz. (Link)

• Another interesting tidbit from this week – Humana is looking to offload Kindred’s hospice segment and fetching a multiple reportedly up to 12x EBITDA, implying around $3 billion purchase price. (Link)

Services:

$MD: Mednax is buying a pediatric specialty chain of urgent cares – Night Lite Pediatrics, a 13 location biz in Florida. (Link)

$AMED: Amedisys is acquiring Evolution Health to reboot its M&A aspirations. (Link)

$ADUS: Addus HomeCare completed its acquisition of JourneyCare Hospice. (Link)

Biz Hits

Trends to know: The name of the game in Q1 so far has been STAFFING.

• Nursing shortages across the country are causing hospitals to look internationally for staff. (Link)
• Staffing firms are under fire as industry groups accuse them of profiteering. (Link)
• Hospital margins are suffering, per Kaufman Hall. Pretty much every services based business is concerned with staffing shortages. (Link)

Strategy:

• Data firm Komodo Health partnered with the Chan Zuckerberg Initiative this week. The data analytics and AI startup is allegedly looking to go public within the near future. (Link)
• Uber Health is building out a “one-stop shop” for health logistics. Shocking. (Link)
• Cigna is trying to find ways to grow synergies between its payor and provider division (Evernorth), identifying areas including behavioral health. (Link)
• CVS is partnering with clinical research company Medable to expand access to clinical trials in their stores. (Link)

Funding:

• RemotePM: As Athelas announced its $132 million fundraising round, valuing the company around $1.5 billion, the remote patient monitoring space is receiving troves of cash from venture capitalists. (Link)

M&A: A few notable deals & rumors this week…

• Spectrum Health and Beaumont Health completed their 22-hospital merger on February 1st. The new system will be temporarily named BSHS Health until they spend an ungodly amount of marketing dollars on a spunky new name likely ending up with a circular logo and a sans serif font. (Link)
• PointClickCare bought Audacious Inquiry to expand their care coordination network. (Link)
• Over on the Biotech side, investment firms Blackstone and Carlyle are in talks to jointly take over Novartis’ generic drug unit, in what would be one of the largest buyout deals in recent memory – around $25bn. (Link)
• Calm acquired fellow health tech startup Ripple Health Group, which seems like a health tech development co. Calm will reportedly use Ripple to build out its new B2B product offering, Calm Health as well as future products. (Link)
• Physician staffing firm US Acute Care Solutions acquired Alteon Health – forming a huge practice of post-acute care providers (9 million patients, 500 programs, 25 states). My bet is on at least a handful of PE backed physician practice platform co’s going public in 2022/2023 and my guarantee is that the multiple here was in the double digits. (Link)

Policy Hits

Fact Sheet: CMS released its 2023 proposed MA fact sheet this week. Based on a risk score trend increase of 3.5% and general reimbursement increase of 4.75%, among other items, the total adjustment for 2023 is expected to be around 8% (inflation am I right). (Link)

Telehealth Waivers: Lots of different organizations are requesting for Congress to extend the current telehealth waivers through 2024. Current telehealth waivers only exist as part of the public health emergency. (Link)

Mental Health: In the first hearing in more than a decade on mental health, Congress is tackling behavioral health inequities and other mental health related topics. Makes you wonder if mental health funding will be part of a future stimulus package. (Link)

• Related: A somewhat unfortunate side effect of the No Surprises Act – mental health providers are asking to be exempt from the bill, since the price transparency provision surrounding Good Faith Estimates disproportionately affects mental health providers over most other providers. (Link)

Other Hits

Bennies: Here’s a rising workplace benefit: Fertility services. (Link)

Physicians: This was a short data-driven read from the Definitive blog into the physician shortage. (Link)

Coverage: As internet access limits telehealth’s reach, insurers are starting to cover the bill. (Link)

Hot Takes

TCHB: Spotify, Joe Rogan, and Health Care. (Link)

Debates: An interesting back and forth on certain Medicare Advantage assertions in the Health Affairs blog. (Link)

MA: Gotta hear all sides.. The Dark History of Medicare Privatization. (Link)

What’s next for digital mental health companies? (Link)

Healthy Muse Top Picks

Shkreli: The annual Shkreli Awards are here (#FreeShkreli) with a list of some bad actors in healthcare from 2021. (Link)

MA: Medicare Advantage, Call Centers, Startups, and the rapidly evolving space. (Link)

Watson: A great read from Slate – How IBM’s Watson went from the future of healthcare to sold off for parts. (Link)

The post The Digital Health Dominos Edition appeared first on The Healthy Muse.

• This week in healthcare: Chamath takes Akili Labs public, ApolloMed’s Value-Based acquisition, HCA Q1 earnings, the great healthcare staffing squeeze, and more relief funding

Chamath is SPACing Digital Therapeutic Firm Akili Labs

Anotha One: On the heels of taking ProKidney public at a $2.6 billion valuation, one of Chamath’s many SPACs is taking Akili Labs, a pre-revenue digital therapeutics firm, public, at around a $1.1 billion valuation. (Link)

• About Akili: The digital therapeutics firm will become the second of its kind on the public markets. Pear, a close peer, went public in December at a $1.6 billion valuation. These companies are highly speculative in nature, similar to clinical stage biotech firms, as their products are largely unproven and they don’t have recurring cash flows. Akili’s claim to fame is its video game product that helps kids with ADHD gain focus. (Honestly they should just play Runescape instead).

More: Here’s a link to Chamath’s write-up on reasoning for the transaction. (Link)

Analysis: This was a hard assessment from Scott Xiao’s In Silico related to Akili’s FDA clearance as he displayed skepticism related to the endpoints used in Akili’s study. (Link)

public market update.

Top 3 weekly performers: SmileDirectClub (+24%); Definitive (+13%); AmWell (+11%)

Bottom 3 weekly sandbaggers: ATI PT (-11%); Oak Street Health (-10%); LifeStance Health (-10%

• Full List YTD performance: (Link)

$AMEH: ApolloMed, a value-based care company you really should be paying a lot closer attention to (I mean check out this spiffy investor deck), acquired Orma Health, a value-based care tech company focused on risk stratificatio and identifying patients for clinical programs. As a part of the transaction, two top execs from Orma Health will transition over to AMEH’s leadership team. (Link)

$HCA: Heavy battle-tested hospital titan HCA released earnings this week which led to some interesting insights: (Link)

• HCA is building 5 acute care hospitals in Texas in areas with hot population growth (honestly everyone is moving to Texas so stay away) (Link)
• Amid broader staffing issues, HCA is still slowly integrating post acute assets into its portfolio, including Brookdale’s home health biz that HCA bought last year for $400 million) (Link)
  • Related: Read about the labor trends affecting hospitals in 2022, including staffing agency and travel nursing prices through the roof, resigning and burnt out clinicians, and more labor union activity. (Link)
    • Staffing agency costs are so bad that provider lobby groups sent Congress

$ANTM: It’s no United, but Anthem doubled its profit to $1.1 billion. However, similarly to Humana, Anthem issued muted expectations for 2022. Anthem is trading flat after its Q1 release. (Link)

• Related: How much do you think the top 7 insurers (including all of CVS) made in revenue in 2021? (Answer)

$DH: Definitive Healthcare launched an interesting product this week – called Latitute Discovery, the software aims to estimate total addressable markets and patient cohorts for pre-commercial biotech and med device companies. (Link)

$LHCG: Although LHC Group is acknowledging ongoing labor challenges, the firm is looking past the short term pain toward long-term tailwinds. (Link)

Biz Hits

Partnerships: Big partnership news in Texas – GI Alliance and USPI are forming a partnership to expand their joint gastroenterology presence in Texas. Like I mentioned before, Texas is a hotbed for population growth and all these millennials have plenty of digestive issues (lol). (Link)

Medicare: This article from McKinsey was a solid discussion of what’s going on in healthcare, but more specifically Medicare and Medicare Advantage. (Link)

Funding: SoftBank led health tech unicorn Alto Pharmacy’s $200 million series E this week, joining other unicorns in raising hundreds of millions of dollars. (Link)

M&A: JnJ made certain comments on its earnings call that signal the healthcare conglomerate is on the prowl for more acquisitions. (Link)

Product: Cigna’s MDLive division is initiating its first virtual first – remote patient monitoring program. (Link)

Trends: VCs love themselves some subscription healthcare services companies. (Link)

Antitrust: To stave off certain antitrust concerns, Change Healthcare is considering selling some of its segments so that it can finally merge with UnitedHealthcare. (Link)

Exec: Uber Health appointed its first Chief Medical Officer for all of the diverse healthcare services they’re offering (non-emergent medical transportation, that’s it – just look at their health division on their site lol) (Link)

Policy Hits

Relief: Providers want Congress to give them more funding and relief on a few fronts:

• Continuing to suspend the mandated sequestration (cut to Medicare reimbursement)
• More funding relief in general for omicron and delta related losses (Link)

ACA: A Record 14.5 million people signed up for ObamaCare. (Link)

Other Hits

Mental: Federal departments are claiming that insurers fall short in their provision and coverage of mental health and substance abuse benefits. (Link)

Referral Patterns: Here’s an interesting little datapoint – post-acute referrals are shifting given the stigma surrounding nursing homes and SNFs. (Link)

‘Rona: Myocarditis risk is17 times higher for unvaccinated patients ages 12-30 who get COVID-19 as compared to COVID-vaccinated patients. Hmm. (Link)

Hot Takes

VBC: this Health Affairs article was a good deep dive into VBC payment models and the market dynamics keeping them at bay. (Link)

Healthy Muse Top Picks

MA: This article from Axios highlighting the Medicare Advantage space, and all of the players, was a good brief read on the current landscape. (Link)

Substacks: I tweeted about these reads earlier this week, but I really enjoyed the following from Olivia Webb and Jan-Felix Schneider:

• A timeline of web1, web2, and web3 in healthcare (Link)
• Risk adjustment – the new revenue cycle management? (Link)

The post The Great Staffing Squeeze Edition appeared first on The Healthy Muse.

• This week in healthcare: Mark Cuban gets into Drugs, Encompass Spins off Home Health, Chamath’s latest SPAC is ProKidney, big funding rounds from digital health unicorns Transcarent and Lyra Health, and more.

Encompass Officially to Spin off Home Health & Hospice Biz

Breaking up: Encompass announced its plans to spin off its home health and hospice business into a separate publicly traded company called Enhabit.

• The details: If interested, I wrote a quick thread on Twitter breaking down the high points of what this means for Encompass. TL;DR, each segment’s management will be able to focus more wholeheartedly on their specific strategy. (Link)
• Link to Encompass’ announcement: (Link)

Chamath takes ProKidney Public

SPAC Daddy: Chamath is taking biotech kidney firm ProKidney public at a $2.6 billion valuation. The deal will give ProKidney a pretty decent chunk of change to continue its phase 3 trials in the kidney and dialysis space. Chamath wrote up a quick one-pager on the deal. Let’s hope this one fares a bit better than Clover (lol). (Link)

• Cool tech: ProKidney is developing some tech to treat chronic kidney disease and kidney failures by repurposing the patient’s own cells to restore kidney function. Pretty amazing stuff if it ends up working.

Mark Cuban gets into Affordable Drugs

Drugs: Mark Cuban just announced the launch of Mark Cuban Cost Plus Drug Company. Yeah. That’s the name of the company. Pretty amazing marketing when you can just put your first name in front of a firm and it’s instantly recognizable. #mediagoals

• Details: Through help from Truepill, MCCPDC will target the generics market and offer a flat 15% mark-up to every drug they can possibly get a hold of. It’s a cool play on transparency, and while the jury is still out as to whether or not it can make an impact when Wal-Mart’s generic list and GoodRx type players exist, I can always applaud an effort like this.
  • Link to press release (Link)
  • Check the site out yourself here: (Cost Plus Drugs)

Big Funding Rounds from Transcarent and Lyra Health

Funding Secured: Digital Health unicorns Transcarent and Lyra Health both successfully raised $200 million and $235 million respectively in recent fundraising rounds.

• Lyra has raised $915 million to date, the vast majority of which has been raised in the past 12 months. The company must be absolutely trailblazing through cash to grow internationally and through acquisitions (Link):
  • August 2020 ($110 million raised) – $1.1 billion valuation
  • January 2021 ($187 million raised) – $2.3 billion valuation
  • May 2021 ($200 million raised) – $4.6 billion valuation
  • January 2022 ($235 million raised) – $5.9 billion valuation
• Related: Lyra also announced its acquisition of ICAS World to continue to expand globally. If it wasn’t the largest mental health player before, it likely is now. (Link)

Transcarent raised $200 million at a $1.6 billion valuation. The firm specializes in patient navigation for employers as an Accolade-type player. (Link)

HHS Extends ‘Rona Health Emergency & SCOTUS Halts Vaccine Mandate

Emergency: HHS extended the Covid-19 health emergency for another 90 days. The emergency was about to expire on January 16 so this news was pretty expected. In fact, I was frantically Googling ‘public health emergency extended’ since I hadn’t seen anything come through yet.

• What this means: All of the loosened healthcare regulations and flexibilities around telehealth, waivers, Medicaid enrollment freezes, and stipulations in the CARES act, will remain in place for another 90 days (Link)

Mandate: The Supreme Court struck down OSHA’s vaccine mandate on 100+ employee-count employers nationwide earlier in January, ruling that OSHA, under the executive branch, doesn’t have that scope of authority.

• They argued that such a national public health measure should be implemented via an act of Congress
• Here’s a good summary of the mandate positioning (Link) and here’s a link to the full opinion. (Link)

public market update.

Top 3 weekly performers: Outset Medical (5.4%). That’s it. That was the only green digital health firm this week.

Bottom 3 weekly sandbaggers: The Oncology Institute (-23%); Augmedix (-22%); Oak Street Health (-21%)

• Full List YTD performance: (Link)

$UNH: UnitedHealth released its earnings, and the machine rolls on per usual. Optum is an absolute beast, as its revenue rose 33% thorugh value-based care arrangements and other optimizations. Despite Humana’s MA growth struggles, UnitedHealth reiterated its expectations for its own MA member growth for 2022. (Link)

$BBLN: Babylon raised 2022 revenue guidance at JPM and announced its acquisition of DayToDay Health, its second deal in two weeks. (Link)

$HUM: Humana dropped 20%, its biggest drop ever, after cutting its guidance for Medicare Advantage members in half. Humana cited increased competition and pricing pressure as the main reason for the guidance slash. (Link)

$TDOC: Teladoc upped its visit and revenue expectations for 2022 but still continues to underperform. You have to wonder when the bottom is in on this once-high flying growth stock. (Link)

$SEM: Select issued preliminary financial guidance this week. As a result of labor shortage issues in its LTACH segment primarily, Select is expecting lower than estimated results for Q4 and full-year 2021. Sounds familiar and I have to wonder how long this is going to be an issue for services firms. (Link)

$SMFR: Sema4 secures a deal to acquire GeneDx, capturing $200M in private investment. (Link)

$AUGX: I had a great conversation with Ian Shakil, founder of Augmedix which recently went public in the ambient documentation space. Look for more coming from this conversation – and the landscape of the space – in the near future.

$SGRY: Surgery Partners went full acquisition mode at the end of 2021, spending $185 million on three deals. SGRY is expecting a 20% bump in revenue in 2022. (Link)

Biz Hits

Partnerships: Humana is expanding its partnership with PE firm Welsh-Carson over its primary care senior clinics into 12 more states. I feel as if this partnership, announced in 2020, is somewhat in the radar, but it’s gaining serious traction. (Link)

It’s Over: Providence is ending its affiliation with Hoag at the end of January. (Link)

M&A: Revenue cycle operator R1 RCM is acquiring Cloudmed, a fellow revenue cycle management platform, for $4.1 billion, or about 2.5 Transcarent’s. Chump change. (Link)

M&A: Convey Health Solutions is acquiring HealthSmart International, a home health supplemental benefits company, for $77.5 million. (Link)

M&A: Circulo, a startup focused on the Medicaid population, acquired Huddle for an undisclosed sum. (Link)

Partnerships: Here’s an interesting little announcement – HCA Healthcare is partnering with Diana Health – a maternal health startup – to open a location inside of one of HCA’s facilities. Women’s health space is heating up. (Link)

Retirement: Amedisys’ Paul Kusserow is retiring from his CEO Role after about 7 years in the role. (Link)

Fierce JPM Week: I thought this was an interesting read on Verily and a dive into its 2022 strategy and expectations from JPM 2022. (Link)

Fundraising: Wheel raised $150M in to continue its investments in virtual-first care. (Link)

M&A: IBM finally sold Watson Health to a private equity firm for about a billion. (Link)

Policy Hits

CMS: After a long, drawn out saga, Medicare has decided to limit the coverage of Biogen’s controversial Alzheimer’s treatment Aduhelm to JUST clinical trial patients (AKA, only if patients are enrolled in ongoing trials). As a result of the significant coverage decrease, lawmakers are now pressing CMS to reduce Part B premiums. (Link)

Covid Response:

• The Biden Admin is giving away 400 million masks to Americans. (Link)
• You can now order at-home COVID tests thru the government…2 years in to the pandemic. In true infomercial fashion: “limit 4 per household.” (Link)

Medicaid: Georgia sued the Biden Administration this week, saying CMS pulled a bait and switch on them after previously approving their proposal for Medicaid work requirements (under Trump) and then revoking that proposal (under Biden). (Link)

Imbecile: Fauci called a GOP senator a ‘moron’ during testimonies last week. I couldn’t help but include it. (Link)

SCOTUS: Gear up for the next Roe v. Wade challenge in the Supreme Court. Here’s an explainer for the challenge from Mississippi. (Link)

BBB: Here’s a good read from the Commonwealth fund on how the Build Back Better Act might improve ACA coverage. (Link)

Other Hits

Interoperability: How interoperability, increased reimbursement options will drive digital health in 2022. (Link)

Free Shkreli: Martin Shkreli was ordered to pay $65 million in fines and was banned for life from the Pharma industry after his wire fraud antics. Oof. (Link)

Hot Takes

Violations: Instagram pulled an ad from mental health unicorn Cerebral (a close peer of Lyra) after the ad depicted a woman who was essentially ‘cured’ from impulsive eating by taking ADHD medication. I have a feeling that over-prescribed ADHD medication will continue to be a thing for a long time to come. (Link)

Healthy Muse Top Picks

Packy’s Not Boring took a deep dive into Oscar, albeit from more of a techy perspective. Keep in mind this is a sponsored post, so the bull case is presented pretty nicely – but no real challenges or bear case was presented. Still a good overview of what Oscar does. (Link)

Health Systems: This dive into health system incentives showed that fee-for-service, at least for the foreseeable future, is here to stay. (Link)

Headspace: This was an interesting watch from THCB about Headspace’s merger with Ginger and its go to market strategy, and where it positions against the Lyra’s of the world. (Link)

Shortages: You should be aware by now of the staffing shortages going on nationwide, but especially in healthcare. Here’s a good read from NPR on how it’s affecting nursing homes. (Link)

LifePoint and Scion: This was an insightful read into the integration between LifePoint Health and Scion Health. It sounds like all systems are a go at the combined organizations. (Link)

The post The Encompass Spin Off Edition appeared first on The Healthy Muse.

• This week in healthcare: HCA snags MD Now in Florida, $29 billion in digital health funding, Humana’s bad week, NFL and healthcare fraud, and more.

HCA snags 59 Urgent Care Centers in Florida

Diversification: HCA, the large publicly traded hospital operator, announced on January 4 its intention to purchase Florida-wide urgent care operator MD Now. The purchase price was not disclosed, but you can imagine it was a platform-level multiple to acquire such a large footprint. (Link)

• Details: MD Now operates 59 urgent care centers throughout Florida at a time when urgent cares are performing extremely well since they’re basically COVID test beacons. Free foot traffic. I guarantee we see more activity in the urgent care space among PE, health systems, and now CVS and Walgreens entering the convenient clinic setting so popular with millennials.
• The acquisition also helps HCA to continue to diversify its offerings throughout the spectrum of care delivery. Don’t forget that HCA purchased Brookdale Senior Living’s home health operations last year as well.

Digital Health Funding hits all-time high in 2021

Funding Secured: Let the EZ money flow…according to the latest Rock Health digital health funding report, total U.S. based funding among digital health startups topped $29 billion in 2021. That’s up BIG time from 2020’s $15 billion investment estimate.

• Details: Funding is mainly being driven by larger deals rather than number of transactions, which seems to mirror the rest of healthcare deals in that regard as the industry consolidates. I’d expect this to follow a similar trend in 2022, but because of tightening money policies, funding will likely come down a bit. (Link)

public market update.

Top 3 weekly performers: UpHealth (+5.4% lol); CareMax (+0.26%)

Bottom 3 weekly sandbaggers: Literally everyone, but the top 3 were P3 Health Partners (-29%); Alignment (-25%); and Oak Street (-23%).

• Full List YTD performance: (Link)
• The Health Tech Index is down 15%…10 days in to the year.

HUM: Here’s a super notable, interesting trend: Humana shares collapsed Thursday after guiding significantly lower Medicare Advantage growth than initially expected. The consensus from most folks is that increased competition on pricing from the new insur-tech gang is crowding the MA space, while others attribute some of the attrition to…well…Covid related deaths and fewer members to go around.

• Humana led all managed care providers lower this week. And here I thought managed care was impervious to bad news. I guess this is what happens when you stop hitting your growth projections, even at the very top of the food chain. (Link)

PRVA: Privia Health announced some good news on the 5th – the firm has entered into a few value-based risk arrangements through two of its ACOs, adding 23k members and $230 million in incremental revenue…do the math there! (Link)

EHC: Encompass and Saint Alphonsus Health announced a JV in Idaho to partner on home health and hospice care in the greater Boise area. (Link)

BHG: Bright Health released revenue guidance above its previously estimated range for 2022. Unfortunately that hasn’t helped the stock price much. (Link)

ACCD: Accolade popped after hours on better than expected Q3 results but still issued downside revenue guidance for its Q4. Still, the stock was up 12% after hours since taking a beating so far this year. (Link)

CNC: Centene settled yet another PBM price fixing allegation. Centene has now settled 5 states for $236 million, and the managed care firm expects to pay up to $1.1 billion for total settlement $$$. No admission to wrongdoing though, I’m sure. (Link)

• In other Centene news, the insurer finalized its acquisition of Magellan Health for $2.2 billion. (Link)

Biz Hits

Digital Health M&A: This acquisition had the whole #healthtwitter world rockin’ Vera Whole Health is acquiring healthcare navigation company Castlight Health in a $370M deal. (Link)

Hospital M&A: NorthShore and Edward-Elmhurst completed their merger to create Illinois’ 3rd largest health system at 9 hospitals. (Link)

Watson: IBM is trying to sell off its Watson Health division once again, for a reported $1 billion. (Link)

Molina: The managed care player closed on its $60 million acquisition of Cigna’s Medicaid contracts in Texas. I’d love to be a fly on the wall for that valuation analysis as a valuation nerd myself. (Link)

Policy Hits

Cali: Democrats are pursuing a highly progressive bill in California which would jack up taxes but also let the state fund a single-payer healthcare system. Pretty crazy stuff going down there, can’t imagine why there’s a u-Haul shortage in the state at all. (Link)

Biden: Is mandating that insurers cover 8 ‘Rona tests per month. (Link)

• In other ‘Rona news, Biden advisers are calling for several policy changes to be made, including changing risk thresholds, stepping up testing and therapeutics, and a slew of other recommendations. Read em all here and I have to say candidly it’s pretty ridiculous the state we’re in 2 years in to this thing. (Link)

Study: This was an interesting study into the differences in coverage denials between traditional Medicare and Medicare Advantage. The study, from Health Affairs, found that traditional Medicare coverage makes up the bulk of denied services, a finding that I consider to be counterintuitive but hey, that’s why studies exist. (Link)

Other Hits

NFL Fraud: A scheme involving medical devices that were never delivered caused several former NFL players to pay up big time for their role in the ring. Among them was Clinton Portis, a pretty successful running back for the Washington (ahem) Football Team. I love it when healthcare news overlaps with mainstream coverage. (Link)

Turtleneck & a deep voice: Elizabeth Holmes, former esteemed founder of Theranos, was found guilty on 4 of 11 charges, ironically none of them involving harming patients despite incredibly inaccurate blood tests. She was convicted on wire fraud involving lots of money, though. Always follow the money, folks. (Link)

Hot Takes

Goldman: Ironically, Goldman Sachs is forecasting a positive outlook for insureres in 2022 as a result of the shifting to value-based care. Not panning out so hot so far. (Link)

Healthy Muse Top Picks

PE: This was a good overview from Keckley on where private equity is at headed into 2022. (Link)

Telehealth: This was a great overview of the current dynamics facing the telehealth industry. Has the bubble actually popped? What do you think? (Link)

Dialysis: This was a great deep dive by ProPublica into how the pandemic ravaged dialysis and end-stage renal disease patients, an extremely vulnerable population, and that nobody really noticed how big of an impact it made on this patient population. (Link)

Noom: This article from Inc was a fantastic deep dive into Noom, a weight-loss company with real weight and lots of momentum behind it (Ha!) Read it here. (Link)

In case you missed it: I wrote about every major healthcare story in 2021 in one long-form read, in chronological order. Support me by sharing it!! (Link)

The post The Urgent Care Surge Edition appeared first on The Healthy Muse.

Money continued to fly in to the space, leading to a plethora of deals and private equity buy-outs.

Apart from all the money flying around, there were plenty of cool digital health partnerships announced, policy proposals made, and strategies implemented.

Let’s dive in to what changed the healthcare landscape in 2021.

Q1 2021 Healthcare Stories.

Grand Rounds merges with Doctor on Demand in multi-billion dollar deal.

More digital health conglomerates: Grand Rounds and Doctor on Demand reached an agreement in March to merge into what most would expect to be a multi-billion dollar company. The synergies are interesting here, as Grand Rounds provides patient navigation services (AKA, a direct competitor to recently gone-public Accolade) while Doctor on Demand is a telehealth service.

• (Here’s some good background on patient navigation)
• (Link to merger announcement)

Broader trend: Like I’ve touched on before, these digital health firms are coagulating in efforts to differentiate themselves from one another and also expand their offerings across an array of services to shop to employers. Think Teladoc-Livongo. Boom – immediately synergistic to each other and a much more compelling offering to employers. Uphealth and Cloudbreak, Teladoc-Livongo, now Grand Rounds and Doctor on Demand.

• In other digital health unicorn news…Ro announced a $500 million capital raise at a $5 billion valuation. Interesting that the firm is opting to stay private when so many other telehealth peers have gone public recently – namely, Hims and Hers, which is essentially a direct peer to Ro. (Link – soft paywall)

Notable Healthcare Policies and Biden’s 2022 Agenda.

Surprise Billing: CMS unveiled surprise billing guidance for the rollout of the No Surprises Act slated to take effect in January of 2022. It’s a huge win for the healthcare consumer (AKA, the patient), but payers and providers are still disputing some of the finer points of the proposal, namely the arbitration process.

Providers are suing the No Surprises Act’s implementation due to the way that disputes would be handled between out of network providers and insurers – the arbiter is supposed to look to median in-network rates for that service in that geography, which providers argue vastly favors insurance companies.

• Why? Providers argue that insurance companies handle thousands of claims and have access to reimbursement information from their own in-network providers, essentially already setting their preferred rate given the arbitration guidance from the bill.
• Further, providers argue that the bill dis-incentivizes insurers to even go in-network with provider groups if they can 1) delay the payments process further which makes them money through bank interest and 2) set the in-network median rate based on their own claims data. Interesting stuff and I can see where it’s coming from.
• Unfortunately any delay or injunction to this bill would impact patients, but obviously any solution is better than none here.
  • This Health Affairs article does a great job of breaking down the key issues. (Link)

Price Transparency updates: CMS issued stiffened guidelines for the hospital price transparency mandate. The fine, which used to be a paltry $300 a day, now scales with hospital bed size, so fines ranging between $110k and $2 million for the biggest hospitals. Did you know that only about 5% of hospitals are compliant with the rule?

• That number will vastly improve with stiffer punishments for non-compliance and will hopefully expose and remediate the incredible variation in hospital pricing for procedures. Still, the maximum fine of $2 million may not even be enough, as insurance negotiated rates are some of the closest held trade secrets in the healthcare industry. (Link)

What’s next for Biden: The Biden Admin released its 2022 agenda for regulations in the upcoming year, and so far HHS is looking at the following issues:

• More regulation of short-term health plans, previously approved by the Trump Admin
• Prior authorization and interoperability improvements
• Dispute resolution guidelines for 340b spats between hospitals and drugmakers (this is actually a big deal)
• Updated safety and other requirements for rural hospitals (critical access hospitals)
• Full link to the Biden agenda here. (Link)

Large Health Systems form Truveta, a bet on Big Data in Healthcare.

Big Health Data: Hospitals are sitting on a treasure trove of data just waiting to be analyzed. That’s the thesis behind Truveta, anyway, which is a partnership between 14 of the largest health systems. Formed in late 2020 as a for-profit entity but officially announced during Q1, Truveta plans to aggregate clinical-level, de-identified patient data to provide meaningful insights for researchers, physicians, biotech firms, and everyone in between. (Link to Truveta Blog Post)

• This partnership isn’t the first foray into the health data space. Remember Project Nightingale, the Google-led venture with Ascension that caused a whole lot of patient privacy controversy?
• While that partnership used identifiable patient data which was accessible by Google employees, this new venture with Truveta seems to indicate that the appetite for big data insights from health data is stronger than any potential backlash from a vast amount of data sharing – albeit, HIPAA-compliant data sharing.
• Other thoughts: I’m personally curious to see whether any actionable insights come from this venture. I also wonder how much competition Truveta will take away from firms like 23andMe and Ancestry, who are trying to leverage their DNA databases into actionable data for drug and other research.
  • Finally, I’m also curious whether these health system coalitions continue in the future. We saw Civica Rx form in late 2018, a partnership for addressing generic drug shortages. Now Truveta, a data sharing platform…what could be next?

Walmart scales down Health clinic expansion.

After an initial enthusiastic and promising pilot and lofty goals for its health clinics rollout, Walmart might be slowing down the healthcare venture amidst shifting strategy. A published article in March from Business Insider shed light on the operational speed bump. (Paywall)

• The initial rollout of the pilot health clinics was met with huge success. More than double the number of expected people visited the new clinics. Some drove more than 90 minutes away for an appointment as the ease of transparent, cash-pay drew in rural crowds. It seemed like a win-win – according to the article, the clinics were at a path to profitability within two years while boosting overall sales at the store itself.

Delays: Although the clinics were met with early success, a new CEO – along with the pandemic – slowed down the operation. From the article, it seems as if leadership wanted to pursue a new strategy: playing the long game by forging relationships with insurers, and slowing the rollout of new clinics as the firm worked to refine its care management strategy.

According to the article, Walmart was losing track of its ability to schedule people with their preferred doctors and keep up with communication because of the visit volume influx.

• Thoughts: I can’t say I’m not disappointed with this news. I can understand the delay from a logistical perspective (e.g., scheduling, prescription communication, etc.), but the fact that so many people were willing to travel large distances to visit your clinics indicates that you’re uniquely positioned to provide care in a transparent, cash-pay fashion while also boosting store sales.
  • This quote from the article wraps up Walmart’s short-term sales-boosting strategy quite well: “One former employee who attended budget meetings said money to build new clinics dried up in favor of things like cooking devices that more directly boosted in-store sales.”

Post-Acute M&A activity in early March.

Lots of M&A in healthcare to headline early March and some interesting transactions in notable sectors to follow.

First up is the UnitedHealthcare and Optum reported acquisition of Landmark Health for $3.5 billion.

• Landmark is an in-home care provider that focuses on the sickest and most frail population of people. The firm works in 17 states and is involved in one of CMS’ new direct-contracting models. Seems like the firm is pretty scalable and with Optum backing it, we’ll probably see Landmark expand nationwide. (Link)

Next up: Cigna’s subsidiary Evernorth acquired telehealth provider MDLive for a reported $1 billion.

• The announcement is interesting as MDLive considered going public in early 2021. I’m thinking the firm left money on the table by being acquired but maybe not since the taste for telehealth is dying down a bit, especially after seeing Teladoc’s soft guidance numbers in its Q1 earnings report. (Link)

Finally, hospital operator HCA acquired an 80% stake in Brookdale Senior Living’s home health and hospice firm.

• While HCA has traditionally focused on elective surgeries and expanded outpatient capabilities, the investment signals that HCA has plans to expand into post-acute and integrate care even further. (Link)
• Side note – Hospice is a hot, hot space right now as multiples are rising. Just last week, the Pennant Group (another publicly traded home health and hospice firm) boosted its credit facility to make way for more hospice acquisitions. (Link)
• Read more – why the HCA deal is a win-win transaction for Brookdale. (Link)

Amazon Care expands Nationwide.

It’s happening: The online retail giant filed paperwork in 17 (and counting) states in order to expand the medical operation that seems to indicate that Amazon is ready to expand the clinics beyond just an employee-only benefit. (Link)

• About Amazon Care: Amazon evidently runs these clinics under a partnership with Care Medical, which is an independent medical practice that provides staffing for the Amazon clinics. The firm seems to be closely intertwined with Amazon and I have to wonder how provider costs will ramp up as the operation scales nationally. Note that Amazon Care will initially be available to its employees and any other large employers that opt in to the service.

Lobbying: In other Amazon-related healthcare news, Amazon and several other prominent public home care providers announced a coalition called Moving Health Home, which is essentially a pretty powerful lobbying group aimed at educating lawmakers on the benefit of in-home care as opposed to nursing homes and other post-acute settings. (Link)

• Specifically, Amazon and the others (Signify Health, Dispatch Health, Intermountain, etc.) will start “lobbying lawmakers to ease regulations on what kind of health services can be performed outside of a doctor’s office — potentially widening the services Amazon Care can provide.”

Big Picture: Amazon’s moves make sense given their recent investments and announcements. In November, the firm announced its Alexa Care Hub, a way to check on seniors living alone through Alexa. Just a WEEK later, Amazon launched Amazon Pharmacy. Not to mention its acquisition of PillPack in 2018 or its venture with Haven that ultimately failed but probably succeeded in knowledge gained in running medical services. Finally, don’t forget about Amazon’s new wearable Halo – announced in late August 2020.

• Get your popcorn ready? If you think about it, Amazon really is attacking healthcare from quite a few different angles. It’s fascinating to watch. Amazon has made some big moves in the past, but this flurry of activity signals major moves are happening.

Shares of publicly traded telehealth firms plummeted after Amazon announced the nationwide rollout of its telehealth platform Amazon Care. (Covered in the March 8th edition).

The question is…is this a fire sale, or a problem for telehealth firms? Other Amazon announcements have resulted in stock selloffs, so this is nothing new.

• Grocers plummeted after Amazon announced its Whole Foods acquisition.
• Then don’t forget about retail pharmacies dropping after Amazon’s move into the pharmacy space.

GoodRx in particular has been getting hammered given its seemingly-delicate positioning between Amazon Pharmacy and now Amazon Care.

• It’ll be interesting to see how telehealth firms deal with increasing competition and whether there will be multiple winners in the space as firms differentiate in order to create compelling, sustainable competitive advantages.

A bad year for nursing homes.

The 5-star rating system is broken: The pandemic really seems to have exposed major flaws in U.S. nursing homes. In March, the New York Times published a pair of hard-to-read stories related to nursing home operators’ ability to game the Medicare star rating system. (Link)

• The first report alleges the following and more:
  • Much of the data nursing homes report to CMS is incorrect
  • Staffing numbers are often understated
  • Nursing home data is rarely audited by CMS
  • Nursing homes often know when their ‘surprise’ inspections will take place
  • Inspectors may find serious infractions anyway but rarely does it cause a drop in the home’s star rating (why not just…turn it into a 10-star system?)

Brookdale sued: As a closely related story, Brookdale Senior Living, the largest nursing home operator in California, was sued by the state for similar veins of ‘Medicare manipulation,’ including inappropriately discharging patients to allegedly fill those beds with higher paying patients. Brookdale denies any wrongdoing. (Link)

DOJ to review Unitedhealthcare’s $13 billion acquisition of Change Healthcare

Litigation: At the request of the American Hospital Association, the DOJ is investigating UNH’s previously announced $13 billion acquisition of Change Healthcare – a revenue cycle and data analytics platform.

About the challenge: As more of an infrastructure-esque purchase, the acquisition was more behind the scenes in nature. But the AHA claims that the acquisition may result in less competition for IT and revenue cycle management services among providers. United plans to start integrating Change Healthcare in April 2022 after DOJ review.

• The DOJ case is just delaying the inevitable: that everyone in healthcare will eventually work for United. (Link)

Q2 2021 Healthcare Stories.

One Medical acquires Iora Health.

Two Medicals: In big news released early June, One Medical announced its intention to acquire value-based primary care chain Iora Health for $2.1 billion.

• Why you should care: One Medical’s typical business model to this point has been to focus on fee-for-service primary care. This acquisition fully plunges the firm into the value-based Medicare Advantage side of things and allows for a major diversification in revenue service lines. (Link)
  • Matthew Holt had some decent initial thoughts on the acquisition on Twitter (Link)

Google Plows further into Hospital Data with HCA Partnership

Data: Google and HCA are partnering to focus on building a healthcare data analytics platform. The end goal here is to streamline HCA’s provider workflow to improve decision making and cut down on admin time. Of course, the data uploaded to Google’s cloud healthcare offerings would be de-identified.

• Why you should care: Google seems to be building a treasure trove of healthcare data after announcing recent partnerships with the Mayo Clinic, Meditech, Allegheny Health Network, Ascension, and now HCA. I’m not an expert here, but I also wouldn’t be surprised if the search giant made some compelling moves over the next 5 years. (Link)

Microsoft’s Nuanced $20 Billion Healthcare Cloud Play

In big news announced in mid April, Microsoft dropped about $20 billion to acquire Nuance for $56 a share. According to folks on Twitter smarter than me, the acquisition appears to be a smart, natural play for Microsoft to dive deeper into cloud-based healthcare infrastructure and physician workflow. The firm also recently announced an integration with Teladoc, which could create a powerful clinical tool for providers nationwide. (Link to Partnership)

• I found this quote provided solid context for the acquisition: “Last year, Nuance launched nationwide an AI tool co-developed with Microsoft that — with a patient’s explicit consent — can listen in on a medical visit, transcribe the conversation into text, pull out relevant medical information and auto-populate that data into the EHR, for the physician to review and sign.”
• Link to press release
• Link to deal analysis

Accolade Buys PlushCare and Digital Health Convergence Continues.

Anotha One: In the next major push to become a digital health player offering a conglomerate of services for employers, Accolade purchased PlushCare for $450 million and became the latest firm to offer telehealth for its platform. (Link)

• The larger trend: These new-age healthcare firms are starting to compete for employers by offering a suite of services – care navigation, telehealth, chronic care management, and more – especially as the push toward value based care materializes. Read the company’s blog post about the acquisition here. (Link)

The Home Health Land Grab and Kindred Healthcare Exchanges Hands

After its transaction alongside private equity giants TPG and WCAS in 2017 to take post-acute operator Kindred Healthcare private, Humana exercised its option to purchase the remainder of Kindred at Home in a $5.7 billion deal. This transaction price valued Kindred’s home health and hospice assets at a separate $8.1 billion enterprise value. (Link)

Why you should care: Especially after Covid and the accelerated push toward home-based care, home health and hospice are a hot transaction market as major healthcare players pivot their strategies toward the home. We’ve seen quite a few acquisitions by a consortium of operators:

• Encompass purchased Frontier Home Health and Hospice, which operates in 5 states mostly in the Northwest U.S. (Link)
• Home care operator Aveanna Healthcare debuted on the public markets in late April. The firm raised about $460 million and now trades under the ticker ‘AVAH.’ (Link)
• Optum purchased Landmark Health for $3.5 billion. (Link)
• HCA also recently bought Brookdale’s home health and hospice assets for $400 million as previously covered. (Link)

As you can see, the space is only seeing an increase in activity. I have to wonder if this entices Encompass to field more offers for its home health and hospice segment, as the firm is in the process of exploring strategic options for those assets. I’m expecting EHC to make some sort of move here in 2022. (Link to transcript)

LifePoint acquires Kindred’s Facilities Service Lines.

Post-Acute Plays: On the heels of Kindred at Home’s divestiture, private, for-profit acute care hospital operator LifePoint Health bought Kindred’s facility-based post acute business (AKA, long-term care hospitals, inpatient rehabilitation facilities, and skilled nursing facilities). The deal was announced on June 21, but unfortunately no financial terms were disclosed. (Link)

• Although the deal is focused on facility based care, LifePoint’s acquisition seems to be similar strategically from an alignment perspective and also provides LifePoint with huge scale – they’ll now operate in over 200 facility-based settings.

Remember: Once this transaction clears, all of Kindred’s service lines will have changed hands, and it looks like that trend will continue – Humana indicated on its earnings call that it plans to sell off the Kindred hospice segment for a juicy valuation multiple. (Link)

• In fact, Home health and hospice multiples are the highest in all of healthcare, and really have been for quite some time. (Link)

Walmart buys a no-name telehealth provider, MeMD.

Walmart announced on May 6th its intention to purchase MeMD, which is a multi-specialty telehealth provider that nobody had really heard of until…now. (Link to press release)

• It’s an interesting addition to Walmart’s health clinic rollouts and a notable play in the retail giant’s overall healthcare strategy considering recent rumors that the firm was scaling back its healthcare clinic rollout goals. (Paywall – Insider)

Bigger picture: Based on comments from the press release and others, Walmart seems to want to complement its in-store healthcare offerings with a telehealth option for customers. The move seems to indicate that if you want to be taken seriously as a healthcare player, you NEED to have a telehealth option.

• The move could be reactive in nature too – considering that Amazon Care just announced its intention to expand nationwide for employees – and has its first B2B client – Walmart might be playing defense to stay competitive in the employment market against its #1 competitor. Also, while this is the first acquisition Walmart has made into the space, the firm has partnered with other telehealth firms like Ro and Doctor on Demand in the past couple of years.
  • Both Amazon and Walmart are laying the foundation for scalable healthcare presences nationwide.

The Hospital at Home Trend.

As a new venture into the Hospital at Home care model, Kaiser and the Mayo Clinic (AKA, massive players in the healthcare space) announced a $100 million joint investment into Medically Home. (Link)

This blog post gives a unique insight into how Mayo Clinic and Kaiser will scale Medically Home’s operations.

• In order to provide higher acuity care in the home, the firm will have a centralized HUB that communicates with caregivers, and connects all aspects of that patient’s care. This care could include everything from medication delivery to dialysis treatments.

Why you should care: Obviously with Covid, there’s been a huge push for more at-home care. This partnership, and other programs similar to Medically Home, will allow seniors to age comfortably in place as healthcare innovation allows care for more complex medical conditions in the home. (Like, Best Buy?)

Hospital at Home: Adding to the trend, Amedisys announced on June 30 that the home health and hospice operator purchased Contessa Health, a provider of hospital and skilled nursing at-home services, for $250 million.

• With the acquisition, Amedisys estimates that its total addressable market just drastically increased from $44 billion to $73 billion. We’ll see if the lofty growth expectations come to fruition! (Link to Press Release)
  • This was a good write-up from HHCN on the strategic benefits of the acquisition. (Link)

Amazon Care Scales its Presence Nationwide

Amazon: Another headline that made waves this quarter – after Teladoc shrugged off concerns of Amazon as an entrant into telehealth during its Q1 call, a Wall Street Journal report disclosed that Amazon had already signed ‘multiple companies’ to its new Amazon Care telehealth service.

• Remember that Amazon just took this operation nationwide and already offers it to employees. To continue scaling, Amazon will need to hire ‘thousands of employees.’ Very interesting to see the telehealth arms race heat up! (Link)

The ACA wins again at the Supreme Court.

3-0: For the third time in a decade, the ACA was upheld by the Supreme Court in a 7-2 decision. SCOTUS decided in its opinion that states did not have standing to sue over whether the removal of the individual mandate (AKA, the $$$ penalty for not having insurance) made the entire ACA illegal.

• To be candid, this prosecution was an embarrassingly weak legal argument, as the court decided that no harm had been done to the states that brought the suit. As a result, the case will be dismissed. (Link)
• It’s probably a good thing that the ACA stayed in place considering enrollees are at an all time high as of this writing – above 80 million individuals. (Link)

Outset Medical and Strive Health team up on Dialysis Home Care.

Partners: On June 16, Value-based kidney care firm Strive Health announced its partnership with publicly traded medical device firm Outset Medical

• Details: Strive Health will use Outset Medical’s kidney care machine called the Tablo Hemodialysis System, which intends to simplify the dialysis process and even allows patients to administer dialysis at home rather than in an outpatient clinic setting.
• Why you should care: The $74 billion end stage renal disease industry is mainly dominated by DaVita and Fresenius. This partnership is an extremely significant foray into challenging that traditional duopoly, so you should pay close attention to this one. (Link)

Major Hospital Mergers. Beaumont Health and Spectrum, Oschner’s 7-hospital Acquisition of Rush Health Systems, and Steward’s Acuisition of 5 Tenet-run Hospitals

Beaumont tries again: This quarter, Beaumont Health and Spectrum Health announced their intention to merge into what would create the largest health system in Michigan, with 22 hospitals and about $13 billion in revenue.

• Long time readers might remember that Beaumont Health has attempted to sell itself off twice already – once to Summa Health and then again to Advocate Aurora Health. Both attempts failed due to antitrust and cultural issues. Can Spectrum succeed where others have failed? Stay tuned! (Link)

Ochsner’s buying spree: Louisiana-based Ochsner Health announced its intention to acquire Rush Health Systems, a 7-hospital system in the Mississippi and Alabama areas. This announcement comes on the heels of Ochsner’s acquisition of Lafayette General Health in late 2020. (Link)

Steward buys Tenet hospitals: To round out the hospital activity, Tenet sold 5 hospitals to Steward Health Care for $1.1 billion in the Florida area. The hospitals will continue to use Tenet’s rev cycle software Conifer and continues to signal Tenet’s push toward outpatient operations and its focus on USPI.

• Remember that Steward was bought back from private equity group Cerberus by a group of physicians in the summer of 2020 – this acquisition marks Steward’s first real activity since then. (Link)

Q3 2021 Healthcare Stories.

Dollar General’s foray into healthcare.

Dollar General hired a chief medical officer and announced its intention to add healthcare products to its stores.

• Details: Dollar General has been on a growth TEAR lately – the retail discount store has over 17,400 stores mainly in rural areas. In this move, Dollar General aims to increase foot traffic at its stores by offering staple healthcare products like cough medicine and other nutritional products. Over time, Dollar General plans to expand this healthcare offering and hopefully continue to address the accessibility gap in rural healthcare. (Link)

A $26 Billion Opioid Settlement for McKesson, Cardinal Health, and AmeriSource Bergen.

The Grand Finale: After a multi-year slog in the courts, drug distributors McKesson, Cardinal Health, JnJ, and AmeriSourceBergen settled on a combined $26 billion multi-year payout to states involved. Assuming states approve the settlement, this agreement would largely put to bed the companies’ liability stemming from the opioid crisis. (Link)

• Deeper: The news comes at a time when drug overdose deaths were at an all time high during the pandemic. (Link)

Akumin acquires Alliance Healthcare Services to create National Imaging Company

Imaging: Publicly traded imaging operator Akumin acquired fellow radiology provider Alliance Healthcare Services this quarter for around $820 million, in what would create a major national competitor to RadNet and U.S. Radiology.

• Big picture: the transaction would expand Akumin’s national footprint from 7 to 46 states with over $700 million in revenue. Interestingly, Akumin appears to be acquiring a larger company in Alliance and is raising $700 million in debt to do so. The combined company expects to do over a billion in revenue and around 20-25% EBITDA margins (Link)

Teladoc, Microsoft Partner, Google’s Interoperability Push, and Amazon’s AWS for Health.

Integration: Teladoc announced a major collaboration with Microsoft to integrate Teladoc’s Health’s Solo platform into Microsoft Teams. The announcement is notable as Microsoft and Teladoc continue to partner on virtual care and easing administrative burden to health system clients. (Link)

• Google also announced new interoperability tools this week as well. (Link)
• Finally, Amazon unveiled AWS for Health – cloud services for a host of healthcare companies including genomics and biotech firms. (Link)

Home Healthcare startup Honor acquires Home Instead to create $2 billion Home Care firm.

Honor, a technology and back-office home care infrastructure firm, announced its acquisition of home care provider Home Instead. The acquisition gives Honor access to 1,200 locations throughout the U.S. and abroad.

This is big: The newly combined co would generate more revenue than Addus, Pennant Group, and would be on par with LHC Group and Amedisys’ consolidated reported revenue of about $2.1 billion.

• About Honor: Interestingly, Honor started as a back-office partner that provides infrastructure to home health and home care agencies. With the acquisition, Honor will pivot into a vertically integrated home-care provider and a major player in the industry. (Link)

Ginger merges with Headspace in $3 billion deal.

In a deal announced August 25, virtual mental health coaching and therapy provider Ginger merged with Headspace, a direct to consumer app that provides mindfulness and meditation programs. The merger is a notable move among two very well-known names in the digital behavioral health space. Moving forward, the combined firms will be named Headspace Health. (Link – Press Release)

• By the numbers: As a combined org, Headspace Health will generate $300 million in annual revenue (ARR) to about 100 million users worldwide. The merger creates a private valuation of about $3 billion.
• How the model works: The merger creates a vertically integrated behavioral health org for lower acuity patients. Think of the model this way – consumers find Headspace in the app store and subscribe to its mindfulness services. At that point, Headspace could funnel those patients into coaching and therapy services provided by Ginger. Although the model currently lacks services for higher acuity patients (clinical depression, etc.), Headspace Health could potentially add those offerings through partnerships or employment of psychiatrists.

More resources:

• Want to be a more holistic healthcare company? Add some Ginger. (Link)
• Ginger and Headspace plan merger to rapidly scale up digital mental health services. (Link)
• Inside the Giant Ginger-Headspace Merger, What It Means for Behavioral M&A. (Link)

Managed Care Partnerships: Aetna – Teladoc and CareMax – Anthem

Partnerships: There were a few notable managed care partnerships announced in August. First off, CVS-Aetna partnered with Teladoc to unveil a nationwide primary care telehealth service to its members. (Link)

• CareMax: In a similar vein, Anthem partnered with recent gone-public CareMax to open 50+ value-based care medical centers. Some of the identified states for this partnership include Indiana, Texas, Kentucky, Wisconsin, Georgia, Connecticut and Virginia. (Link)

Carbon Health’s Busy Summer.

As the header mentions, primary care digital health firm Carbon Health made plenty of headlines themselves all summer long. After acquiring remote patient monitoring firm Steady Health, Carbon raised another $350 million and quickly put some of those funds to use by purchasing two major urgent care retail footprints in California and Arizona.

Given the acquisition of these 13 clinics, the tech-enabled primary care platform now operates 83 clinics across 12 states.

• Bigger picture: These new-age health tech enabled services firms are consolidating and are starting to boast major market presences across the U.S. (Carbon Health, Teladongo, Ginger-Headspace, Accolade, and more). It’s a fascinating time to observe the trends and seemingly changing tides for health tech.
• More reading: about Carbon Health and its founder. (Link)

Full FDA Approval for Pfizer’s Vaccine.

After its standard review process, the FDA finally fully approved Pfizer’s and Moderna’s vaccine in the fall. Previously, the vaccines were only approved for emergency use. Now, we’re all getting boosters. (Link)

Intermountain Announces Merger with SCL Health

Big-time: Utah-based Intermountain Healthcare announced its intention to merge with SCL Health on Thursday, September 16 in what would create a 33-hospital, $14 billion in annual revenue system. The combined system would employ more than 58k caregivers across six states – Utah, Idaho, Nevada, Colorado, Montana, and Kansas.

• I know what you’re thinking: “But hospital mergers result in higher prices.” That’s the general consensus around hospital mergers. But Intermountain seems to be focused more on value-based care initiatives and population health, which this merger would allow them to execute on.
• Merger quote: “This is the opposite of those mergers where people come together and try to exert leverage over commercial insurance to get more money,” he said. “What we’d really love in the long run is for some of those payers to engage with us in risk-based contracts where we can really work hard at keeping people well. That would be the most exciting thing for us, I believe.” Marc Harrison, MD – Intermountain CEO
• Links: (Press Release) (Article Summary)

NorthShore University Health System, Edward-Elmhurst Health unveil merger plans

More: Also along the Midwest, the combined health systems of NorthShore and Edward-Elmhurst would create a 9-hospital conglomerate, serving about 4.2 million Illinois residents across 6k physicians and 300 facilities. (Link)

• Antitrust: These merger announcements are coming at a time when Biden regulators are increasing scrutiny on vertical and horizontal mergers. Hospital mergers are among the most heavily scrutinized when it comes to antitrust, so it’ll be interesting to see whether the above deals actually get done. (Link)

Q4 Healthcare 2021 Stories.

Health IT Deals Continue with Evolent.

Evolent: Reports from Bloomberg indicated that Walgreens is considering acquiring health IT firm Evolent, which assists providers with managing value-based care programs among other segments. Evolent’s stock initially rose 18% on the news and is up 20% as of this writing since the announcement on September 29. (Link – Bloomberg soft paywall)

Walgreens and CVS double down on Health SuperClinic Expansion.

Recent news, investments, and rumors have indicated that Walgreens and CVS are about to aggressively escalate their primary care and health super clinic strategy.

Walgreens doubled its stake in its health clinic partner VillageMD with a $5.2 billion investment on October 14. With the influx of cash, VillageMD plans to open 600+ health clinics called “Village Medical at Walgreens.” (Link)

• On top of this investment, Walgreens also made a majority investment in CareCentrix, which is a post-acute care platform. (Link)

CVS is also planning a rapid expansion of health clinic facilities. Rather than initially partnering, CVS chose a build strategy in conjunction with acquiring Aetna a few years back. During CVS’ Q4 investor day, the firm projected $304-309 billion in revenue for 2022..small change. The retail health giant believes the pivot to HealthHUBs will drive higher growth and consumer engagement at their stores as people view their stores more as a one-stop shop healthcare destination. They’re also going to start acquiring more primary care physicians probably to employ them in HealthHUBs or bring them in network, similar to Optum or Neue Health strategy.

• CVS probably has one of the most complicated business models on the planet between its PBM, retail footprint, health insurance business, and now HealthHUBs. It’s really interesting that CVS has an enterprise value of around $180 billion when UnitedHealth is closer to $450 billion. You could make an argument that CVS is extremely undervalued if they’re able to succeed on the pivot to HealthHUB and keep executing on the healthcare strat including the building of its provider base.
• Final point…CVS retail spaces are generally very prominently displayed, which is a key indicator of success for urgent care operations. So that’s an immediate synergy / tailwind for the pivot. The main block here is probably just getting consumers to view HealthHUBs as a place to get healthcare services when before CVS’ were just for picking up snacks or prescriptions, but that shouldn’t be an issue given Aetna’s huge captured membership base. Link to Investor Day HUB. (Link)

Bottom Line: Both Walgreens and CVS are investing more heavily in the entire spectrum of care in order to bolster their core retail pharmacy businesses amidst increasing competition from all sides. CVS seems better positioned to capitalize on the strategy given the leverage it maintains with operating Aetna.

Must Read: This was a great read from Nisarg Patel on how CVS plans to leverage its health super clinics as a part of its overall business strategy – combining full-service, consumer oriented primary care, strengthening its pharmacy operation, increasing traffic to its stores, and maintaining a strong provider based through Aetna. (Link – Medium Soft Paywall)

Rise of the Virtual Health Plan.

Virtual: Here’s a trend a long time in the making – major insurers, through built, bought, or partnered telehealth infrastructures, are launching virtual-first health plans slated to begin January 1, 2022

• UnitedHealthcare plans to launch its virtual-first primary care product using the strength of its already-existing Optum physician network. It’s a natural, organic progression for the health behemoth. (Link)
• Similarly, Cigna, on the heels of its acquisition of telehealth provider MDLive, will pursue a similar virtual first primary care strategy. In addition to rolling out the plan to some select employer sponsored plans, Cigna also aims to provide all of its plans with a broader telehealth offering. (Link)
• Finally, Aetna is partnering with Teladoc to make its primary care plan available nationwide to all benefit sponsors, as previously mentioned earlier in this post. Teladoc’s newly unveiled Primary360 service will be available in this plan and is currently being used by ‘several large companies.’ (Link)

Kindred and LifePoint spin off 79 hospitals to form ScionHealth.

Spin-off: Recently merged healthcare providers LifePoint (hospitals) and Kindred (post-acute) spun off certain non-strategic assets into a separate company called ScionHealth. ScionHealth will be comprised of 79 hospitals after the spin-off, including 61 of Kindred’s long-term acute care hospitals (LTACHs) and 18 of LifePoint’s acute care hospitals. (Link)

• It looks like LifePoint and Kindred want no more skin in the LTACH game, instead focusing on acute care and inpatient rehab operations. I wouldn’t be surprised if a Select Medical-type operator swooped in here to purchase Scion.

General Electric and JnJ Spin off their Healthcare Divisions.

J&J: Healthcare conglomerate, maker of all things Johnson & Johnson is spinning off its consumer products division into a separate company to focus its core biz on pharmaceuticals and medical devices. (Link)

GE: In a similar fashion, GE, grandpa of the stock market, is splitting up its company into 3 distinct units, one of which is focused solely on healthcare and healthcare manufacturing. GE plans to spin off the healthcare unit by 2023. (Link)

athenahealth sells for $17 billion

Health tech EHR software giant athenahealth (what’s the deal with the lowercase anyway?) was acquired by PE giants Bain and Hellman & Friedman for $17 billion, just a couple of years after athena was taken private by Veritas and Evergreen for ~$7 billion – a 142% appreciation. Talk about a juicy ROI. Also, I’m apparently in the wrong line of work.

• Bain and Hellman must think that there’s juice left to grow athenahealth after the hefty sum given its current position in ambulatory settings and supporting platforms like Privia Health. The valuation makes more sense in the broader context of private digital health valuations, while their publicly traded counterparts struggled this year. I’m generally concerned with how frothy these transactions across healthcare are becoming – it seems as if someone is going to get burned here soon. (Link) (Link – press release)

Tenet grows its ASC Footprint with SurgCenter Acquisition

Ambulatory: Hospital operator Tenet Healthcare continues to triple down on its outpatient strategy under its ambulatory arm, USPI. Tenet purchased ownership interests in 92 ASCs from SurgCenter Development for about $1.2 billion.

• Further, SurgCenter and USPI plan to open an additional 50 centers over the next 5 years which indicates the level of outpatient growth these operators are expecting as the appetite for outpatient procedures grows stronger. (Link)

Amazon Launches new Elder Care Service Alexa Together

Aging in Place: Previously announced in September 2021, Amazon is expanding its Care Hub program to create a new service to help loved ones and caregivers check in on elderly folk. Called Alexa Together, the subscription service will provide a number of convenient offerings including customized alerts, 24/7 urgent response availability, fall detection and more. It’s pretty cool and could definitely be a major catalyst in speeding up the Aging in Place movement overall. (Link)

• Check it out on Amazon’s site yourself to see the full list of features available for loved ones. (Link)
• Related Content: There’s seemingly endless upside for startups looking to make their mark on the aging-in-place market. (Link)

Oracle buys Cerner for $28.3 Billion

Cash to burn: Oracle, the traditional database software giant, is making its biggest acquisition EVER by acquiring electronic health record giant Cerner for $28.3 billion, or $95 a share in an all-cash deal. (Link)

• Why Oracle: Oracle likely thinks the acquisition gets their cloud offering on a closer playing field with that of Amazon and Microsoft According to Oracle’s disclosures, the acquisition is almost immediately accretive to earnings.
• athenahealth was just purchased by private equity for $17 billion with $1.2 billion in revenue, whereas Cerner was valued publicly at $28.3 billion with $5 billion in revenue, so on a true numbers basis, a $30 billion acquisition is a ‘value play’ – but athena is better positioned for growth

Cerner gives Oracle access to the department of Veterans Affairs, as Cerner won a huge contract with the org for EHR services…Personally, Oracle must believe that Cerner gives them a ton of synergy, because the EHR giant has been bleeding market share to Epic, its second largest competitor. Cerner experienced revenue decline in 2020 with marginal growth so far in 2021. Kind of seems like two second-tier businesses combining with the idea of making something better overall.

• I halfway predicted this acquisition in 2020. Sort of. It’s close, right?

A Big Year for Digital Health SPACs and IPOs

• 25 digital health and services companies went public during 2021 by way of SPAC or IPO. SPACs generally underperformed IPOs, but overall, the Health Tech Index vastly underperformed the broader stock market. Investors looking for exits dumped privately overvalued unicorns onto the public markets, leading to a steep 35% decline for the Health Tech Index as opposed to a 27% gain for the S&P 500 during 2021. You’ll notice a trend among 95% of these stocks: They almost all finished in the red.
• Will we see a repeat of this selloff in 2022? As these companies mature, they’ll slowly regain momentum and investor sentiment will pick up. I personally believe a lot of these names were simply too quick to market.
• For a summary of the Health Tech Index and the members included in the index, including performance by stock, you can go here: (Link)

Talkspace.

Talkspace, the virtual behavioral health app, went public via merger with Hudson Executive Investment at a $1.4 billion valuation. The firm was the latest in a long stretch of digital health firms to hit the public markets this year and last. The fact that Talkspace operates in the behavioral health sector is a tailwind for the firm, as the behavioral health market is expected to grow significantly in the coming years. (Link)

• Despite the growing mental health wave, Talkspace shares suffered this year. Shares of Talkspace collapsed after its Q3 earnings and departure of its CEO and COO. Woof. The behavioral health app is down more than 75% since going public via SPAC amid lower than expected growth and retention issues. (Link)

Hims & Hers.

In late January, Hims & Hers tied the knot with the public markets and started trading under the ticker ‘HIMS.’ (Link)

• What to know about HIMS. The company – which offers a variety telehealth and medication delivery services – has exhibited a meteoric rise in scale since its inception in 2017. 3ish years to go from inside someone’s brain to a $1.6 billion company today? That’s impressive.

Drastically scalable: Since its inception in 2017, Hims & Hers expanded dramatically:

• Once only known as Hims, the firm started with selling just four products, the most popular of which was its ED medication business.
• Hims rebranded into ‘Hims & Hers’ when the company added a women’s health service line.
• More recently, Hims & Hers expanded into a wide array of virtual services, including behavioral and mental health, primary care, and now a partnership with Privia Health – an extension of its primary care offering.

Bottom line: pay attention to Hims & Hers and other firms like it as COVID accelerates telehealth and digital health adoption, while easy money and low interest rate policies allow digital health players the capital to make a realistic foray into our sluggishly innovative healthcare system.

• If you want to learn more about Hims & Hers, I highly recommend this Bloomberg article (note – soft paywall) which dives into how the firm grew so quickly and effectively, but also takes a critical look at its business practices and prescription services. Ro is also a very close peer and competitor here.
• One more thing: Interestingly, during its earnings call, UnitedHealthcare mentioned that telehealth and online pharmacy services are key focuses for the business in 2021 which is…basically what HIMS offers. (Link)

Sharecare.

Sharecare: Went public via SPAC merger at a $3.9 billion valuation and received an investment from Anthem as part of the transaction. Right before debuting publicly, the firm also combined with health AI startup Doc.AI. Founded by WebMD’s founder, Sharecare is an online health & wellness platform that provides its customers with personalized programs and resources to help improve their health. The firm seems to be a conglomerate of all sorts of perks and benefits that works with health plans – including drug discounts. The co. trades under the ticker $SHCR. (Sharecare’s Background)

• Link to 8K and merger documents (Link)
• Access the investor presentation here. (Link)
• An informative Twitter thread on Sharecare. (Link)

23andMe.

23andMe: Also went public via SPAC. You’re probably more familiar with this company – it provides personalized DNA testing to individuals and is also trying to leverage that genetic data with biotech firms, launching studies to see what insights can be gleaned from DNA data and drug development.

• 23andMe’s primary competitor, Ancestry, was valued at $4.7 billion as recently as December. Still, both of these businesses seem a bit risky to me given that the consumer DNA testing craze appears to be dying down while there’s no guarantee that any of these biotech data partnerships pan out. (Link)

After 23AndMe’s announcement to go public via SPAC, a few individuals took deep dives into the DNA testing firm’s investor presentation and well, folks…there’s some definite spin going on. I found this Twitter thread especially amusing and quite the bearish opinion. (Link to investor presentation)

Incredibly, 23andMe is going public at a time when its revenues are shrinking significantly as the DNA testing fad dies out. To counter the unfortunate shrinkage, the firm is trying to pivot into a value-add for biotech giants and research into promising new drugs while adding a subscription product to its offerings which no one appears to know what it actually is.

• Then there’s the question of data privacy, too. Maybe if things don’t work out, 23andMe will sell American DNA data to China. I suppose it’s more of a threat than we might think, considering 60 Minutes just released a feature on it. (Link)
• 23andMe dropped 44% in 2021.

Oscar Health.

The long-awaited tech-full-stack-healthcare-unicorn company firm startup Oscar Health filed its IPO paperwork late in 2020 and published its S-1 form for the world to see during Q1 of 2021. (Link)

Oscar, the Good: The health insurance firm provides insurance plans mainly focused on the individual market and differentiates its product from other insurance offerings through its tech platform. Their data shows that the platform enables a better customer experience, which provides the firm with data-driven insights into care delivery patterns. Oscar’s membership base is growing big-time.

• Compared to the big insurers, Oscar claims a much better patient experience (the firm’s Net Promoter Score is 30 compared to the average insurance NPS of around 0). Its platform also seems to be scalable, which could be a yet-untapped avenue for growth.

Oscar, the Bad: Despite a decade of operation, Oscar is still hemorrhaging losses. The jury may still be out as to whether or not the product is differentiated enough to create staying power against the incumbent insurance behemoths.

As Covid and late individual marketplace additions boosted membership growth, Oscar also failed to adequately manage medical spend within its populations, leading to high losses in 2021 and dropping 77% in 9 months of being public.

More Oscar Health analyses:

• The Caseload: Oscar’s S-1: Why it matters. (Link)
• Kevin O’Leary’s bull and bear thesis for Oscar. (Link)

Clover Health.

As a part of the meme stock craze and backed by Chamath, Clover struggled this year amid short selling reports and getting whipsawed by hedge fund managers and retail investors. Overall, Clover dropped 77% on the year (not a fun year for insur-tech).

About that short selling report…Clover Health took a beating in February resulting from famed short-selling shop Hindenburg Research’s scathing short selling report on the company, which touched on:

• An undisclosed DOJ investigation connected to Clover potentially paying illegal kickbacks;
• A sketchy related party subsidiary also ‘thinly disclosed’ by the firm, Seek Insurance;
• Turnover at the executive level in the company implying inner struggles;

And more. You can read Hindenburg’s Twitter thread here, which touches on the main points from the report. Of course, Clover replied quickly with a Medium post of its own from its CEO and President claiming that the firm believes it made all appropriate disclosures and that its subsidiary Seek Insurance is truly independent. (Link to Clover Response)

UpHealth.

Uphealth: Merged with GigCapital2 (who comes up with these SPAC names?) and Cloudbreak at a $1.35 billion valuation, so a few orders of magnitude smaller than Sharecare’s transaction. The firm, after its merger with Cloudbreak, appears to be positioned in several fast-growing healthcare sectors including telehealth, behavioral health, integrated care management, and digital pharmacy. The combined co. will trade under the ticker $UPH and will close sometime in the first quarter, so pretty soon.

UpHealth was one of the worst performing names in digital health this year, dropping over 80% since its SPAC in June.

• Link to press release (Link)
• Link to S-4, investor presentation (Link)

Sema4.

Sema4: Chalk another one up on the board for digital health companies I don’t understand. CM Life Sciences took Sema4 public via SPAC in a transaction valuing the firm at about $2 billion. Sema4 seems to run an operation similar to what 23andMe is trying to break into – i.e., using data analytics to help enable drug discovery for biotech firms and researchers, creating genomic maps, etc.

• Link to informative article (Link)
• Link to investor presentation (Link)

ATI Physical Therapy.

Next SPAC up: In another big Q1 story, Fortress Value Acquisition Corp. II (don’t you LOVE these SPAC names?) took national physical therapy operator ATI Physical Therapy public in a deal valued at $2.5 billion. (Link)

It was one of the first healthcare services-related SPACs of 2021.

• Details: ATI PT operates 900 clinics across 25 states. ATI went public at an adjusted EBITDA multiple of 14.0x…based on its EBITDA estimate for 2022. This didn’t pan out well for investors.

Trouble in SPAC Paradise: Shortly after going public, ATI slashed its EBITDA guidance in half because of COVID staffing headwinds, poor payor mix, and lower than expected clinic openings. Teh stock dropped more than 35% on the news and ATI finished the year down 66% despite just going public in June. (Link)

InnovAge.

InnovAge: At-home care provider InnovAge successfully debuted on the public markets in March at a $3 billion-plus valuation. The firm offers one of the largest PACE programs in the country and aims to be a compelling alternative to seniors facing nursing homes. (More about PACE) (More about InnovAge)

• In somewhat similar fashion to ATI, InnovAge dropped significantly during 2021 after disclosing that CMS was auditing its program in Colorado, resulting in a membership freeze for the program. InnovAge dropped 25% initially in Q2 on the news and hasn’t recovered since, leading to a 79.3% drop for the PACE program provider in 2021 after going public in March 2021.

Alignment Healthcare.

Alignment: Similar to Clover but with better financials, Alignment IPO’d in late March 2021. The managed care firm operates in the Medicare Advantage space. Alignment fared much better than most digital health, value based care platforms, dropping just 19%. Personally, this is a solid business but was just taken down with the rest of the digital health players. (Link) (Link to S-1)

The Company Formerly Known As Ambulnz.

SPAC me: DocGo, AKA Ambulnz but that was too wild for the public markets apparently, finalized its SPAC merger on November 5th to enter the public markets. Ticker: $DCGO

• About Ambulnz: The company claims to be bridging the gap between physical and virtual care, which is a niche that actually might be useful. I suppose it would have been misleading for a company to be named after the ambulance, which transports patients of all acuity types, when it doesn’t actually provide this service. Anyway, the firm transports providers to people’s homes and also transports non-emergent patients to providers where needed. The company previously known as Ambulnz raised $160 million in the merger and at last glance, was valued a bit north of a billion. (Link)
• DocGo dropped 6.5% this year after debuting on the markets in November.

Bright Health.

Managed care player Bright Health filed its S-1 in April, chock full of interesting information and commentary related to their business. Later at the end of June, Bright raised just under $1 billion in its IPO with a market cap at about $10 billion.

About Bright: At the time of public debut, the insurance platform served just over 600,000 members across 14 states mostly in the individual insurance market, but more recently started to dabble in Medicare Advantage. Structure-wise, think of Bright Health as a mini UnitedHealthcare (yes, a $20 billion company is considered mini to UHG) in the sense that Bright separates its provider platform (AKA, Optum) from its insurance business.

• Alignment: Compared to a Clover or maybe even an Oscar, Bright is focused on vertical alignment in the markets it serves – identifying quality providers, acquiring providers in markets, etc. with the goal of delivering higher quality care to its participants.
• Tech Stack: Of course, Bright has its own health tech platform to build on – called NeueHealth, the segment provides a platform for primary care physicians to transition to value-based contracts.
• Although Bright entered the public scene with a lot of fanfare and momentum, the public markets quickly shut down and reversed this sentiment. Along with the rest of the insur-tech gang, Bright Health dropped 81% on the year.

Privia Health.

Physician enablement company Privia Health debuted on the public markets via IPO on April 29. Privia’s business model is complicated but interesting, serving as a platform for physicians to perform much of the back office functions for a practice – enabling the switch to value-based care arrangements, setting up physician websites, billing and collecting on behalf of physician practices, and more. Close peers to Privia include ApolloMed and P3 Health Partners, who also went public late in 2021. (Link)

Aveanna.

Aveanna Healthcare, an in-home care firm, also went public around the same time as Privia. The home health company dropped 36% on the year. Aveanna joined the likes of LHC and Amedisys in rolling up the home health and hospice industries in healthcare. (Link)

Babylon.

Babylon: announced its intention to merge with Alkuri Global Acquisition Corp at about a $3.6 billion enterprise value and completed this transaction in October.

• About Babylon: Since starting as a virtual chatbot service in the UK, Babylon since expanded into value based primary care (aka, Capitation). The firm recently acquired two provider groups in the U.S. and is expecting continued growth in membership with a similar strategy to that of Oak Street Health or One Medical’s latest acquisition with Iora.
  • (Link to Investor Presentation) – provides a solid, rosy overview of Babylon’s business and market

Babylon dropped 42% on the year since going public in October.

Doximity.

Social: Doximity went public the traditional way, via IPO at the end of June along with Bright Health. Its stock skyrocketed in its trading debut; as a result, the firm had a successful IPO.

• About Doximity: It’s essentially the Facebook or LinkedIn of physicians, APPs, and graduating medical school students with a few bells and whistles attached – including free telehealth and scheduling tools for its members. According to its S-1, the firm has 1.8 million users which makes the platform a compelling advertising opportunity for recruiters, health systems, and pharma organizations trying to reach medical professionals.
  • Notably, Doximity is profitable and growing, which lends itself to a potentially robust valuation once it hits the public markets later this year. Most interesting – Doximityreserved a portion of its shares for physicians on its platform – similarly to Uber drivers or AirBnB hosts. The firm sold 10,000 pre-IPO shares to those physicians, which gives itself a compelling foothold on those physicians.
  • (Link to S-1)

Doximity initially skyrocketed throughout much of the year but suffered a late-year selloff resulting in a return of just 2% since its IPO in June.

LifeStance Health.

Also going for the IPO route, LifeStance operates outpatient mental health facilities and employs about 3,300 mental health clinicians. The firm successfully began trading in mid-June.

• About LifeStance: LifeStance was founded in 2017 and has since grown to operate in 27 states and 370 facilities with almost 2.3 million patient visits in 2020. Notably, the firm operates under a fee-for-service model – 89% of its $377 million in 2020 revenue was derived from commercial in-network payors. The growth and number of increasingly larger players in the mental health spaces confirms bullish sentiment around this particular sector of healthcare, and I’m curious to see how Talkspace, LifeStance, and others grow and execute on their strategy.
  • (Link to S-1)
  • (Link to Press Release)
  LifeStance dropped 62% on the year.

Convey Health Solutions.

Digital: Yet another health tech platform, Convey Holdings focuses on working with payors and PBMs to ‘improve government-sponsored health plans.’ The firm went the IPO route and debuted at a $1.1 billion value. (Link) (Link to S-1)

• Convey dropped 40% on the year.

The Oncology Institute.

SPAC: Following in the footsteps of Cano, Babylon, and other value-based care providers, the Oncology Institute was taken public via SPAC as the first value-based care oncology (cancer care) business. The transaction valued TOI at an enterprise value of about $840 million (Press Release)

• About the Biz: According the prospectus, the Oncology Institute operates out of 50 locations in four states, primarily in California. The firm did about $155 million in revenue in 2019 and expects to achieve about $350 million in 2022 through value-based partnerships with payors and expansion into ancillary service lines like pharmaceuticals, clinical trials, and M&A. (Investment Prospectus)

The Oncology Institute officially began trading on the public exchanges after combining with DFP Healthcare Acquisitions Corp.

• The Oncology Institute dropped 2.5% on the year since going public in November.

Definitive Healthcare.

Definitive Healthcare: Data analytics firm Definitive Healthcare announced its IPO filing in August. The firm boasts health systems, PE firms, and consulting firms among its clients who access its healthcare databases. (Link – Press Release) (Link to S-1 Prospectus)

• DH dropped 37% in the last quarter of 2021 after its IPO in September.

Warby Parker.

Warby Parker: In other anticipated news, Warby Parker went public via direct listing – similar to how Slack and Spotify went public. Warby Parker’s business model revolves around direct to consumer eyewear offerings – a flat price of $95 for eyeglasses, and its own line of contacts to boot. The company went public on September 27 and has dropped about 10% over that timeframe. (Link)

P3 Health Partners.

P3 Partners, a physician enablement, population health management platform, went public via SPAC with Foresight Acquisition Corp. at a $2.3 billion valuation.

• About P3: Similar to peers ApolloMed and Privia Health, the firm aims to enable physicians to take on value-based contracts and remain in independent while providing back-office support and electronic health platforms to make their lives easier. (Link)
• P3 dropped 9% on the year after debuting in December. So really, it dropped 9% in less than a month. Oof.

Cue Health.

Cue: At-home and B2B lab testing firm Cue Health debuted on the public markets on September 24. After an initial pop, the stock since drifted down below its IPO $16 reference price to $14 today. Cue is trading under the symbol $HLTH.

It seems as if Cue is trying to take full advantage of the at-home testing trend – first with Covid testing, and I would imagine expanding into other kinds of tests. (Link)

• Link to S-1 prospectus: (Link)

Ensemble Health Partners.

Ensemble: As if the space isn’t already red-hot, revenue cycle management firm Ensemble Health Partners filed for IPO. The firm currently ‘manages’ $21 billion in revenue for its health system and other provider clients. According to its S-1 (linked below), Ensemble claims the total addressable market for RCM services is $50 billion, or about 5% of net patient revenue in the U.S.

• By the numbers: Ensemble generated $600 million in revenue and adjusted (sigh) EBITDA of $210.3 million. So far in 2021, Ensemble is on pace to make over $800 million in rev and $276 million in EBITDA.
• Useful Links: Press Release (Link); S-1 Prospectus (Link)

BrightSpring Health Services.

BrightSpring: Home Health and community service provider BrightSpring Health Services also filed its IPO paperwork in late October. BrightSpring claims in ITS S-1 that there is a $1.5 trillion market opportunity across its service lines as the home health market continues to grow.

• By the numbers: BrightSpring generated $5.6 billion in revenue and made $412 million in adjusted (sigh) EBITDA in 2020 through 37,000 caregivers and clinicians (side note, that margin seems razor thin, but it was 2020 after all).
• BrightSpring’s platform includes home health, long-term and rehab care, and a pharmacy segment that I imagine isn’t too different from CVS’ long-term pharmacy operation Omnicare that it divested back in 2019. The firm operates in all 50 states and maintains a census of over 30,000 in its facilities.
• Useful Links: Article write-up on BrightSpring (Link); S-1 Prospectus (Link)

Pear Therapeutics goes full SPAC

Therapy: Digital therapeutics firm Pear Therapeutics began trading on the public markets on December 6 after its previously announced SPAC with Thimble Point Acquisition Corp.

The details: Pear Therapeutics is expecting $4 million in revenue this year and went public via SPAC at a $1.6 billion valuation. Yes, you read that correctly. Investing in Pear is very similar to investing in an early stage biotech firm developing a potentially game-changing drug. Digital therapeutics are on the cutting edge of digital health

• Link to initial press release. (Link); Link to 12/6 press release. (Link)
• Shockingly, I can’t seem to find any sort of investment prospectus or investor presentation related to this acquisition. It’s likely coming soon, but nothing currently on the Pear website or SEC EDGAR system.
• Digital Therapeutics? For a precursor on the digital therapeutics trend, and what to expect, Nikhil Krishnan put together a nice piece last year on the emerging industry. (Link)
• Pear dropped from its initial SPAC price of $9 to $6.20 at the end of the year, resulting in a 31% decrease

My Favorite Healthcare Reads from 2021.

Healthcare Newsletter Writers of the year:

• Nikhil Krishnan: Out-of-Pocket (Link)
• Jared & Brett Dashevsky: Healthcare Huddle (Link)
• Olivia Webb: Acute Condition (Link)
• Brendan Keeler: Health API Guy (Link)
• Kevin O’leary: Health Tech Nerds (Link)

Best of Q1.

Systemic: How kidney failure is the perfect storm of an unequal health care system. (ProPublica)

Politics: The crash landing of ‘Operation Warp Speed’ (Politico)

Atul Gawande: To fix our broken healthcare system, start with primary care. (Fast Company)

Caseload: Read this informative post from Steve Hardgrove’s Caseload, which breaks down Accolade’s business model and describes how the firm can create value by enabling employers to make informed decisions on health plans.

• The analysis also dives into Accolade’s decision to buy 2nd.Md and how Accolade is developing a platform for employers, including opportunities and potential pitfalls. (Link – 11 minute read)

Out-of-Pocket: Read Nikhil Krishnan’s latest on the value of patient communities and how they should evolve to better suit those they serve given the evolving social media world. (Link – 11 minute read)

Acute Condition: Olivia Webb dove into the world of specialty pharmacy – how the system works and why innovation is frozen. (Link – 7 minute read)

Fierce: How the NFL tackled COVID-19 spread among its players and staff. (Link)

Semantics: Maybe the biggest news of the week – the Wall Street Journal announced a change in its stylebook from “health care” to “healthcare.” It’s a massive rift in the industry. I’m in the one word camp – more efficient! (Link)

Noah Smith: The U.S.’ vaccine rollout is world-beating. That doesn’t mean it’s good enough. But let’s take a moment to appreciate it. (Link)

Shady: Not only did New York officials admit that they lied about nursing home deaths back in August, a state-run nursing home also gave dozens of veterans experimental treatments without their family knowing. (Link)

Heroic? Read this gut wrenching story about a doctor’s decision to find 10 people for vaccine doses set to expire in 6 hours – and getting fired for that decision. (Link)

Big Data: Read about the multitude (thousands) of health datasets across the nation, the challenges that this fragmentation provides, and the opportunities to address the scattered resources. (Link) – Medium soft paywall.

From the frontlines: Read about Clover Health’s CEO’s reaction to the recent short-selling controversy, something I covered a few weeks ago. It’s quite the entertaining read. Let me know if you can sense Mr. Garipalli’s frustration. (Link)

Corona Reads: A couple of powerful coronavirus related reads were published by ProPublic and NPR. The first article dives into physicians around the country who had to decide which patients could live or die due to limited resources and time. The second article documents a physician’s experience in the ER through words and photos. (Link)

Small-Town Hero: Read about Marilyn Bartlett, a CPA who has saved the state of Montana over $30 million by creating a reference pricing model for hospitals – and the problems with scaling such a program nationwide. (Link)

Value-Based: Read this great breakdown of value-based care models from the Prescription. Worth a (sub)scription. (Link)

Disruptor: The healthcare revolution at-home. (Link)

Behavioral Health: The money behind mental health: How the pandemic increased innovation, investment in behavioral health care. (Link)

Policy: Read about Biden’s healthcare policies in the ‘new Washington.’ Deep dives from Axios on what to expect and what’s going on. (Link)

Rock Health: Read the latest from Rock Health on digital health – what’s working and how things are trending. (Link)

Report: Read McDermott, Will & Emery’s 2021 Health Report, which provides a spin on the legal ramifications of 2020 in healthcare. (Link)

Transparency: Here’s a super interesting read on the wide variation in pricing by hospital for the same procedures. (Link)

Logistics: Read this informative summary from Acute Condition of the vaccine distribution and absolute pandemonium of the patient intake process. (Link)

Consolidation: This Health Affairs article offers a somewhat contrarian viewpoint of health system consolidation in healthcare by arguing that consolidation allowed these health systems the scale to efficiently allocate resources to fight COVID. Quick actions included rapidly expanding ICU capacity and managing cases over a wide region. The article goes on to argue that maybe consolidation isn’t so bad – when it doesn’t increase consumer prices. (Link)

Teens: My final pick for the week comes from ProPublica – highlighting the emotional toll the pandemic took on crucial developmental years for teens. (Link)

Delivery: What it’s like to have a baby during a pandemic. (Link)

Family Feud: America’s Covid swab supply depends on two cousins who hate each other (Link – Bloomberg Paywall)

Doctor Fentanyl: The untold story of the doctor who fueled a drug crisis. (Link)

Best of Q2.

Epic: This was a fascinating read about one of the most successful female entrepreneurs in the U.S.: Judy Faulkner, who founded Epic Systems. (Link – soft paywall – Forbes)

Therapy Apps: How great are therapy apps, anyway? Diving into the therapy app fantasy. (Link)

Telehealth: employer tele-mental health is new branding on an old model. (Link)

Supply Chain: Read this fascinating deep dive into the drug industry: a drug’s convoluted journey from factory to patient. (Link)

Digital Health: This is a fantastic overview of digital health from Triple Tree – trends to watch, major players to follow, and more. (Link)

Status Vax: This was a fascinating read about how Pfizer’s vaccine somehow became top tier from a social perspective – the Pfizer elites (full disclosure, I’m a Pfizer elite – sorry to all you JnJ peasants). (Link)

A New Era: Here’s a good well thought out essay from Joe Connolly about healthcare’s movement toward a virtual first ecosystem – how a host of anti-consumer factors are causing a paradigm shift in the industry. (Link)

All about the FDA: This write-up was a great dive into how the FDA works – the article starts from the ground up and left me with a solid understanding of how things get done at the agency. (Link)

Racism: There were a few thought-provoking articles involving racism in healthcare. I’ve linked both of them below:

• The world’s leading medical journals don’t write about racism. That’s a problem. (Link)
• Race and Healthcare in America. (Link)

M&A: Learn more about the newly formed health system Virginia Mason Franciscan Health up in the Pacific Northwest – how the two systems integrated, the first 100 days, deciding on a dual-CEO model, and more. (Link)

GoodRx: This profile of GoodRx from Fortune was interesting, especially because while GoodRx helps patients navigate an extremely difficult drug industry, the firm technically shouldn’t need to exist. (Link)

Sewage: Here’s an interesting long-form read about sewage in the U.S., and using the system to improve our healthcare system and public health infrastructure. (Link)

The Flu: An interesting read on the potential return of the flu, with experts weighing in on what kind of flu season we might expect – if any. (Link)

Public Option Opinions: This was a pretty engaging piece from the Brookings Institute on thinking about smartly designing a public option policy that would actually set out to reduce prices for healthcare consumers. (Link)

New Look, who dis: Go check out Out-of-Pocket’s revamped site which has a fantastic design. Nikhil Krishnan does great work with his newsletter and describing healthcare business models – I highly recommend dropping a subscription if you haven’t already. Also, check out the most recent article on SWORD Health – which provides MSK care via smart sensors and virtual therapies. (Link)

Increased Complexity: This was a great (but revealing) read from ProPublica about the increased complexities in cancer cases being found in patients now after going undiagnosed during the first year of the pandemic. (Link)

Pharmacies: Here’s a good read from the NY Times highlighting the various ways that CVS, Walgreens, and others are targeting the mental health market, including providing therapy within their retail footprints. (Link – soft paywall)

Faxes: Here’s a great read from substack guild aficionado Brendan Keeler about legacy standards in healthcare, the fax machine, and why things move so slowly in our world. (Link)

Machine Learning: An interesting deep dive into the world of the FDA and how medically based machine learning devices are being regulated by the governing body. (Link)

Direct Contracting: We’ve heard a lot about the new direct contracting model (capitation, value based arrangements) coming out from CMS and the parties involved are very bullish on the program. This article breaks down the Direct Contracting program and what to expect with its implementation. (Link)

One Medical: This was a good read from the Washington Post on One Medical, and diving into whether a subscription model is the right approach for primary care in the U.S. (Link)

Value-Based: Since we’re apparently obsessed with value based care this year, Olivia Webb posted a good write-up on primary care capitation. (Link)

Patient Outcomes: Following up on that whole value-based care thing, here’s an equally good article from Kevin Wang about how patient surveys are converted into an actionable performance measure for providers. (Link)

Women’s health: This was a great overview of the women’s health space and a solid attempt at killing off the buzzword ‘Femtech’ (Link)

Cityblock: Here’s a solid read from a great newsletter – Not Boring – giving a great operational overview of Cityblock Health, a super interesting player in healthcare. (Link)

Iora Health: Read more about Iora’s deal with One Medical from Kevin O’leary. I really enjoy his summaries and perspectives from both a bull and bear point of view. (Link)

DTC: This piece from Ro’s CEO was a cool insight into how the firm thinks about direct-to-consumer principles. (Link)

FHIR: Brendan Keeler’s write-up on the Fast Healthcare Interoperability Resources had me rolling. Great read for anyone wanting to learn more about this standard. (Link)

Best of Q3.

The Alzheimer’s Drug: I’ve been seeing a lot of controversy and scandal surrounding Biogen’s Alzheimer’s drug, Aduhelm – how Biogen received accelerated approval despite mixed trial results, and more. Here were some of my favorite articles surrounding the topic:

• Did The FDA Mess Up With Aduhelm? (Out of Pocket)
• Background – FDA calls for investigation into controversial Alzheimer’s drug approval. (Link)
• Aduhelm approval controversy dials up as FDA seeks probe. (Link)

Out-of-Pocket: The latest from my favorite healthcare newsletter dives into healthcare data – who’s buying it, who’s selling it, and how it can be manipulated. Sign up for Nikhil’s newsletter here. (Link)

Cross Contamination: An interesting piece from Bloomberg this week highlighted a lesser-known issue in drug distribution – that drug cross-contamination is rampant. (Link – soft paywall)

Genome: This week’s cool healthcare story from Nature dives into Google’s DeepMind AI and its ability to predict structures for a vast trove of proteins. (Link)

Unvaccinated: The NY Times took a deep dive into who comprises the 50% of unvaccinated people in America, including interviews with individuals who comprise different camps of thought. Worth a read to understand the perspectives here, but what’s it going to take to end this thing? (Link – NY Times – Soft Paywall)

Insurance: This was another great read from Out of Pocket as Nikhil discusses the individual insurance market and what improvements can be made. (Link)

Dialysis: I really enjoyed this analysis of the kidney care industry by the Margins of Medicine – challenges the industry faces, interesting details on how reimbursement is structured, and parting thoughts on solutions to the above. (Link)

Funding: Olivia Webb analyzes the rapid growth of digital health funding – and what might be driving it – in her latest on Acute Condition. (Link)

Comp Models: Nikhil Krishnan crowdsourced some interesting thoughts on how physicians should actually be paid. (Link)

Pharmacy: This was a great read from the Commonwealth Fund on the Pharmacy industry, including key players, market dynamics, and reimbursement structure. (Link)

Transparency: Of course, one of the hottest ‘mainstream’ healthcare articles centered around price transparency – the NY Times took a dive into hospital price disclosures and the variation between procedures. (Link)

Health Tech: This article from Providence’s Health Systems’ CDO Aaron Martin was a great read on the dynamics between existing health systems and big tech. (Link)

GoodRx: I really enjoy reading investment overviews because they provide a great look into that company’s industry and this overview of GoodRx from Richard Chu was a solid read. (Link)

Definitive Healthcare: As I mentioned, I enjoy investment overviews – Vital Signs, a new newsletter that dives into healthcare S-1’s, broke down Definitive Healthcare’s upcoming IPO and S-1. (Link)

Drugs: Read Nikita Singareddy’s interesting thoughts on drugs – how they’re named – and more tidbits. (Link)

Air Quality: Nikhil Krishnan’s piece on linking air quality and health was fascinating and frankly, something I don’t really even think about that often. BRB, going to buy air filters for every zone in my house. (Link)

DNA Data: Here’s a good read from the NY Times about how exactly 23andMe is leveraging your DNA data. (Link – Soft Paywall – NY Times)

Best of Q4.

MA: This deep dive from Health Affairs was a great analysis of Medicare Advantage and what’s going on from a business perspective behind the scenes with adjusting risk scores, direct contracting, and more. (Link)

This long-form read from the Cut dives into a woman who used drugs while pregnant and was charged with murder after having a stillborn. Crazy stuff and an impactful longform read. (Link)

Nutrition: This dive into nutrition labels is worth a read, because really, nobody knows how to make sense of nutrition labels and I’m personally infuriated by it. (Link)

Fraud: This investigation from the Intercept was an absolutely ridiculous dive into the world of America’s Frontline Doctors, who are apparently actively sowing distrust in the Covid vaccine in order to prescribe medication like hydroxychloroquine and Ivermectin and make millions off the duped folks. (Link – soft paywall)

PE: I thought this was a fantastic overview of private equity and physician practice acquisitions and how they can be harmful if implemented poorly. (Link)

Drugs: How should we think about re-imagining drug plan design? The Donut Hole takes a deeper dive into the problem. (Link)

OOP: Out of Pocket’s latest dives into EMR integration and Epic’s dominance. I know next to nothing about this part of healthcare, so it was a fascinating read. (Link)

Babylon: gearing up to go public, Babylon’s CEO provided an interesting insight into the company’s long-term game in digital health. They have a long road ahead of them. (Link)

DTC: This was a great discussion from Christina Farr and colleagues as to why direct-to-consumer health products and firms are winning investors – product first. (Link)

Startup: This was an interesting read from a16z on how digital health startups can go to market in the current healthcare landscape. (Link)

Mental Health: Axios took a deep dive into America’s mental health crisis, and how things got worse because of the pandemic. Side note, if you’re handling a ton of stress, it’s okay to seek help. (Link)

Olivia Webb wrote about Sidecar Health and cash pay initiatives in healthcare. (Link)

Brendan Keeler wrote about HIPAA, data privacy, and information blocking in healthcare. (Link)

Caleb Banks and the Donut squad wrote about Medicare and Medicare Advantage – what they are, how they differ, and emergent trends facing the government programs. I’m really enjoying this new newsletter and it’s worth dropping a subscription for free. (Link)

PPM: Olivia Webb took a dive into the physician practice management companies of the 1990s. History lesson! (Link)

Medicaid: The Twitter thread and article below were good, quick, helpful breakdowns of Medicaid provisions and the future of the program.

• Cynthia Cox broke down the Medicaid coverage gap and how the Build Back Better plan expects to close the gap. **(Link – Thread)
• Jason Shafrin explained CMS’ plans for Medicaid and CHIP based on CMS leaders’ recent commentary – expanding coverage and access, ensuring equity, and innovation revolving around whole-person care. (Link)

Diabetes: Reuters’ special report on diabetes provides a phenomenal insight into the dynamics between diabetes, drugmakers, and policymakers. (Link)

Primary Care: Sebastian Caliri provided a solid framework for building a biz in primary care and how the sector is transforming into a risk-bearing ‘new world.’ (Link)

Patents: This was a great insight into how pharma companies can take advantage of the patent system to maintain their drug exclusivity (looking at you, Humira) – (Link)

Digital Health: Rock Health released its list of top 50 firms in digital health and it’s a great way to dive into the landscape and see the companies changing the healthcare landscape. (Link)

Child Care: Bloomberg covered the broken industry of child care. If you have any free articles left, know how to delete cookies, or are a BB subscriber, it’s a solid read. (Link)

Digital Health 150: Read more from CB Insights about the 150 digital health startups shaping the future of healthcare. Buzz words!! (Link)

Pharmacies: This was an insightful read from McKinsey on the pharmacy’s future in the home. (Link)

Diabetes: Reuters’ third part to an ongoing series about diabetes, the news reporting firm dove into JnJ’s response into a popular diabetes drug despite red flags popping up. (Link)

GoodRx: This was a great deeeeeep deep dive into GoodRx’s business model from Stock Market Nerd covering just about everything you could possibly dream of for free. (Link)

OOP: Nikhil Krishnan’s latest about the intersection of decentralization, crypto, and blockchain applications in healthcare…that are actually practical. (Link)

Policy: The Commonwealth Fund provided a solid breakdown of all of the policy decisions and happenings that affected America in 2021. (Link)

Rural: KHN highlighted the impact of pharmacy deserts in rural America. Rural America in general is struggling healthcare-wise. (Link)

Let’s Keep it Rolling.

If you’ve made it all the way to the end – you’re a legend.

Thank you for being an avid reader and subscriber to the Healthy Muse. I love sharing and learning more about healthcare with each and every one of you, and here’s to an equally eventful 2022.

If you think I missed a major news event or fantastically written article, please yell at me on Twitter!

Your writer,

Blake Madden

The post The Healthcare in 2021 Review Edition appeared first on The Healthy Muse.

• This week in healthcare: Cerner acquired by Oracle for $30bil, Centene’s CEO steps down, Teladoc partners with NLA, Amazon’s health division restructures, Select partners with pickle ball, Omicron ramps up, and more.

Oracle buys Cerner for $28.3 Billion

Cash to burn: Oracle, the traditional database software giant, is making its biggest acquisition EVER by acquiring electronic health record giant Cerner for $28.3 billion, or $95 a share in an all-cash deal. (Link)

• Why Oracle: Oracle likely thinks the acquisition gets their cloud offering on a closer playing field with that of Amazon and Microsoft
  • According to Oracle’s disclosures, the acquisition is almost immediately accretive to earnings
  • athenahealth was just purchased by private equity for $17 billion with $1.2 billion in revenue, whereas Cerner was valued publicly at $28.3 billion with $5 billion in revenue, so on a true numbers basis, a $30 billion acquisition is a ‘value play’ – but athena is better positioned for growth
  • Cerner gives Oracle access to the department of Veterans Affairs, as Cerner won a huge contract with the org for EHR services

Personally, Oracle must believe that Cerner gives them a ton of synergy, because the EHR giant has been bleeding market share to Epic, its second largest competitor. Cerner experienced revenue decline in 2020 with marginal growth so far in 2021. Kind of seems like two second-tier businesses combining with the idea of making something better overall.

• I halfway predicted this acquisition in 2020. Sort of. It’s close, right?

public market update.

Top 3 weekly performers: Phreesia (+8.4%); Oak Street (8.0%); Privia (+6.8%)

Bottom 3 weekly sandbaggers: P3 Health Partners (-30% – yikes); Oscar Health (-24%); The Oncology Institute (-23%)

• Full List YTD performance: (Link)

$CNC: Centene had an active week including its investor day. The managed care giant reached a deal with activist investor group Politan Capital Management – they’ll get 5 board seats. Further, Centene announced a succession plan as its current CEO Michael Neidorff will step down. (Link)

• Centene is also considering selling non-core assets, including its international business, currently generating around $2 billion in revenue. (Link)
• Amidst all of this news, Centene’s stock price hit 52 week highs as investors welcomed the updates and changes in strategy. (Link – Investor Day Presentation)

$UNH: UnitedHealth pushed back its deadline for its previously announced $13 billion Change Healthcare acquisition to April, meaning the DOJ is likely asking for more info on the deal. (Link)

$GDRX: GoodRx and telehealth provider Wheel announced a partnership to give Wheel providers GoodRx coupons and increases the medication discount effort. (Link)

$TDOC: Teladoc has announced a slew of partnerships in recent months. This most recent announcement expands Teladoc’s existing partnership with the National Labor Allicance. The partnership grant TDOC’s full suite of services to 6 million NLA members. (Link)

$SEM: This is awesome: Select Medical is partnering with the PPA Tour to provide therapy services. Select becomes the official PT partner of Pickleball! Apparently pickleball is the fastest growing sport in America. (Link)

$ACHC: Behavioral health co Acadia Health announced a joint venture with Fairview Health Services for a new Minnesota-based facility. (Link)

$AMZN: Amazon is centralizing its healthcare operation under one subsidiary and assigned a former Prime executive to run the health division. The restructuring follows in the footsteps of other Big Tech health division restructures at the likes of Apple and Google. (Link)

Biz Hits

M&A: Despite antitrust concerns, Intermountain and SCL Health are chugging right along with their plan to merge into a 6 state, 33 hospital, $11 billion system. The combined entity is going to have some serious scale, which may assist with its value-based care, population health management plans. (Link)

Physicians: Physician practices are selling in droves to end out the year boosted by easy money policies, PE prevalence, and potential tax reforms coming to top earners in 2022.

• According to PwC, the average EBITDA (AKA, operating profit) multiple was 15.2x…now compare that multiple with publicly traded physician services counterparts. There’s a huge gap there! (Link)

Integrations: UnityPoint Health and Carle Health are considering a partnership in Illinois. (Link)

Akumin: Here are some updates to Akumin’s financials and operating performance post-acquisition with Alliance. The combined org is anticipating around 20% in EBITDA margins for 2022. Not sure if that’s adjusted, though! (Link)

• Related: What’s the endgame for private equity in radiology? (Link)

Settlers: A Judge rejected Purdue Pharma’s $4.5 billion opioid settlement, arguing that the civil court did not have the right to grant immunity to the Sackler family. Man, what a headache this has become. (Link)

IPO: Loosely healthcare related – private equity conglomerate TPG is planning to IPO. The firm has a smattering of healthcare investments across a number of verticals. TPG has $109 billion in assets under management and is based in Texas (shout-out DFW). (Link)

Cerebral: Hot off its equity raise and $4.6 billion valuation, mental health unicorn Cerebral is partnering with Alto Neurosciences to offer its members the ability to participate in at-home clinical trial research for Alto’s depression drug and identification of potential candidates for those trials. Pretty cool stuff here. It’ll be the first ever clinical trial for depression. (Link)

Policy Hits

Coronavirus: The Omicron variant is ramping up.

• Biden unveiled a “test to stay” strategy to keep kids in school rather than those kids having to stay at home previously. Is anyone else worried about the state of education given the disruptions? (Link)
• New York is experiencing a surge in cases, but the peak is expected within the next few weeks. (Link)
• Despite the surge in cases, outcomes are expected to be less severe because of ….the vaccine! Booster shots appear to be highly effective against Omi. (Link)

Relief: HHS is sending another $9B in relief funds to providers. The latest influx of funds favors smaller providers (Link)

HC Costs: ****Healthcare costs rose 9.7% in 2020 due to the influx of cash from the CARES Act relief funds. Healthcare services didn’t actually expand in 2020, so this is kind of fake. Private spending from commercial payors was probably way lower than normal. (Link)

Antitrust: Humana and Centene (ironic) are suing pharmaceutical companies over Big Pharma’s alleged scheme to stifle HIV competition. I swear these stories happen 5x a year. (Link)

Other Hits

Comp: Doximity released its 2021 Physician Compensation Report which highlights compensation by region by specialty and by gender. Some pretty insightful things all around. (Link)

JPMorgan: The banking giant moved its 40th annual healthcare conference to all-virtual after Omicron fears. Fewer megadeals as a result? We’ll see. (Link)

Rebates: Insurers paid out $2B in medical loss ratio rebates for 2020 claims. (Link)

Hot Takes

Fintech: This was a cool take on the intersection of fintech and healthcare: buy now pay later companies could boost collection rates in historically poor markets. (Link)

Healthy Muse Top Picks

OOP: Nikhil Krishnan’s latest about the intersection of decentralization, crypto, and blockchain applications in healthcare…that are actually practical. (Link)

Policy: The Commonwealth Fund provided a solid breakdown of all of the policy decisions and happenings that affected America in 2021. (Link)

Rural: KHN highlighted the impact of pharmacy deserts in rural America. Rural America in general is struggling healthcare-wise. (Link)

The post The Cerner Mega-Sale Edition appeared first on The Healthy Muse.

• This week in healthcare: Amazon launches a new elder care subscription service called Alexa Together, an insur-tech comeback, CVS investor day and HealthHUB expansion, Medicare sequestration gets further delayed, vaccine mandates halted, surprise billing lawsuits, and more.

Amazon Launches new Elder Care Service Alexa Together to capitalize on Aging in Place Trend

Aging in Place: Previously announced in September 2021, Amazon is expanding its Care Hub program to create a new service to help loved ones and caregivers check in on elderly folk. Called Alexa Together, the subscription service will provide a number of convenient offerings including customized alerts, 24/7 urgent response availability, fall detection and more. It’s pretty cool and could definitely be a major catalyst in speeding up the Aging in Place movement overall. (Link)

• Check it out on Amazon’s site yourself to see the full list of features available for loved ones. (Link)
• Related Content: There’s seemingly endless upside for startups looking to make their mark on the aging-in-place market. (Link)

public market update.

Top 3 weekly performers: Bright Health (+29.5%), Oscar Health (+24.5%), P3 Health Partners (+20.7%). Interesting tidbit – despite their performance this week, Oscar and Bright are down 40.4% and 34.0% respectively on the month.

Bottom 3 weekly sandbaggers: Phreesia post-earnings report (-24.5%), Pear Therapeutics (-19.8%), Doximity (-9.9%)

• Full List YTD performance: (Link)

$CVS: CVS had their investor day – projecting $304-309 billion in revenue for 2022..small change. The retail health giant believes the pivot to HealthHUBs will drive higher growth and consumer engagement at their stores as people view their stores more as a one-stop shop healthcare destination. They’re also going to start acquiring more primary care physicians probably to employ them in HealthHUBs or bring them in network, similar to Optum or Neue Health strategy.

• CVS probably has one of the most complicated business models on the planet between its PBM, retail footprint, health insurance business, and now HealthHUBs. It’s really interesting that CVS has an enterprise value of around $180 billion when UnitedHealth is closer to $450 billion. You could make an argument that CVS is extremely undervalued if they’re able to succeed on the pivot to HealthHUB and keep executing on the healthcare strat including the building of its provider base.
• Final point…CVS retail spaces are generally very prominently displayed, which is a key indicator of success for urgent care operations. So that’s an immediate synergy / tailwind for the pivot. The main block here is probably just getting consumers to view HealthHUBs as a place to get healthcare services when before CVS’ were just for picking up snacks or prescriptions, but that shouldn’t be an issue given Aetna’s huge captured membership base.
• Link to Investor Day HUB. (Link)

$BHG: Bright Health received a $750 million investment from big names including Cigna’s investment division Evernorth. Acquisition incoming? Now would be the time. (Link)

• BHG’s Investor Day (Link)

$CLOV: Clover announced a partnership on December 9 with value-based chronic kidney care company Cricket Health to help manage chronic kidney disease. (Link)

$PHR: Phreesia bought Insignia Health, a firm that licenses patient activation measures. (Link)

Biz Hits

Deal Volume: Services deals have risen by 56% (!!!!) through November compared to last year, according to PwC. This is crazy levels of activity driven by multiple tailwinds including the easy access to capital, tax changes potentially going into effect in 2022, and value-based care plays. (Link)

Platforms: This series on healthcare platforms was a helpful explainer to understand new healthcare companies and how they’re combining to create new-age healthcare conglomerates. (Link) (Link – Part 2)

Funding: Adding fuel to the mental health wave fire, SoftBank backed mental health co Cerebral’s most recent fundraise, giving it a $4.8B valuation. (Link)

M&A: In an interesting move, City of Hope which is an oncology nonprofit in the California area, purchased radiation oncology biz Cancer Treatments of America for $390 million, an organization that received backlash in the past for patient practices. The acquisition allows City of Hope, which has a solid brand, to expand geographically. CTCA currently operates in 3 states with 3 hospitals and 5 clinics. (Link)

Policy Hits

Mandates: A judge temporarily halted nationwide vaccine mandates imposed by the Biden Administration as the case makes it way through court. Bottom line: the court case comes down to whether the Biden Admin exceeded authority when he issued a nationwide vaccine mandate public health measure

• Key quote: “However, even in times of crisis this Court must preserve the rule of law and ensure that all branches of government act within the bounds of their constitutionally granted authorities.”
  • (Link)

Medicare: Lawmakers passed the Supporting Health Care Providers During the Covid-19 Pandemic Act (not even a fun acronym…sigh) that significantly reduces planned reimbursement cuts in Medicare spending.

• Details: The bill would delay sequestration (what is sequestration?) further while also delaying the 4% PAYGO cut until 2023. So in summary, the bill would delay a 6% cut in Medicare reimbursement to physicians but still cut reimbursement slightly.
• Bigger picture: Medicare reimbursement is in a weird state, especially during the emergency period. Providers are asking for a more permanent solution than having to constantly lobby Congress to delay the planned cuts to reimbursement. In actuality, it seems as if there’s a lot of irresponsible spending going on, but let’s not get too political in this newsletter! (Link)

Surprise Billing: Providers are suing the No Surprises Act’s implementation prior to the bill going into effect on January 1, 2022. They’re mainly suing due to the way that disputes would be handled between out of network providers and insurers – the arbiter is supposed to look to median in-network rates for that service in that geography, which providers argue vastly favors insurance companies.

Why? Because they handle thousands of claims and have access to reimbursement information, and providers argue that the bill dis-incentivizes insurers to even go in-network with provider groups if they can 1) delay the payments process further which makes them money and 2) set the in-network median rate based on their own data. Interesting stuff and I can see where it’s coming from. Unfortunately any delay to this bill would impact patients. I think any solution is better than none here.

• This Health Affairs article does a great job of breaking down the key issues. (Link)

Agenda: The Biden Admin released its 2022 agenda for regulations in the upcoming year, and so far HHS is looking at the following issues:

• Short-term health plans, previously approved by the Trump Admin
• Prior authorization and interoperability
• Dispute resolution guidelines for 340b spats between hospitals and drugmakers
• Updated safety and other requirements for rural hospitals (critical access hospitals)
• Full link here. (Link)

Other Hits

Compensation: A Health Affairs article published recently found that hospital employment for physicians resulted in slightly lower pay, a conclusion that I frankly can’t believe. I wish I could access the full HA article to understand exactly what they’re defining as compensation, but something doesn’t seem to be adding up here. (Link)

Premiums: Employer insurance costs rose by 6.3% in 2021. Employers are expecting less-intense growth in 2022, but this still eats into profit margins along with the rest of the inflationary effects from the pandemic. (Link)

Stress: Gen Z is getting hit much worse by stress than other Gens as a result of the pandemic – it makes sense given that this is the most plugged-in generation. That being said, the trend highlights the continual need for accessible mental health services. (Link)

Urgent Care: Of all of the primary care offerings, urgent cares have seen a boon from shifting visit volumes to testing and immunizations. It’s why you’re seeing such a dramatic shift in strategy from CVS and Walgreens. EHRN had some interesting data to outline what’s going on with urgent care volumes. (Link)

Hot Takes

Data: It’s time to open up health care’s secret analytics – Stat First Opinion’s write-up on insurance and health systems who have key consumer data and how that affects their strategy. Pretty eye-opening stuff. (Link)

PE: This was a good little insight into the athenaHealth private equity transaction and the ROI involved from THCB. (Link)

PA or PA? Here’s more opinions on that whole ‘Physician Assistant’ renaming thing. (Link)

Healthy Muse Top Picks

Digital Health 150: Read more from CB Insights about the 150 digital health startups shaping the future of healthcare. Buzz words!! (Link)

Pharmacies: This was an insightful read from McKinsey on the pharmacy’s future in the home. (Link)

Diabetes: Reuters’ third part to an ongoing series about diabetes, the news reporting firm dove into JnJ’s response into a popular diabetes drug despite red flags popping up. (Link)

GoodRx: This was a great deeeeeep deep dive into GoodRx’s business model from Stock Market Nerd covering just about everything you could possibly dream of for free. (Link)

The post The Aging in Place Edition appeared first on The Healthy Muse.

This week in healthcare: Pear Therapeutics and P3 Health Partners go public, Omicron, a major digital health selloff, CVS partners with Microsoft on digital health, and more

Pear Therapeutics goes full SPAC

Therapy: Digital therapeutics firm Pear Therapeutics began trading on the public markets on December 6 after its previously announced SPAC with Thimble Point Acquisition Corp.

• The details: Pear Therapeutics is expecting $4 million in revenue this year and went public via SPAC at a $1.6 billion valuation. Yes, you read that correctly. Investing in Pear is very similar to investing in an early stage biotech firm developing a potentially game-changing drug. Digital therapeutics are on the cutting edge of digital health
• Link to initial press release. (Link) Link to 12/6 press release. (Link)
• Shockingly, I can’t seem to find any sort of investment prospectus or investor presentation related to this acquisition. It’s likely coming soon, but nothing currently on the Pear website or SEC EDGAR system.

P3 Health Partners hits the public markets

New VBC Comp: P3 Partners, a physician enablement, population health management platform, is going public via SPAC with Foresight Acquisition Corp. at a $2.3 billion valuation. The announcement was back in May, meaning this press release was one of the few I’ve missed since starting the Healthy Muse…ugh.

• About P3: Similar to peers ApolloMed and Privia Health, the firm aims to enable physicians to take on value-based contracts and remain in independent while providing back-office support and electronic health platforms to make their lives easier. (Link)

What to know about Omicron.

Greek: In what has become the slowest way to learn the Greek alphabet, the WHO sounded the alarm about Covid’s next figher: the Omicron variant. (Link)

• According to South African officials, the new variant is ‘very different’ from its predecessors. That doesn’t mean the vaccine won’t protect you, though. In fact, Scott Gottlieb pointed out that those with booster shots will likely be highly protected from Omicron. We’ll stay updated as the world learns more about the latest variant. (Link)
• The variant has been found in at least 10 states so far, which probably means it’s everywhere, right? (Link)
• It’s possible that the variant may cause less severe Covid, according to early indications from South Africa data. (Link)

public market update.

Top 3 weekly performers: LifeStance (+9.61%, InnovAge (+9.20%), DocGo (+4.97%)

Bottom 3 weekly sandbaggers: Clover (-20.52%), ApolloMed (-20.12%, 23andMe (-16.30%)

• Of note, the entirety of digital health and related firms sold off in droves over the past couple of weeks, which is creating a VAST disconnect between publicly traded valuations and privately held valuations. My prediction is that we see fewer digital health firms go public next year unless there’s a major narrative shift here.
• Full List YTD performance: (Link)

$AVAH: Aveanna Healthcare acquired home health operator Comfort Care for $345 million. More recently, the publicly traded firm bought Accredited Nursing Services for $180 million not including post-acquisition incentives. Some big acquisitions from the home health operator. (Link)

$UHS: Hospital operator Universal Health Services partnered with Riverside Medical Clinic, a 180-doc group in California along with an MSO affiliation. (Link)

$UNH: UnitedHealthcare held its investor day and Health Tech Nerds had a great write-up in their weekly post. (It’s not quite published on their site yet). Most notable – UNH is expecting $317 billion in revenue for 2022 and expects Optum to become the face of the company. (Link)

Biz Hits

Drug Pricing: Axios revealed some documents in its latest article about drug pricing and how closely held to the vest a wholesale drug distributor keeps its pricing. Very informative and concise in true Axios fashion. Also, the entirety of drug pricing is just insane. (Link)

M&A: Post Acute Medical, a post-acute care (ha) operator acquired 8 LTACHs and 8 IRFs from Curahealth and Nautic Partners across a broad array of states. As I’ve touched on before, the post-acute market is experiencing a huge land grab amidst consolidation in home health, hospice, inpatient rehab, and other settings. (Link)

Uber: Hims & Hers announced a partnership with Uber to deliver personal care products. Looks like you can get your ED pills and condoms together now, which make sense as a package deal? (Link)

Best Buy: As Best Buy diversifies its revenue a bit, the retail giant disclosed that it paid around $300 million for Current Health, a remote patient monitoring firm. Makes sense when you think about the synergies with Geek Squad and other in-home services there. But it really seems like BBY is keeping one toe in the healthcare water while otherwise focusing on optimizing its core biz. Hmm. (Link)

M&A: In an interesting merger announced November 24, Clinigence, a population health management firm and Nutex, an operator of micro-hospitals and hospital outpatient departments, will merge to operate 19 facilities in 8 states. It’s a super under the radar but interesting transaction in what combines a future-ready platform with a hospital services business. (Link)

VBC: Humana and Allina Health expanded their value-based care partnership in Minnesota. (Link)

RPM: Carbon Health becomes the latest digital health firm to jump into remote patient monitoring by launching a continuous glucose monitoring program for diabetics. (Link)

Digital: CVS inked what appears to be an extremely robust tech partnership with Microsoft to accelerate its ‘digital-first’ strategy across all of its services. It really appears as if Microsoft is taking a behind-the-scenes approach to entering healthcare by building out infrastructure and partnering with firms like CVS, Teladoc. (Link)

Competition: In what seems like a move into GoodRx’s space, Express Scripts announced a partnership with Amazon through the launch of ESRX’s new prescription discount card. Members can then access Amazon Pharmacy’s pricing and look at discounted options through that interface. (Link)

Policy Hits

Roe: The Supreme Court heard arguments Dec. 1 in a case from Mississippi that tests whether all state laws that ban pre-viability abortions are unconstitutional. The NPR link was very handy in providing background into what’s at stake here. (Link)

Reimbursement Stuff.

• 2022 Fee Schedule: My firm wrote up a great summary of the key changes in the 2022 Physician Fee Schedule. (Link)
• CMS is slashing reimbursement for certain common lab procedures. (Link)
• Hospitals lost the fight to delay Medicare sequestration further, in a similar vein to the lab reimbursement cuts above. (Link)
• 340B: I’ve mentioned this case a few times, but keep an eye on the 340B ruling. The American Hospital Association is suing HHS over HHS’ decision to cut drug reimbursement to hospitals who were 340B eligible, meaning that they get favorable rates for drug purchases. Check out the Weekly Gist’s great infographic here on what’s at stake. (Link)

Relief Funding Updates:

• HHS is rolling out over $7 billion to rural healthcare providers from the relief funding pool sourced from the 2020 CARES Act. (Link)
• The Biden Admin announced a $1.5 billion plan to train about 23k new healthcare workers to help alleviate shortages. (Link)

Other Hits

Hacked: As if abortion weren’t in the news enough, a ransomware attack stole 400,000 patient records from Planned Parenthood. (Link)

Data: Medicare telehealth visits increased 63-fold from 2019 to 2020. (Link)

Mandates: After courts issued temporary injunctions on imminent vaccine mandate deadlines, major hospital operators have paused their company-wide mandates to alleviate staffing pressures. (Link)

Halo: In a nod to Pear therapeutics and digital therapeutics in general, scientists are developing video games to diagnose and monitor depression. It’s interesting – a kid’s tendencies in a video game or what they choose are probably more telling than what they put on a survey or what they tell mom or dad. (Link)

Opinions

Post-Acute: It’s not often that you get an opinion piece about post-acute care! The article dives deeper into why ‘systemness’ in post-acute care (aka, more scale) can be a good thing. (Link)

Private Equity: Here’s another thoughtful write-up from the NEJM about how providers can successfully partner with a private equity firm to achieve healthcare objectives – choosing the right investors, making sure incentives are aligned from a financial and operational standpoint, and define what success means for both organizations. (Link)

PAssistant or PAssociate? In what I would consider the most petty drama of this week’s healthcare news, physician assistants are fighting for a title change to physician ‘associates.’ I personally cannot believe this has made the news. (They should all be called APPs or physician extenders anyway.) (Link)

Healthy Muse Top Picks

Patents: This was a great insight into how pharma companies can take advantage of the patent system to maintain their drug exclusivity (looking at you, Humira) – (Link)

Digital Health: Rock Health released its list of top 50 firms in digital health and it’s a great way to dive into the landscape and see the companies changing the healthcare landscape. (Link)

Child Care: Bloomberg covered the broken industry of child care. If you have any free articles left, know how to delete cookies, or are a BB subscriber, it’s a solid read. (Link)

The post The Digital Therapeutics Edition appeared first on The Healthy Muse.

• This week in healthcare: Athenahealth sells for $17 billion, a new Oncology SPAC, Tenet grows its outpatient footprint, GE and JnJ plan spin-offs, a rough week for Talkspace, Teladoc’s investor day, insur-tech sophomore slumps, and more.
• Last week in healthcare: Ambulnz, now known as DocGo (lame) goes public, big Q3 earnings week, Democrats’ drug pricing package, antiviral Covid treatments, and more. (Link)

The Oncology Institute Goes Public

Oncology: The Oncology Institute officially began trading on the public exchanges after combining with DFP Healthcare Acquisitions Corp. As you can imagine from the name of the acquirer, this was a SPAC and not an IPO. Other healthcare-related SPACs haven’t gotten off to a hot start (looking at you, Talkspace, UpHealth, Clover, ATI…you get the idea), but maybe this more services-based value-based care biz will fare better (update: it’s already down 24%).

• Look for $TOI on your stock watchlists. (Link)
• Link to S-1. (Link)

athenahealth sells for $17 billion

Health tech EHR software giant athenahealth (what’s the deal with the lowercase anyway?) is getting acquired by PE giants Bain and Hellman & Friedman for $17 billion, just a couple of years after athena was taken private by Veritas and Evergreen for ~$7 billion – a 142% appreciation. Talk about a juicy ROI. Also, I’m apparently in the wrong line of work.

• Bain and Hellman must think that there’s juice left to grow athenahealth after the hefty sum given its current position in ambulatory settings and supporting platforms like Privia Health. The valuation makes more sense in the broader context of private digital health valuations, while their publicly traded counterparts struggled this year. I’m generally concerned with how frothy these transactions across healthcare are becoming – it seems as if someone is going to get burned here soon. (Link) (Link – press release)

Tenet grows its ASC Footprint with SurgCenter Acquisition

Ambulatory: Hospital operator Tenet Healthcare continues to triple down on its outpatient strategy under its ambulatory arm, USPI. Tenet purchased ownership interests in 92 ASCs from SurgCenter Development for about $1.2 billion.

• Further, SurgCenter and USPI plan to open an additional 50 centers over the next 5 years which indicates the level of outpatient growth these operators are expecting as the appetite for outpatient procedures grows stronger. (Link)

GE and JnJ go full high-school relationship: Breaking up

J&J: Healthcare conglomerate, maker of all things Johnson & Johnson is spinning off its consumer products division into a separate company to focus its core biz on pharmaceuticals and medical devices. (Link)

GE: In a similar fashion, GE, grandpa of the stock market, is splitting up its company into 3 distinct units, one of which is focused solely on healthcare and healthcare manufacturing. GE plans to spin off the healthcare unit by 2023. (Link)

public market update.

Top 3 weekly performers: ApolloMed (+3.2%); Alignment (+0.55%); Hims & Hers (-1.22%) …yeah…rough week

Bottom 3 weekly sandbaggers: Talkspace (-36% – more on this below); 23andMe (-21%) Clover (-19.7…but mah Chamath)

• Full Health-Tech Index performance: (Link)

$TDOC: Teladoc’s investor day unfortunately left investors…wanting. Despite plans for 30%+ top-line growth annually over the next 5-7 years, Teladoc’s stock slid as analysts question the digital health conglomerate’s struggles with Livongo integration. (Link)

$OSH: Oak Street Health is facing a DOJ inquiry into its relationships with marketing agents and its provision of free transportation for members. (Link)

Q3 Earnings:

$Insur-Tech: Although Clover, Bright, and Oscar all scored big in the special enrollment period, the insur-tech gang experience high medical costs stemming from COVID. If anything, these firms are going to be long-term investment plays as they expand beyond their initial geographies and develop the scale to weather regional risks. (Link)

• $OSCR: Oscar Health increased its members to almost 600k, but struggled to managed its high MLR amidst surging Covid cases. The stock sold off 20% after its earnings report after the company disclosed its intention to achieve profitability by 2023. (Link)
• Clover earnings. (Link)
• Bright earnings. (Link)

$TALK: Shares of Talkspace collapsed after its Q3 earnings and departure of its CEO and COO. Woof. The behavioral health app is down more than 70% since going public via SPAC earlier this year amid lower than expected growth and retention issues. (Link)

$DCGO: In its first earnings report, DocGo (Ambulnz) reported strong revenue growth from a year ago. Through its first 9 months of the year, its revenue is $197 million, up 214% from last year. Although candidly this is a company I thought would fail long-term, DocGo is currently break-even on the year. (Link)

$CVS: The retail pharmacy giant is closing 900 stores nationwide and lowered its guidance. Retail pharmacies have faced headwinds recently, so the shift in strategy makes sense given CVS’ grand plans with Aetna. Now, CVS stores will focus more heavily on healthcare offerings and will be one of three formats: HealthHUBs, MinuteClinics, and retail pharmacies. (Link)

Biz Hits

Paris: Amazon Care landed its biggest public customer – Hilton. (Link)

Diet: Ro’s diet pill is making waves – the DTC healthcare firm is ‘going all-in’ on weight management. (Link)

JV: Jefferson Health and Bayada are partnering on a new post-acute joint venture. Post acute JVs will continue for the foreseeable future, so keep up. (Link)

Hospital M&A: CommonSpirit is still shopping around its 14 hospital portfolio in the Midwest after its deal with Essentia fell through 6 months ago. (Link)

Funding: Health tech startup H1 raised $100M to expand its digital doctor network for pharma, medical device companies. (Link)

Investments: Bain Capital stays busy…the PE firm wing purchased a majority stake in InnovaCare, an MSO / physician enablement & support platform. (Link)

Policy Hits

Opioids: In a somewhat unsurprising move, the Oklahoma appellate court reversed a $465M opioid verdict against Johnson & Johnson. (Link)

Build Back Better: Things you should know about drug cost changes and the planned Build Back Better Act healthcare provisions:

The CBO estimates BBBA’s health care provisions roughly pay for themselves over 10 years:

• $75B ACA enhancements
• $33B End Medicaid coverage gap
• $37B Medicare hearing benefit
• $165B Long-term care & Medicaid provisions
• Offset by ~$300B in Rx drug savings. (Link)

Other Hits

Overdose Crisis: More than 100,000 people died of a drug overdose from April 2020 through April 2021 as the COVID-19 pandemic took hold, new figures from the federal government found. (Link)

Costs: New data from Cigna indicates that when an individual is diagnosed with a behavioral health condition and receives OP care, HC costs decrease by $1.4k. hashtag whole-person-health. (Link)

Opinions

PT: Physical therapy is about to witness the next innovation wave as sensor technology rapidly improves and reaches the masses. (Link)

ER: A new write-up from the HCCI revealed that ER spending increased 51% from 2012-2019 while utilization actually dropped. The authors attribute the increase in spending to a couple things – higher acuity and complexity of patients, and just generally higher price increases caused by out of network care. (Link)

Healthy Muse Top Picks

Medicaid: The Twitter thread and article below were good, quick, helpful breakdowns of Medicaid provisions and the future of the program.

• Cynthia Cox broke down the Medicaid coverage gap and how the Build Back Better plan expects to close the gap. **(Link – Thread)
• Jason Shafrin explained CMS’ plans for Medicaid and CHIP based on CMS leaders’ recent commentary – expanding coverage and access, ensuring equity, and innovation revolving around whole-person care. (Link)

Diabetes: Reuters’ special report on diabetes provides a phenomenal insight into the dynamics between diabetes, drugmakers, and policymakers. (Link)

Primary Care: Sebastian Caliri provided a solid framework for building a biz in primary care and how the sector is transforming into a risk-bearing ‘new world.’ (Link)

Substacks: The writers’ guild put out another solid group of write-ups this week:

• Brendan Keeler breaks down Meaningful Use. (Link)
• Healthcare Donut breaks down the Relative Value Unit for physicians. (Link)
• Olivia Webb took a dive into the physician practice management companies of the 1990s. History lesson! (Link)

The post The Thanksgiving Dealmakers Edition appeared first on The Healthy Muse.

• This week in healthcare: Ambulnz, now known as DocGo (lame) goes public, big Q3 earnings week, Democrats’ drug pricing package, antiviral Covid treatments, and more.

The Company Formerly Known As Ambulnz goes Public

SPAC me: DocGo, AKA Ambulnz but that was too wild for the public markets apparently, finalized its SPAC merger on November 5th to enter the public markets. Look for their management team to ring the NASDAQ bell on Nov. 11th. Ticker: $DCGO

• About Ambulnz: The company claims to be bridging the gap between physical and virtual care, which is a niche that actually might be useful. I suppose it would have been misleading for a company to be named after the ambulance, which transports patients of all acuity types, when it doesn’t actually provide this service.
• Anyway, the firm transports providers to people’s homes and also transports non-emergent patients to providers where needed. The company previously known as Ambulnz raised $160 million in the merger and at last glance, was valued a bit north of a billion. (Link)

public market update.

Top 3 weekly performers: ApolloMed (+25%), UpHealth (+17%), 23andMe (+14%, sigh)

Bottom 3 weekly sandbaggers: Skylight Health (-14%), Bright Health (-14%, can’t catch a break), Pennant Group (-7%)

• Full List YTD performance: (Link)

$PRVA: Privia Health was up 13% today on a big earnings beat and guidance raised. (Link)

$OM: Home dialysis innovator Outset Medical won a CMS dialysis add-on payment and is poised to take on the dialysis duopoly. (Link)

$CNC: An activist investor group Politan Capital Management disclosed a $900 million stake in Centene. Should get interesting (Link – Paywall – WSJ)

$AMEH: ApolloMed is buying the rest of Diagnostic Medical Group within the next 3 years. (Link)

Earnings:

• $PNTG: Home Health provider the Pennant Group dropped over 20% on lower than expected earnings and dropped guidance, mainly attributable to Covid cases and labor shortage challenges. Pretty crazy the number of firms dealing with this dynamic and I’m personally interested to see how Biden’s vaccine mandate slated to take effect December 4th will affect healthcare staffing further. (Link)
• $HOSPITALS: Hospital operators experienced higher volumes (and higher Covid volumes) while also dealing with supply chain constraints in PPE and labor shortages in emergency departments. Makes you wonder how long this nationwide labor shortage is going to continue. (Link)
• $INSURERS: Insurer profitability remained strong in Q3 despite unexpectedly high COVID-19 costs. Healthcare Dive created another nifty roundup for all the major insurers. (Link)
• $MRNA: Moderna missed badly on its earnings this week as Covid vaccine sales came in much lower than expected. To add insult to injury, Moderna is struggling with its vaccine supply chain and thus lowered guidance for the remainder of the year. Of course the winner in all of this is Pfizer, which is expecting $36 billion in vaccine sales next year in addition to recently disclosing a highly successful Covid antiviral pill. (Link)
• $ONEM: One Medical raised its full-year guidance after disclosing much higher than expected membership numbers despite a higher medical loss ratio in Q3. Management also had some notes on how the Iora integration is faring. (Link)

Biz Hits

Moat: This was an interesting piece on Teladoc and how it plans to continue to build its moat and retain customers by having the most comprehensive suite of telehealth and remote healthcare products. (Link)

Drug Money: Novartis is selling its stake in fellow drugmaker Roche for $21 billion. (Link)

Daddy: Senior care partner provider Papa raised $150 million at a $1.4 billion valuation this week. (Link)

Policy Hits

Back from the Dead: Congressional leaders agreed on a skinnied-down version of the once-ambitious drug pricing bill. It’s a start – Medicare will be able to negotiate on certain qualified drugs, there’s a Part D out of pocket cap, and insulin prices will be heavily regulated now. More here. (Link)

• Analysis: Democrats’ drug pricing plan, while scaled back, could still squeeze pharma top-sellers. (Link)

Telehealth: A consortium of Senators are seeking to permanently expand telehealth eligibility in what seems like the most common-sense move of all time. (Link)

CMS Final Payment Rules: Things to know about the OPPS, MPFS, and Home Health rulings.

This write-up from Beckers was a good, brief overview of the three final rules from a high level. (Link)

• Home Health: CMS is expanding its value-based care program (aka, HHVBP) and is increasing the base rate by 3.2% next year. (Link)
• Physician Fee Schedule: CMS is expanding telehealth, but decreasing the conversion factor for FFS payments. (Link)
• OPPS: CMS is significantly increasing the price transparency compliance penalty and increasing its base rate by 2.3%. (Link)

Mandates: The Biden Administration set a deadline for all Medicare and Medicaid healthcare staff to be vaccinated by January 4th or face stiff punishments. Somewhat interesting – CMS is setting the requirement for healthcare workers (those providers who accept Medicare or Medicaid) while OSHA is setting the requirement for all large employers. (Link)

• Meet me in the club: Of course, these governmental mandates aren’t sitting right with everyone. Florida’s governor DeSantis vowed to fight the federal vaccine mandate: It’s ‘going down’ (Link)
• Courts: More recently, an appeals court temporarily halted the OSHA order as it works its way through court. (Link)

Other Hits

Pfizer says its COVID-19 antiviral pill cuts coronavirus risks by 89%. The next wave of coronavirus treatments are these antiviral pills, and they’ll hopefully be a gamechanger as we enter the winter months. (Link)

MA: This was a really great analysis on KFF on just how expansive and competitive the Medicare Advantage market is this year. As Boomers age into Medicare, the land grab is on. (Link)

Opinions

PE: This was good little PDF on value-based care in private equity, and how the emerging trend is a must-watch for PE investors. (Link)

Healthy Muse Top Picks

The healthcare writers’ guild came in with some strong action this week. If I missed yours hit me up:

• Olivia Webb wrote about Sidecar Health and cash pay initiatives in healthcare. (Link)
• Brendan Keeler wrote about HIPAA, data privacy, and information blocking in healthcare. (Link)
• Caleb Banks and the Donut squad wrote about Medicare and Medicare Advantage – what they are, how they differ, and emergent trends facing the government programs. I’m really enjoying this new newsletter and it’s worth dropping a subscription for free. (Link)

The post The Company Formerly Known as Ambulnz Edition appeared first on The Healthy Muse.

• This week in healthcare: New IPOs from Ensemble and BrightSpring Health, Rise of the virtual health plan with offerings from UnitedHealthcare, Aetna, Teladoc, and Cigna, Ro’s dramatic week, LifePoint and Kindred spin off ScionHealth, Biden backs down on drug pricing negotiation and supplemental benefits for Medicare, & more

Ensemble Health Partners and BrightSpring Health Services file for IPO

Ensemble: As if the space isn’t already red-hot, revenue cycle management firm Ensemble Health Partners filed for IPO. The firm currently ‘manages’ $21 billion in revenue for its health system and other provider clients. According to its S-1 (linked below), Ensemble claims the total addressable market for RCM services is $50 billion, or about 5% of net patient revenue in the U.S.

• By the numbers: Ensemble generated $600 million in revenue and adjusted (sigh) EBITDA of $210.3 million. So far in 2021, Ensemble is on pace to make over $800 million in rev and $276 million in EBITDA.
• Useful Links: Press Release (Link); S-1 Prospectus (Link)

BrightSpring: Home Health and community service provider BrightSpring Health Services also filed its IPO paperwork in late October. BrightSpring claims in ITS S-1 that there is a $1.5 trillion market opportunity across its service lines as the home health market continues to grow.

• By the numbers: BrightSpring generated $5.6 billion in revenue and made $412 million in adjusted (sigh) EBITDA in 2020 through 37,000 caregivers and clinicians (side note, that margin seems razor thin, but it was 2020 after all).
• BrightSpring’s platform includes home health, long-term and rehab care, and a pharmacy segment that I imagine isn’t too different from CVS’ long-term pharmacy operation Omnicare that it divested back in 2019. The firm operates in all 50 states and maintains a census of over 30,000 in its facilities.
• Useful Links: Article write-up on BrightSpring (Link); S-1 Prospectus (Link)

Rise of the Virtual Health Plan.

Virtual: Here’s a trend a long time in the making – major insurers, through built, bought, or partnered telehealth infrastructures, are launching virtual-first health plans slated to begin January 1, 2022

• UnitedHealthcare plans to launch its virtual-first primary care product using the strength of its already-existing Optum physician network. It’s a natural, organic progression for the health behemoth. (Link)
• Similarly, Cigna, on the heels of its acquisition of telehealth provider MDLive, will pursue a similar virtual first primary care strategy. In addition to rolling out the plan to some select employer sponsored plans, Cigna also aims to provide all of its plans with a broader telehealth offering. (Link)
• Finally, Aetna is partnering with Teladoc to make its primary care plan available nationwide to all benefit sponsors. Teladoc’s newly unveiled Primary360 service will be available in this plan and is currently being used by ‘several large companies.’ (Link)

Ro’s Rollercoaster Week

Drama: An interesting piece from Tech Crunch was published last week detailing Ro’s seemingly internal struggles over culture and its apparent inability to expand its service lines beyond its bread and butter ED pill offering.

The report prompted an almost immediate reply hours later from Ro’s CEO, Zachariah Reitano who was surprisingly transparent about Ro’s operations and a behind the scenes look into the firm. All in all, I thought his response was pretty solid and thorough, perhaps chalking up the article to some disgruntled employees. I suppose time will tell.

• Links: Link to article (Link); Link to Ro’s response (Link)

public market update.

Top 3 weekly performers: LifeStance (+9.5%), CareMax (+9.0%), Privia (+8.6%)

Bottom 3 weekly sandbaggers: Cano (-7.6% – odd to see this one decoupled from CMAX), Skylight Health (-7.6%), Signify Health (-6.4%)

• Full List YTD performance: (Link)

$PRVA: Privia Health announced its previously planned entry into the California and expansion into the West Texas market this week through strategic affiliations – BASS Medical Group in Cali (400 providers) and Abilene Diagnostic Clinic in Abilene (30 providers). (Link)

$OSCR, $HCA: Oscar Health announced a partnership with HCA to offer health insurance plans across all of the large markets in Texas. Members in these plans will have access to HCA Healthcare providers while receiving the benefit of Oscar’s digital health tools. Seems like a notable collaboration. (Link)

Earnings:

• $TDOC: After initially selling off after releasing earnings, Teladoc rallied on its Q3 earnings after displaying strong growth in its fundamental business. Teladoc also unveiled its plan to take on risk in primary care, expand its Primary360 offering, and continue to bolster its offerings to hospital clients. Really seems like the machine is churning along here, but the big question mark is obviously the continued integration of Livongo and remote patient monitoring amidst constant entrants and heavy competition. (Link)
  • More on Teladoc: Read this deep dive from Healthcare Dive on Teladoc’s primary care strategy. (Link)
• $UHS: the hospital and behavioral operator performed above expectations (similarly to HCA, Tenet). (Link)
• $CYH: Fellow hospital operator Community Health posted a profit in Q3 similar to its Q3 from last year. The firm beat on revenue and earnings as the comeback healthcare kid continues to deal with labor issues and focuses on its better-performing hospitals after divesting much of its struggling portfolio. (Link)
• $CNC: Centene seems to be struggling as of late – the managed care giant is planning to divest some ‘non-core’ assets. However, analysts noted an improvement over CNC’s Q2 despite a still high MLR of around 88%. (Link)
• $EHC: Encompass filed a lawsuit against its former home health & hospice CEO for violating her non-compete. Additionally, the post-acute firm is nearing a spin-off for that same segment. (Link)

Biz Hits

Spin-off: Recently merged healthcare providers LifePoint (hospitals) and Kindred (post-acute) are spinning off certain non-strategic assets into a separate company called ScionHealth. ScionHealth will be comprised of 79 hospitals after the spin-off, including 61 of Kindred’s long-term acute care hospitals (LTACHs) and 18 of LifePoint’s acute care hospitals. (Link)

• It looks like LifePoint and Kindred want no more skin in the LTACH game, instead focusing on acute care and inpatient rehab operations.

Mental: Google is hiring a former Headspace exec to run its tech-driven mental health initiatives at the firm. (Link)

You’re done. You’re done: Ascension and AdventHealth are unwinding their joint operation Amita Health in Chicago. Looks like the 19-hospital, 7-year joint operating agreement wasn’t panning out the way the operators intended, and I’m actually really curious to know why in today’s day of constant mergers and partnerships. (Link)

Gym Membership: In an interesting, kind of wild health crossover none of us saw coming, CrossFit (yes, the gym) is launching a fully digital primary health care service. I imagine a lot of their members get injured in the same fashion by doing those weird full-body-flinging muscle up things. Can’t be good on the joints. At the same time, I do think this is an interesting, holistic approach to healthcare where CrossFit has a solid community and accountability, which could lead to better health outcomes? Hmm. (Link)

Notable Funding:

• Truepill raised $142 million in its Series D, bringing its private valuation to $1.6 billion. (Link)
• Hinge Health raised $600 million, boosting the remote musculoskeletal provider’s valuation to $6.2 billion. (Link)

Divested: TransUnion is divesting its healthcare unit in $1.74 bln deal. (Link)

Specialty Drugs: In addition to offering its virtual primary care offering, Aetna is also rolling out in-network coverage for some incredibly costly, specialized drugs that treat retinal diseases and spinal muscular atrophy. The Gene-Based, Cellular and Other Innovative Therapies network will launch starting in 2022 and I’m really intrigued to see how this plays out. (Link)

Policy Hits

Two major policy updates this week, the rest is mostly fluff:

• Drug prices: Although there’s some pushback from certain Democrats in election years, it looks like any major drug pricing policy (namely, direct negotiation) is getting scrapped from the Build Back Better Act. (Link)
• Additionally, the Biden Admin is dropping Medicare supplemental benefits from the package. So no dental, hearing, or vision will be added to traditional Medicare fee-for-service. I imagine this was dropped after major pushback from dentists and the insurance industry. (Link)

So what does the Build Back Better Act include now? Mostly stuff related to ACA expansion – more permanent subsidies, closing the gap in Medicaid coverage, and expanded subsidies for CHIP. Apart from the now-defunct aforementioned changes to the bill, KFF had a great overview of what’s included from a healthcare perspective. (Link)

Abortion: The SCOTUS will hear challenges to the Texas abortion law. (Link)

MA Fraud: the DOJ accused Kaiser Permanente of Medicare Advantage fraud – basically, upcoding patients making them seem more sick on paper than they actually were, leading to receiving more payments from CMS. Score one for the lawyers. (Link)

Antitrust: The FTC is taking a tougher stance on a few of DaVita’s recent acquisitions in Utah, requiring prior approval before acquisitions and forcing the ESRD co to divest these clinics to prevent local monopolies. Pretty interesting development. (Link)

Sued: Score another win for the lawyers – UnitedHealthcare is suing TeamHealth, stating that it overpaid for ER care by $100 million because TeamHealth allegedly overexaggerated patient acuity. (Link)

Arbitration: The Texas Medical Association filed a lawsuit against the new surprise medical billing legislation. In particular, the TMA has big reservations with the bill’s arbitration process, especially since arbitration is guided by median regional in-network rates, which are generally dictated by payors. (Link)

Vaccine Mandates: After the Supreme Court declined to hear Maine’s health worker challenging vaccine mandates (Link), the state of Texas has decided to sue the White House for the same exact issue – that vaccine mandates are unlawful.

• Main argument here: that the White House is “using subterfuge to accomplish what they cannot achieve directly—universal compliance with their vaccine mandates, regardless of individual preferences, healthcare needs, or religious beliefs.” (Link)

Other Hits

Kidneys: In what seems like a big deal, surgeons successfully transplanted a pig’s kidney into a brain-dead human. Big implications for kidney care? (Link – Youtube)

Data: Medicaid covers nearly 1 in 5 Americans, per KFF. (Link)

NFL football player Calvin Ridley stepped away from the season this week for mental health reasons. This is a major trend unfolding before our eyes – removing the stigma around mental health. (Link)

Opinions

Crossfit: More on Crossfit from Health Populi: Why CrossFit and 23andMe Are Moving from Health to Primary Care. (Link)

Healthy Muse Top Picks

Startup: This was an interesting read from a16z on how digital health startups can go to market in the current healthcare landscape. (Link)

FFS vs. VBC: This was a great overview (as always) from Out-of-Pocket on value-based care – how it works, potential pitfalls, challenges facing VBC, and mechanics associated with value-based care arrangements. (Link)

Mental Health: Axios took a deep dive into America’s mental health crisis, and how things got worse because of the pandemic. Side note, if you’re handling a ton of stress, it’s okay to seek help. (Link)

The post The Virtual Health Plan Edition appeared first on The Healthy Muse.

• This week in healthcare: CVS and Walgreens Super Health Clinics, 23andMe gets into telehealth, Oak Street acquires specialists, Q3 earnings, remote patient monitoring, & more

Walgreens and CVS double down on Health SuperClinic Expansion.

Recent news, investments, and rumors have indicated that Walgreens and CVS are about to aggressively escalate their primary care and health super clinic strategy.

Walgreens doubled its stake in its health clinic partner VillageMD with a $5.2 billion investment on October 14. With the influx of cash, VillageMD plans to open 600+ health clinics called “Village Medical at Walgreens.” (Link)

• On top of this investment, Walgreens also made a majority investment in CareCentrix, which is a post-acute care platform. (Link)

CVS is also planning a rapid expansion of health clinic facilities. Rather than initially partnering, CVS chose a build strategy in conjunction with acquiring Aetna a few years back. (Link – Fortune Paywall)

Bigger picture: Both Walgreens and CVS are investing more heavily in the entire spectrum of care in order to bolster their core retail pharmacy businesses amidst increasing competition from all sides. CVS seems better positioned to capitalize on the strategy given the leverage it maintains with operating Aetna.

Must Read: This was a great read from Nisarg Patel on how CVS plans to leverage its health super clinics as a part of its overall business strategy – combining full-service, consumer oriented primary care, strengthening its pharmacy operation, increasing traffic to its stores, and maintaining a strong provider based through Aetna. (Link – Medium Soft Paywall)

public market update.

Top 3 weekly performers: 23andMe (+18%), Oak Street Health (+14%), Bright Health Group (+14%)

Bottom 3 weekly sandbaggers: ATI Physical Therapy (-19%), Hims & Hers (-9%), Pennant Group (-8.5%)

• Full List YTD performance: (Link)

$UPH: Fell off the face of the planet after its latest secondary equity offering. UpHealth is now trading at around a $200 million market cap after going public via SPAC at a $1.4 billion valuation. (Link)

$ME: 23andMe has decided to purchase telehealth and pharmacy services operator Lemonaid Health for $400 million in a 25/75% cash/stock deal. On the outside looking in, I can’t fathom how the acquisition is strategic whatsoever, unless the DNA testing firm figures out a creative way to integrate testing kits into a fully integrated primary care / preventive care model. I’m skeptical of the longevity of $ME’s business model, so I hope the firm proves me wrong for shareholders’ sakes. Somebody let me know a bull case here? (Link)

$OSH: Oak Street Health, a value-based primary care network for seniors, has acquired virtual specialty provider RubiconMD for $130 million, integrating specialty care into its existing care model. Seems like Oak Street was able to acquire a specialty physician network for a pretty reasonable price considering the current transaction environment. (Link)

$ONEM: One Medical launched a new program called Impact – free for its customers – aimed at chronic condition management. Seems like a nice value-add for its members. (Link)

$MD: Mednax announced an interesting partnership with Brave Care to develop new pediatric primary and urgent care clinics throughout the U.S. Looks like the trend of ‘specialized primary care’ isn’t going anywhere! (Link)

$MOH: Molina is buying AgeWell’s Medicaid long-term care business for about $110 million in cash. Adds another 13k members and $700 million in premiums to the Molina pool. (Link)

Earnings:

• $UNH: UnitedHealth, with profit up 29%, expects contested Change acquisition to close early 2022 (Link)
• $THC: Tenet posted a profit of $449 million for the third quarter, rebounding from a loss during the same quarter last year, which was upended by the pandemic. The for-profit health system reported the vast majority of its hospital markets exceeded company expectations for the quarter even amid a COVID-19 surge. (Link)
• $HCA: Revenue jumped 15% in Q3, but the machine-like hospital operator also experienced rising labor costs. Continues to be a common theme in the provider world (RIP ATI). (Link)
• $ATIP: Continues to sh*t the bed, slashing guidance once again after already slashing revenue and EBITDA guidance previously. This thing just continues to hemorrhage value. Oof. (Link)

Biz Hits

Microsoft: Adding to its slew of deals and integrations, Microsoft announced a new health-specific cloud based offering with Cerner’s EHR. (Link) The announcement comes on the heels of a few other notable Microsoft and healthcare related things:

• Acquisition of Nuance (Link)
• Teladoc integration with Teams (Link)

Radiology: Intelerad Medical Systems acquired Ambra Health to create a $1.7 billion imaging software giant. Per Fierce, the combined firm serves nearly 2,000 customers globally, including the top 10 U.S. hospitals. (Link)

Primary Care: Adding to the ridiculous number of deals in the back half of the year, Goldman Sachs and Charlesbank acquired MDVIP Primary Care Network – an independent association of physicians that serves 362k patients and includes 1.1k primary care physicians. The land grab is happening. (Link)

Carbon: Carbon Health continues to stay busy, this time acquiring RPM vendor Alertive Health (remote monitoring) (Link) as well as Central Jersey Urgent Care, a chain of 10 urgent care facilities in …you guessed it…New Jersey. (Link)

Best Buy: Nontraditional healthcare player Best Buy continues to speculate and dabble in healthcare – the firm just bought Current Health, which is – you guessed it – a remote patient monitoring firm! If Best Buy’s healthcare plans are anything like their oven delivery and installation service, they’re in for a rude awakening. Might be speaking from personal experience there? (Link)

HeadGinger: Headspace, Ginger finalized their merger to form a $3B mental health company. Good thing they’re not public yet because Talkspace has lost 60% of its value. Seriously though, this seems like a great integration. (Link)

Optum: Everyone’s favorite healthcare behemoth Optum is partnering with SSM Health on a new 10-year deal centered around inpatient, revenue cycle management, and digital health services. (Link)

Devoted: Private managed care firm Devoted Health raised about $1.2 billion recently and is now valued above $11 billion after the new fundraising round. (Link)

Policy Hits

Colorado: Will become the first state to require some health insurance plans to cover gender-affirming care in what I’m sure will not be controversial whatsoever. (Link)

OIG: According to the OIG, UnitedHealthcare banked $3.7B in Medicare Advantage payments in 2017 through chart reviews, HRAs inappropriately. Since this report was released, UnitedHealthcare apparently plans to return the funds. (Link)

Payments: Speaking of insurance payments, in an interesting little report from Kaiser / USA Today, Anthem, UnitedHealthcare, other major insurers are running billions behind in payments to hospitals, doctors. (Link)

Other Hits

Boosters: J&J is asking the FDA to authorize its COVID-19 booster shots. Also, it looks like we’re about to start mixing and matching vaccinations. (Link)

PE: This is a great, current overview of private equity’s investment in urology from some of my teammates at my firm. (Link)

Alexa: Amazon is planning to launch Alexa at senior living facilities and health systems. Will be interesting to see how much traction lexie gains. (Link)

Opinions

Drugs: How should we think about re-imagining drug plan design? The Donut Hole takes a deeper dive into the problem. (Link)

• One of the hottest topics of conversation as of late revolves around drug price negotiation. KFF wrote a deep dive on how drug price negotiation might get implemented and what that means regarding access to medicines. (Link)

Costs: Health Populi dives into how the healthcare system might address waste and save about a quarter of a trillion dollars. (Link)

MA: The CTO and President of Clover, Andrew Toy, wrote an editorial on how we might fix Medicare Advantage – especially the risk adjustments involved. (Link)

RPM: I thought this was a timely discussion surrounding remote patient monitoring and the importance of getting it right. (Link)

PE: I thought this was a fantastic overview of private equity and physician practice acquisitions and how they can be harmful if implemented poorly. (Link)

Healthy Muse Top Picks

OOP: Out of Pocket’s latest dives into EMR integration and Epic’s dominance. I know next to nothing about this part of healthcare, so it was a fascinating read. (Link)

Babylon: gearing up to go public, Babylon’s CEO provided an interesting insight into the company’s long-term game in digital health. They have a long road ahead of them. (Link)

DTC: This was a great discussion from Christina Farr and colleagues as to why direct-to-consumer health products and firms are winning investors – product first. (Link)

The post The Health SuperClinic Edition appeared first on The Healthy Muse.

• This week in healthcare: New IPOs from Ensemble and Cue Health, Walgreens pursues Evolent, athenaHealth going public again, payor market consolidation, right wing antivax fraud, payor consolidation, and more.

IPO Watch: Ensemble and Cue Health

Cue: At-home and B2B lab testing firm Cue Health debuted on the public markets on September 24. After an initial pop, the stock has since drifted down below its IPO $16 reference price to $10 as of this writing. Cue is trading under the symbol $HLTH.

It seems as if Cue is trying to take full advantage of the at-home testing trend – first with Covid testing, and I would imagine expanding into other kinds of tests. (Link)

• Link to S-1 prospectus: (Link)

Ensemble: New-age revenue cycle management (AKA, all the billing and management and behind the scenes stuff that nobody wants to deal with) Ensemble Health Partners filed for IPO on September 29. The firm is owned by PE firm Golden Gate Capital after Bon Secours Mercy Health sold a majority stake back in 2019. Ensemble will likely try to raise between $100 – $500 million (tbd) and is profitable according to its S-1 prospectus. (Link)

• Link to S-1 prospectus: (Link)

Health IT Deals Continue with Evolent and athenaHealth.

Evolent: Reports from Bloomberg indicated that Walgreens is considering acquiring health IT firm Evolent, which assists providers with managing value-based care programs among other segments. Evolent’s stock initially rose 18% on the news and is up 20% as of this writing since the announcement on September 29. (**Link – Bloomberg soft paywall**)

athenaHealth: Three years after a $5.7 billion public-to-private acquisition, Veritas Capital and Elliott Management are exploring taking athenaHealth public at a valuation potentially as high as $20 billion – quite the return for a three year hold period.

• Bigger picture: Health IT and software is a hot space right now especially after recent IPOs and private transactions (Definitive, Doximity, Datavant). There’s definitely a sell-high strategy being implemented here, and it all depends on whether investors value athenaHealth at Cerner multiples or Doximity multiples. (Link)

Market Consolidation – it’s not just hospitals.

Consolidation: An AMA report released this week disclosed that it’s not just hospital consolidation the Biden Admin should worry about – nearly 75% of U.S. metro areas are highly concentrated with health insurers, meaning that these markets have little to no competition between payors.

• It’s concerning that healthcare in general is becoming less competitive for both payors and providers and I can’t help but be concerned for how the patient fares as these healthcare conglomerate amoeba titans battle each other in the skies above. (Link) (Article Summary)

public market update.

Top 3 weekly performers: CareMax (+13.4%), Convey (+6.25%), Oscar (+3.95%)

Bottom 3 weekly sandbaggers: UpHealth (-20.5%), Signify (-13.8%), Skylight Health (-12.5%)

• Full List YTD performance: (Link)

$HCA: Is buying 5 Utah hospitals from fellow hospital operator Steward Health Care. (Link)

$AMED: Amedisys to Acquire Home Health Regulatory Assets in Charlotte and Raleigh, N.C. (Link). Along with this acquisition, AMED’s recent acquisition of Contessa closed a deal with Henry Ford Health System to expand its SNF at Home program. (Link)

$GDRX: GoodRx launched GoodRx Health last week, which is a content-driven guide to health resources. GoodRx Health is intended to provide its consumers with research-based answers to vital health questions and is a great marketing but also educational strategy. (Link)

$INNV: The PACE provider dropped 25% on Q2 earnings (and continued to drop) after CMS initiated an audit into the operator’s Colorado and California facilities – 50% of the firm’s members. Is the selloff overblown? We’ll know in Q1 2022 when the report gets published. (Link)

$PFE: The FDA authorized Pfizer’s Covid booster shots for people 65 and older and other vulnerable Americans. (Link)

$EAR: Smart hearing company Eargo is the target of a criminal investigation by the DOJ over some reimbursement claims. Its stock plummeted 70% on the news. Yikes. (Link)

$OSH: Oak Street Health announced an exclusive partnership with the AARP. (Link)

$WRBY: The eyewear start-up Warby Parker made its public debut Wednesday, via a direct listing, at $54.05 per share, soaring more than 30% above a $40 reference price. (Link)

$OSCR: Oscar Health teams up with Chicago health systems to offer tech-enabled health plans. (Link)

Biz Hits

Imaging: Intermountain launched an outpatient imaging business this week called Tellica Imaging as insurers crack down on HOPD pricing. Intermountain plans to offer flat-rate prices on CTs and MRIs. (Link)

Walmart: The retail giant is partnering with recently merged Grand Rounds and Doctor on Demand to launch a virtual program targeting health disparities among African American workers. (Link)

• Along with this announcement, Walmart is clearly trying to soothe some administrative woes in its health clinics by installing the least-worst option, Epic. (Link)

Kidney: End-stage renal disease provider Strive Health announced a partnership with a large nephrology group in Illinois and Indiana to provide risk-based contracting for chronic kidney disease patients. (Link)

• The news comes at a time when care for kidney disease plummeted during the pandemic. (Link)

SPAC: This was a great overview of recent SPACs in healthcare. Of course as a subscriber to the Healthy Muse you should already know about all of these (Link)

Policy Hits