Weekly Health Tech Reads | 5/21/23

Hippocratic AI raises $50 million for a healthcare LLM, a question about whether AI will replace therapists, and more

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A clarification regarding the Babylon transaction

Babylon’s team reached out asking for a correction after our post about the Babylon restructuring transaction last week after we noted the deal “appears to be a bankruptcy proceeding” and that “it has reached the end of the road” after striking a deal with its lender AlbaCore that expects to return $0 for Babylon shareholders. This deal comes under two years after announcing a SPAC deal valuing Babylon at $4.2 billion implied equity value. Here’s Babylon’s perspective on the transaction:

  • Babylon will continue to operate under its current business strategy to achieve profitability, with a focus on delivering exceptional care. The planned investment will allow Babylon to increase focus on building an integrated digital-first primary care service that can manage population health at scale and deliver on its mission to make quality healthcare accessible and affordable for all.

It’s clear that Babylon’s team wishes to express confidence about the prospects of its business moving forward given this restructuring transaction. Yet our understanding remains that this transaction will involve Babylon going through the UK’s equivalent of Chapter 11 bankruptcy, which is called an administration process in England (link, link). Babylon’s team clarified that it would only be the publicly-traded holding company, Babylon Holdings Limited, that will need to go through administration. Babylon’s subsidiary businesses will continue ongoing operations under a NewCo created by AlbaCore. So, for individuals who purchased equity in the publicly traded Babylon Holdings Limited, this does indeed seem like the end of the road as this transaction will value their equity at zero and the holding company will be dissolved.

Despite the confidence Babylon portrays about the transaction, we remain quite skeptical about Babylon’s ability to execute on its mission, particularly now that it will be owned by a creditor. But we certainly hope they are indeed eventually able to deliver exceptional care that is accessible and affordable for all.

News:

Hippocratic AI raised $50 million to use LLMs to power the “bot workforce” in healthcare

This kinda just seems like a “all-in” move from Andreessen and GC, placing a big bet on building an LLM model for healthcare without any real idea what the heck this business is yet. You know when TechCrunch, BI, and STAT are all covering meal planning as a leading potential use case for the technology, the team is very far from having an understanding of what the business model might be here.  

Yet if you’re a VC like Andreessen or GC, this seems like the business you’re in - placing big bets on potentially transformative technologies even if there’s a relatively high likelihood the investment goes to $0. The Hippocratic AI website features a number of charts suggesting that its LLM outperforms GPT-4 and other LLMs, so it’s understandable that VCs would be backing up dump trucks of cash into this model given the general hype around LLMs at the moment.

What is surprising to us here is that no leading healthcare institutions were named as either customers or co-investors in this deal. This despite GC and Andreessen’s recent strategic moves build strategic innovation networks that engage health systems in the co-creation of new technologies (see this and this). Why go through that effort and not include any of them in the ground floor of your big bet in the hottest market of all? Seems like there’d be no better way to provide credibility.

There is a reference in STAT to how helpful GC’s intros to health systems have been - but given this company was incubated inside of GC, it seems like an odd disconnect that none of Health Assurance systems are publicly involved here.

Link / Slack (h/t Alex Mohseni)

LRVHealth raises a new $200 million fund

Speaking of VCs partnering with health systems, LRVHealth raised a new fund, leveraging its ecosystem of strategic partners to “transform healthcare from the inside”. The LPs in the fund consist entirely of 29 strategic LPs across payors, providers, and vendors. The list of strategic advisors included in the press release gives a good sense of the types of organizations in that LP base.

Wellstar creates a new $100 million venture fund

Wellstar, the health system in Georgia, intends to invest in 50 pre-seed to series A startups over the next five years while also indirectly investing in another 150+ startups via investments in other funds as an LP.

It is so interesting to see a system publicize an effort like this in an environment where they’re closing medical centers because they can’t pay staff. I get that systems have large portfolios of assets to manage and if you think of them as portfolio managers you’d want to put some of those assets in a high risk / high return portfolio, but I still struggle to reconcile that activity happening inside of not-for-profit health systems. No margin, no mission and all that jazz, I suppose.

CVS is closing its clinical trials business

Less than two years after CVS launched the clinical trials business, it is now exiting it. Makes sense given the broader headwinds CVS all of a sudden is facing in digesting its massive strategic acquisitions in Oak and Signify. The STAT article highlights how Walgreens and Walmart, which launched similar clinical trials businesses, still appear to be all in on the space.

HCA is buying 41 urgent care centers in Texas

HCA, which currently has 268 urgent care centers, will have over 300 after this transaction.

Adonis raised $17.3 million for an AI revenue cycle management tool helping providers collect more

Laguna Health, a care management platform, raised $15 million

HealthSnap, a remote patient monitoring platform, raised $9 million

Opinions

What are the limits of AI chatbots in therapy?

Elisabeth Rosenthal takes on the topic of whether AI Chatbots can actually replace therapists. It includes a quote suggesting that medicine is about a relationship between a human and another human, and that AI won’t ultimately replace therapists because AI can’t love.  This prompted a fascinating conversation in HTN Slack about what the limits of AI are and whether LLMs will be able to convince humans they can learn how to act with empathy. I have no idea what the future holds here, but there are lots of good thoughts in Slack. Whatever happens from here, it does seem like all of this is going to get very weird.

HTNers share their experiences in the early stage fundraising market

We hear a lot from folks in the community who are working through their pre-seed and seed fundraising journeys. Needless to say, it’s a challenging journey in this environment. So we thought we’d take some learnings from the journeys of founders and investors in the community and share those experiences to hopefully help normalize the process for folks and share some helpful tips. It was interesting to see that while everyone had their own idiosyncratic experiences on their journeys, we started to hear some common themes across experiences and the success companies are having in fundraising. Check out the four general buckets of fundraising experiences we heard below.  

How startups can partner with Medicare Advantage organizations

Duncan Reece’s third installment of his series on the Medicare Advantage bid process how startups can seek to partner with Medicare Advantage organizations as part of the bid process. It does a nice job highlighting an opaque process and giving startups some tangible thoughts on how to approach partnership conversations.

BI highlights Truepill’s challenges

Rebecca Torrence and Blake Dodge do a really thorough job going through the current state of the business and highlighting the many operational, financial, and strategic challenges Truepill appears to be facing as the digital health startup landscape shifts rapidly. In many ways it’s not surprising at this point to hear of a high flying startup having myriad issues behind the scenes, and in particular the tech perhaps not being quite as advanced as Truepill’s public narrative would have suggested. As the tide continues to go out, I imagine we’re going to continue seeing more of this across the landscape, and in particular for venture backed companies that were seeking rapid growth.

Link / Slack (h/t Rik Renard)

Data

Definitive Healthcare data on retail clinic use

The headline number from the report is that claim volume at retail clinics increased 200% over the past five years, and really it’s all been over the past three years as the chart below highlights. The report provides some interesting insights into the trends at hand and how providers can think about partnering with retail clinics. Zooming out, the trend really highlights to us how the definition of a retail clinic is becoming very blurred. Definitive seems to define it as any clinic in a “convenient retail setting”. But as organizations like CVS, which owns 63% of the retail clinic market, fundamentally shift their business model from a retailer to a health care business, it makes for a confusing distinction.

McKinsey on savings associated with virtual hospitals

It’s an interesting analysis based off the experience of an Australian hospital looking at how much could be saved by leveraging virtual models. The chart below highlights potential unit cost savings, stemming from reduced fixed costs and also lower labor costs (under the presumption that virtual staff could have larger panel sizes).

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