More Q2 earnings (Bright, Clover, Privia, & Oscar), SCAN expands to Texas, details on the Amazon / ONEM merger, & more
The HTN community this week passed over 3,000 members (yay!). We're quite humbled by the word-of-mouth growth the community has seen since we launched just over a year ago with ~350 nerds. If we were a venture backed startup, we'd probably be putting out a press release talking about our 750% member growth ;)
Instead, we're focused working to ensure the community stays as vibrant as ever. Along with more content, we continue to work on new offerings / events to support our members, including:
Last month, we launched a curated networking service to make 1:1 introductions between members. We had nearly 500 matches and saw early positive feedback like "We had SO many shared interests & experiences across the health tech space, which made for an energizing conversation!" Next week, our second round of intros will go out via email and members who opt in will get paired with another community member with a similar functional role to talk shop.
We hosted a live session with HTN members on the recent proposed Physician Fee Schedule rule changes. It was a hugely educational session for founders / anyone working in telehealth on the impact regulatory changes can have on business models. We'll be sharing a recording and summary in Slack this week.
If you've been enjoying the insights from the newsletter but are not already a HTN member, you're missing out - sign up here!
Q2 Earnings Discussion:
Bright's earnings highlighted how narrow of a margin of error it has moving forward. After saying in Q1 earnings it had the cash to last the year, it acknowledged it needs to raise fresh funding ASAP. The level of operational mismanagement inside Bright continues to become clearer, as management discussed how it is auto-adjudicating ZERO percent of claims on the existing claims platform it is now migrating off of. For context, we shared some Oscar data from 2018 in Slack showing they were above 90% auto-adjudication, while the industry average is apparently in the high 80% range. It's beyond perplexing. Beyond that, NeueHealth looks like it lost ~25% of lives managed for third parties, which obviously is a concerning trend. It's hard to have much faith here in the ability to execute. Link (transcript) / Slack (HTN paywalled - sign up here)
Clover's quarterly earnings was most notable for what it didn't include - after consistently reporting on Clover Assistant Lives Under Management as a key metric for the business, they shared this quarter they will not report on that moving forward. We were already skeptical of the narrative surrounding Clover Assistant and how it is actually being used (or not) by clinicians, and this move just adds to that. It's hard to envision how the single most important element of Clover's story is now no longer relevant because of Direct Contracting. We shared a number of our other key takeaways in the Slack post below for HTN members. Link (transcript) / Slack (HTN paywalled - sign up here)
Oscar's earnings followed a similar story arch to Bright and Clover. It is focused on shifting the insurance business to profitability, with rate increases coming up in 2023 designed to increase margin potentially getting them there. While there's some light for the core insurance business, we discussed on Slack how the +Oscar platform continues to be an unmitigated disaster, as Oscar is pausing platform sales of +Oscar for the next 18 months. At this point, you have to wonder if they're really just shelving that forever. Given the challenges that launch is facing, it makes sense for Oscar to focus on getting the insurance business to profitability. Link (transcript) / Slack (HTN paywalled - sign up here)
Privia had a solid quarter, increasing the number of contracted providers by 31% YoY and raising guidance for Adjusted EBITDA in 2022 (expected to come in at $57 - $60 million for the year). Privia shared in the prepared remarks a bit about the opportunity presented by CMS changes to MSSP, which it seems quite excited about (as discussed in the HTN event referenced above, it seems these changes will make MSSP a more attractive program to new entrants generally). There was also some interesting discussion about how Privia is signing up additional full cap contracts and how it thinks about booking medical expenses (which right now it is booking at 100%). Seems like lots of momentum for the MSO models at the moment. Link (transcript) / Link (press release)
News of the Week:
SCAN Health Plan announced it is expanding to Texas coming on the heels of significant growth in open enrollment in California. SCAN continues to push the limits of the strategic playbook for an incumbent insurance organization. As I mentioned in Slack, this is a really interesting foil to all the VC-backed activity in the space, testing the idea of whether a solid regional insurer can reorient itself towards a growth mindset. It'll be a fun experiment to watch unfold particularly in the Texas market where you obviously have a bunch of new care delivery and insurance models competing for attention. Link / Slack
The Amazon / One Medical merger doc came out this week, and it includes some interesting background on the negotiation. It's been reported that CVS was the other bidder, which makes sense given the sequence of events described in the document here. CVS was in negotiations with ONEM since October, and had offered $18/share for ONEM in early June, but apparently was unwilling to move on the transaction quickly enough, which allowed Amazon the space to swoop in. Would be curious to know why CVS was dragging its feet, particularly given their subsequent statements to analysts that they're going to make a big acquisition this year. Seems like a miscalculation on their part. It's also worth noting that ONEM had no additional interest, and received no inbound interest from any other party even after the leak in July - perhaps CVS thought it was in a stronger negotiating position than it ended up being in. Given ONEM's CEO was an EVP at Optum immediately prior to ONEM, it should give you some indication of how much interest Optum likely had in exploring this deal. Link / Slack
Amazon Care announced a partnership integrating with mental health app Ginger. On the one hand, this seems like an obvious move for Amazon Care as it looks to expand its product offering in selling to employers. On the other hand, the elephant in the room is obviously the One Medical acquisition. An announcement like this, coupled with the merger announcement details above, seems indicative of Amazon's approach in health care delivery and that One Medical was more of an opportunistic move than a grand strategy being unveiled in health care delivery. Of course it will be fun to watch how all of this unfolds as Amazon's various care delivery initiatives compete for resources and attention, both with employers and presumably within Amazon. Link / Slack (h/t David McCarthy)
Truepill apparently conducted its third round of layoffs this year, and will be refocusing the business on pharmacy operations moving forward. It's a logical move, and yet another indication of the current state of the market - as companies feel the pressure to demonstrate profitable financial models, it becomes less about grand ambitions to change healthcare and more about having a clear business model and corresponding go-to-market strategy. Link / Slack (h/t John Prendergass)
The Inflation Reduction Act will limit out-of-pocket drug spending for seniors at $2,000. While just one part of the bill, this is the type of legislation that will have a meaningfully positive impact on a large number of patients and those involved deserve some serious kudos. Slack (h/t Bryce Platt)
A new PE group, Cypress Ridge Capital, announced it has acquired a majority stake in, atria, a new value-based care MSO focused on the cardiology space. Link / Slack
TikTok's owner ByteDance acquired a hospital in China for $1.5 billion. Link / Slack
Humana is acquiring Inclusa, a Medicaid MCO in Wisconsin with 16,000 members, for an undisclosed amount. Link
In the interoperability space, Availity acquired Diameter Health. Link / Slack (h/t Bishoy Saleeb)
Biofourmis, a virtual care platform supporting hospital-level care at home, added $20 million to its recent $300 million funding round. Link
Abridge, a cool platform helping patients record doctors visits, raised $12.5 million and is focusing on selling its medical transcription software to healthcare enterprises. Link
Hazelden Betty Ford, Xealth, and Cerner partnered, enabling Hazelden care teams to share content with patients straight from the EHR. Link
This is an interesting read on how the end of the PHE might pose an existential threat to digital care delivery models that are prescribing controlled substances and may be in violation of the Ryan Haight Act when the PHE lapses. It includes some interesting workarounds that companies have been attempting (i.e. using WeWork office addresses to claim a clinician is registered in a state), suggesting those likely won't comply with DEA regulation moving forward. It's a nice summary of the change afoot, and even includes a new startup idea for folks towards the end! Link / Slack (h/t Arpan Parikh)
The Providence Digital folks shared an interesting post suggesting healthcare needs more digital flywheels that drive patient engagement. It's an interesting read, arguing that healthcare doesn't have flywheels and would benefit from such an engagement flywheel, while suggesting that Providence is working on building a digital flywheel in order to reduce patient churn. It's a really logical rationale for health systems investing in digital initiatives in this world where so many folks are competing for patients' attention virtually. Although I'd make a slight modification to the overarching flywheel argument, which is that healthcare very much has flywheels (those flywheels are how large institutions like Providence, UHG, and others have been built in the first place), but historically those flywheels have had nothing to do with patients and everything to do with aggregating providers. Until that power dynamic shifts and the system is built around meeting the needs of the patient, this is going to be hard to achieve. Link
Rock Health shared a quick read on how healthcare organizations should think about their innovation initiatives during these uncertain times, focusing on getting back to the basics - understanding why you're doing what you're doing, and being thoughtful about the various options you have to pursue those things. Seems like solid advice for big organizations during any market conditions. Link
The folks at Gist per usual include some interesting insights in their newsletter, including this graphic highlighting how quickly hip and knee replacements have moved outpatient after being taken off CMS's inpatient only list. It's funny how quickly the procedures move from 95%+ to less than half of the volume. Link
This is an interesting survey of 300 insurance execs looking at what their top challenges are today. Managing administrative costs comes in as a top priority, with 58% of respondents suggesting their cost per claim is >$8. Link
CertifyOS, a startup building a platform to automate provider network management, is hiring a Head of Marketing. Link.
Circulo Health, a startup providing home and community-based care for individuals with intellectual and developmental disabilities, is hiring a Director of Technology - Health. Link.
Paytient, a startup building an employer sponsored payment platform for employee medical expenses, is hiring a Senior Product Marketing Manager. Link.
The Chartis Group, a healthcare focused consulting firm, is hiring a Consultant - Private Equity Advisory. Link.
Transcarent, a care navigation startup for self-insured employers, is hiring a Director of Product, Care Experiences. Link.