HTN | Weekly Health Tech Reads | 10/29
October 29, 2023
NEWS OF THE WEEK
Sharing our perspective on the news, opinions, and data that made us think the most this week
CMS released 2022 performance year results for the Global and Professional Direct Contracting Model
Summary: Last Friday, CMS released 2022 results for GPDC, the CMMI model now known as ACO REACH. GPDC saw net savings to CMS of $371 million in 2022, 1.6% of the model benchmark. This was across 99 participating organizations and 21 million beneficiary months, up from 53 organizations and 3 million beneficiary months in 2021. 81 out of the 99 organizations generated net gross savings, including organizations like Iora and Oak Street leading the pack. Yet, it's interesting to note that the 18 organizations that had net savings losses included three of the four largest DCEs by members enrolled - Clover Health, Sutter, and UnityPoint.
- One of the things that stood out to me in these results was the variability in performance among various venture backed / growth oriented models that we talk a lot about in places like HTN. It was a bit surprising, for instance, to see Cityblock as one of the worst performing DCEs, generating a net savings rate of -3.1% with 3,662 beneficiaries in the program. It was less of a surprise to also see Clover as such a poor performer at a -2.1% net savings rate given their public commentary about needing to reduce their membership in the program to focus on profitability. On the other hand, Iora and Oak Street still generated top savings rates. agilon, Alignment, VillageMD, CenterWell, and others also had solid performance in the program.
The intra-company variance in performance is also interesting to note here. For instance, NeueHealth (Bright Health's services arm) achieved net savings of 8.8% in one DCE with 17,550 beneficiaries while generating a net savings of -0.5% in another DCE with 32,285 lives. It seems like that variance in performance is telling of how hard it is to standardize products across markets and the different dynamics at play with various provider relationships. This stuff is hard to scale, making the outperformance by other orgs like Iora / Oak Street that much more impressive here.
HTN Slack Convo (h/t Anthony Hemming)
A review of key Q3 calls from the week
Summary: Teladoc’s Q3 earnings caused a meaningful drop in its stock price this week as its dropped ~14% since Monday. The earnings call was a similar tone to that we’ve heard of other high growth digital health companies - Teladoc is pivoting hard towards profitability following “a period of elevated investment following the Livongo transaction”. They shared they’re undergoing a strategic review focused on improving operational efficiency. Moving forward, Teladoc expects to grow EBITDA and free cash flow faster than revenue. One of the more interesting details shared in the call was that Teladoc added 4 million lives in virtual care programs that it took from competitors, which was “primarily a result of a large competitive takeaway during the quarter”. In the analyst Q&A, Teladoc’s CEO seemed to attribute this competitive takeaway to a failing business model for the competitor that has them struggling to raise additional capital / exist as a going concern. Seems like an interesting implication that a vendor servicing a client large enough to have 2+ million lives is struggling that much in Q3. Seems like there can only be a handful of potential clients that large.
Summary: Centene raised outlook for the year as strong growth is outweighing Medicaid redetermination coverage losses. Centene shared in the earnings call that it is roughly 40% through Medicaid redeterminations, which is approximately one million members. It is seeing 20% re-join rates from members, and noted that because of 90 day grace periods it is not seeing many members lapse coverage. Seems like Centene is seeing a bit more of an orderly process than what Anthem was experiencing. Centene’s Star results came inline with expectations, and it noted that it continues to make internal operational improvements there. In particular, Centene cited a 40%(!) reduction in member complaints year over year. I’d be so fascinated to know the numerators and denominators in that calculation. Beyond that, they share some really good, tangible detail about the operational improvements Centene has been working on internally to improve results.
Summary: Molina saw flat Medicaid membership in Q3 because redeterminations were offset by growth from the Iowa contract and closing the My Choice Wisconsin deal. Molina has lowered its retention rate assumption on redetermination members from 50% to 40% and noted that members leaving Medicaid cost less than those who aren't. Although it sounds like they expect to be able to manage losing those lower acuity members. 2024 sounds like it will be much of the same - Molina is keeping premium revenue targets the same as new growth will offset the redetermination losses. Molina is also seeing growth in exchange enrollment - prior to redeterminations it was seeing growth of 9,000 members a month in SEP, now it is averaging 12,000 - 13,000 members.
CHART(S) OF THE WEEK
Sharing a visual or two from the week that made us think
Christopher Young's Reaction:
Christopher Young is the Co-Founder and Chief Product Officer of Harmonic Health, a Redesign portco building in the Alzheimer's/dementia space. Prior to founding the company, he worked for 4.5 years as a product and strategy leader at Force Therapeutics, as well as spent several years in B2B SaaS before jumping into digital health. He shares his reactions to the report's findings:
A recent USC study, spotlighted in Time Magazine, really puts the spotlight on how often Mild Cognitive Impairment (MCI) goes unnoticed. With breakthroughs like Lecanemab (Leqembi) for Alzheimer's, getting a diagnosis accurate and early is super important. These treatments aren’t cheap, and they come with their own set of side effects, so knowing when to use them is key.
But there’s more to MCI management than just medication. This study is a nudge for us to think wider – like tweaking our diets, keeping active, and giving our brains a good workout. These steps are simple, low-risk, and can do a lot for someone with MCI. The big message from the USC research, as Time Magazine points out, is that dealing with MCI isn't just a one-track, meds-only route. It's about mixing medical treatment with lifestyle changes for a well-rounded approach.
An article from The Information (paywalled) this week dove into Carbon's journey, including the chart above highlighting Carbon's revenue and EBITDA numbers over the past four years and the challenges it is currently facing as it attempts to build a profitable business. In many ways, Carbon perfectly encapsulates the cautionary tale that seems to have become the defining narrative of the last few years in healthcare startup land. The article includes this quote from Carbon's CEO, which I think sums up the experience many have had in the space the past few years: “We went from fairytale startup world to the real world.”
A round-up of other newsworthy items we noticed during the week
Hartford HealthCare announced a partnership with Walgreens to set up five health clinics at various Walgreens sites to provide primary care, screenings, vaccinations, telehealth, among other services. Given the recent earnings announcement that Walgreens is intending to reduce the number of VillageMD clinics and focus on only a few markets, it will be interesting to watch if we'll see Walgreens embark on more of these partnerships.
Link / Slack (h/t Geoff Matous)
BCBS NC is set to acquire all FastMed urgent care clinics in North Carolina. The move appears to be designed to bolster access to care in rural communities in NC - the press release notes that FastMed was struggling with staffing and keeping clinics open. FastMed currently providers several care offerings, including preventative, telehealth, occupational health, primary, and urgent care.
Link / Slack
PicnicHealth, a healthcare evidence generation startup, announced its acquisition of AllStripes, a company focused on evidence generation for the rare disease population. The deal aims to help advance PicnicHealth's work in the clinical data and patient-reported outcomes space.
Link / Slack (h/t Raihan Faroqui)
Marc Harrison shared more details regarding HATCo's strategy for acquiring a health system in an interview with Forbe's Katie Jennings. In some interesting additional details on the approach. First, they're attempting to buy a $1 to $3 billion hospital that has a leadership team already in place that is "eager to do transformation". Second, this hospital ideally will have an insurance arm, and the hospital will either already be for-profit, or HATCo will convert it into a for-profit. Third, Harrison wouldn't say how much General Catalyst actually owns in HATCo, but did share it is independent from GC's funds / core venture capital business. Who else are the investors here if GC doesn't own all of it, isn't investing as part of their investor business, and Harrison is talking about how they intend to hold the investment indefinitely? The more details that are shared about this, the less confident I get in it.
Link / Slack
A collection of notable startup financing rounds across the industry
Abridge, an AI for clinical documentation startup, has raised $30 million in a Series B funding to support large-scale health system rollouts and accelerate product advances. The company's software converts patient-clinician conversations into structured clinical note drafts in real-time, to reduce admin burden on providers.
Link / Slack (h/t Rik Renard)
Greater Good Health, a VBC-focused care provider for seniors, closed $20 million in Series A financing to scale its clinical solutions and expand development of its own primary care clinics. The first clinics will open in Montana to serves the state's senior population.
Link / Slack (h/t Michael Ceballos)
Signos, a metabolic health platform, has announced $20 million in Series B funding to expand its team and platform and advance research on metabolic health. The platform leverages its AI-enhanced continuous glucose monitor (CGM) to provide real-time data and recommendations for healthy weight management.
Link / Slack (h/t David Kolacny Jr.)
Sage, a senior care platform, raised $15 million in a Series A funding round to expand its data science team and fuel growth. The company offers a care coordination platform that connects senior living residents and caregivers to their care teams.
Link / Slack
Heidi Health, an AI clinical workflow startup, raised $6.3 million Series A to expand product development for its new AI tools for clinicians.
A round-up of posts from the broader healthcare community this week that made us think
State of Health Tech 2023 by Sofia Guerra and Steve Kraus
In Bessemer Venture Partners' first annual State of Health Tech Report, the team unpacks the recent performance of the health tech sector and discusses where the sector is heading with some predictions for 2024.
A Quarter of Clinic Visits are No longer with Doctors by Soleil Shah
The latest piece from Tradeoffs looks at research in BMJ highlighting how the number of visits with PAs and NPs has increased from 16% in 2014 to 25% in 2019.
This was an interesting interview from Blake Madden with Thyme Care's Dr. Bobby Green (Co-Founder & CMO) and Scott Voigt (VP of Product) that dives into Thyme's value-based care oncology model. The article goes deep on CMS' Oncology Care Model (OCM) and how it shaped the future of VBC-based oncology, highest cost areas of oncology, and what investors and builders should know before adopting the more focused Enhancing Oncology Model (EOM).