Weekly Health Tech Reads | 1/10/21

A correction: In last week’s newsletter I mistakenly said Humana was partnering with Virta Health for it’s diabetes program with Medicaid patients in Kentucky. Humana is in fact partnering with Vida Health, not Virta. Whoopsie!

News:

• UHG / Optum acquired Change Healthcare for $13 billion and will be rolling Change into OptumInsight. Change is one of those companies in healthcare that probably gets less attention than it deserves at least in part because of how complicated the business is. I can’t claim to understand all the parts of Change’s business, but perhaps the easiest way to describe the impact of this acquisition is from a comment on the Slack channel this week: “Almost every physician and hospital claim will now be running through Optum”. It puts into perspective how intertwined UHG and Optum are with every part of the healthcare system. The breadth of assets that sit under the umbrella of UHG is insane, and this just adds to the arsenal. Seems like an incredibly smart acquisition for UHG. Link.

• In another big acquisition this week, Centene acquired behavioral health provider Magellan for $2.2 billion. The investor presentation does a nice job explaining the excitement around the behavioral space at the moment - 15% - 20% of a payors medical spend is associated with behavioral, and medical spend goes up 2x - 3x when a member has a behavioral health diagnosis. Link (news). Link (investor presentation).

• Bright Health issued a jam-packed press release this week announcing that they’ve grown to 500k lives covered, acquired another MA plan in California with ~40k lives, and that they have a primary care platform that’s now operating 40 clinics. The growth and acquisition seem pretty straightforward to me. I’d expect Bright to continue on the acquisition path moving forward given the arbitrage play in valuations between venture backed health insurance startups and incumbent insurers. The PCP operating platform is quite an interesting development - I had no idea they were apparently building out their own MSO to operate primary care practices. I’m not sure I understand why they’re both signing up health systems as Care Partners and building this MSO for PCPs - they seem like conflicting strategies for care delivery partnerships moving forward. Link.

• Haven, Amazon / JPMorgan / Berkshire Hathaway’s healthcare thing, formally shut down this week. Chrissy Farr (link) and Olivia Webb (link), among others, have written very good pieces examining why Haven didn’t work out. In general it appears your reaction to this news feels like a Rorschach test for your views on outsiders disrupting healthcare - are you optimistic or skeptical? The optimistic view: you should applaud Haven for taking on a daunting challenge even if this effort ended in failure. The skeptical view: this was a predictable failure and incredibly easy to dunk on as you have a new entrant to healthcare taking a misguided approach to trying to disrupt the space. In general, I do think that attempts like this are a good thing and we should encourage more of them, although this effort seems like it could have better heeded learnings of previous employer coalitions to have more of a chance of success. Link.

• Hinge Health, the digital MSK platform for employers, raised $310 million after experiencing 3x revenue growth in 2020 while expecting another 3x growth in 2021. Hinge’s valuation jumped to $3 billion(!!!!) in this round, up from only $520 million earlier this year, a huge jump that seems to signal investor excitement in the space at the moment. I’m old enough to remember when Livongo went public at a $3.4 billion valuation and that seemed high at the time. Oh wait… that was only 18 months ago? Link.

• Hinge isn’t the only digital MSK platform growing like crazy, as SWORD Health released a press release this week that it saw 8x revenue growth in 2020 and is signing up 75% of employer clients that evaluate it. I can see why VCs are lining up to fund this market. Link.

• Walgreens announced it is accelerating its rollout with VillageMD, completing its $1 billion investment in the VillageMD. They’ll be opening 600 - 700 clinics over the next 4 years in 30 markets, with plans to open hundreds more long term. Link.

• Color raised $167 million and appears to be shifting its model from a consumer genomics company to a population health company providing genetic tests. Link.

• RapidSOS quietly raised $51.2 million for its emergency response platform for first responders. RapidSOS seems like it is poised to take off in the payer market given all the industry dynamics of the moment - imagine how excited payers will be at the thought of deploying their various in-home / care management programs at the point of a 911 call. Link.

• Aspen Rx, a platform for pharmacists to manage patient populations, raised $23 million. Link.

• Monument, a digital alcohol treatment platform, raised $10.3 million. Link.

• Hospitals sent a letter to the incoming Biden administration asking them to roll back regulatory changes, including the price transparency mandate as well as a number of other policies. Link.

• Hospitals aren’t the only ones this week complaining about regulatory changes, as payers are upset about the CMS proposed rule to streamline prior auths. Link.

• Cedar Gate Technologies, which just received funding from BCBS KC, just acquired Enli Health Intelligence, a pop health management platform. Link.

Opinions:

• I stumbled upon this ProPublica story from a few weeks ago telling the story of JaMarcus Crews, a Black man who was failed repeatedly by our health system, unable to receive a kidney transplant before passing away from COVID-19 last year. I’d recommend everyone subscribed here take a the time to sit down in a quiet spot and read it. It is one of the most difficult things I have read in quite some time - I simply cannot comprehend how this sort of outcome appears to be acceptable for the healthcare system in this country. I mean, just read this paragraph:It’s all just so damn heartbreaking. I can’t help but wonder whether one of the long term impacts of for-profit, virtual first, employer-centric healthcare innovation is that we’re going to exacerbate the social inequities that already exist in healthcare in this country. This article sure seems to illustrate how that can happen with devastating consequences. The points raised about the inequities in kidney care that are now baked into the very technology used to deliver care serve as a reminder that we all need to be cognizant of how some virtual-first innovation may be worsening the gap between haves and have nots in this country. Link.

• Andreessen Horowitz released a ton of content about how “it’s time to heal”. I can’t say I’ve waded my way through all of the content yet, but there’s definitely some interesting stuff in there. The predictions article has some interesting thoughts generally in line with other predictions (virtual care delivery on the rise, the importance of healthcare in the home, etc). Julie Yoo’s presentation on the tech stack for virtual-first care is definitely worth checking out, particularly the section arguing that the new dominant go-to-market strategy will be selling an infrastructure layer to other digital health companies. Check out the market map below of startups working on this infrastructure play. I have a hunch Andreessen is going to do very, very well with this thesis over the next few years. Link.

• This is a good article by Chris Hogg discussing the future of virtual care models. Lots of interesting thoughts in this one, also touching on the rise of infrastructure companies enabling virtual care delivery. Two questions I keep wondering in my head are on his points around the rise of population-specific care models such as Folx and Spora. How many different companies will emerge following this approach / for which populations? And how long will it be before we start experiencing the headaches of fragmentation and yearn for the re-bundling of care delivery? Link.

• This is an interesting read from Venrock folks on how healthcare innovation can be driven either by regulatory change or by a combo of aligned economic incentives and availability of data. I personally wouldn’t put availability of data on equal footing with aligned economic incentives in terms of their importance driving innovation. Without the economic incentives, innovation doesn’t get off the ground. Without quality data, innovation is certainly hamstrung, but as long as the economics are there people are still going to attempt it. Regardless, it’s worth checking the article out and thinking through. Link.

Data:

• McKinsey wrote a good piece on new business models in healthcare, including payers that are building next gen managed care models and health systems that are moving beyond the four walls of the health system. This is quite an interesting chart on their projected growth rates across various segments in healthcare the next few years. McKinsey sees data analytics, Medicaid, and virtual care growing 10%+. They see a number of categories shrinking, including hospitals, group and individual insurance markets, and post acute care among others. Link.

• KLAS released a survey of 277 providers, payers, and employers to get their thoughts on virtual care vendors. Interesting to see so many respondents feeling unsatisfied with their current options. Link.