Weekly Health Tech Reads

Direct Contracting performance data, UHG's investor day, Rendr and Excelsior merge, & more!

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News of the Week:

  • CMMI released Direct Contracting performance year 2021 data just before the Thanksgiving holiday. There was a good Slack thread on this topic with some insightful takeaways on performance of the various DCEs from Duncan Reece and others, which got into some detailed questions as to how apples-to-apples savings rates are across different models that might account for primary care costs differently. Regardless, a couple things clearly stand out from the results: Clover Health and CareMore performed incredibly poorly in 2021, albeit for different reasons. Clover's strategy of blitz-growth backfired in a big way. While it was able to dominate market share, with 64k members enrolled out of a total of 357k members in all of DCE, it was only one of a handful of organizations that generated a negative savings rate, driving $30 million in net savings losses for the organization, which is over $20 million more than any other organization lost. On the other hand, while CareMore only had 1,200 members in the program, something seems to have gone very wrong as its savings rate was -29.4% (compare this with Clover at -4.5%. Meanwhile, UHG appears to have performed very well in the program, albeit on only 1,035 members. But still, UHG's DCE generated a net savings rate of 29.2% versus the next highest, Oak Street at 15.7%. As we'll get into more below, if UHG can consistently perform like this, given they now employ over 10% of the primary care workforce in this country, watch out. Link / Slack (h/t Anthony Hemming)

  • UnitedHealth's investor day was this week, again highlighting the immense scope and continued growth of the organization. One of the most impressive parts of UHG's continued growth is how consistent the organization has been. UHG highlighted its five key growth pillars at the session, which are the same five it highlighted a year ago: 1. value-based care, 2. health benefits, 3. technology, 4. financial services, and 5. pharmacy. While it might not seem remarkable that an organization like UHG is highlighting the same five pillars two years in a row, it's worth noting how many other public companies have had to entirely rethink their strategies over the past year. Meanwhile, UHG continues to chug along and execute in a really impressive manner (look no further than the Direct Contracting data above for a good example of this). UHG spent a lot of time in the investor session highlighting its progress in the commercial insurance market. In particular, it sounds like Bind - now Surest - is resonating with large insurers, as it has grown from 1 in 25 large accounts for UHG in 2021 to 1 in 9 large accounts today. UHG's national accounts team serves 400 national accounts, which means it has grown from something like 11 national accounts to 44. UHG also emphasized how it intends to move the commercial market to VBC contracts, a trend that will be interesting to watch over the next few years. UHG highlighted Kelsey-Seybold's model for taking risk in the commercial population, which makes sense as it's one of a few organizations that have been able to successfully do so. It's not quite clear how UHG intends to expand Kelsey-Seybold's secret sauce to the rest or the organization, but if anyone can figure out how to do that it seems like it'd be Optum. They shared they're now up to 70,000 clinicians, half of which are in primary care and half of which are specialists. Yes, this means Optum employs >10% of the primary care workforce in the country at the moment (according to AHRQ there are ~295k people in the primary care workforce). As always, the biggest question here seems to be what if anything could actually stop UHG's flywheel at the moment. Regulatory intervention seems like the clear answer, but then you look at the acquisitions UHG made in 2022: Change, Kelsey-Seybold, Atrius, LHC Group, EMIS, and Refresh Mental Health, among others. The dark horse answer should be whether UHG can effectively build the consumer orientation it is trying to move towards. While it highlighted the partnerships with Walmart and Red Ventures during the day, it’s worth noting those are partnerships with other organizations that have that competency, not UHG, and Optum actually jettisoned one of the key consumer-facing assets it was building internally in the Optum Store. We’d imagine that UHG won’t take a partnership approach to this capability forever, which means they’re either building or buying it at some point. Link

  • Rendr and Excelsior Medical Group are merging, forming a group of 200 providers at over 100 locations in the NYC area focused on providing care to the Asian community. Rendr, which got its start in 2019 by the founders of CityMD, currently cares for ~100,000 people, and the combined entity will treat ~200,000 people. While we spend a lot of time talking about virtual care delivery models that are employing a handful of providers, it seems like traditional bricks + mortar models are too often overlooked in terms of where meaningful innovation is happening in healthcare today - here a sizable group of providers who are providing culturally competent care to a large population of patients and seemingly building deep, trusted relationships within a community. It also seems well positioned to manage risk effectively for that population, which puts Rendr in a position of strength moving forward. Link / Slack (h/t Harry Zirinsky) 

Other News:

  • Upstream raised $140 million to help primary care orgs manage risk through a pharmacy centric offering. Upstream is competing with the agilons of the world to partner with primary care groups to more effectively manage risk. Its approach to doing so is integrating a pharmacist into the primary care group, with the idea that more effectively leveraging a pharmacist can help manage risk. Upstream has signed up at least two orgs as customers, a multi-specialty group with 220 PCPs in Virginia called Tidewater (link), and MUSC's 300 PCPs (link). It appears the initial focus is ACO Reach, at least for MUSC, and they expect to have 30,000 members participating. As more and more MSO orgs are competing over winning contracts with primary care groups to help the PCPs manage risk, it will be worth watching if Upstream can convince PCP groups to integrate Upstream's pharmacists in their practices, which seems like it will entail a good deal of change management for the practice, but with the potential to make PCP's lives easier by having a pharmacist as a partner. Seems like there might be an opportunity to help practices that might not be as sophisticated in managing risk, assuming you can convince them to make the necessary changes.Link / Slack (h/t Jake Fishbein)

  • Palantir inked a ten year partnership with Cleveland Clinic with a broad goal of making the Cleveland Clinic more efficient across the board - optimizing patient flows and workforce scheduling.  Link / Slack (h/t Samir Unni)

  • AmWell is apparently again in talks to acquire Talkspace for around $200 million. The article here does a nice job highlighting some of the strategic questions about the potential transaction. Link

  • Cloud Health Systems raised $30 million at a $200 million valuation, a pretty impressive feat given it was founded earlier this year and has not launched a product. Of course it helps that Cloud was founded by a co-founder of Instacart. Its first product will be Sunrise, a metabolic health and obesity brand, and it sounds like it aims to build a Ro-like suite of brands for patients. I have lots of questions about how a pre-product healthcare company is worth $200 million valuation, but then again, it probably isn't much more complicated than VCs writing a blank check to a successful founder. Link (paywalled) / Slack (h/t Casey Langwith)

  • Payzen raised $20 million in equity and $200 million in debt to help health systems collect more of their bills by giving people who can't afford care a BNPL option. Link

  • Global Premier Fertility raised an $11 million Series C to build what appears to be an MSO-like model for IVF clinics. It's interesting to read the article and how Global Premier Fertility is pitching itself as the alternative to the PE-backed IVF clinic, giving providers autonomy and support without the downsides of PE-ownership. Of course, it still appears to be taking a PE-style approach to working with practices in a variety of ways, including acquisition of clinics. I'm not sure I understand what vilifying PE while essentially copying their model accomplishes, but hopefully it makes high quality IVF available for more people at a reasonable cost. Link

  • Providence announced it is shutting down 27 retail clinics in Southern California due to unprecedented losses in the clinics, and ongoing concerns about labor shortages, supply chain, inflation, patient volumes, and competition. It'll be interesting to watch how the retail clinic space evolves in 2023. It's not hard to envision those dynamics described here playing out for many companies behind closed doors at the moment. Link / Slack 

Opinions:

  • Interesting to see these two articles looking at how D2C care delivery companies are increasingly leveraging patient communities to drive word of mouth growth as advertising costs have skyrocketed over the last year. I am all for incorporating more community concepts as a core component of care delivery, but I'd be very weary of just bolting on the concept of patient communities to models as a way to drive growth. But when you see stats like in the Business Insider article talking about how CAC for mental health startups has increased from $150 in 2018 to $500 - $1000 currently, you can see why companies are needing to be more thoughtful about how to drive growth. In many ways it seems like virtual care is becoming more and more like traditional care models, which have always been reliant on word of mouth patient acquisition in the local communities they've operated. It seems like a natural next step for these companies trying to grow via community is to consider a physical presence in local markets where their communities exist, and just like that, virtual and physical models have blended. Link (Modern Healthcare) / Link (BI paywall) / Slack (h/t Arpan Parikh)

  • This is a tough read about a couple who died via suicide after the DEA shut down the doctors office that the husband was seeing for chronic pain management. It's a hard example of someone who gets lost in the shuffle of a decision the system has made to crack down on pill mill models. It's hard for me to read the article and not feel like the system failed Danny and Gretchen Elliott, but I also don't know that I have any better suggestion for how to design a system that avoids people falling through the cracks like this. Anyways, for those of you designing care models, payment models, etc, I think it's useful to have examples of real people like this who are "edge cases" for the model to provide a reminder of the very real impact these decisions have on those edge cases. Link 

  • Fierce Healthcare summarized a few analyst perspectives on CVS's acquisition strategy in the primary care space, with one analyst predicting companies like Carbon and Forward Health could be good acquisition targets, and another suggesting that companies like Privia and local primary care orgs are more likely targets. As discussed in the HTN Slack, the Carbon and Forward suggestions make no sense to me at all. Privia and local primary care orgs seem to fit more strategically with where CVS is heading. Either way, it seems like the pressure is continuing to mount on CVS to make meaningful progress here as its competitive set (i.e. UHG & Walgreens) appear to be moving significantly faster.  Link / Slack 

  • Kaufmann Hall penned a piece highlighting how hospitals moving forward will need to address the sunk cost fallacy and stop throwing good money after bad money moving forward as they face increasingly challenging financial situations. It's hard to argue with the logic here, although it presents some interesting questions about hospital strategies moving forward and where the bad money is at the moment. Link

  • The New Yorker featured an excellent, albeit depressing, read about how hospice care became a "for-profit hustle" as the number of private equity-backed hospice practices tripled between 2011 and 2019. It includes some really disturbing examples of bad behavior, including hospice owners asking staff to overdose patients who were staying on hospice too long, which would put Medicare hospice payments at risk. That specific owner went to jail for thirteen years, which frankly seems light. It reminds you that bad actors are out there in healthcare. Link / Slack (h/t Duncan Reece)

  • This is a cautionary tale about pharmacy startup Medly, which had raised over $100 million from well known VCs like Greycroft, and how the "move fast and break things" mindset can have some really bad consequences in healthcare. The article does a nice job describing how Medly burned through cash attempting to scale nationally, but has now run out of money and is going dark on patients who rely on Medly for medications. It's a bad look for VCs like Greycroft. Sure, companies are going to fail, but if you're going to get into healthcare investing it seems like you have an obligation to unwind those failures in a responsible way and not screw with people's health.  Link (paywall) / Slack (h/t Frederik Mueller)

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