2022 Wrapped: HTN's Year in Review
Over the course of 2022, we sent out 48 Sunday newsletters (sign up here if you’re not already on it!), sharing our perspective on the important healthcare news of the week. As 2022 comes to a close, we thought it’d be fun to take a look back through the year and highlight some of the biggest themes of the newsletter.
Here are the nine themes we saw, which we’ll go much deeper into below:
- The solidification of a vertical consolidator competitive set
- VBC enters the disillusionment phase
- The unforgiving public markets
- The Medicare Advantage Frenzy
- Inklings of Meaningful Change in the Employer Market
- The Startup Market Turns Upside Down
- D2C Telehealth Hits Bumps in the Road
- VCs Change their Tune / Approach
- Clinician Workforce Challenges Come to the Forefront
Ultimately, it seems like the 2022 healthcare experience could be summed up well with the phrase “all that glitters is not gold.” The year certainly provided a harsh reality for many working in healthcare, whether that was frontline workers facing burnout issues, startup employees facing massive layoffs, or VCs watching their returns evaporate. It turns out that many of the grand visions for disrupting healthcare appear to have been more akin to a collective hallucination we all experienced in 2020 - 2021.
In all, as we go through these trends, we find ourselves asking the question if we’re confusing activity for progress in healthcare, with progress roughly defined as building a better healthcare system for the patient, the individual for whom we’re all ultimately here in service of. We’ll come back to that thought at the end.
Without further ado, here are a few of the biggest trends we’ll remember 2022 for:
The Solidification of a Vertical Consolidator Competitive Set
2022 seems to have clarified a competitive set that each appears to be attempting to vertically integrate and build their own healthcare ecosystems in UHG, CVS, and Walgreens. Of course, UHG has had the lead here for some time in terms of healthcare assets under its umbrella. However, as UHG has continued to emphasize its need to become a consumer brand, both CVS and Walgreens have doubled down on their healthcare efforts, the three have set themselves apart as a new competitive set this year.
UHG continues to advance its strategy in an impressive manner, and relatively quietly. Just look at the list of organizations it acquired over the course of 2022: Kelsey-Seybold in April (link), LHC Group in March (link), Refresh Mental Health in March (link), Healthcare Associates of Texas in June (link), and EMIS in June (link). It also completed the acquisitions of Atrius (link) and Change (link). Optum also continued slowly taking over the back offices of health systems (MarinHealth in January). In UHG’s Q2 earnings call in July it shared the insight that deals like Kelsey-Seybold and Atrius are roughly five years in the making (link), highlighting how entrenched its relationships with providers are at this point. It’s really impressive the rate at which UHG continues to bolt on meaningful new assets. But perhaps what’s most notable in the current competitive set is what UHG is lacking: a retail presence. UHG has been attempting to make progress here via the Optum Store, but it apparently decided it couldn’t go at it alone building this capability, deciding in July to form a JV with Red Ventures and combine the Optum Store with other assets, including Healthgrades (link). UHG also went the partnership route in announcing a deal with Walmart in September, which obviously gives it access to a massive retailer, but it will be worth watching if UHG ever looks to bring this expertise in house (link).
Meanwhile, Walgreens took a major leap forward late in the year executing on its healthcare strategy articulated late in 2021, announcing the Summit Health acquisition in November (link), which provided VillageMD with a provider partner that helps it go deep in the markets Summit Health operates in. It appears Walgreens paid up for Summit, but when you look at the investor slides it seems like a no brainer, accelerating growth and profitability for Walgreens. They’ve got a big agenda to execute on, and it’ll be interesting to see if/when they bring the payor capability in house.
Speaking of executing on an agenda, CVS struggled a bit with doing so this year. CVS’s CEO made what appears to have been a major strategic error in its Q2 earnings call, suggesting to Wall Street that they’d make a major acquisition in primary care before the end of the year (link). The quote technically was referring to either primary care, enablement, or home health, and technically CVS did meet that criteria with its acquisition of Signify Health in September (link), which also provided some enablement capabilities with Signify’s acquisition of Caravan Health in February (link). Nonetheless, CVS is facing analyst questions about its ability to execute in the primary care space, particularly as Aetna faces some financial headwinds due to Stars ratings which will potentially limit the capital CVS has to deploy on acquisitions moving forward (link).
As always, there are some other new entrants hovering around the edges as dark horses to join the party, with Amazon being the leading potential candidate here after swooping in to beat out CVS in acquiring One Medical (link). While this prompted lots of speculation about Amazon’s grand strategy in healthcare, subsequent events make it feel like more of an opportunistic grab. Amazon had its fair share of starts and stops this year, with the major starts obviously being the One Medical acquisition in July (link) and the Amazon Clinic launch (link) in November. What is interesting about both is how different they are. On one hand, Amazon Clinic espouses a marketplace-style approach to connect consumers with providers (starting with SteadyMD and HealthTap). On the other hand, One Medical is a place where Amazon obviously owns the primary care practices. Those seem in pretty direct conflict - it’ll be curious to watch which wins out. It certainly seems like Amazon would be more comfortable with a marketplace approach, which would essentially relegate One Medical to being a white-labeled Amazon offering. Amazon also reminded us this year that it is willing to move on from failed efforts quickly, as Amazon Care joined the growing list of ill-fated tech-backed ventures trying to disrupt employer healthcare (link).
Meanwhile, the other tech players largely had a quiet year in terms of their various healthcare aspirations. Of course, Oracle completed the acquisition of Cerner, which was announced late in 2021. As mentioned, Walmart partnered with UHG and made some other moves rolling out more clinics (link). Google’s OneFifteen effort highlighted the limitations of tech-centric approaches to disrupting healthcare, as it had to embrace an “old-school” care model to combat the opioid epidemic in Dayton (link).
While we’re on the topic of newer players, it’s worth calling out the efforts of one old school player taking a new approach, SCAN Health. SCAN is attempting to reinvigorate an old-school regional not-for-profit insurer by taking a page from the consolidator playbook, building off its efforts in 2021 to launch various services businesses. In 2022, it modernized its plan offerings (link), launched a new in-home care business (link), started plotting both line of business and geographic expansion via organic means (link), and also announced a merger with CareOregon (link). It’s impressive progress for a not-for-profit organization, many of which have gotten tripped up in the organizational redesign required to execute on a plan like this.
VBC Enters the Disillusionment Phase
There was a marked tone shift as it relates to value-based care this year, with many more questions being raised about the impact of VBC on the industry. Increasingly, we saw questions about whether organizations are using the concept of VBC as a construct to enhance the profitability of businesses without improving care for patients. Sachin Jain penned some thought provoking pieces back in April asking questions about whether organizations are putting profits over patients (link) and whether common VBC concepts like “practicing at the top of your license” are really just being used for profiteering via labor arbitrage (link). This idea of profiteering in healthcare is something we heard again and again this year, inviting a number of questions about the impact of these models. We saw a number of deep-dives calling into question various companies, including this look at Welsh Carson’s efforts in healthcare (link).
By July, we saw articles like this suggesting that VBC needed a “time-out” because of the lack of results associated with VBC efforts, referencing the 2021 piece from then-CMMI director Brad Smith suggesting that 5 of 54 CMMI models had saved Medicare money (link). All of this leads to a very unclear picture as to the ultimate impact of VBC from a financial perspective.
On the clinical outcomes side, the jury is still out - or perhaps confused would be a better descriptor - as to the impact of VBC. Back in March, Humana highlighted how two-sided risk agreements generate meaningfully better clinical outcomes than upside-only deals, which look very similar to FFS (link). It makes sense that this would be the case, as physician incentives are more fully aligned in a two-sided risk scenario. Which is great, but in many ways this is also the issue with VBC, as it doesn’t appear we’re making progress towards two-sided risk.
Back in January, we saw a survey of physician leaders showing how health systems still compensate on volume (link). In December, Health Affairs showed how ACO growth has been non-existent since 2016, with as many ACOs leaving as entering (link). The Signify experience exiting BPCI-A back in July highlights the practical reality of some of these situations as analysts essentially applauded its decision to exit a program that was one of its core businesses when going public (link). It’s a reminder that provider orgs are fairly savvy at understanding and participating in programs where they can make more money and avoiding programs where they can’t. And if baseline rates are cut dramatically like in BPCI-A, it undermines that program.
Capping off the year, Humana’s annual report on the progress of VBC in December seems to have inadvertently highlighted how little progress we’ve actually made here over the last 5 years despite all of the activity (link). The 2022 report highlighted how 68% of MA members were in VBC contracts, yet that number was already at 66% in Humana’s 2017 report (link), indicating we’ve seen very little new adoption of VBC among Humana’s providers, this despite it being one of the leading champions for VBC stalwarts like Oak Street and Iora. And then if you look at clinical outcomes, it’s the same story - HEDIS Stars ratings, preventative screening for colon and breast cancers, ER Visits and Hospital Admins all are strikingly similar numbers between Humana’s 2022 report and 2018 report (link).
The Unforgiving Public Markets
You can’t talk about 2022 without talking about the terrible year health tech had on the public markets. Back in January, we were already seeing the public company valuation declines that had hammered the space in 2021 (link). In many ways, this poor performance on the public markets appears to have set the tone for the entire sector in 2022, albeit it took a bit of time to trickle down to the private markets as we’ll discuss later.
Certainly, the struggles of the public insurtechs dominated the headlines on the public markets, in part because of the slow drip of negative news throughout the year. Bright Health heads that list after experiencing a stock price decline of 85% YTD in 2022. Kicking off the year, Bright announced it lost $800 million in Q4 2021 alone, sharing some stunning operational details that contributed to the unexpected loss, including that it was processing all claims manually (link). In April, Bright announced it had to exit a handful of markets and was being fined by the Colorado state regulator (link). Bright’s downfall escalated as it jettisoned its original exchange business just before open enrollment, choosing to focus instead on a future as a Medicare Advantage primary care platform (link). All of this provides some indicator of why a company that has raised over $2 billion since its inception now has a market cap of only $360 million.
Oscar (down 72% YTD) and Clover (down 75% YTD) each also had their own major challenges. Clover attempted to move on from its ill-fated 2021 strategy of being a meme stock and instead focused on driving growth as a physician enablement business (link) focused on ACO REACH business. That appears to have backfired in a big way as Clover has subsequently had to retreat from ACO REACH after suffering massive losses in the program in 2021 (link). Clover continues to innovate (to put it charitably) in finding ways to drive growth by paying both physicians and patients to use its software (link). Oscar, meanwhile, had to halt sales of its new software platform, +Oscar, after a catastrophic rollout. It appears Oscar’s advanced tech platform is so far ahead of the rest of the industry that nobody else wants to implement it, as was apparent at its Investor Day (link) and then became very clear when its key client, HealthFirst, terminated its contract in August (link).
Bright, Clover, and Oscar are now attempting to chart new courses towards profitable growth. And Oscar deserves some credit versus the other two for going back to its core business and trying to make that thing work. You have to imagine all of their leaders are wishing they were running private organizations at the moment, and if you look at the relative performance of Devoted over 2022, you can see why. Back in January, Devoted investor Bob Kocher suggested Devoted’s $11 billion valuation was "realistic and will likely grow in the coming years as the company remains private” (link). And while that prediction was probably a bit rosy, this Business Insider update on Devoted later in the year suggests they’ve been making solid progress as it turned a profit on the insurance business and looks to expand (link). It’s not surprising that the health tech IPO (and SPAC) market shut down in 2022 as leaders took a look at the bloodbath happening in the public markets and decided to stay away.
And certainly, the insurtechs weren’t the only companies to have a rough year on the public markets in 2022. But they were pretty distinctive in how much their narratives have shifted over the course of the year. Compare that to Oak Street Health (link) or agilon (link), which both told relatively straightforward and compelling growth stories at their Investor Days during the year. While their stocks also didn’t make for good investments this year - Oak is down 38% and agilon is down 39% on the year - both have the advantage of focusing on executing on a clear and consistent narrative.
Of course, the public markets highlight the advantages of scale, as the stock performance of UHG (up 5% YTD) and Humana’s (up 10% YTD) indicate. Humana’s stock is up modestly despite facing some challenges in the Medicare Advantage business (link), starting off the year lowering membership expectations, and hosting an Investor Day that saw it refocusing on the core business (link).
The Medicare Advantage Frenzy
The beginning of the year started off with some serious intrigue around the Medicare Advantage Money Machine and whether Medicare Advantage insurers have been bilking the federal government out of money by gaming risk adjustment. The Money Machine debate seemed to fizzle out without resolution, although there were a few additional articles on the topic, essentially arguing that Medicare Advantage is still a net positive (link). The fundamental question about risk adjustment persists, but it has become so confusing to unpack I’m not sure we’ll ever reach a collective consensus on what is happening. For instance, see this Health Affairs article from July arguing the challenge is actually undercoding in Medicare FFS (link).
Beyond that debate, there were a number of other cautionary notes on the Medicare Advantage frenzy, with this Health Affairs piece from March providing a really good summary of the potential concerns ahead (link). The NY TImes also skewered the Medicare Advantage “cash monster” in October, highlighting how 9 out of the 10 largest MA insurers have either been accused of fraud and/or overbilled according to the OIG (link). That article featured a memorable anecdote about how Kaiser would reward providers with bottles of champagne for finding enough new diagnoses, which seems quite telling as to the business interests at play here.
The concerns about Medicare Advantage profiteering bled into Medicare FFS this year via the Direct Contracting / ACO REACH program. The drumbeat for this change started back in January, with Senator Elizabeth Warren calling for an end to the Direct Contracting program, saying in part: “It is completely baffling to me that the Biden administration wants to give the same bad actors in Medicare Advantage free rein in traditional Medicare” (link). In February, CMS rebranded the program as ACO REACH along with a variety of changes to the program designed to ameliorate some of the concerns with profiteering (link). However, Congress still had an eye on the program throughout the year, as recently as December asking CMS to explore fraud (link). The 2021 results from Direct Contracting were posted in November, and it looks like many companies generated a small profit, with CareMore and Clover standing out for their poor financial performance in the program (link).
Member acquisition was also a big topic throughout the year in Medicare Advantage, after the year kicked off with Humana’s earnings call in January discussing how they were seeing higher churn due to third-party marketing organizations confusing members (link). This issue became a much bigger conversation ahead of Open Enrollment 2022, and in August we started hearing about concerns of deceptive marketing practices (link), ultimately resulting in CMS cracking down on well-known TV ads like those from Joe Namath (link).
Toward the end of the year, CMS released 2023 Stars ratings, which indicated some potential challenges ahead as a wet blanket on the space when they came out in November, as many plans are facing reductions in Star ratings (link). This will have a major impact on revenue in the space in a few years - it was a big enough deal that CVS had to issue an 8-K about the revenue reduction it faces (causing more issues with its growth strategy moving forward) (link).
Inklings of Meaningful Change in the Employer Market
For most of the year, the employer market seemed to be business as usual, which is to say that there was lots of discussion about how the employer market doesn’t actually serve the interests of the employer/employee, but very little sustained progress from the stalemate that exists. And yet all the while, lots of point solutions are being pitched and sold into employers for their various needs.
In January, JAMA highlighted how TPAs actually make more money off increasing costs (link), putting them in direct conflict with the interests of the employer. We saw the state of New Jersey state employee plan get in a massive public brawl with its TPA, Horizon Blue Cross Blue Shield, over attempting to claw back $34 million in payments in a contract dispute (link). It’s the unfortunate reality of the industry.
There was some interesting movement forward from an innovation perspective - this article highlighted how Centivo is making inroads in Milwaukee, but also highlighted how much change needed to happen for employers and providers in the market (link). Morgan Health continued advancing its strategy, and is attempting to create the playbook for how employers can adopt disruptive practices (link). Meanwhile, there were also some steps backward, with Amazon shutting down its Amazon Care effort as noted above. And of course, there was the usual activity among organizations selling their solutions to employee benefits teams - with companies like Maven building meaningful businesses targeting common employer needs (link).
Towards the end of the year, we saw some interesting legal cases emerging from employers fighting back against their TPAs, in part leveraging the data that is now publicly available thanks to price transparency legislation. This was a great podcast highlighting the Consolidated Appropriations Act and the change it is bringing about, highlighting a lawsuit in Florida between a school system and their TPA (link). Anthem (we’re still getting used to the new brand name, Elevance, announced this year) is also now facing a class action lawsuit along similar lines that was brought by employers in Connecticut (link). Perhaps this amounts to nothing, but it seems that employers may be recognizing they have both an obligation and an ability to push back against the nonsense they’ve been dealing with for so long.
But perhaps most notably for the employer market, it was interesting how much UHG discussed driving forward VBC in the commercial market at its investor day in November (link). The Kelsey-Seybold acquisition appears to be a foundational asset for them in terms of understanding how to manage VBC contracts in the commercial space. While UHG has been driving growth moving UHC members to VBC contracts with OptumCare providers, that transition has been focused on Medicare Advantage in the past. UHC also seems to have seen notable success in rolling out Surest (formerly Bind) as a consumer friendly insurance option as it also shared at its investor day (link). And it seems like Surest is really resonating with employees. For the first time in my life, I actually had a friend tell me - unprompted - that they *liked* their health insurance coverage. And not in a “hey I like the brand and it’s cheap so I signed up” but in a “the benefits are actually really clear and simple.” That seems like a notable achievement, and when UHG starts talking publicly about change in the market, it seems like a good indicator that said change might be coming.
The Startup Market Turns Upside Down
The public market pessimism took a few months to trickle down to the startup market, but it sure caused chaos when it did. Gone were the days of 2020 and 2021 when firms like Tiger were pouring unending amounts of capital into digital health, and going so far as to reverse pitching entrepreneurs to fund their businesses. For a walk down memory lane, check out this NYTimes article from January 2022, highlighting what funding was like only twelve short months ago. It’s like you’re stepping back into an alternative reality.
By March, we were seeing thoughtful pieces rightfully questioning how real many venture backed health tech startups were, noting that revenue was still a rarity and many startups didn’t have evidence that their solution worked (link). Reality was starting to sink in for the market in a big way. By June, our survey with Chrissy Farr highlighted just how much things had changed - growth stage companies were pivoting en masse to focusing on profitability versus growth (link). As part of that pivot, in June and July we saw week after week of growth stage VC-backed health tech companies conducting massive layoffs.
What became apparent as the tide went out was that the companies pitching massive visions of disruption without much in the way of practical evidence were really going to struggle. We saw this story play out across virtually every growth stage startup. Carbon Health’s experience in 2022 provided a good case study of these challenges (link). Back in February, it published an investor update centered around its rather large ambition to build “the greatest modern healthcare company in the world” (link). Of course, this was very much a forward looking vision, as what Carbon Health had built thus far looked a lot like a PE-roll-up of urgent care practices (link). Obviously, urgent care clinics can be a very profitable business to be in, but Carbon’s visions for growth on top of the model generated significant losses and necessitated layoffs when the market turned (link).
Certainly, Carbon was not the only growth stage startup facing these issues. Olive was also skewered for “overpromising and under delivering” (link) before going through its own layoffs (link). Truepill had to go through four rounds of layoffs throughout the year (link) as it struggled with focus, before closing on a funding round in November that necessitated the company refocus on the core business (link).
Truepill’s decision to refocus on its core business seems to be one of the lasting trends of the year - moving away from grand visions and ambitions that are less tethered to reality, and instead choosing to focus on the here and now. Many growth stage companies had to learn the hard way to focus on building a durable business with a profitable unit economic model as the markets shifted away from a mindset favoring growth at any cost to one that encouraged profitable growth.
D2C Telehealth Hits Bumps in the Road
Beyond just the general startup market turning, the D2C telehealth space in particular faced some notable headwinds this year as it has gone more mainstream. This time last year, the “B2C2B” approach was the en vogue approach to building a healthcare business, with Andreessen penning a founders playbook on how to execute the B2C2B model (link). Everywhere you turned, organizations were trying to figure out how to acquire patients without needing to deal with the pain of interacting with traditional healthcare channels (i.e. payors, employers, providers).
As many startups seemingly tried to follow the Andreessen playbook, the advertising market was flooded with digital health ads, particularly in the mental health market. Teladoc sounded the alarm here early in the year on its April earnings call, noting a spike in CPAs driven by companies bidding up search auction prices. By the end of the year, we’ve seen investor interest in D2C models wane due to concern over CACs associated with acquiring patients via online ads. D2C companies are needing to get creative, and some are turning to communities as a way to drive growth (link), while others are turning back to B2B models (link).
No recap of 2022 would be complete without touching on the challenges in the ADHD market, and Cerebral in particular as the poster child of those challenges. Cerebral’s issues emerged in January with questions about inappropriate Instagram ads (link). There was then a slow burn of concerning content over the next few months (link, link, link, link), that ultimately culminated in Cerebral halting controlled substance prescriptions (link), ousting its CEO in May (link), and pivoting to focus on SMI (link). As recently as November Cerebral was still under fire, highlighting how telehealth is ill-equipped to handle addiction issues, leading to some Cerebral patients overdosing (link). Cerebral’s journey in 2022 should serve as a stark reminder for all of us of the potential risks with growing too quickly, particularly in D2C healthcare.
Cerebral certainly wasn’t the only company that displayed questionable judgment in 2022 though. A lesser known startup, Done, actually seemed like the worst offender in that market, as it chose to increase ad spending in the first half of the year (link). In December, Truepill received an Order to Show Cause from the DEA for its involvement in filling unlawful ADHD prescriptions (link). Autism care provider Elemy received some deserved scrutiny for how it handled dropping patients after making a business decision to stop providing care in some states (link). Elemy, like Cerebral, provides a case study in everything that went awry over the last few years. In July, Elemy had to stop providing care in two states, leaving some families in a bad spot (link). This article in October highlighted how Elemy had been growing rather sketchily, getting referrals from providers while claiming not to have a wait list, when in fact, Elemy did have a waitlist and couldn’t meet patient demand (link). Newsflash: when you project to hire 2,000 clinicians in three years as Elemy was in order to justify a sky-high valuation (link), things are going to end badly. Note that it’s not like every digital health company behaves like this, for instance check out how Bicycle Health helped transition patients when a regulatory change meant it could no longer provide care in Alabama (link).
One of the more positive trends we saw continue to emerge in the D2C space this year was the increasing focus on building culturally competent care models, with companies like FOLX Health (link), She Matters (link), Violet (link), and Zocalo (link) raising early rounds of funding. Articles like this one highlighting the Hispanic Paradox (which suggests the Spanish language reduces health risks), or this one highlighting how female patients and people of color are more likely to have symptoms dismissed by providers underscored the need to build culturally competent care models.
D2C companies also stepped up in the aftermath of SCOTUS’s decision to overturn Roe v Wade, which of course was one of the biggest news stories of the year. The decision caused concern for providers and patients alike in states as it brought up very real questions about legal concerns associated with providing and receiving abortion care (link). This article highlights how D2C companies – like Hey Jane and Choix – were stepping in to provide services for women, and the associated questions about state medical licensing (link).
But in general, this year called into question whether health tech startups on the whole are more focused on generating profits for investors, or doing what is right for patients. This was punctuated at the end of the year by an investigation that highlighted how dozens of health tech startups are sending sensitive health information to social media companies (link). Understandably, it seems like there will be more scrutiny on the space moving forward.
VCs Change Their Tune / Approach
The valuation declines in the health tech startup landscape over the first half of the year invited the question: is care delivery venture backable? Greycroft started the conversation in July, suggesting a framework through which the answer could be yes (link). Slow Ventures suggested care delivery is not, but the infrastructure for care delivery is (link). Bessemer chimed in with some helpful data suggesting that care delivery is indeed venture backable, with some benchmarks on what numbers should look like (link).
Regardless of the answer to that question, it seems telling that VC strategies appear to have been shifting, and quickly. In the second half of the year, we saw much more partnership between VCs and incumbent organizations in the space. General Catalyst was at the forefront of this move, announcing 15 health systems participating in its health assurance ecosystem (link). Andreessen announced it is moving in a similar direction launching a partnership with Bassett Health Network (link). The value here for VCs is pretty clear - a built-in customer giving feedback - but whether or not these ambiguous relationships are actually beneficial for health systems in any way remains an open question. We also saw Flare Capital partnering with health systems to launch new businesses in the second half of the year, including Inbound Health with Allina Health (link) and RightMove with Hospital for Special Surgery (link). And we also saw startups using big funding rounds to acquire an existing business to grow on top of, including ConcertoCare early in the year, which used the funding to acquire a home-based primary care practice, Crown Health (link).
It seems in general like VCs are moving towards more venture studio-esqe models of trying to build companies in conjunction with a close group of partners they have around the table that provide built-in customer feedback. The benefits here are fairly straightforward in terms of having built-in customers for the businesses that are launching. Obviously partnering so closely with incumbents likely means the innovation occurring will be more incremental than disruptive, but it’s a logical response to the markets today.
Any conversation of venture studios would be incomplete without mentioning what Redesign Health has been up to this year. In September, it announced a funding round valuing the business at $1.7 billion (link), which perhaps not surprisingly was led by General Catalyst. Redesign intends to build dozens of companies a year on top of its platform.
It sure feels like we’ve seen a new playbook emerge here as VCs attempt to figure out how to consistently deploy (and generate returns from) the massive funds raised over the last few years.
Clinician Workforce Challenges Come to the Forefront
As we emerge from the pandemic, it feels like we’re starting to see the clinician community say “enough”. One of the biggest pandemic-related challenges being discussed regularly at the beginning of the year was staffing issues in hospitals (link, link, link). Of course, the NYTimes highlighted how hospitals might not be entirely blameless in this conversation, as it highlighted how Ascension had been cutting staffing for years, common moves inside hospitals that likely contributed to some of these challenges (link). Ever the optimists, investors saw a massive opportunity to solve the staffing problem, with both venture capital (link) and private equity (link) investors making significant bets in the space.
Beyond the nurse staffing issues in hospitals, there was a growing concern over clinicians choosing to leave the workforce coming out of the pandemic. The AMA highlighted the potential of a “great resignation” in care delivery, publishing data in January suggesting that 20% of the provider workforce plan to leave their practice in the next two years (link).
More and more providers are working for corporate entities, with data suggesting the number of physicians employed by corporations has grown by 43% over the last three years, growing to ~22% (link). But at the same time, it appears that fewer and fewer clinicians are interested in being employed by large corporate entities, perhaps aside from Optum, which now employs over 70,000 clinicians as they shared during their Investor Day (link). Meanwhile, some providers have started leaving health systems for greener pastures, as evidenced in Wisconsin where a group of specialists decided to leave a local health system, SSM Health Dean Medical Group, and instead choose to partner with HOPCo, a PE-backed MSO for orthopedic practices (link). Of course, the independent group made it seem like the move wasn’t about the desire to earn more money, but it’s hard to overlook the ability to do so under VBC contracts.
Payors of course also appear to be doing their part to support independent providers. Elevance / Anthem, long the payor most closely aligned to local-market providers, announced a deeper partnership with Aledade this year (link) and clarified its strategy as being a flexible partner to provider entities (link). Centene also talked about wanting to be “best in class” at supporting independent providers during its recent investor day (link).
In the startup world, there was also lots of activity supporting independent providers, particularly in the mental health space. Provider enablement platforms like Alma gained serious attention this year from investors (link). It’s a good example of a startup model that is focused on one key stakeholder, the provider, but is also solving a real problem for other key stakeholders, patients and payors (link).
While the general conversation in the industry is about clinician shortages and how to help provide more support infrastructure for clinicians, we also saw indicators that these shortages may not remain forever, as some areas are actually starting to see an oversupply of clinicians. This article highlighted well how PE-backed ER staffing firm are encouraging an over-supply of ER providers as a mechanism to keep labor costs down (link).
What to Make of it All?
As we mentioned in the introductory remarks, there certainly was a lot of activity that occurred in 2022. When we come back to the overarching question we’re asking ourselves, “are patients benefiting from any of these themes?”, we’re hard pressed to think that much of the activity is yes. It’s striking to compare all of the activity above to what patients have to go through. From this article highlighting the ordeals with during IVF (link), or what patients are dealing with in the Mississippi delta (link), or what a patient in Colorado had to go through to get the Colorado Supreme Court to take their side after eight years of litigation over a billing dispute with Centura (link), or how health systems are hiring McKinsey to devise new ways to collect bills from patients who should have received care for free (link) - it certainly doesn’t feel like much has actually improved for patients despite all the activity going on in the space.
Can it really be the case that Mark Cuban beat the entire industry in 2022 in terms of making steady progress on unambiguously doing better for patients by making drugs less expensive (link)? Certainly we saw other progress from organizations like RIP Medical Debt which worked with cities like Toledo and Chicago to eliminate hundreds of millions of dollars of medical debt (link). And we’d be remiss to not mention the many front line care providers like doulas, whose services go under-appreciated while they have to fight for payment increases to rates that are still below living wages (link). These sorts of efforts and headlines remind us that there is a lot of good to be found in this industry, even if the headlines really make you squint to see it sometimes.
So that’s our 2022 version of “HTN wrapped” - while there is certainly some bleakness to the themes, there is opportunity and good people out here trying to make change. We’re hopeful and we’re excited to see what 2023 brings.
If you want to go through and develop your own perspective on trends, we’ve included below a month-by-month breakdown, highlighting the big news of the month and some of the best “evergreen” articles from the year.
A Month-by-Month Breakdown of Newsletters
Jan 2: Duke being sued after practice takeover, ONEM’s Vaccine policy being investigated
Jan 9: Vera Whole Health gets significant investment and acquires Castlight, Nomi raises a big round, Humana stock takes a hit after mgmt signals lower MA membership, Waymark initial funding, telehealth bubble bursting article, Halvorson’s response to MA critique
Jan 16: JPMorgan, Aledade acquires Iris and launches Care Solutions, Transcarent raised $200 million, CMS outlines strategic vision (health equity, affordability, high quality care)
Jan 23: UHG earnings (Optum Care increased revenue 33% per member), IBM Watson sold to PE, Galileo launches Medicaid partnership, more big funding rounds
Jan 30: A review of MA startups and how Devoted’s $11b valuation is realistic, Oscar earnings, Anthem highlighting care delivery
- NYTimes on peak froth. A good reminder of just what it was like in January, with startups being reverse pitched by Tiger
- Dysfunction of the employer markets. This JAMA article suggests TPAs have financial incentive to increase costs, in conflict with their employer clients
- Arnold Ventures on dysfunction for duals. An explainer on how to improve care for duals with some practical advice on how to do better
- Medi-Cal patients confused by subcontractors. A nice perspective on how confusing subcontractors in VBC can be for patients, something we imagine will be happening more moving forward
- FQHCs moving to risk. Some practical considerations as VBC potentially moves to the Medicaid market and the limitations FQHCs face in terms of resources
- Current state of VBC. Data from HCP LAN on current adoption of VBC
- Bloomberg explores care in the Mississippi delta. A reminder of what healthcare is actually like for a part of the country
Feb 6: Kindbody big acquisition, Warren calls for end to Direct Contracting w/ concerns over profiteering, ConcertoCare gets $105 million, Athletas (RPM) gets $132 million, Anthem articulates a partnership VBC strategy
Feb 13: Oscar highlighting +Oscar platform growth, CVS talking about acquiring MSO, Amazon Care expanding to 20 new cities, Carbon’s investor update all about growth, Signify acquires Caravan
Feb 20: Cerebral’s issues start in the ADHD market, facing questions about billing practices, how specialty care is getting into VBC, changes to Direct Contracting imminent
Feb 27: Direct Contracting becomes ACO REACH, Somatus and Omada raise funding, earnings calls (incl Clover pivoting to provider enablement)
- Anthem’s partner strategy for VBC. A good look at how Anthem is partnering with organizations to drive VBC adoption
- $265 billion of healthcare could move into the home. A McKinsey report walking through care delivery that might move into the home
- Carbon’s 2021 investor review. Carbon’s CEO shared a letter highlighting their progress in 2021 and broad ambitions moving forward
- Cost Comparison of Sites of Care for Low Acuity. Interesting article in NEJM highlighting the difference in costs across virtual care, urgent care, primary care, and EDs
- BI profiles how specialty providers are getting into VBC. Some good examples of how nephrology, oncology, and cardiology specialties are moving toward VBC
Mar 6: Bright posts a terrible Q4 2021, Oak titrates down growth expectations, Ro makes an acquisition
Mar 13: agilon’s bullish investor day, CanoHealth rumored to be going private w/ activist investor, more questions on Cerebral
Mar 20: Oak Street & agilon’s Investor Days, Clarify acquires Embedded Healthcare, data on VBC performance
Mar 27: Oscar’s investor day flop, Fresenius / interwell / Cricket merge, a look at the state of Medicare Advantage
- NYTimes overview of PACE. A good overview of the PACE program and how the model is helping seniors
- Oak Street machine learning model. Oak Street’s experience implementing a machine learning model vs provider predictions
- Humana VBC clinical outcomes. Two-sided risk deals generate better clinical outcomes than one-sided
- Chartis Health system exec survey. A survey of health system execs indicated they view telehealth as a competitive threat equal to other health systems
- Medicare Advantage’s trajectory. Perspective on potential challenges we’ll face with Medicare Advatage’s continued growth
- agilon’s Investor Day. Our review of agilon’s 2022 Investor Day
- Oak Street’s Investor Day. Our review of Oak Street’s 2022 Investor Day
- Oscar’s Investor Day. Our review of Oscar’s 2022 Investor Day
Apr 3: Optum acquires LHC group, Hims partners with Carbon, Brightline raised $105 million for pediatric behavioral health
Apr 10: Optum acquires Kelsey-Seybold, Walmart launches clinics in FL, VillageMD acquires 80 PCPs in Colorado, Olive faces major questions
Apr 17: Bright gets fined by Colorado and exits markets, UHG has a successful quarter, Carbon Health acquisition / partnership (Froedtert), Truepill shuts down ADHD model Ahead, Sachin Jain calls into question VBC
Apr 24: Optum completed acquisition of Atrius Health, Anthem posts earnings, Babylon and HCA see stock prices drop, Humana divests Kindred's hospice & personal care division
- CHCF data on primary care in California. Data on primary care spending and associated outcomes in the commercial population in California
- The Hispanic Paradox. Interesting insight into how the Hispanic population has better health outcomes than expected given the risk factors and how the Spanish language might influence that
- MA Onboarding. A HTN deep dive looking at the MA onboarding process for insurance plans and how Devoted does a good job with onboarding
- Deep dive on BrightSpring. A sobering view on the challenges Brightspring, a home and community provider, has faced since being acquired by KKR in 2019
May 1: Teladoc and Accolade shares tank after earnings, Cerebral faces a lawsuit, our look at Devoted Health
May 8: Earnings season, Tia partnered with UCSF, Truepill settled with the DOJ, NEA merges companies into Curana
May 15: Advocate & Aurora announced merger, Roe v Wade opinion leaked
May 22: Humana and WCAS create a second JV, early signs of insurance rate increases, Cerebral in news again
May 29: AHA sends a letter to DOJ encouraging MA investigation, SCAN Health Group acquires a home care model, CVS launches virtual primary care for 2023
- Devoted Health deep dive. HTN’s deep dive on Devoted Health
- Framework for primary care innovation. NEJM article attempting to bucket all the primary care innovation into defined categories, no easy feat these days
- Commonwealth Fund MA primer. An overview of Medicare Advantage
- Life as a telemedicine provider. Interesting day-in-the-life perspective from a telemedicine provider on
- Colorado Supreme Court case. This case highlights the lengths health systems are willing to go to collect bills from patients, in this case arguing for years that they should get paid despite telling a patient the wrong price for a procedure
- RAND on employer rates. Data on how much employers are paying over Medicare rates
- The Provider Surplus in EDs. Looking at the Emergency Department staffing market and how there is now an oversupply of providers that PE-backed firms are using as an opportunity to increase profits
Jun 5: Homeward partnered with Rite Aid in rural markets, Optum acquires Healthcare Associates, Carbon and Cerebral announce layoffs
Jun 12: CareBridge raised $140 million, Aledade $123 million, Gilfillan / Berwick respond to MA piece
Jun 19: Optum acquired EMIS, Circulo pivots away from its Medicaid plan
Jun 26: Roe v Wade official, NJ and Horizon in a contract dispute, California Medicaid increased rates
- Carbon Health article. HTN deep dive on Carbon Health’s model
- A history of health insurance. A good brief history of health insurance in the US
- Provider licensing challenges. A first-hand story from Crossover’s CEO, Scott Shreeve, and his challenges getting a license in Colorado.
- The pros and cons of fertility coaches. A New Yorker article that discusses the rise of fertility coaches, both the good and the bad.
- Medicaid addressing homelessness. A policy-oriented conversation about how Medicaid can address homelessness, with examples of activity in Philadelphia and Arizona
- AARP Monetizing Partnerships. A look at how AARP monetizes partnerships like Oak Street, generating ~$1 billion in annual revenue
- Medi-Cal doubles doula rates. A discussion of how doulas have had their rates increased, but it’s still not a living wage payment
Jul 10: Signify exits BPCI, Optum & Red Ventures form JV, rumors of ONEM and Cano Health deals, Nomad Health raised $105 million for nurse staffing
Jul 17: Nomi Health made two acquisitions, a look at why Atrius chose Optum as its acquirer, Greycroft opinion on VC-backed care
Jul 24: Amazon / ONEM, Elemy stops care in some states, more “Is care delivery venture backable?” takes
Jul 31: Everside Health (formerly Paladina) withdraws S-1 and raises $164 million, value-based care needs a time-out, the role of AI in healthcare w/ Bayesian Health
- Market conditions. HTN teamed up with Chrissy Farr to survey startup founders and investors to see how the market changed
- The Atrius acquisition backstory. A look at why Atrius chose Optum as its acquirer over local Massachusetts organizations
- SCAN’s “street medicine” model. An article describing SCANs approach to street medicine with some financial details on the model
- Amazon / One Medical take. HTN deep dive on the Amazon / One Medical transaction
- Medicare Advantage challenges in Puerto Rico. Looking at how MA penetration can cause problems with rate setting when it gets too high like in Puerto Rico.
- Aon’s Presentation to New Jersey State plan. Slides that showed Aon’s recommendation to the New Jersey State Employee Health Plan and savings estimates for Livongo, Hinge, and others.
- AI & Clinicians teaming up. A good look at studies featuring efforts from Bayesian Health attempting to integrate AI into clinical workflows.
Aug 7: Q2 earnings, Aledade & Elevance partner, Signify looking for a deal, Bessemer on valuations, a primary care study
Aug 14: Bright Health needs funding, Clover stops reporting on CA metrics, Oscar shifts to profitability, SCAN expands to Texas
Aug 21: KeyCare builds a new telehealth platform for health systems, Devoted Health overviews, more nurse staffing funding
Aug 28: Signify bidding war heats up, Amazon shuts down Amazon Care, MA deceptive marketing in the news, ACO Reach participants shared
- Bessemer on valuations. Bessemer published a set of financial benchmarks for tech-enabled services businesses
- Crossover Health study. A study from Crossover suggesting the model can help reduce specialist referrals
- Amazon / ONEM merger doc. The SEC filing highlighted the deal negotiations between ONEM, Amazon, and CVS, and how Amazon came in at the last minute to win the deal
- Buying rural hospitals. Highlights efforts of Braden Health, which is purchasing rural hospitals for basically nothing and attempting to revitalize them
- Data on telehealth lobbying. Data showing telehealth companies are spending very little on lobbying efforts
Sept 4: +Oscar’s platform loses its customer, 98point6 pivots to a platform, Medicare Advantage brokers facing challenges
Sept 11: CVS wins the Signify bidding war, UHG & Walmart partner, Optum’s home health strategy
Sept 25: Cano continues to be for sale, the challenges of charity care in hospitals
- GoodRx investor questions. A good perspective on the issues GoodRx faced with Kroger and why this investor exited their position
- CVS & Signify Health investor slides. Slides from the SEC filing on the acquisition
- Optum home care strategy. Optum leadership lay out the key components of a home health platform, providing a roadmap where they might go
- CareOps survey. Helpful data on the current state of clinical operations roles highlighting the relatively low consensus on implementing care pathways
- +Oscar’s Challenges. HTN deep dive on the challenges Oscar has had rolling out its technology platform, +Oscar
- Missouri Medicaid waitlist. A good read highlighting the challenges Missouri is having with its Medicaid waitlist
- Medicaid Market Map HTN market map providing an overview of Medicaid startups
- Humana’s Investor Day Recap. HTN deep dive on Humana’s investor day
- OIG report on Medicare telehealth fraud. The OIG report highlights some egregious examples of telehealth billing (i.e. two providers billing services every single day of the year, a total of 76,000 services across 4,300 Medicare beneficiaries)
- Relentless Health Value podcast on CAA. This episode highlights how employers can leverage the compensation disclosure component of the Consolidated Appropriations Act.
Oct 2: A dive into Google's OneFifteen program, Medicaid Section 1115 waivers, a CBO report on commercial prices in healthcare
Oct 9: NYTimes calls out MA payors, Medicare Star ratings hit, Providence reverses program for Medicaid, B2C startups increasingly looking to B2B sales
Oct 16: Bright exiting the exchanges, Babylon selling Meritage, Walgreens highlights more on strategy
Oct 23: DOJ suing Cigna for upcoding, Elevance reported earnings
Oct 30: Teladoc earnings, hospitals creating NewCos
- Google OneFifteen Project. An update on the OneFifteen effort to combat opioid addiction in Dayton, with Google learning about old-school care delivery
- CBO’s perspective on policies that can impact prices. A good overview of policy levers that can be used to reduce the prices paid by employers for care delivery
- Revisiting Bright’s Early Strategy. HTN deep dive on Bright’s early strategy and how it evolved to its current strategy
- DOJ’s lawsuit against Cigna. DOJ filed a lawsuit against Cigna for leveraging its home visit program to game the risk adjustment process
Nov 6: Lots of earnings (Humana, CVS, One Medical, agilon), VillageMD potentially acquiring Summit Health
Nov 13: VillageMD & Summit Health announce merger; Oak, Oscar, Bright & others report earnings; Friday told to leave the Texas exchanges
Nov 20: Amazon announces Amazon Clinic, Sanford & Fairview merging, DispatchHealth raised a big round
- The VillageMD / Summit SEC Presentation. It’s not the most in-depth presentation, but worth bookmarking as this deal, and Walgreens broader healthcare strategy, unfolds over the next several years.
- Duke Margolis on specialty care VBC. Good read on policy reforms that could help drive the adoption of Specialty Condition-Based Payment Models
Dec 4: UHG's investor day, Direct Contracting performance results, Render & Excelsior Medical Group merging
Dec 11: Humana's annual value-based care report, articles on Morgan Health & Bright Health's respective strategies, Elevance class-action
Dec 18: Oscar shares deets on enrollment cap, SCAN & CareOregon merge, Centene's annual investor day, digital health co's sharing patient data
- Hospice as a for profit hustle. The New Yorker highlights how hospice has changed as for-profit interests have gotten involved
- Allina & UniteUs in SDoH. A really good deep dive on how to implement new initiatives in the SDoH space
- Health Affairs suggesting VBC stalled. Data on ACOs shows growth has stalled over the last few years
- Centene Investor Day slides. Slides from Centene’s Investor Day