HTN Weekly Health Tech Reads 10/10

Optum acquires SSMs revenue cycle mgmt business, CVS doubles down on its primary care strategy, & more!

News:

  • Optum landed a big fish this week, announcing a deal with SSM Health to outsource back office functions to Optum. SSM is quite a bit larger than Optum's other partners with 11,000 providers and 40,000 employees across 23 hospitals in the Midwest. If you're UHG, this approach makes all the sense in the world, particularly if you can get systems like this to agree. Why bother buying the hospitals when you can buy their back offices and rent them back to them? Eat the cash flow, use it to go do other deals. Link.
  • Molina is buying the Medicaid Managed Long Term Care business of AgeWell New York for $110 million. AgeWell's business served 13,000 members in 2020, generating around $700 million of premium revenue (yes, that's almost $5k PMPM). If only that AgeWell business were venture backed it'd have been worth billions with those membership and revenue numbers!! Link.
  • Fitness company CrossFit has launched a new product in the virtual primary care market. Will be very curious to watch this unfold and see how well CrossFit is able to sell this offering into its user base. It seems like this space at the intersection of health / wellness is poised to take off over the next few years as strong consumer wellness brands attempt to branch out into healthcare offerings. Link.
  • Virtual primary care startup Firefly Health launched an insurance plan for employers. An interesting move for Firefly, presumably one that will help drive membership to the virtual care offering. While a number of insurers have moved into the primary care world, this seems to be one of the first primary care players moving into the insurance world. Curious to see if we see more companies moving in this direction moving forward. Link.
  • In the employer wellness market, Virgin Pulse acquired patient engagement startup Welltok. Link.
  • The health systems that launched Civica Rx are now partnering to create a not-for-profit data platform called Graphite Health. While it's not clear exactly what the platform is yet - it sounds like one part Redox and one part Commure - it seems like a rather large opportunity if these health systems can come together in the same way they did around Civica Rx. Link.
  • Carbon announced the acquisition of two companies this week, a remote monitoring startup Alertive Healthcare and a chain of New Jersey urgent care clinics, Central Jersey Urgent Care. Alertive makes sense in terms of giving Carbon the ability to manage care in patients homes, while the New Jersey urgent care clinics follow the recent pattern of Carbon acquiring clinics. Recall from a recent Inc article that Carbon has long term ambitions of being the largest health system in the country, with 1,500 clinics by 2025. It makes sense that if they want to hit that number, we're going to see a lot more acquisitions moving forward. Link (Alertive). Link (Central Jersey Urgent Care).
  • Digital MSK startup SWORD Health acquired Vigilant Technologies, maker of a wearable sensor that corrects posture to avoid workplace injuries. Link.
  • Apervita announced this week it is ceasing operations. Apervita raised $22 million in 2019 from Optum and other investors, a healthy reminder that even in this market, not every company pans out as you'd like. Link.

Funding:

  • As previously reported, Devoted has closed on a massive new round of funding. It's interesting to read Devoted's post, as you can see how Devoted is attempting to broaden itself from a Medicare Advantage insurer to a much broader platform. It centers the pitch around its Devoted Health Guide service, which sounds a lot like a navigation platform. That navigation platform is enabled by four additional products: 1. a Medicare Advantage plan, 2. close relationships with providers, 3. Devoted Medical, a virtual & in-home provider, 4. a tech platform called Orinoco. Unfortunately the post provides little detail on how much of this is real, although the 4.5 STAR rating on its Medicare Advantage plan is an eye-opening data point (compare it to the other MA startups below). Will be curious to watch what materializes from here and if Devoted can successfully scale its early success, avoiding some of the pitfalls Bright, Clover, and Oscar have come across going down similar paths. Link.
  • Home health company Honor raised another $370 million, $70 million of equity and $300 million of debt. Honor, which recently acquired Home Instead, sounds like its using the funding primarily to continue investing in the tech platform supporting Home Instead. Link
  • BetterUp, a mental fitness / coaching platform for employees (the one that Prince Harry works for as Chief Impact Officer), raised $300 million at a $4.7 billion valuation. This funding comes only ten months after it raised $125 million at a $1.7 billion valuation. BetterUp reached $100 million in annual recurring revenue in July across 380 enterprise clients. Link.
  • Pediatrics behavioral telehealth startup Elemy, formerly Sprout Therapy, raised $219 million at a $1.15 billion valuation. Link.
  • Twin Health, a metabolic chronic disease startup that creates a "digital twin", raised $140 million. The press release doesn't include much detail on traction Twin Health has, which would be interesting to know - from its website, it looks like Twin Health is targeting employers, insurers, health systems, and risk bearing providers. Link.
  • NowRX, a same day pharmacy delivery startup, is raising $73 million. NowRX is crowdfunding the round and has its pitch up on the site, so it's an interesting read if you're wanting to learn about the space / model. Link.
  • Clinical trials startup Lightship raised $40 million. Link.
  • Wider Circle, an interesting peer-based approach to addressing SDoH-issues within communities, raised $38 million. Medicaid managed care organization AmeriHealth Caritas led the round, as Wider Circle is targeting Medicaid and Medicare populations. Very cool. Link.
  • Pediatrics clinic BraveCare raised $25 million led by Mednax, a national medical group with 2,300+ physicians. Together they'll build out 100 clinics. Yet another example of startup and incumbent organization coming together to partner in an interesting way. Link.
  • ThymeCare raised $22 million to build a cancer care navigation platform. Link.
  • Slope, a startup automating clinical trials, raised $20 million. Link.
  • Pivotal Analytics, a data analytics startup helping care delivery orgs identify optimal real estate, raised $10.2 million. Link.
  • Mindful Care raised $2.7 million for a mental health urgent care model. Link.

Opinions:

  • CVS appears to be doubling down on its clinic strategy, as this Fortune interview (paywalled) with CVS CEO Karen Lynch suggests. Seems notable that you have a health insurance exec at the helm of this organization. CVS will be remaking hundreds of stores to entirely focus them on addressing primary care needs. This is in addition to the existing HealthHUBs that use some square footage for primary care, but still have the majority of the retail footprint for general retail services. Wild to think about CVS turning entire stores into primary care clinics moving forward as it creates a hub-and-spoke model with its clinics. It's quite notable to see the difference in commitment CVS has to the retail health approach versus other large retailers, perhaps the benefit of owning Aetna and having a former Aetna exec running the combined organization. Certainly will be interesting to see how Wall Street reacts to this strategy over time. Link.
  • This is a good perspective on potential policy responses to the trend of private equity ownership of physician practices practices. The majority of policy responses suggested aren't actually specific to private equity owned practices, though, as the article essentially highlights that private equity owned practices are particularly good at taking advantage of financial loopholes that technically any provider group can leverage. The recommendation suggesting reform of Corporate Practice of Medicine so that it isn't quite as easy to create a "friendly" professional corporation is interesting to see and consider the impacts of given the wide range of for-profit organizations leveraging that approach today. Link.
  • Also on the subject of private equity in healthcare, this is a nice explainer of the PE roll-up strategy of provider practices by investor Bijan Salehizadeh in a tweetstorm. Walks through in a very straightforward manner some of the math involved, and challenges that many of these deals face. Link
  • Axios highlighted how the pandemic has fueled activity in the revenue cycle management space, with health systems looking to maximize revenue collected. Link.
  • CMS leaders continue to leave a breadcrumb trail suggesting where their heading with value-based care models, as Elizabeth Fowler suggests they'll be using mandatory models versus voluntary models, and thinking about how the various models intersect with one another. Also worthwhile to note Fowler supporting the Gilfillan / Berwick Health Affairs article, saying that risk adjustment methodology should be either improved or replaced. I'll leave this quote here for the MA startup investors to ponder: "Medicare should be ensuring that plans caring for sicker patients are not disadvantaged, rather than rewarding those who are investing in the best technology." Change is in the air! Link

Data:

  • CMS released its 2022 stars data for Medicare Advantage, and plans are doing significantly better this year than previous years, with enrollment in 4.5 or 5 star plans at 60% of total enrollment versus only 31% last year. Where do the startups check-in? Clover has a 3 and 3.5 star plan, Bright has all 3.5 star plans, Devoted checks in at 4.5 stars, and Oscar is at 3 stars. Devoted sure seems to stand out from the pack of health insurance startups in that regard.  I'd be curious to know hear each of those companies explain why Devoted is so far in front of the others. Link (CMS data). Link (article).
  • HCCI released a report looking at healthcare spending using data through 2019. It found that healthcare spending increased 21.8% between 2015 and 2019, with prices driving 18.3% of that increase while utilization drove 3.6%. Link.
  • A JD Power survey looking at consumer telehealth satisfaction found that while utilization is going up, satisfaction is declining. Looking at this data it makes you wonder if we're really taking a step forward, or just recreating many of the same issues healthcare delivery has always had. This quote is concerning: "Apart from barriers like limited services and inconsistent care, consumers also reported not being aware of costs while using telehealth, confusing technology and a lack of provider details." That sounds an awful lot like... the traditional healthcare delivery apparatus? Link.

Featured Jobs:

  • BabyScripts, a virtual maternity care platform, is hiring a Strategy & Operations Lead. Link.
  • Papa, a startup that addresses loneliness in seniors, is hiring a Director, Demand Generation. Link.
  • Two Chairs, a virtual and in-person mental health startup, is hiring a Partner Operations Manager. Link.
  • VillageMD, a value-based primary care startup, is hiring a VP of Corporate Development. Link.

Access the HTN Jobs Board for the full list of job postings.

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News:

  • Optum landed a big fish this week, announcing a deal with SSM Health to outsource back office functions to Optum. SSM is quite a bit larger than Optum's other partners with 11,000 providers and 40,000 employees across 23 hospitals in the Midwest. If you're UHG, this approach makes all the sense in the world, particularly if you can get systems like this to agree. Why bother buying the hospitals when you can buy their back offices and rent them back to them? Eat the cash flow, use it to go do other deals. Link.
  • Molina is buying the Medicaid Managed Long Term Care business of AgeWell New York for $110 million. AgeWell's business served 13,000 members in 2020, generating around $700 million of premium revenue (yes, that's almost $5k PMPM). If only that AgeWell business were venture backed it'd have been worth billions with those membership and revenue numbers!! Link.
  • Fitness company CrossFit has launched a new product in the virtual primary care market. Will be very curious to watch this unfold and see how well CrossFit is able to sell this offering into its user base. It seems like this space at the intersection of health / wellness is poised to take off over the next few years as strong consumer wellness brands attempt to branch out into healthcare offerings. Link.
  • Virtual primary care startup Firefly Health launched an insurance plan for employers. An interesting move for Firefly, presumably one that will help drive membership to the virtual care offering. While a number of insurers have moved into the primary care world, this seems to be one of the first primary care players moving into the insurance world. Curious to see if we see more companies moving in this direction moving forward. Link.
  • In the employer wellness market, Virgin Pulse acquired patient engagement startup Welltok. Link.
  • The health systems that launched Civica Rx are now partnering to create a not-for-profit data platform called Graphite Health. While it's not clear exactly what the platform is yet - it sounds like one part Redox and one part Commure - it seems like a rather large opportunity if these health systems can come together in the same way they did around Civica Rx. Link.
  • Carbon announced the acquisition of two companies this week, a remote monitoring startup Alertive Healthcare and a chain of New Jersey urgent care clinics, Central Jersey Urgent Care. Alertive makes sense in terms of giving Carbon the ability to manage care in patients homes, while the New Jersey urgent care clinics follow the recent pattern of Carbon acquiring clinics. Recall from a recent Inc article that Carbon has long term ambitions of being the largest health system in the country, with 1,500 clinics by 2025. It makes sense that if they want to hit that number, we're going to see a lot more acquisitions moving forward. Link (Alertive). Link (Central Jersey Urgent Care).
  • Digital MSK startup SWORD Health acquired Vigilant Technologies, maker of a wearable sensor that corrects posture to avoid workplace injuries. Link.
  • Apervita announced this week it is ceasing operations. Apervita raised $22 million in 2019 from Optum and other investors, a healthy reminder that even in this market, not every company pans out as you'd like. Link.

Funding:

  • As previously reported, Devoted has closed on a massive new round of funding. It's interesting to read Devoted's post, as you can see how Devoted is attempting to broaden itself from a Medicare Advantage insurer to a much broader platform. It centers the pitch around its Devoted Health Guide service, which sounds a lot like a navigation platform. That navigation platform is enabled by four additional products: 1. a Medicare Advantage plan, 2. close relationships with providers, 3. Devoted Medical, a virtual & in-home provider, 4. a tech platform called Orinoco. Unfortunately the post provides little detail on how much of this is real, although the 4.5 STAR rating on its Medicare Advantage plan is an eye-opening data point (compare it to the other MA startups below). Will be curious to watch what materializes from here and if Devoted can successfully scale its early success, avoiding some of the pitfalls Bright, Clover, and Oscar have come across going down similar paths. Link.
  • Home health company Honor raised another $370 million, $70 million of equity and $300 million of debt. Honor, which recently acquired Home Instead, sounds like its using the funding primarily to continue investing in the tech platform supporting Home Instead. Link
  • BetterUp, a mental fitness / coaching platform for employees (the one that Prince Harry works for as Chief Impact Officer), raised $300 million at a $4.7 billion valuation. This funding comes only ten months after it raised $125 million at a $1.7 billion valuation. BetterUp reached $100 million in annual recurring revenue in July across 380 enterprise clients. Link.
  • Pediatrics behavioral telehealth startup Elemy, formerly Sprout Therapy, raised $219 million at a $1.15 billion valuation. Link.
  • Twin Health, a metabolic chronic disease startup that creates a "digital twin", raised $140 million. The press release doesn't include much detail on traction Twin Health has, which would be interesting to know - from its website, it looks like Twin Health is targeting employers, insurers, health systems, and risk bearing providers. Link.
  • NowRX, a same day pharmacy delivery startup, is raising $73 million. NowRX is crowdfunding the round and has its pitch up on the site, so it's an interesting read if you're wanting to learn about the space / model. Link.
  • Clinical trials startup Lightship raised $40 million. Link.
  • Wider Circle, an interesting peer-based approach to addressing SDoH-issues within communities, raised $38 million. Medicaid managed care organization AmeriHealth Caritas led the round, as Wider Circle is targeting Medicaid and Medicare populations. Very cool. Link.
  • Pediatrics clinic BraveCare raised $25 million led by Mednax, a national medical group with 2,300+ physicians. Together they'll build out 100 clinics. Yet another example of startup and incumbent organization coming together to partner in an interesting way. Link.
  • ThymeCare raised $22 million to build a cancer care navigation platform. Link.
  • Slope, a startup automating clinical trials, raised $20 million. Link.
  • Pivotal Analytics, a data analytics startup helping care delivery orgs identify optimal real estate, raised $10.2 million. Link.
  • Mindful Care raised $2.7 million for a mental health urgent care model. Link.

Opinions:

  • CVS appears to be doubling down on its clinic strategy, as this Fortune interview (paywalled) with CVS CEO Karen Lynch suggests. Seems notable that you have a health insurance exec at the helm of this organization. CVS will be remaking hundreds of stores to entirely focus them on addressing primary care needs. This is in addition to the existing HealthHUBs that use some square footage for primary care, but still have the majority of the retail footprint for general retail services. Wild to think about CVS turning entire stores into primary care clinics moving forward as it creates a hub-and-spoke model with its clinics. It's quite notable to see the difference in commitment CVS has to the retail health approach versus other large retailers, perhaps the benefit of owning Aetna and having a former Aetna exec running the combined organization. Certainly will be interesting to see how Wall Street reacts to this strategy over time. Link.
  • This is a good perspective on potential policy responses to the trend of private equity ownership of physician practices practices. The majority of policy responses suggested aren't actually specific to private equity owned practices, though, as the article essentially highlights that private equity owned practices are particularly good at taking advantage of financial loopholes that technically any provider group can leverage. The recommendation suggesting reform of Corporate Practice of Medicine so that it isn't quite as easy to create a "friendly" professional corporation is interesting to see and consider the impacts of given the wide range of for-profit organizations leveraging that approach today. Link.
  • Also on the subject of private equity in healthcare, this is a nice explainer of the PE roll-up strategy of provider practices by investor Bijan Salehizadeh in a tweetstorm. Walks through in a very straightforward manner some of the math involved, and challenges that many of these deals face. Link
  • Axios highlighted how the pandemic has fueled activity in the revenue cycle management space, with health systems looking to maximize revenue collected. Link.
  • CMS leaders continue to leave a breadcrumb trail suggesting where their heading with value-based care models, as Elizabeth Fowler suggests they'll be using mandatory models versus voluntary models, and thinking about how the various models intersect with one another. Also worthwhile to note Fowler supporting the Gilfillan / Berwick Health Affairs article, saying that risk adjustment methodology should be either improved or replaced. I'll leave this quote here for the MA startup investors to ponder: "Medicare should be ensuring that plans caring for sicker patients are not disadvantaged, rather than rewarding those who are investing in the best technology." Change is in the air! Link

Data:

  • CMS released its 2022 stars data for Medicare Advantage, and plans are doing significantly better this year than previous years, with enrollment in 4.5 or 5 star plans at 60% of total enrollment versus only 31% last year. Where do the startups check-in? Clover has a 3 and 3.5 star plan, Bright has all 3.5 star plans, Devoted checks in at 4.5 stars, and Oscar is at 3 stars. Devoted sure seems to stand out from the pack of health insurance startups in that regard.  I'd be curious to know hear each of those companies explain why Devoted is so far in front of the others. Link (CMS data). Link (article).
  • HCCI released a report looking at healthcare spending using data through 2019. It found that healthcare spending increased 21.8% between 2015 and 2019, with prices driving 18.3% of that increase while utilization drove 3.6%. Link.
  • A JD Power survey looking at consumer telehealth satisfaction found that while utilization is going up, satisfaction is declining. Looking at this data it makes you wonder if we're really taking a step forward, or just recreating many of the same issues healthcare delivery has always had. This quote is concerning: "Apart from barriers like limited services and inconsistent care, consumers also reported not being aware of costs while using telehealth, confusing technology and a lack of provider details." That sounds an awful lot like... the traditional healthcare delivery apparatus? Link.

Featured Jobs:

  • BabyScripts, a virtual maternity care platform, is hiring a Strategy & Operations Lead. Link.
  • Papa, a startup that addresses loneliness in seniors, is hiring a Director, Demand Generation. Link.
  • Two Chairs, a virtual and in-person mental health startup, is hiring a Partner Operations Manager. Link.
  • VillageMD, a value-based primary care startup, is hiring a VP of Corporate Development. Link.

Access the HTN Jobs Board for the full list of job postings.