Weekly Health Tech Reads

Oscar's membership cap explained, SCAN & CareOregon merge, Centene's investor day, & more

News:

  • Oscar issued a press release on the decision to stop new membership in Florida that shed more light on the backstory and the moves Oscar is making. The press release characterizes this move as a proactive one that is a "result of the changing market dynamics following market exits by certain carriers." So it's not hard to envision a scenario where Oscar was concerned with Bright's market exit and that it might send a bunch of new members in Oscar's direction, which would cause Oscar financial issues with respect to risk based capital requirements. All-in-all it seems like the best possible explanation for Oscar's halted enrollment in Florida, in particular because it seems like the regulators were willing to be flexible with Oscar to keep them in the exchanges. But it also highlights how tenuous the situation Oscar is in currently - had they not made this move proactively, or had a flexible regulator to work with - it seems like Oscar likely would have had a major cash crunch and probably wouldn't have been able to meet its regulatory capital requirements. It goes without saying it's less than ideal Oscar is in this position in the first place, but this feels like one of those pivotal moves that could be the thing that ends up saving the business just by giving it the chance to get to profitability. On that note, while it's not explicitly stated publicly, it appears Oscar essentially has an agreement with CMS for a membership cap at 1.1 million members for 2023, which is the high end of enrollment it has disclosed publicly. Given this news in Florida, it seems like we should expect them to be around that high end. As discussed on Slack, these sorts of moves feel a bit reminiscent of the 2016-2017 era on the exchanges, which were quite tumultuous with various insurers entering and exiting the exchanges. I can imagine if you're the regulators here you're looking to stabilize things as quickly as possible, as this move is going to require a lot of stakeholder management. Link / Slack

  • SCAN Health Plan and CareOregon announced this week that they will be merging, combining SCAN's Medicare Advantage population in California with CareOregon's Medicaid population in Oregon. The new entity, which will be named HealthRight, will be helmed by current SCAN CEO Sachin Jain. Like most horizontal mergers in healthcare, the rationale here seems to stem from the benefits of greater scale, with the combined entity serving 800,000 Medicare and Medicaid beneficiaries, generating $6.8 billion of annual revenue. Yet, as not-for-profit health system mergers have shown time and time again, it'll be worth watching if the theoretical benefits of scale actually accrue to patients. Either way, with a membership base of 800k, it provides a really solid opportunity to build care delivery companies in SCAN's diversified business arm and sell their services back to the insurance arm in an Optum-like fashion. An integration of this magnitude will certainly put the strategy to the test, and small details in the press release like CareOregon retaining its separate Board of Directors will be worth keeping an eye on. Best case scenario, SCAN, now HealthRight, provides a playbook for other regional insurers to build more modern businesses and compete against the for-profit national insurers.  Link / Slack (h/t Deana Bell)

  • Centene hosted its annual investor day this week, and the slides linked here provide for a good overview of the business and how it's focused on insurance across marketplaces, Medicare, and Medicaid. You can see Centene playing up its local approach throughout the presentation, and in particular it's interesting seeing in the regulatory section. Centene doesn't see much meaningful change at the federal level - see the header of slide 62 for a good example of this "Divided Government Provides Stability for Healthcare Delivery System." Instead, Centene sees more impactful healthcare policy decisions happening at local / state levels, and listed four things to watch for in 2023 - 1. redeterminations, 2. PHRMA / PBM Activity, 3. Product expansion opportunities, 4. Rural care and coverage. I'm particularly curious to hear more about what they expect on the rural care topic. There were also some interesting analyst questions about Centene's movement to value. Centene shared that in Medicaid, 26% of its business is in upside / downside / capitated arrangements, and 15% is in upside-only shared savings agreements. They shared some good insight into how they're thinking about moving providers to risk, and how they differentiate the Cano / ChenMeds / Oak Streets. Centene sees a lot of opportunity to work with those organizations, but also working with MSOs/aggregators that are helping other providers in moving toward risk. Centene noted it wants to own this enablement capability and intends to be best-in-class at enabling providers in moving to risk. Obviously it will be worth watching how Centene chooses to build / buy / partner for that capability. Link (slides) / Link (webcast)

  • Komodo Health raised $200 million. It sure seems like a sign of the times that this article is citing their previous valuation of $3.3 billion, with no mention of a valuation for the current $200 million round. Link

  • Commons Clinic, a "One Medical for specialty care," raised $11 million. I'm not actually sure the One Medical comparison makes a ton of sense to me here - its goal is to build a new ambulatory health system in five to eight major metros over the next decade. The initial target area is MSK, conditions, and they're currently acquiring small local practices to build out a medical group. It's a cool model, and it seems like there's a big opportunity here to build a modern multi-specialty group.  Link / Slack (h/t Kevin Wang)

  • The DEA served an Order to Show Cause on Truepill this week, suggesting that an investigation into Truepill found that it was filling prescription that were exceeding 90-day supply limits, and/or prescribers who didn't have a license in the state.  Link / Slack (h/t Nate Lacktman)

  • Override, a new chronic pain management startup, raised $3.5 million and acquired a pain management coaching business. Notice a trend between this and the Commons announcement of acquiring local clinical talent? Seems like we're going to see a lot of this activity in 2023. Link / Slack (h/t Kevin Wang)

  • CMMI released its 2022 report to congress on the state of CMMI activities, providing a nice rundown of everything CMMI has been up to over the past year.  Link / Slack (h/t Anthony Hemming)

Opinions:

  • This Stat piece made waves this week as it highlighted just how much sensitive data digital health companies are sharing with the social media conglomerates, and it is a pretty gross read. While it seems like some of the companies are getting bogged down in relative technicalities like whether the data is covered under HIPAA and MSO / PC distinctions, when you step back and look at it from a patient perspective this behavior seems pretty egregious. For example, If I as a patient go to a virtual substance use disorder clinic's website and fill out an intake form indicating I have substance abuse issues, I think I should be able to have the expectation of privacy in doing so, not that the clinic is going to share back with Facebook that I indicated I have alcohol issues, which is apparently exactly what some companies are doing here. For a sector that is so focused on improving things for patients versus the incumbent industry, this is a really bad look.Link / Slack (h/t Michael Albert)

  • On a more uplifting note, this story about Allina's experience implementing a SDoH screener via NowPow, now UniteUs, as part of the Accountable Health Communities grant is a really cool tangible example of an organization driving meaningful change. It might not be the sexiest change that gets talked about when VCs talk about trends changing the industry, but when you think about the impact of a health system screening every patient for social needs, connecting them with community resources, and closing the loop on that, it's a really cool effort. The article highlights well the amount of lift required to drive the change - from a regulator launching a new initiative, to a massive implementation lift inside the health system, to startup / community partners that can help with the infrastructure to close the loop on referrals, to payors being willing to pay - its a massive endeavor that requires a ton of stakeholder coordination and extraordinary efforts by a handful of individuals (which largely go unrecognized by the industry). And, as it always seems, the cliffhanger is whether a payment model can be devised to continue supporting the effort now that the government funding has run out. Link / Slack

  • This Bloomberg piece again highlights the tenuous state of the relationship between the New Jersey state employee health plan and Horizon Blue Cross Blue Shield New Jersey. The article mentions that New Jersey's employee health plan has been trying to understand if its claims are being paid correctly for years, not all too dissimilar from the class action lawsuit Anthem is facing. In this situation in New Jersey, the state has claims it was billed $674k for care at New York Presbyterian, but somehow Horizon paid out $2 million for that claim, and somehow can't, or won't, tell the employee health plan why. The email back and forth featured in the article between the employee health plan and Horizon is mind-numbing to read. Similar to the digital health commentary above, this seems like one of those areas of healthcare that is pretty egregious when you look at it from a common sense patient / member point of view. I'm not sure why this is so hard. Link (paywalled) / Slack (h/t Samir Unni)

  • This was an interesting read in Barron's last weekend on CVS Health's primary care strategy. It provides a good summary of the current state of things, and highlighting the mounting questions Wall Street analysts have about CVS's strategy in the primary care space. As we mentioned in Slack, it seems a bit concerning if the article is accurate in suggesting that CVS is still figuring out whether it wants to acquire local medical practices market-by-market or if it wants to acquire a ONEM like tech platform / group of providers that it can scale across various markets. That seems like a pretty fundamental strategic question that you'd hope CVS has a strong position on at this point in the game. Link (paywalled) / Slack (h/t Casey Langwith)

  • The Brookings institute shared a really good white paper on the topic of integrating mental health into primary care. Link

  • The New York Times continues its recent trend of skewering health systems, this week highlighting how Ascension has been short staffing hospitals. Link (paywalled) / Slack (h/t Ed Melendez)

Data:

  • Here's some Epic data on telehealth use, highlighting how most virtual care doesn't require in-person follow-ups. What's most interesting to me here though is how different mental health utilization is versus what we've seen in other data sets, i.e. Fair Health's reports. In this data, it suggests mental health represents only 26% of telehealth utilization, versus other data sets suggesting it is upwards of 55%. Lots of interesting insights in Slack the differences in those numbers, and the differences in denominators that might be driving those percentages. Link / Slack 

  • Clarify Health released a report looking at payer negotiated rates based on the publicly available rates. It's a really interesting read looking at "zombie rates" and how to make meaning of this data. They highlight how for a single DRG, there are over 4 billion (yes, billion) records across three large national payors, which you can distill down to roughly ~4,000 rates across ~2,000 distinct NPIs. The result is a chart like the below, which highlights the variation in negotiated rates for inpatient hip / knee replacements (MS-DRG 470). Check out those >50 negotiated rate amounts in excess of $80k for a hip/knee replacement! Wild. Link

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