HTN Weekly Health Tech Reads 1/9

Vera acquires Castlight, Nomi acquires Artemis, a defense of Medicare Advantage, perspectives on staffing shortages, & more

If the first week of the year is any indication, 2022 is going to be an incredibly active year for health tech innovation. Already we're seeing the emergence of what feels like some key themes for the year - employer solution consolidation, a big Medicaid funding round, more debate on Medicare Advantage, telehealth bubbles bursting, and staffing shortages.

The HTN Slack Community has a pretty incredible dialogue going on each of these topics, so if you want to join a group navigating these changing waters together, join us here.

News:

  • Vera Whole Health, the employer-focused primary care startup that recently received a big investment from PE firm Clayton, Dubilier, & Rice and Morgan Health, announced it is acquiring Castlight Health for $370 million. It seems like a shrewd move for CDR to roll-up a once high-flying but now struggling asset in Castlight with some key contracts and capabilities that augment Vera’s primary care model, as the combined entity presumably looks to take on risk and manage an employer’s overall healthcare spend. In a market where employers are having a hard time distinguishing various digital health solutions and every vendor is competing to be the employer’s trusted partner, combining Vera and Castlight creates a broader solution to sell to employers. It’s not hard to imagine CDR rolling-up additional assets into this entity at the right price – at some point, entities like Vera / Castlight will likely seek to become the health plan itself for employers, with capabilities like on-site / near-site clinics, navigation, etc as a means to manage spend. More broadly, this should serve as a good reminder of what happens to valuations when the growth music stops for digital health startups. Castlight was acquired for around 2x 2021 revenue – a relative pittance compared to the valuations that employer-focused startups are seeing on the private markets. As the market matures and growth inevitably slows at these startups, it should raise questions about what will happen to those valuations. While that market trend shakes out broadly, I expect we’ll continue to see private equity groups look to roll-up digital health assets at reasonable valuations when compared to the private markets. It’s a smart play on their part. Link (announcement). Link (Castlight SEC filing).
  • Nomi Health, the fast-growing and politically-connected COVID-19 testing startup that is fresh off a $110 million funding round, acquired employer data analytics vendor Artemis for $200 million. You don't have to squint hard to see the trend here between the Vera / Castlight deal and this - well-financed pieces of the puzzle deploying capital to round out their offering in an attempt to become the dominant employer platform. We're going to be seeing a lot of that this year. Seems like everyone is in a race to get to a scale that survives the coming inevitable valuation crunch when growth stops. Link.
  • Medical device manufacturer Stryker acquired Vocera, the hospital communication and workflow company, for $3 billion. Interesting to see these two companies with deep relationships at hospitals combine forces to create a more integrated offering across devices, equipment, and technology. Link.
  • Humana's stock price took a hit this week as it revised down its projections for Medicare Advantage membership growth next year. With all of the competition seeking to attract MA lives, I'd expect a lot of board room attention on which insurers are gaining share. Seems like we could see more growth via acquisition this year. Link.
  • IBM is looking at spinning out Watson Health as it looks to focus on its core cloud strategy. Link.
  • Babylon completed its acquisition of higi that was mentioned back in Babylon's SPAC filing. Link.
  • Privia is entering into capitated MA contracts on behalf of two of its ACOs in Florida and the mid-Atlantic. Link.
  • Two Midwestern behavioral health providers are joining forces as Acadia Healthcare acquired CenterPointe Health. Link.
  • HCA purchased an urgent care chain in Florida. Link.
  • Elizabeth Holmes was found guilty on 4 counts of fraud this week in court. Link.

Funding:

  • Waymark, a new model leveraging community health workers to support Medicaid populations, raised $45 million. Super cool to see a community health worker model get such significant backing - as the article notes, we've seen community health worker approaches find success in small scale settings (i.e. if you've never heard of IMPaCT you should change that because its awesome), but it has been a challenge for them to scale. The article provides some good insights on the challenges of scaling in Medicaid regarding margins and patient churn. As folks who have worked with Medicaid / exchange populations can attest, the churn makes continuity of care really challenging. That patient churn element is a big part of what has made Medicare Advantage so appealing financially (where churn is very low). 2022 feels like a big year for Medicaid innovation - its wild to see a company getting $45 million right out of the gates. Link
  • Little Otter, a virtual behavioral health model for kids, raised $22 million. Link.
  • Kiddo, a remote patient monitoring platform for kids, raised $16 million. Link.
  • ianacare raised $12.1 million to support family caregivers. Link.
  • Kiira Health, a virtual care model for young women, raised $4 million. Link
  • Labrador, an in-home robot assistant that looks a lot like a bar cart, raised $3.1 million to support aging-in-place, among other things. Link.

Opinions:

  • Here's an interesting (and quick) Substack read on the topic of heart failure readmissions. The most interesting part to me? The mention of the rural community that is doing really well managing heart failure readmissions. Did a virtual first care model come to town to save the day? Nah. They had an awesome nurse (working on a grant) who made a list of the patients, spent time with them, and built trusting relationships with them. For all the new care delivery models raising massive funding, it's a good reminder that healthcare is both that easy, and that difficult. All the tech platforms and data analytics and whatnot are great, but at the end of the day a lot of this still comes back to a relationship between one individual and another. Sometimes it seems like that is forgotten in the startup hype cycle these days. Link.
  • It took all of three days into 2022 to get our first "telehealth bubble bursting" article. It's a good read, and raises some interesting points - particularly around how health systems rushed to adopt telehealth solutions in response to COVID, and are now rethinking their strategies. Seems like a major headwind for digital health companies that are selling to health systems. Link
  • George Halvorson, former CEO of Kaiser Permanente, penned a passionate response to the Gilfillan / Berwick Medicare Advantage money machine articles. The substance of the response felt a bit underwhelming - a bit of a red herring - avoiding the money machine debate raised in the initial argument. The response focuses on the fact that Gilfillan / Berwick did not discuss quality gains driven by Medicare Advantage, which does seem like a fair critique (and is one I'm certain we'll hear more of from payors / providers). But once you get past that, the critique of Gilfillan / Berwick's understanding of the financials doesn't have much substance refuting the detailed case Gilfillan and Berwick laid out regarding the money machine. I'd love to see Halvorson refute the data presented in the original argument - rather than link out to a few studies - to better understand what specifically he thinks Gilfillan / Berwick have wrong. Link.
  • Rock Health released a fashionably late 2022 trends piece that is worth checking out, especially the predicted rise of digital health marketplaces, both for consumers and enterprise. The consumer side is more interesting to me - as D2C startups proliferate, it seems like this navigation layer will need to emerge and I'm going to be curious to see how that happens. The consumer company they mentioned as an example, Live Better With, looks really cool. Link.
  • Here's one more predictions piece, this one on the changing health and wellness landscape. It's a really good read if you're interested in how the wellness industry and healthcare industry might collide over the next few years. Feels like we're still in the earliest innings of consumer brands emerging in the healthcare space - Ro seems to have a leg up in the race at the moment - and we're going to see a lot more of this for people who can afford it. Of course, it also raises a bunch of questions about what healthcare looks like for those who are outside the consumer brands core demographics. Link.
  • This is a solid read behind the Business Insider paywall on tech's entry into healthcare, some of the challenges that have plagued the approaches, and how they might make progress in 2022. I love Sachin Jain's suggestion that a big tech player buys a health system. Of course, I'm not sure buying a health system these days is actually a wise decision financially, but it sure would be fun! Link
  • Matthew Holt documented his confusing billing experience after a One Medical visit. The user experience outlined here leaves a lot to be desired. Link.
  • The healthcare workforce appears like it is being pushed to the brink by Omicron, as hospitals are struggling to find staff. Link
  • Meanwhile, this article highlights how in addition to Omicron issues, hospitals are struggling with paying rising wages. Link.

Data:

  • A JAMA article on the dysfunction of employer insurance markets, arguing that the insurers who manage employer health spending are incentivized to have spending increase, as the chart below indicates. Link.
  • This JAMA study looks at NYU Langone's acquisition of Lutheran Medical Center, finding that the integration helped improve quality outcomes at Lutheran, unlike many hospital acquisitions. Link.
  • This Health Affairs study finds that calling people during open enrollment can increase enrollment rates. Link.

Featured Jobs:

  • CVS Health is hiring a Senior Manager of Strategic Enterprise Growth. Link.
  • Included Health, the LGBTQ+ focused virtual care provider, is hiring a Regional Vice President of Health Plan Solutions. Link.
  • One Medical, the tech enabled primary care company, is hiring a Director of Mergers & Acquisitions. Link.
  • Reveleer, a data analytics platform that helps payers with risk adjustment and quality improvement, is hiring a Product Designer. Link.

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