Oh boy what a week - not one but two different healthcare SPAC announcements this week!
This week’s first installment of healthcare SPAC news: the founder and former CEO of UnitedHealth Group is launching a $300 million SPAC that will “target select sectors of the senior market, including lifestyle, home-based services, and health platforms, among others”. This will be an interesting one to watch. Link.
This week’s second installment of healthcare SPAC news: a collection of companies now called UpHealth are going public via SPAC at a $1.35 billion valuation. UpHealth is aggregating four businesses into one - telehealth (Cloudbreak and Glocal), integrated care management (Thrasys), behavioral health (BHS), and a digital pharmacy (MedQuest). The combined entity cites that it will have 1,800 U.S. hospitals as customers, which appears to equal the number of customers that Cloudbreak has, so it’s not immediately clear how real the other four businesses are here outside of Cloudbreak. But if the financials are realistic, UpHealth seems like a nice business - the combined entity is estimating $115 million of revenue and $13 million of EBITDA in 2020, growing to $346 million and $69 million respectively in 2022. Of course, it’s hard to tell what is real here from the investor deck and investor call given the lack of any historical financial data - thanks SPACs! Link (Investor Deck). Link (Investor Call).
There were a handful of interesting regulatory changes this week:
The Trump administration is rolling back Stark laws in order to boost value-based care models. The interview with HHS Secretary Alex Azar and HHS Deputy Secretary Eric Hargan on this in Modern Healthcare is worth checking out for their views on the change and how it will enable value-based care. They give an example of a hospital that could now contract with a diabetes management vendor to provide free services to a patient after hospital discharge. Link (overview). Link (Azar / Hargan interview).
CMS is creating an Acute Hospital Care At Home payment model. Seems like a huge boon for Contessa, Dispatch, and Medically Home - each of which is referenced by CMS in the FAQs for hospitals looking to adopt hospital at home models. Hopefully this change gives hospitals the financial incentive they need to adopt hospital-at-home models… feels long overdue for this approach to take off. Link (overview). Link (FAQs).
CMS announced that in 2022 it is lowering fees for the individual exchanges from 3.0% to 2.25% as well as giving states the option to stop offering plans through healthcare.gov, instead allowing individuals to sign up via direct enrollment pathways through insurers or brokers without needing to use healthcare.gov. Link.
Hospitals are reporting financials for Q3 2020 (the period ending Sept 30 2020) and the last three months appear to have gone fairly well financially for leading hospitals despite lower than normal volumes:
Ascension performed quite well. It generated $1.2 billion of net income, up from a loss of $235 million the prior year. The net income was buoyed by $1.3 billion of investment gains over the period. Volumes were still down across the board, but sicker patients help offset the decrease. Link.
Mayo Clinic also had a relatively strong third quarter financially. Revenue was up for the quarter 7.5% over last year, although down 1.5% over the first nine months of the year vs last year. Mayo’s investment portfolio also performed quite well, and days cash on hand increased from 262 last year to 320 at the end of Q3. Link.
Cleveland Clinic has perhaps had a bit more financial difficulty this year, posting an operating loss of $108 million for the first nine months of the year, versus $268 million last year. Q3 was a better quarter for them though, posting a operating profit of $134 million versus $115 million last year. It also is sitting on a cool $1.1 billion of cash & equivalents at the end of the quarter versus $484 million at this time last year… so it’s not doing too badly. Link.
Signify Health acquired PatientBlox, a healthcare blockchain technology startup. Signify is a rather interesting Private Equity roll-up play in the value based care space, backed by New Mountain Capital. Signify was originally formed in a merger between Censeo Health and Advance Health in 2017, it then acquired bundled payments convener Remedy Partners in 2019, and then acquired social determinants of health startup TAV Health earlier this year. Somebody else smarter than I am will need to explain why blockchain is a necessary technology to successfully administer bundled payments as my simple midwestern brain remains confounded as to the need here. Link.
Clover Health released a transcript of its analyst day hosted last Friday. Not surprisingly, the conversation was heavily focused on the Clover Assistant (CA) and the Direct Contracting (DC) opportunity. They share some additional data on CA use - 60% of docs are in practices with 10 or less physicians; 11% of the docs don’t have an EMR. Patients on the CA platform are also using more primary care and have one incremental diagnosis versus patients not on the platform. There was also a lot of conversation here about their programs for complex patients as identified by the CA and the cost savings they’re seeing there with their in-home care model. On the DC side, Clover plans to launch its Direct Contracting Entity in April 2021. Lots of interesting questions from the analysts on the DC strategy and financials and how Clover is accounting for the opportunity. They’ve signed up 1,500 docs across eight states for DC, three of which aren’t states where they currently offer MA plans and are have increased their estimates - they think they’ll hit 500k lives in 2022. Link.
PE firm Warburg Pincus has invested an undisclosed amount in Quantum Health, a company providing employee benefits navigation services for self-insured employers. Quantum is working with 1.7 million employees across 400 employers today. Great Hill, the private equity firm that had previously been the majority shareholder, will still retain its stake. Link.
WELL Health, a digital patient communication platform for health systems, raised $45 million. This is WELL’s second big announcement in the last few weeks, coming on the heels of a partnership to integrate with Cerner as the patient communication solution for Cerner customers. Link.
WithMe, a pharmacy startup launched out of Oak HC/FT that is attempting to build an alternative to the PBMs, raised $20 million from OMERS Ventures. WithMe launched its first customer using it as a full-replacement to the PBM, with 20 additional companies in the process of rolling it out. Link.
This HBR article looks at Chenmed, Iora, Landmark, and Oak Street for examples of how new care delivery organizations have encouraged seniors to adopt telehealth. The article does a nice job highlighting common challenges in doing so and the ways in which those challenges are being addressed. Landmark’s patient population highlights why this is a complex topic - 60% - 70% lack needed technology for telehealth, 50% of those with technology didn’t know how to use their smartphones for a video visit, 40% of all patients have hearing issues, 15% of all patients have vision impairment, and 10% have dementia. Link.
McKinsey interviewed Annie Lamont of Oak HC/FT, getting her perspective on some of the interesting companies in the primary care and behavioral health spaces. Nothing earth shattering in here, but it highlights some of the work that Oak HC/FT portfolio companies are up to (VillageMD, Brightline, Vesta Healthcare, & DispatchHealth). Link.
Gwendolyn Lee and Dan Gebremedhin of Flare Capital published a nice Medicare 101 article. Provides a good overview on the various components of Medicare for those confused by the four parts of Medicare, and where Medicare Advantage fits in. Link.
KFF looks at insurer participation on the marketplaces. 30 insurers are entering the market across twenty states, and 61 insurers are expanding coverage within states. 78% of enrollees will have 3 or more options for their insurer. Link.