Kevin's Weekly Health Tech Reads 8/9

The Teladoc / Livongo merger edition plus other things

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News:

  • Lots of excitement in the digital health world this week as Teladoc and Livongo announced their merger. Livongo is valued at $18.5 billion, and will make up 42% of the combined entity that is worth over $37 billion. This caps an incredible run for Livongo as its stock price is up over 430% on the year. Of course, the crazy high valuation also invites some reasonable questions from investors as to whether Teladoc overpaid. Livongo’s valuation is an insane 30+ times its 2021 revenue projections, which will screw up every bankers digital health comparable transactions analysis for the foreseeable future. Worth keeping an eye on what, if anything, comes of the market’s negative reaction to the deal thus far.
  • Strategically, the acquisition seems pretty straightforward for both parties once you get past the valuations. Livongo and Teladoc’s current client base has only 25% overlap, so there is a huge cross-selling opportunity for two organizations that have each proven quite good at selling their digital wares to employer HR teams. And, on top of that, the product offerings of each organization round each other out quite well in terms of creating an overall digital health ecosystem. The combo of Teladoc (urgent / primary(…?)) + Livongo (chronic mgmt) + InTouch (specialty) starts to look an awful lot like the digital health system everyone dreams of. The investor presentation as well as the STAT and Forbes articles linked below all do a really nice job of articulating the rationale for the deal.
  • It will be fun to watch the ripple effects of this deal in the industry. Teladoc / Livongo has taken a massive step forward in the arms race to own digital healthcare. And it would seem the combined entity will continue to be very acquisitive given the history of both orgs. The investor presentation highlights some potential areas for acquisitions - CHF, CKD, MSK, COPD, virtual primary care, hospital at home. But the bigger question is what other players will do in response - does Optum finally have a competitive threat and decide it is time to make a big move in digital health (to bolster its recent moves with Vivify and Ableto)? Do any of the retail players make an acquisition(s)? Does any health system recognize that they’re the frog in a pot of water that’s starting to boil and decide to do something bold here? That last question I think is the particularly interesting one to watch. I continue to think it’d be really interesting if one of the big health systems - Intermountain, Mayo Clinic, Providence, etc - could wrap its head around buying Omada, for instance. At some point I have to imagine the incumbent providers are going to realize they need to do something here. Link (STAT). Link (Forbes). Investor Presentation.
  • More earnings announcements from the week:
  • Humana had their earnings call and made some interesting comments about how they view their care delivery model with the recent investments in Heal and Dispatch Health and how those models integrate into Kindred at Home. Heal is the preferred in-home primary care model for the org moving forward, because of it’s capital efficiency and ability to scale. Link.
  • CVS hosted their earnings call - and after the huge splash around their first few HealthHUBs opening up, they all of a sudden have pretty quietly opened 205 HealthHUBs across the country and remain on track to have 1,500 HealthHUBs by the end of 2021. Link.
  • GoodRx has started the process of going public - this will make for a fun S-1 to read. Link.
  • Blackstone has acquired a majority stake in Ancestry.com in a deal worth $4.7 billion. Link.
  • Missouri voted to expand Medicaid. Hooray! Link.
  • Alignment Healthcare, the Medicare Advantage insurance startup, is expanding in California and North Carolina, as well as into Nevada, in 2021. Link.
  • Ginger, a telepsychiatry platform, raised $50 million. Link.
  • Cerner and LRVHealth invest $6 million into Xealth. Link.
  • SCAN Health Plan and Optum (Rally Health) partner to launch a social community for seniors to address social isolation. Link.
  • Mental health startups Quartet and SilverCloud partner. Link.
  • Liyfe Clinic launched, building a virtual clinic to support breast cancer patients. Link.

Opinions:

  • Here’s a quite good look at the women’s health space from a startup / investment perspective by the Rock Health team. It does a nice job of laying out different areas within the space that are seeing lots of investment and looking at the various approaches startups are taking. I was a little surprised to see that <20% of companies in the space are going to market targeting employers based on their data (16 of 84 companies) - would have expected that to be a lot higher. Link.
  • The NYTimes took a look at the telehealth reimbursement landscape, wondering whether telehealth is here to stay post COVID-19 boom. It’s wild to me that as an industry we’ve all collectively bought into this notion basically saying that if telehealth continues to get reimbursed at the same rates as in person visits, telehealth is gonna continue to be gangbusters. But, if not, folks are worried telehealth utilization will basically vanish overnight. Like, it becomes clear really fast how you drive innovation in healthcare, right? Link.
  • With that telehealth lesson in mind, lets take a look at another really interesting piece on the hospital-at-home market. It’s another space that should logically be taking off in this COVID-19 environment. And this article by Jane Sarasohn-Kahn does a really nice job at looking at various models that have emerged in the space. But despite the logical need, and emerging proof that the model works, adoption has been pretty slow even in COVID-19 world. We have a few early adopters and case studies (highlighting some really cool work in where else… Minneapolis!!!!), but that’s about it. What is missing from the equation? Oh yeah, the whole getting paid the same rate as before thing. Right, right - that’s how you drive innovation in healthcare…..how could I forget. Link.
  • Interesting read from Julie Yoo at Andreessen on how COVID-19 is accelerating some of their investment theses around the unbundling of the hospital. Link.

Data:

  • Research out of the University of Minnesota (go Gophs!) suggests that nurse practitioners practice with more autonomy in rural markets than urban markets. Link.
  • According to this JAMA study roughly 25% of Medicare enrollees lack access to high speed internet or a smartphone with wireless data, making it a challenge for them to use telehealth services. Link.