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- Weekly Health Tech Reads | 2/26/23
Weekly Health Tech Reads | 2/26/23
Teladoc’s earnings updates, Humana shutters its employer business, some interesting data & more
Kevin O'Leary & Amanda DiTrolio
February 26, 2023
This newsletter is sponsored by Synapse Medicine
Synapse Medicine, an intelligent medication success platform that provides real-time drug data and front-end clinical decision support tools for prescribers and care teams, will be hosting a webinar on March 8th to help explain how health tech companies should think about choosing the right drug database for their organization.
If your organization has healthcare professionals who need easy access to drug data and prescription decision support, check out the webinar on March 8th at 10am CST to learn how the Synapse Platform can help providers deliver personalized care.
News:
Teladoc reports earnings, takes another massive impairment on Livongo
Teladoc’s stock dropped after its Thursday earnings announcement, which featured another $3.8 billion writedown of Livongo in Q4 as well as a worrisome update on 2023 growth. Teladoc leadership highlighted a challenging macro environment, where employers are shifting away from point solutions and increasingly seeking demonstrated results. A couple interesting points from the call:
The analyst Q&A about the role of value-based arrangements for Teladoc moving forward was interesting. Teladoc’s answer was not exactly satisfying. They talk about interest in deals with “value-based components” being up 4x, but reading between the lines it sounds like a lot of the business might still be just FFS contracts with some bonuses for hitting quality metrics, versus the true capitated type models you’d want to see Teladoc moving toward. Will be interesting to watch how that progresses for the business moving forward given the emphasis they’ve placed on moving toward value-based contracts.
The Primary360 business was also an area of focus here, with Teladoc confirming our math from the Q3 earnings call that they only did a few thousand primary care visits in 2022. They expect visits to grow by 5x - 10x in 2023 with revenue from Primary360 tripling. In the Q&A, you can see analysts confused as to the impact of Primary360 on the business as they tried to understand the levers driving Teladoc’s $200 million of expected incremental revenue in 2023. But if you do the math on a few thousand primary care visits in 2022, it seems like Teladoc’s Primary360 revenue is less than $1 million. The math: assume $150 per FFS primary care visit, $150 x 3,000 = $450k. If you assume Teladoc is getting a cap payment on commercial primary care of $25 PMPM, 3,000 x $25 x 12 = $900k. So if Teladoc grows revenue by 3x in 2023, you’re still looking at Primary360 revenue <$3 billion. So it has almost no material impact on the business at the moment when you think about Teladoc projecting ~$2.6 billion of revenue in 2023. To be fair to Teladoc, they’ve always harped that it’s a very small revenue base for Primary360 in 2022, but it’s odd how central it is to the thesis of a public company when at most next year it will be 0.1% of Teladoc’s revenue.
Teladoc is moving to an employed physician model and aims to get to north of 50% of visits with physicians who are employed by Teladoc. Teladoc thinks this will result in driving better productivity, higher customer NPS, and similar clinical outcomes
There was an interesting question posed about Teladoc’s integration strategy with in person care. Teladoc mentioned thinking about three concentric circles for care delivery: 1. what can be delivered virtually; 2. what can be delivered in home; and 3. what needs to be referred out in-person. Teladoc is focused on circle one and moving more and more into two. It is also steadfast in not wanting to own brick-and-mortar. From their perspective it’s not scalable and creates perverse incentives.
Teladoc is breaking out BetterHelp as its own business unit moving forward, highlighting how large of a role the D2C mental health platform plays in the business.
Teladoc sees a lot of point solution competitors as being in serious financial trouble this year. While they said they’ll evaluate building vs buying, given Teladoc’s penchant for acquisitions we’d imagine we’ll see at least some M&A activity from Teladoc this year.
Link (Earnings Transcript)
Aledade adds practices and acquires AI data analytics vendor Curia (not to be confused with Curia Health)
Aledade announced this week that over 450 new practices signed up for their platform, and it also acquired Curia, which will bolster Aledade’s AI analytics capabilities.
Humana exits the employer insurance market
Humana’s approach over the last several months of focusing on the core Medicare Advantage business took a big step this week as the organization announced it is exiting the commercial insurance market. Humana found the “business was no longer positioned to sustainably meet the needs of commercial members over the long term or support the company’s long-term strategic plans.”
Ambience Healthcare launched an AI scribe for PCPs with $30 million
Ambience is building a new AI-based medical scribe. The quotes in the press release from providers are pretty impressive about how well the AI works. From the press release it seems like they’re deeply integrated into Pine Park Healthcare, a VC-backed primary care model for senior living facilities.
MA primary care enablement platform Vitalyze raises $100 million
Vitalyze, which is relatively under the radar compared to other platforms like agilon, Aledade, and Privia, raised another $100 million this week. Vitalyze is more in the agilon / Aledade world of only focusing on Medicare VBC, versus Privia. From the press release, it appears they’re now partnering with 2,500 providers covering 250,000 patients, meaning they’re averaging ~100 patients per provider.
Redox and Google partnered to improve interoperability
Two big deals closed this week: Amazon / One Medical and UHG / LHC
Link (Amazon / ONEM)
Link (UHG / LHC)
Olive AI is divesting its payor-facing prior authorization business
Opinions
STAT tells the origin story of the PHQ-9
If you’ve ever looked at a PHQ-9 question form and wondered why at the bottom of the form it notes that Pfizer has the copyright, this article is for you. Stat highlights how a Pfizer marketer created the screening tool as a way to drive sales for Zoloft by making PCPs more comfortable with prescribing it. What started out as a marketing ploy has now taken on a life of its own as the industry standard for managing depression. It’s a great example of the conflicts that exist in healthcare. There is both a lot of good that can be done, and also a lot of money to be made, which kind of feels like the story of American healthcare. This case presents an interesting question about whether the ends justify the means here - if you believe the PHQ-9 ultimately has done a lot of good as a screening tool, does it matter that Pfizer has made a lot of money off its widespread adoption? It’s a really well done article worth a read for anyone thinking about the patients vs profits dynamic in healthcare.
Interesting look at mental health advertising market
This Modern Healthcare article highlights quarterly advertising spend from large D2C mental health players. BetterHelp appears to be spending over double what Calm, Cerebral, Mindbloom, and Talkspace are spending combined. You can also see pretty clearly Cerebral’s reversal in course as spending drastically dropped between Q2 and Q3.
Link (paywalled)
A good read on mental health startup business models
HTNer Owen Muir penned a post that is part love letter to NOCD, and part new ideas for others to build similar businesses to NOCD in the mental health market. It does a nice job outlining clinical models for the treatment of schizophrenia and bipolar disorder that could easily be implemented by a new mental health startup.
Data
Chartis breaks down Medicare Advantage market growth in 2023
This is a really helpful report highlighting how much UHC and Humana dominated growth in the Medicare Advantage market as well as some of the more nuanced aspects of growth in MA. For instance, it was interesting to see the data that some markets - California, Illinois, Connecticut, and D.C. - all saw MA enrollment declines, even though their total populations across Original Medicare + MA grew by about the national average of 1.9%. So MA is actually losing market share to Original Medicare in those states. As the richness of MA benefits are likely pulled back in 2024 it is not hard to imagine that becoming more common. Also interesting to see the chart below on Stars ratings by years. Among other things, it makes it pretty clear 1. how badly CVS was hit by Stas ratings changes (making the need for a provider asset like Oak Street all the more apparent) and 2. how far behind Centene is versus other payors.
Rock Health data on consumer views of digital health
Rock’s excellent annual report on consumer use of digital health highlights that 80% of consumers now have used telehealth. Within that, it is interesting to see the trust gap for patients between doctors and digital health apps in the chart below. As many D2C companies work to build trust between their brand and a patient (versus a clinician and a patient) it invites questions about how viable of a goal that is. It’s not hard to imagine a future state where digital health wins out on convenience but clinicians win out on trust, and ultimately the real winners will be those that marry the conveniece of digital with the trust of an individual provider.
A new Milbank dashboard attempts to shed light on the state of primary care
There are some very helpful data in here, although it also highlights how confusing the state of VBC in care delivery is. Check out the chart below looking at the number of primary care visits are in fully capitated models. Suggesting almost 10% of PCP visits in the US in 2018 were fully capitated seems… much higher than what I’d expect.
Epic’s data on telehealth use in primary care
Epic finds that more than 60% of primary care telehealth visits don’t result in in-person follow-up within 90 days based on almost 20 million primary care telehealth visits between 2020 - 2022.
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