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MY MUSING
AI and the nuances of reinventing primary care
For as long as I can recall, the healthcare industry has been talking about reinventing the front door to healthcare in this country. Entrepreneurs breathlessly share how their new approach will allow us to reframe how people access high-quality care at a low cost, solving the riddle of the iron triangle in health care for once and for all. Incumbents fret about the potential disruption to their business model and bring in armies of consultants to present the safe path forward to Boards. To date, these disruptive threats seem to end in one of two ways: either they flame out or the shift to enable the incumbents. It turns out that the iron triangle is a pesky concept, and once you can no longer subsidize losses using VC cash, you’re forced to make hard decisions about which lever to give up on. Around and around on this merry-go-round ride we go.
A previous iteration of this story reached its conclusion this week, as Carbon Health filed for Chapter 11 bankruptcy early in the week. Recall that at the peak of the Carbon narrative in 2021, it articulated a vision of having 1,500 clinics open by 2025, on its way to becoming “the greatest modern healthcare company in the world”. With the benefit of hindsight, it seems clear that the reality was that Carbon was buying urgent care clinics at a premium valuation on the heels of COVID, pressing the gas on an unprofitable business while driving straight off a cliff. One of the ironies of rebuilding a new approach to healthcare is that at the time of bankruptcy filing, the two largest equity shareholders in Carbon appear to be VC fund DCVC (~13.6%) and everyone’s favorite disruptive healthcare entity, CVS (12%). CVS of course led Carbon’s $100 million Series D round in January 2023, at which time Carbon was reportedly valued at ~$1.3 billion, down from its peak of $3.3 billion in 2021. Sometimes you still flame out even when trying to enable the incumbents.
These sorts of efforts from visionary entrepreneurs always seem to attract outsized attention in the industry, and it is not hard to see why. The problem here is very real, and the allure of solving it is immense. KFF provided yet another reminder of this dynamic this week, highlighting the story of a Boston woman whose PCP passed away, leaving her in need of a new PCP for her blood pressure meds. After calling ten separate practices, the earliest any could see her was 1.5 to 2 years out because there aren’t enough primary care doctors in Boston. I cannot fathom how that sentence is true, but apparently it is.
AI enters the chat: the next disruptive threat
2026 seems destined to present the next credible disruptive threat to solve this issue, as AI-enabled primary care models are gaining traction and investors are starting to place massive bets in the market. I’m guessing that we’re going to be talking about these companies a lot this year.
The latest news this week was that Lotus Health AI raised $36 million from Kleiner Perkins and CRV to launch an AI-centric primary care provider. The narrative is certainly appealing: use AI to 10x what a PCP can do and open up free access to primary care for everyone. Once again, we see an appealing solution emerge to that old pesky issue presented by the iron triangle — free, high-quality care for everyone? Sign me up!
I was excited to get a glimpse of this reality when signing up for Lotus on Wednesday night, only to be put on a waitlist. Why? Per the app, the unnamed human PCPs behind Lotus’s AI were apparently at capacity and not accepting new patients. There’s a certain irony to a company releasing hype videos about how it is reframing access to healthcare while suffering from the very same challenges the industry has (as of Sunday, I’m still on the waitlist). As always, the devil is in the details with these narratives.
A path forward for AI-augmented care
Despite the challenges that we should all expect nascent models may run into — and there are many — I don’t think that is a reason to shy away from using AI in primary care. We shared a guest post this week from Andy Slavitt and Toyin Ajayi, making that exact point specifically as it relates to low-income populations. The potential for good, if done right, is immense. Of course, there are going to be risks and challenges associated with deploying AI. All of us will inevitably grapple with those challenges in the years ahead. Slavitt and Ajayi paint a sensible path forward here, noting that “the strongest results come from AI-augmented care, not AI replacing clinicians”.
Let’s turn back to Boston for a second, as institutions in that city appear to be on a bumpy path towards rolling out the concept of AI-augmented care. Mass General Brigham is a good example of this — primary care providers have been seeking to unionize, unhappy with work conditions. Early in 2025, MGB pledged to invest $400 million over the next five years to support the primary care workforce. It has also rolled out an AI virtual offering via a partnership with K Health, which seems to have further upset at least some MGB PCPs, who suggest that instead of paying a startup, they could also just pay MGB’s PCPs better and hire more. It’s a refrain I remember well from my days at a health system, back when organizations like One Medical and Oak Street were viewed as potential solutions to the front door challenges in healthcare.
That MGB example seems to get to the heart of the issue here. It’s not hard to envision why MGB leadership might choose to implement an AI solution to increase access, but again, the details matter here. Imagine going to a PCP at MGB and gleefully telling them that AI will 10x their panel size, from something like 2,000 to 20,000 patients. Meanwhile, they’re trying to unionize because they already feel overworked and underappreciated. I’m guessing they’d look at you like you have eight heads.
The core issue these AI-centric models will need to figure out over the coming years is not necessarily technical, but rather organizational design. For a primary care workforce that feels overburdened and underpaid as the loss-leader for the industry, 10x’ing the capacity of that workforce will require building trust more than it will building tech.
A learning lesson from Intuitive Surgical’s success
I find myself talking a lot these days about the entrepreneurial journey of Intuitive Surgical. The leading surgical robot platform has found incredible success by positioning itself as a tool for providers to deliver better care, see more patients, and, as a result, do better financially. It’s a value prop that has led to a ~24,000% increase in Intuitive's stock price since it went public in 2000. Intuitive is now worth $180 billion today. I suspect the winning companies in this AI-augmented care race in 2026 will develop a narrative very similar to Intuitive Surgical's, emphasizing how they augment, rather than replace, clinicians. Organizations that successfully do this strike me as like the care delivery organizations of the future — they’re the places clinicians will want to work for / with.
And yes, if you’re tracking along with the iron triangle references interspersed throughout here, that means the AI-enabled primary care winners will win on access and quality. That also means by default, they will increase costs, despite VC-subsidized fever dreams of free high-quality primary care for all.
MEDICARE ADVANTAGE
Devoted Health very quietly announces a very large funding round
In news that appears to have completely flown under the radar, Devoted Health announced that it raised $366 million in new equity funding and that it grew its Medicare Advantage book to over 466,000 members in January 2026, representing 121% year-over-year growth. If not for a Bill Frist LinkedIn post about the membership growth on Monday, I’m not sure I’d have noticed this anywhere.
It is rather odd that this announcement went out so quietly, and seemingly indicative of the uncertainty in the Medicare Advantage market. As a Venrock team noted in a December prediction in which they suggested Humana will crash in 2026 under the weight of new MA membership: “The problem with MA growth is that if you are not careful, you can lose a lot of money on new members.” Note that Venrock’s partners were part of the Devoted founding team going back to 2018, after leading Devoted’s seed round in 2017.
I don’t think many Medicare Advantage industry veterans would disagree with Venrock’s assessment of the profitability challenges of managing a new influx of MA members. The massive challenges that large MA plans have faced over the last few years serve as the most recent evidence. Couple that with the profitability issues posed by v28 for both plans and providers, and the fact that Devoted has been building its own in-house medical group, and it seems like a recipe for financial disaster.
So, needless to say, it is curious to see Devoted growing as quickly as it is, particularly in this Medicare Advantage environment. Presumably, Devoted feels it is growing the right way and will be able to manage through this membership influx, and I’d imagine Devoted’s technology platform plays a key part of that.
It’s also worth noting that Humana leadership appears to feel the same way. The question now is whether either of them are right, as both appear set for massive growth in 2026.
Public Markets Earnings Updates
Molina’s stock dropped 28% on earnings this week as it again missed earnings — after beginning 2025 guiding to $25.50 of adjusted EPS for the year, it came in at $11.03. The miss in Q4 was driven by a retrospective adjustment in California and continued medical pressure. On the positive side, it highlighted its RFP win in Florida, where it will be the sole partner for Children’s Medical Services, which is expected to be $6 billion in annual premiums. The pipeline of RFPs and M&A presents a huge growth opportunity for Molina, assuming the market stabilizes at some point. Molina believes 2026 will be the trough year for Medicaid margins and that it will still produce a low single-digit margin even in that environment. Molina sees brighter years ahead as states adjust rates for a market that is currently underfunded by 3% - 4%. Analysts in the Q&A didn’t seem as confident that the market would improve in the near term as states make program adjustments.
Centene’s stock dropped 10% on its earnings report on Friday as it works towards margin recovery across its ACA, Medicare Advantage, and Medicaid businesses. Centene again called out behavioral health trend as a key cost driver, but how it has been taking action to address costs in ABA therapy across states. Centene noted that it had to take an accrual for costs related to the No Surprises Act in the ACA business in 2025, driving up medical costs 1% for the year. It noted it filed a lawsuit this week against a provider in New York as providers extract profits via the NSA independent dispute resolution process. Centene expects ACA membership of 3.5 million at the end of Q1, down from December's 5 million, providing yet another indication of the contraction in the ACA market over the next few months. Centene noted it has launched a new operating model for Duals populations, which now is roughly 40% of its MA business.
Cigna ended the week up 7% after reporting Q4 results on Thursday, as it moves past uncertainty around PBM legislation and it drives growth, particularly in the specialty pharmacy market and rotates away from the challenging insurance market. Cigna highlighted a number of partnerships throughout its prepared remarks — from working with TrumpRx, to its investment in Shields, to collaborations with Progyny, Carrot, and Headspace in Cigna Healthcare. In the insurance business, Cigna highlighted the launch of a new co-pay only product, called Clarity, which is apparently seeing savings of up to 10% for clients. Yet another sign of the interest in alternative plan design offerings in 2026. Cigna’s specialty care offerings now make up 35% of the business, up from 25% only three years ago, driven by both general market trends and Cigna's deliberate prioritization of that business. It sees a significant opportunity shifting to biosimilars and specialty generics ahead. The FTC Settlement and PBM legislation news seemed a bit like non-news, as Cigna does not expect the business's margin profile to shift.
PACE provider Innovage saw its stock jump 50% this week as it beat earnings expectations and raised its full year EBITDA guidance for its Fiscal Year. It reported an Adjusted EBITDA margin of 9.2% in the quarter, an impressive feat in the world of capitated care delivery models. It’s going to be interesting to keep an eye on PACE in 2026 — in many ways, Innovage’s recent success seems like the exemplar of VBC performance, coming on the heels of challenging operational issues for the organizations in past years. PACE seems to have been relatively immune to some of the challenges facing other VBC markets, and it will be interesting to see if headwinds emerge as changes to MA and Medicaid filter into the program. The community discussion this week pondering whether this is a high-water mark for PACE was particularly interesting.
Doximity shares dropped 25% after it reported earnings Friday morning, despite beating the high end of guidance for both revenue and Adj EBITDA in the quarter — it generated $185 million of revenue and $111 million of Adj EBITDA, good for an impressive 60% margin. The momentum OpenEvidence has at the moment looms large on Doximity's performance as Doximity highlighted its AI growth narrative. At one point, Doximity’s CEO Jeff Tangney mentioned in the prepared remarks: “to be clear, no AI has eliminated mistakes or achieved anything near superintelligence.” Almost certainly, that was a thinly veiled shot at OpenEvidence’s recent talk track around building medical superintelligence. Despite the outperformance in this quarter (Fiscal Q3 2026), Doximity is not raising guidance for the FY 2026, because it expects lower Q4 revenue and increased AI investment. The reason for the lower Q4 revenue is apparently market uncertainty over policy headwinds and adjusting the timing of contract cycles. Doximity intends to commercialize its AI offering in 2026, citing impressive traction — 300,000 quarterly active doctors and 100 hospitals using it. As much as OpenEvidence may wish otherwise, it doesn’t seem like Doximity is going anywhere anytime soon. It was particularly interesting to note that one analyst asked whether Doximity even needs to be a public company, given the strength of its balance sheet and how the public markets are valuing it at the moment, and Tangney noted that investors are asking the same question of Doximity.
Chart of the Week: The Haves and Have-nots of Hospital Margins
The Hoosier State is having an interesting conversation right now about its hospitals. Kaufmann Hall shared a presentation highlighting the plight of hospital finances, noting that margins were below the national average in 2025.
Given that, it was also interesting to see the Employer’s Forum of Indiana’s response, which shared data showing that almost 20% of Indiana hospitals earned a net profit margin above 20% in 2024. The chart below highlights the profitability across all hospitals.
Source: Employer’s Forum of Indiana
Parkview Orthopedic Hospital in Fort Wayne leads the way in Indiana, reporting $186 million in revenue and $117 million in operating expenses in 2024. That equates to $69 million of operating income in 2024, or a 37% operating margin.
If you are scratching your head, wondering how a not-for-profit hospital in Fort Wayne, Indiana, is earning an operating margin that equates to best-in-class SaaS margins, join me.
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Other Top Headlines
CommonSpirit made waves in the RCM space this week by exiting its relationship with Conifer Health Solutions and insourcing its RCM function. Tenet, which owns the majority stake in Conifer, will pay CommonSpirit $540 million to buy CommonSpirit’s 23.8% ownership stake in Conifer as part of the deal. CommonSpirit will pay $1.9 billion to exit its contract with Conifer Health Solutions. Given the amount of activity in the RCM market at the moment, it is interesting to see CommonSpirit choosing to pay a high price tag to bring RCM back in-house. While Conifer, Ensemble, and others are pitching the benefits of an end-to-end partner for RCM, I can’t help but wonder if we’ll see more systems head in this direction. It almost seems like a net positive for some “point solutions” as systems look to their internal teams to make build/buy/partner decisions and presumably bring in best-in-class partners.
Hims had an incredibly bizarre week this week that had me scratching my head, wondering “is that legal?” more than any company I can remember in recent history. Of course, the big news was that Hims launched a compounded GLP-1 pill on Thursday morning for the low price of $49 per month. This news, which coincided with Novo Nordisk’s earnings session, sent both Eli Lilly and Novo Nordisk stocks down, while Hims’ stock jumped 9% on the news. That bump was short-lived as the market learned more and started questioning both the legality of the move and whether the product would even work. The announcement prompted a swift reaction from both the FDA and HHS. After Hims ultimately pulled the product from the market late on Friday, but not before being referred to the DOJ for investigation. Ultimately, Hims’ stock is trading down 30% on the week as I write this on Sunday morning. It’s going to be fascinating to see where this company goes from here — this week felt like a major tactical error on their part.
HCA is acquiring thirteen urgent care centers and six free-standing EDs in Texas. HCA now operates 95 urgent care sites in Texas and 400+ nationwide.
President Trump signed a new funding package this week, which includes funding for telehealth and an extension of hospital-at-home waivers, along with transparency requirements for PBMs.
Cigna’s Express Scripts reached a settlement with the FTC this week in a case regarding the cost of insulin in the US. As part of the settlement, Express Scripts agreed to make certain changes, including more transparency and reshoring its GPO operations from Switzerland to the US. While it’s being hailed as a landmark settlement, analysts didn’t seem to be concerned with the impact on Cigna’s model at this point.
TrumpRx officially launched this week. Casey Langwith shared some great perspectives on LinkedIn this week, looking at both the consumer experience and the operational mechanics of the offering.
Fair Square Medicare was acquired by Senior Market Sales, a brokerage that is part of Alliant Insurance Services.
Funding Announcements
Devoted Health quietly announced $366 million in new funding, along with 121% year-over-year growth in Medicare Advantage membership to 466k members. The round was led by The Space Between and Centricus. GV, VZVC, and Morgan Health were among the new investors here. See discussion above.
Elara Caring, a provider of skilled home health, hospice, and related services, announced a strategic investment from DaVita and Ares. DaVita noted on its earnings call this week that it invested $200 million in a minority stake here, which seems like an interesting signal about the opportunity in the home health market for kidney care. Elara has had issues with its debt burden over the past several years and underwent a distressed restructuring in December 2022.
Midi, a women’s health company best known for menopause care, raised $100 million at a valuation of $1+ billion. Goodwater Capital led the round. It’s an impressive milestone for Midi, which noted in its announcement that 45+ million women have access to Midi via insurance, and it is seeing 25,000 patients per week.
Chamber Cardio, a VBC platform for cardiologists, raised $60 million. Frist Cressey led the round, with General Catalyst, AlleyCorp, and others participating. Fierce Healthcare notes that Chamber supports a network of 500+ cardiologists. Worth keeping an eye on momentum in the specialty VBC market, given CMS interest in these models at the moment.
Alaffia Health, an AI platform for health plan claims processing, raised $55 million. Transformation Capital led the round. Alaffia reports seeing 20%+ average savings on high-cost facility claims and 5x+ ROI for health plans.
Lotus Health AI, an AI primary care provider, raised $36 million. Kleiner Perkins and CRV led the round.
Synthpop, an AI administrative platform, raised $15 million. Ansa Capital led the round.
Climatic, a wellness model for respiratory health, raised $10 million. Lerer Hippeau led the round.
Graici, a platform supporting Medicaid renewals and redeterminations, raised $7.5 million. Santé Ventures led the round.
What I’m Reading
We helped create Medicare Advantage. Here’s how to fix it by Donna Shalala and Tommy Thompson
Two of the architects of what became MA twenty-five years ago argue that flawed policy is putting the program in jeopardy. Given the amount of political dialogue hammering MA the past few years, it seems notable that we’re finally starting to see people come out to defend the merits of the program.
Read more
AI in Healthcare Could Be More of the Same — Or It Could Finally Fix What Really Matters by Andy Slavitt and Toyin Ajayi
Andy and Toyin shared a guest post on HTN arguing for the thoughtful deployment of AI in low-income populations.
Read more
High-Deductible Health Plans and Mortality Among Cancer Survivors by Justin Barnes, Arjun Gupta, and Meera Ragavan
This JAMA Network Open study suggests that having a high-deductible health plan is correlated with worse survival outcomes for cancer patients, positing that the driver might be that the financial barriers associated with HDHPs are causing people to forego needed medical care.
Read more
The Scribe That Launched a Thousand Takes by Brendan Keeler
Brendan digs into Epic’s much-anticipated AI Scribe product launch that occurred this week and the broader implications of the AI-centric change afoot in the industry.
Read more
What a time to be an oncologist by Olivia Webb Kosloff
Olivia shared a good perspective on the implications of approaches that seek to monetize provider attention, specifically in this case, focusing on the industry interest in oncologists. I think it’s worth spending some time on the questions raised in this piece, particularly thinking about why drug wholesalers seem so interested in acquiring specialist providers lately.
Read more
HTN Radio
We heard from a number of you that you’d prefer listening to Martin and I muse about healthcare topics with each other and industry leaders in podcast form instead of YouTube. Well, if that’s you, today is your lucky day — you can now check out Health Tech Nerds Radio on your favorite podcasting platform. Here’s the Spotify links to a couple of recent episodes:
If you still prefer watching us on YouTube, check out the latest Grand Roundup here:
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