Weekly Health Tech Reads

CVS / Oak Street dominates the headlines, Medicare Advantage advance notice causes concern, Oscar moves toward profitability, & more

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NeuroFlow partners with both health systems and health plans to effectively and sustainably integrate behavioral health into care delivery settings at scale. NeuroFlow's technology infrastructure enables this by giving clinicians and care teams the tools and data to effectively measure, triage, and manage individuals throughout their healthcare journey.

NeuroFlow released a case study of its work with Jefferson Health, highlighting the benefits of the approach nicely. Jefferson leveraged NeuroFlow to integrate behavioral health into 50 primary care practices, while reducing administrative burden and increasing the reach and impact of care teams. The result? Jefferson reported a 34% reduction in ED utilization and 19% increase in screening rates.


CVS acquires Oak Street for $9.5 billion

Everyone reading this has likely already heard the news that CVS is acquiring Oak Street. The valuation here is eye-popping, as CVS is paying roughly $59 million for each of Oak Street’s 169 primary care clinics, or ~$45,000 for each of Oak Street’s 159,000 at-risk members. This despite the fact that Oak Street lost ~$184 million in Adjusted EBITDA over the first nine months of 2022 and will likely continue to lose money for the next few years. In CVS’s earnings call, they noted that it will be four years before the deal even is neutral to earnings and then become accretive in year five. In many ways the transaction is pretty straightforward, as it appears CVS will generally be leaving Oak to operate independently after the transaction is completed. The primary synergies highlighted in the deal are 1. that CVS will drive more MA members to Oak Street, and 2. that Oak Street will help CVS’s MA member retention. It’s clearly a lot to pay, but it also seems like CVS had to make a move here to acquire this capability as a central piece of its care delivery strategy supporting the insurance business. We’ve linked to a couple of good summaries of the deal below, and HTN members can expect to see a deeper dive on our perspective early next week on some of the key strategic questions posed by the deal.

Link (Hospitalogy)

Link (Home Health Care News)

Slack (h/t Samir Unni)

APG sounds the alarm on Medicare Advantage advance notice changes

In a sign of how intense the debate over risk adjustment changes is going to get, the America’s Physician Groups issued a statement this week suggesting that the proposed changes to risk adjustment could drop provider revenue by 10% - 20%. The APG statement highlights what likely will be the political argument against the changes being proposed:

Multiple consequences could ensue, including inevitable decisions by some of our members to close inner-city and rural clinics, many of them barely financially viable already, that cater to older adults – many of whom have the conditions described above. As a result, hundreds of thousands of vulnerable Medicare Advantage enrollees could lose needed access to care.”

Obviously given the news above this week, it is going to be fascinating to keep an eye on how this plays out. Given the sophistication of Oak Street, as well as the various payvidors in the space, it is not hard to imagine that they’ll be at the top end of the range APG is citing in terms of negative revenue impact, which is massive. You can be sure the industry will push back hard against this change. Given CVS / Oak Street noted they talked through this dynamic as part of deal conversations, you have to imagine they felt pretty confident CMS will be unsuccessful in this attempt to rein in profits in Medicare Advantage. Either way it’s setting up to be a very big political debate. As Manas Kaushik shared in the Slack dialogue, Better Medicare Alliance is already starting to run pretty politically charged ads about Medicare Advantage cuts.

Oscar reported Q4 results - they’re not out of the woods yet but continue to move in a positive direction

Oscar’s Q4 earnings call continued the trend of them sounding very much like an insurance business optimizing for cost cutting in order to hit profit targets. Again, it seems like a necessary change for the org, but it still raises a bunch of questions about whether Oscar can achieve its disruptive vision while seemingly looking to manage costs the exact same way as every other insurer. Oscar’s 2023 expectations include an MLR between 82% - 84% and an InsuranceCo Admin Ratio between 17% - 18%. Combining those two numbers gives a range for InsuranceCo Admin Ratio of 99% to 102%. Oscar is still guiding that the insurance business is going to be profitable in 2023, meaning this number needs to be at or below 100%. So it appears Oscar intends to hit the low end of that range, but it’s not clear yet that they’re going to get there. Oscar is introducing a new metric for 2023 called InsuranceCo Adjusted EBITDA, which certainly seems like hedging against not hitting the InsuranceCo Admin Ratio target, because they will be EBITDA positive in 2023.

The tightrope Oscar is trying to walk in 2023 becomes even more challenging in 2024 as it attempts to navigate to overall company profitability. Oscar’s CFO went on at length during the call about how investment income is going to start yielding 3% - 4% returns each year, a talk track that feels very un-Oscar-like, but again relevant as the company tries to move toward profitability. On the positive side, Oscar announced that in Q4 it sold its first campaign builder deal for +Oscar, even if we still have more questions than answers about the growth prospects for this division. Oscar also noted that while it looks like 2023 will be slightly down from a membership perspective, it intends to get back to growth in 2024. Which in many ways might be the ultimate test for Oscar - in order to get to overall profitability it seems like it will need to grow. Can it do so in a profitable way this time around?

Link (press release) / Link (earnings transcript)

Humana and ChenMed announced a five year collaboration

On the same day CVS and Oak Street announced their deal, Humana issued a press release on their new five year partnership for ChenMed to be an in-network provider for Humana MA members. Worth noting how far this relationship goes back, dating back to the early 1990s in South Florida.

Link / Slack (h/t Duncan Reece)

Centene will be pricing for negative margin on MA in 2024

If you’re looking for some indication of how payors are viewing 2024 for Medicare Advantage, Centene shared during earnings that it plans to price for negative margin in its MA product in order to maintain stable benefits for consumers. Centene’s CEO echoed Humana’s comments last week regarding the RADV ruling - they’re glad it didn’t go back past 2018, but disappointed about the lack of fee-for-service adjuster.

General Atlantic is looking to sell OneOncology for $2 billion

OneOncology partners with community oncologists, taking the MSO-style approach of helping practices manage finances and moving them toward value. OneOncology’s platform was built on top of Flatiron Health’s data capabilities, and their annual reports on the website provide for a good overview of the business.

Link / Slack (h/t Kevin Wang)

GE acquired AI ultrasound startup Caption Health

There’s no mention of any customers for Caption in the press release which likely highlights the challenges Caption had - it was a very cool AI technology that struggled to find a workflow it could fit into (and get paid for). Hopefully GE can help bring it to market it because the tech does look quite cool.

Link / Slack (h/t Raihan Faroqui)

UPMC and Redesign Health team up to launch Pip Health, an app helping patients navigate recovery from surgery

The health system + venture studio combo is an intriguing one. Will be curious to watch whether the approach leads to a higher hit rate than other health system backed startup ideas.

Link / Slack (h/t Kevin Wang)

Albertson’s launched a new digital wellness platform

Its app will help consumers make healthy choices, starting with a wellness assessment and integrating data from various apps. This feels like one of those new entrant initiatives that you hear about once in the press release and then it goes quietly into the night, but hopefully we’re wrong in that.

Link / Slack (h/t Bethany Vick)

firsthand, a care model for serious mental illness, raised $28 million

Link / Slack (h/t Raihan Faroqui)

Marker Learning raised $15 million for learning disability assessments and support

PSA: We’re hiring!

We’re looking to add a fourth Nerd to the team to help us grow our digital community of healthcare innovators. This role, our Community Engagement and Operations Manager, will be responsible for day-to-day management of the HTN community & ensuring it’s a place that our members continue to enjoy engaging with!


A summary of individual exchange competition dynamics becoming “King Kong vs Gozilla”

This is a good summary of insurance competition dynamics on the exchanges, which increasingly seem like the big payors are winning out as the exchanges stabilize. The article notes how attempts in the exchanges to bring in new competition to the market has largely failed, as co-ops have gone almost completely extinct and startups have had to retreat. Another reminder that scale wins in healthcare. It’s also a reminder that should Oscar succeed in getting the business to profitability in 2024, it’ll make a pretty natural acquisition target for an insurer looking to grow its exchange presence.

Another story of patients left in lurch by corporate decisions

This KHN article highlights how CVS shuttered a big part of its home infusion business Coram and Optum Rx took a similar action. Not surprisingly, this left a number of patients in a really tough spot and caused disruptions in care. In many ways this article is a microcosm of healthcare today - we have left decisions about life-altering healthcare services in the hands of large for-profit corporations, and then seem to act surprised when those corporations act like… large for-profit corporations. This scaled, consolidated version of healthcare we’re careening towards seems like it will naturally include more depressing stories like this one of patients getting left behind.

Keckley describes wave two of VBC

Paul Keckley’s post this week highlights how wave one of VBC has fallen short, but that we’re now heading into wave two of value based care. He argues that wave two will have more success in managing costs as regulators tighten profitability in the MA market and employers continue to get more active in managing healthcare costs. As noted in Slack, it’s hard to imagine any of this actually occurring on a three year timeline, but feels like a positive trend regardless.

What telehealth companies need to know about the PHE ending

The Foley team penned a helpful post looking at some key implications of the PHE ending for telehealth companies.

Link / Slack (h/t Nate Lacktman)


WTW survey suggests more change in employer benefits market

A survey of 232 employers with 3 million employees collectively, 88% said they plan to make changes to vendor partnerships over the next two years. Wellbeing programs should see the most change, with 55% of employers expecting to make a change. But other key markets, including clinical point solutions, mental health, advocacy, and digital platforms all also see ~40% of employers planning changes.

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