Kevin's Weekly Health Tech Reads 10/18

Q3 earnings season begins; 98point6 raises $118 million; a good podcast on VillageMD & more

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News:

  • Q3 Earnings season commences with some notable names hosting earnings calls:
  • UnitedHealth Group. I found Wichmann’s intro comments particularly interesting around UHG’s interest in launching / deploying digital therapeutics (i.e. Level2 for diabetes) as it attempts to create a next generation health system. Also interesting seeing them talk up new insurance products in the employer market Allsavers (a level-funded product), Bind (on-demand health insurance), and provider specific products (Harmony, a narrow network around Optum providers). Lots of discussion around impacts of COVID-19, as expected. Link.
  • Accolade. It doesn’t appear that they’ve seen significant impacts yet from financial challenges their employer customer base may be facing. They’ve had to renegotiate contracts with their airline customers and are delaying the receipt of revenue a few months, but that’s about it thus far. There’s also some interesting comments in here on the partnership with Ginger, and how if I’m reading it right Accolade is up-charging 20% - 30% for rolling out the platform with Ginger. Seems like a big lift from adding a mental health product. Link.
  • Walgreens. This also focused heavily on COVID-19. Interesting to see the dichotomy they’re seeing between store results in big cities vs rural areas - revenue is down 24% in stores in big cities, while its up 12% in stores in rural areas. Link.
  • Augmedix, the startup that uses Google Glass for medical documentation, is going public via a reverse merger that includes a $25 million investment into the company. The Form 8-K filed as part of the detail is full of interesting details on Augmedix’s business and the medical documentation space in general if it’s your jam. The business overview starts at page 8 of this SEC filing. The filing highlights how hard it is to build digital health companies - Augmedix has been working on this company for 8 years and it currently has 510 providers on the platform (as of June 2020). Average revenue per doc currently sits at $30k - they did around $14 million of revenue in 2019. Their gross margin is only at 33% for 2019 as they’re paying other vendors to do the remote documentation services. What started off as a super cool tech story (Google Glass for AI scribing!) has become a very human labor intensive service (remote medical scribes). It appears they’re currently in a precarious financial spot as their debt obligations exceed cash reserves. Link.
  • 98point6 announced it raised $118 million, after it raised $43 million back in April of this year. Not surprisingly 98point6 has done very well with COVID-19, as membership is up 274% this year. Over half of its visits each month are from repeat customers. Link.
  • Twentyeight Health raised $5.1 million in seed funding for a women’s health telemedicine platform targeting the Medicaid / uninsured population. Very cool idea. Link.
  • Paladina acquired Healthstat, an organization with 230+ onsite / nearsite primary care clinics for employers. Paladina will grow from only 120 clinics to over 350 clinics, as well as enter 13 additional states via the acquisition. Link.
  • AllScripts sold its care coordination business, CarePort Health, for $1.3 billion to private-equity backed WellSky. The acquisition was for 13x+ trailing revenue meaning CarePort did around $100 million in revenue last year. Link.
  • CommonSpirit and Concert Health announced an interesting partnership integrating mental health into primary care. Link.
  • Press Ganey made two moves this week, acquiring Doctor.com and acquiring a majority stake in Binary Fountain. Two very interesting adds to Press Ganey’s portfolio and help it stand apart in the provider reputation management space. Link.

Opinions:

  • Matthew Holt poured some cold water all over Humana’s value based care report released last week. Holt’s post raises a number of really good questions regarding the report, questioning how much progress we’ve actually made in the value based care arena since the late 1990s. Well worth a read. Link.
  • This is a fascinating podcast / read on VillageMD. VillageMD, which was the brainchild of some folks at Accretive (now R1 RCM) and Anthem, went to Andy Slavitt while he was still leading Optum for some seed funding for the concept. Slavitt instead tried to buy it, and VillageMD got the seed funding elsewhere. It also shares that Optum has attempted to purchase VillageMD ‘many’ more times since then. The post also includes a ton of other interesting points. Direct Contracting is brought up again here. There is a lot of wisdom behind this quote:
  • “Most physicians would say if they don’t want to remain independent, which is becoming scarier and scarier, they have two options: sell to a health system, or sell to Optum. VillageMD wants to be the preferred employer of choice for physicians that choose this latter employment as an option.”
  • The VillageMD pitch seems pretty straightforward in that context. Also of note is how the VillageMD and Walgreens partnership got started - two old friends working at two different organizations deciding to launch something together. Seems like the story of a lot of healthcare innovation. Link.
  • Stat has a very good piece summarizing how the rise of algorithms in healthcare settings is reinforcing racial disparities that have historically existed in healthcare. It’s a worthwhile read for anyone designing programs around algorithms that drive care delivery (including folks building value-based care programs based off risk adjustment scores). The focus of much of the article is on Optum, but of course the problem lies in algorithms more broadly than Optum, it just faces the brunt of the pushback as an industry leader. Link.
  • ZocDoc released a blog post trying to repair its image in what basically seems like an advertisement for an upcoming SPAC. It provides a good update on the business, which has apparently been EBITDA profitable starting in Q4 2019 (save for a blip due to COVID-19 earlier this year). It also hits hard on the changes it has made post CEO-transition a few years back, including throwing out the ‘growth at all costs’ mindset that caused turmoil there historically. Link.
  • As many of you likely are aware, there’s a case going to be heard at the Supreme Court in the coming weeks that might overturn the Affordable Care Act. And if you’re like me and think that is bad news but don’t really understand the practical implications of it, then this article is for you. It does a really nice job walking through the practically of what might happen if the ACA is repealed and the variety of far-reaching impacts (and uncertainty) that a repeal would cause around Medicare and Medicaid. Note the discussion about CMS losing its authority for a variety of demonstration projects, which includes the CMS Innovation models. This could represent a significant headwind for things like Direct Contracting that everyone is excited about which could face some significant headwinds ahead. Link.
  • Also in the courts this week was another case regarding price transparency. It’s amusing to read snippets of Circuit Court judges trying to understand the AHA’s argument that prices of healthcare are unknowable. It doesn’t seem like the AHA argument is going all that well. Link.

Data:

  • The American Medical Association released a report complaining about increasing consolidation in the payer market. It strikes me as a bit amusing that we consistently have payers arguing provider consolidation is bad, and providers arguing payer consolidation is bad, without wanting to perhaps look inwards. Maybe neither is good for patients? Link.