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Kevin’s Note: I’ll be spending some time with my family for Christmas and taking next weekend off from writing the Sunday newsletter. You might get one or two bonus articles from me, depending on how long naptimes go (for the kids, and for me too I suppose).
I hope everyone has a safe, healthy, and happy holiday season 🎊
PS - If you’re missing this newsletter the next few weeks, I’d encourage you to join the HTN community, where you’ll find 5,000+ other nerds and me discussing the news below and more. Here are just a few of the other things we were thinking about this week:
One Big Thing: A New AI Conglomerate Emerges on Walden Pond
New Mountain Capital’s Matt Holt departs and plans to acquire five of its healthcare AI assets for $30 billion, per Reuters
Per Reuters, New Mountain Capital’s Matt Holt is departing the firm with plans to create a new firm called Thoreau. Thoreau is apparently in talks to buy five health tech assets for $30 billion in total, with backing from ICG.
The five assets mentioned, in chronological order of New Mountain’s investment:
Datavant. Data platform. New Mountain backed the merger of Datavant and Ciox in 2021.
Swoop. AI omnichannel engagement platform. New Mountain spun this out of Real Chemistry, which it also owns, in early 2024.
Machinify. Payments platform that New Mountain acquired in January 2025 and combined with Rawlings, Apixio, and VARIS
Office Ally. Claims clearinghouse and software provider. New Mountain purchased a stake in April 2025.
Smarter Technologies. RCM platform that New Mountain brought together in May 2025 via SmarterDx, Thoughtful.ai, and Access Healthcare
I put that list in chronological order because, with the benefit of hindsight now, I think you can almost see this thesis forming in Holt’s head, particularly in early 2025 as he made investments in key pieces of an AI-centric platform for healthcare — payments, claims processing, and RCM. Couple that with earlier investments in a data platform (via Datavant) and a front-end engagement offering (Swoop), and you’ve got key building blocks of a massive healthcare IT platform.
It sounds like Holt is very bullish on the set of businesses here, enough to give New Mountain an attractive exit opportunity that creates a win-win for Holt and New Mountain, and allows both parties to move on amicably. Per Bloomberg, New Mountain shared a letter with its investors discussing the transaction. It will apparently receive $12 billion in cash and $2 billion in equity in Thoreau, resulting in $8.5 billion in gains on the assets. Seems like a nice gain, particularly given the recency of some of the moves.
✍ Going Deeper
I spent part of my Friday re-reading this recent interview between Venrock’s Bryan Roberts, Siobhan Nolan Mangini, and Matt Holt. If you apply Holt’s commentary to the transaction here, it seems like you can map out the strategy Holt is applying here pretty clearly. Notably, the move here very much strikes me as a continuation of the thesis that Holt deployed at New Mountain Capital over the past 25 years, which Nolan Mangini described as “deploying a lower leverage, growth-first ethos, and the ability to hold and build companies via continuation funds without the usual exit pressure.”
When thinking about this transaction via the lens of a continuation fund — and noting that a key part of ICG’s business is private equity secondaries — I think it’s pretty clear what Holt is doing here in terms of moving these assets into a new vehicle he can hold and manage over a long period of time. It all hints at the opportunity he sees to turn these businesses from a $30 billion asset into something much larger. I’d imagine the quote below describes well the broader market opportunity he sees in AI transforming the industry:
I’d say within broadline healthcare, if you look at the explosion of jobs in the US healthcare industry, it’s not physicians. It’s all of the administration professionals that are sitting in the administration functions running all aspects of health insurance plans, employers, providers, the full supply chain. And what’s happened is the regulatory complexity has become a tax on the industry. Because it’s so complex, the amount of labor that’s had to go in just to keep up with the regulations has become a cost that we estimate as $500 billion. Ultimately, that’s the administrative bloat, for lack of a better word, that’s burdening the system. And causing things to take a long time and causing things to be very, very expensive. And so, my view is AI at large is very, very good at speeding up data analysis, cutting out administration inefficiency. And the US healthcare industry is the number one market with respect to high-cost administration processes taking a long time. I’m an optimist that we may be entering an incredibly positive time over the next five to ten years if we can harness these tools to take out the cost, speed things up. And then, ultimately transform the industry to a more outcomes and health-based sector.
As an aside, I always wonder what would happen if this AI-centric thesis did indeed play out? I generally agree with the perspective above on the bloat in administrative roles, as I’m sure many readers would as well. I’m also fairly certain that $500 billion in administrative bloat is what has so many investors foaming at the mouth over AI investment opportunities.
But I also think that leaves out the most challenging piece of the $500 billion bloat reduction opportunity, which is that healthcare in so many ways has become a jobs program in this country. I’m sure many readers will recall the NY Times article from earlier this year that highlighted how healthcare organizations have become the dominant employers across the country.
If the thesis holds that we can save $500 billion in healthcare waste via automation, it seems to make the unsaid part of the bloat reduction thesis critical: that savings will only be achievable if AI replaces a massive chunk of the workforce in this country. It is really hard for me to think through how that transition will unfold over the coming decades without triggering ( / being part of) a catastrophic financial event for the broader US economy.
I’d like to find someone out there who can walk me through why this isn’t the case, without pitching me that their AI agents are the solution to this societal conundrum. Every time I think it through and discuss it with folks, we seem to come to the inevitable conclusion that this all breaks down at some point in the future, and that will be a pretty bleak moment societally.
My broader existential dread, of course, has little specifically to do with Matt Holt’s investment here — I imagine he is going to do quite well building AI infrastructure over the next decade. Which, when coupled with the workforce issue above, only amplifies the point about the runaway train that is US healthcare.
Quote of the Week
Olivia Webb Kosloff shared an interesting piece on cell and gene therapies on Acute Condition, pondering if the high cost of therapies will force us to rethink insurance as a whole. I thought the quote below was a fascinating one, highlighting a general sentiment I’d very much agree with:
If 2010s were focused on value-based care, the 2020s vibes are turning toward high cost, fix-all therapeutics. And that completely changes the calculus of reducing the cost for patients.
The 60 Minutes coverage of CGT last Sunday provides a great example of Kosloff’s general sentiment here. So does the recent emphasis on specialty pharma by Cigna and CVS as key pieces to their respective growth strategies moving forward. It seems quite clear that we’ll see a lot more investor activity over the next few years.
Back in the early 2000s, there was a similar discussion around how new medical technologies might break the Medicare bank. Breakthrough technologies like Left Ventricular Assist Devices (LVADs) were coming to market at high price tags, offering incredible benefits to the people receiving them. Rather interestingly, a key figure in the discussion of LVAD costs was a cardiothoracic surgeon whose name will be familiar to many readers today: Dr. Mehmet Oz.
As Oz put it back in 2003, the key question he was asking then was: "What is the price of a human life?"
It certainly seems like cell-and-gene therapies will cause us all to revisit that question over the coming years, along with the many philosophical and practical implications of whatever your answer is. While I am mostly terrified about how this conversation is going to go societally (yes, my existential dread is a common theme here), I must admit I am a bit excited to debate QALYs with y’all more.
Other Top Headlines
Humana announced this week that long-time Medicare Advantage leader George Renaudin is retiring in 2026 and will be replaced by Aaron Martin, who will join Humana after spending the past few decades in roles at Amazon and Providence. Given the amount of intrigue surrounding Humana’s MA business in 2026 and its ability to handle an influx of new members as other plans retreat, the timing of this move is fascinating. Going back to Humana’s Investor Conference in June, this move seems consistent with Humana’s desire to become known as a consumer business over the next five years. I’m not sure I can recall a scenario in the years I’ve written this newsletter where the range of opinions on outcomes for a business is such an extreme barbell distribution — it seems like Humana’s leadership team is either going to be viewed as Babe Ruth calling their shot or the leading example of the “you had one job” meme. There is not much middle ground here. Personally, when I see a long-time business leader retiring in the middle of a critical year for that business, while it pursues a strategy that has crippled its peers over the past several years, I think there’s a growing pile of evidence suggesting this will not go well for Humana. Humana will report Q4 2025 results in February, at which point we should hear its 2026 guidance, which will be fascinating to watch.
CMMI continued its streak dominating the headlines this week. It announced the LEAD Model, a 10-year voluntary model that will launch on January 1st, 2027 as ACO REACH ends.
CMMI also shared its Request for Applications for ACCESS, which provides much more detail on the mechanics of the program
Cencora announced a definitive agreement to acquire the remaining stake in OneOncology from TPG. The deal values OneOncology at $7.4 billion. Cencora is acquiring the outstanding stake for $3.6 billion and will retire $1.3 billion of debt, bringing Cencora’s total cash outlay to ~$5.0 billion. Cencora raised its long-term operating income guidance as part of the transaction. TPG and Cencora (then known as AmerisourceBergen) originally acquired OneOncology in April 2023, with TPG acquiring a majority stake and Cencora acquiring a minority stake for $2.1 billion. That deal included a put/call structure for Cencora to acquire 100% of OneOncology in three to five years, meaning that Cencora and TPG accelerated that transition here.
Evensun’s Wesley Sanders highlighted that Kaiser has entered into a consent decree with the Georgia Department of Insurance to pull Kaiser’s on-exchange plans from the market, presumably because Kaiser’s enrollment is running very hot, raising concerns about whether Kaiser priced correctly. Sanders post explains well some interesting nuances in the metal level mix and the challenges Kaiser is likely experiencing here.
The DOJ announced last Friday that two individuals in Arizona were sentenced to ~15 years in jail, with each required to pay $600+ million in restitution for a $1.3 billion fraud scheme involving skin substitutes. Per the 2024 indictment, they fraudulently billed Medicare and other payers over $900 million for applying skin grafts to only ~500 patients(!!) between 2022 and 2024. Yes, that math equates to roughly $1.8 million in payments per patient for skin substitutes. I’m rarely surprised by healthcare shenanigans these days, but I am gobsmacked by this one (and also why there is so much pushback against WISeR given cases like this).
HealthcareDive reports that Optum and Humana are at odds over a network contract in Washington state.
Funding Announcements
Tebra, an EHR / practice management platform for indpendent providers, raised $250 million in equity and debt financing. Hildred led the equity financing. Tebra was formed in 2021 as the new brand for Kareo and PatientPop following their merger. Tebra notes that its core business is now profitable, and the funding will be used to further monetize its installed base of 140,000 providers.
Codoxo, an AI payment integrity model, raised $35 million. CVS Health Ventures led the round.
Valerie Health, an AI front door for independent provider groups, raised $30 million, led by Redpoint Ventures. Valerie reports that practices are growing 5% to 7% faster using its tooling. Business Insider shared the pitch deck for this funding round, which is worth perusing. The slides highlight one of the core challenges in the narrative about supporting independent provider groups. While Valerie’s mission centers on supporting independent practices so they can thrive, its go-to-market strategy is to sell to PE-owned clinics. By definition, I think the go-to-market approach is in direct conflict with the articulated mission. While I can certainly appreciate the financial rationale for targeting PE-backed clinics, I also think helping PE-owned clinics scale faster is a fundamentally different concept from supporting providers thrive independently.
Drive Health, an AI agent for clinical workflows, raised $15 million. Vitalis Ventures led the round.
Clarity Pediatrics, a virtual care model for kids, raised $14.5 million. Jackson Square Ventures led the round.
Leona Health, an AI copilot for providers using WhatsApp in Latin America, raised $14 million. a16z led the round. TIL that patients in other countries communicate with their providers via WhatsApp, which is a problem for providers who are overwhelmed by the messages they’re receiving. Seems very Doximity-esque to me in its utility for providers.
Auxira Health, a virtual cardiology platform, raised $7.8 million. Route 66 Ventures and Abundant Venture Partners co-led the round. Auxira was co-created by MedStar and Abundant, with Abundant spinning out MedStar’s connected cardiology program to sell it to other health systems and cardiology practices. Auxira is the first initiative that is part of the venture platform Abundant announced earlier this year with seventeen provider organizations, including MedStar and others. It’ll be interesting to see if any of those sixteen other provider organizations are early adopters here.
First Voyage, the app developer behind Momo Self Care, an AI digital pet encouraging self-care, raised $2.1 million. a16z speedrun and SignalFire were among the investors here.
Vivoro, a GLP-1 telehealth startup, quietly launched in Charlotte. It has 150 patients in its first month and plans to scale to a few thousand in 2026.
What I’m Reading
The Costs Are Too Damn High: Responding To Affordability Pressures In ACA Markets by Scott Heiser, Rahul Rajkumar, and Bob Kocher
A thoughtful set of suggestions to help stabilize the ACA market. It’s a good reminder that Obama referred to the ACA as a “starter home” that inevitably would need improvements over time. These seem like thoughtful suggestions for remodeling the house without requiring a move to a new home.
Read more
Employer Approaches to GLP-1 Coverage by Peterson Health Technology Institute
PHTI wrote a helpful white paper on the current state of GLP-1s, with recommendations for employers.
Read more
What 101 Healthcare C-Suites are Planning for Value-Based Care in 2026-2027 by Sage Growth
Interesting survey results on how health system leaders view VBC at the moment, suggesting most health systems plan to increase VBC activity in 2026. Read more
Annual Wellness Visits and the Economics of Prevention: Insights from a Longitudinal Study of Medicare Enrollees by Hunter Schouweiler, Luis Arzaluz Angulo, Stephen Gates, and Luke Barnes
A report from Wakely looks at how Annual Wellness Visits were associated with lower Total Cost of Care for Medicare beneficiaries.
Read more
Premier Data Shows OBBBA Will Trigger a $68 Billion Hospital Revenue Impact by Premier
Premier published an article exploring the impacts of OBBBA on hospitals, breaking down the impact by state. It projects that some hospitals could see net patient revenue reductions of more than 20% as a result of shifting revenue across commercial, Medicaid, and uncompensated care.
Read more
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