HTN | Weekly Health Tech Reads | 10/8
October 8, 2023
NEWS OF THE WEEK
Sharing our perspective on the news, opinions, and data that made us think the most this week
Summary: Instacart will expand payment options to Medicare Advantage, Medicaid, and other supplemental benefits next year allowing members to purchase various food, wellness products, and OTC meds. The program will run through Alignment Healthcare and follows Instacart’s move earlier this year to accept food stamps across all 50 states.
Duncan Reece's Reaction:
Duncan Reece is the President of Oxeon, a healthcare investment firm and venture studio. Prior to Oxeon, Duncan was the Co-Founder and COO of Cohere Health, EVP of Market Operations at Iora Health, and continues to advise several health tech startups.
- Instacart’s entry into healthcare has been a breath of fresh air relative to big tech where entries into healthcare have fallen short. Entering into a partnership with Alignment Healthcare via Medicare Supplemental Benefits demonstrates that the company understands the mechanisms to integrate their technology and logistics delivery into the nuances of healthcare payment, which has been an area where most tech companies have struggled previously. Beyond Medicare Advantage, Instacart has been able to provide its offering to Medicaid populations with WellCare in Kentucky in partnership with Boston-based Good Measures for nutrition coaching.
- The focus is a result of the vision from the top, as CEO Fidji Simo formally launched the company's strategy in September 2022 with a series of initiatives and partnerships addressing big challenges in food insecurity and nutrition. Fidji's unique background growing up in rural France to joining Ebay and running the Facebook app has given her an interesting lens as a builder in the digital health industry. Further, part of the explanation for the continued push into the space is that healthcare is personal for her - Fidji has been very open about her own challenges with postural orthostatic tachycardia syndrome (POTS). It is exciting to see the tech leaders like Instacart apply their offerings for the populations that need the support. Hopefully more tech companies can learn from Fidji’s leadership.
- Meanwhile, investors are leaning in. Instacart was among the first IPOs to emerge in the latest fundraising slump.
Summary: The CBO released a report looking into the budgetary impact of CMMI activities over the last decade and the potential impact over the next decade. After originally projecting CMMI to save $2.8 billion between 2011 - 2020, the CBO found that CMMI increased spending by $5.4 billion. This is because CMMI programs didn't cut benefits spend by nearly as much as projected previously - savings generated were $2.6 billion versus the projected $10.3 billion. Given CMMI spent $7.9 billion to achieve this $2.6 billion in savings, total costs to the government increases. The CBO similarly expects CMMI to increase spending over the next decade - after originally projecting it would generate benefits spend savings of $88.4 billion, it now projects CMMI will generate roughly $7.0 in savings, while spending $8.3 billion to achieve that. The four CMMI models that have been certified for expansion are saving the federal government money, it's the other models that haven't been certified that are dragging on results.
- The report from the CBO doesn’t seem like it should come as much of a surprise given the reports we’ve seen out of CMMI leadership over the past few years – notably this 10 year progress report from then-CMMI leader Brad Smith highlighting how many of the CMMI programs failed to save money. This report essentially highlighted the same – that CMMI didn’t generate savings essentially because the ratio of programs that scaled versus programs that didn’t scale was too low. The programs that scale saved money, the programs that didn’t scale cost money and so instead of seeing net savings, CMMI actually increased costs. Seems like a pretty straightforward conclusion.
In many ways, it seems like the more interesting question on this topic is how much money is it worth the federal government to be spending on experimentation like CMMI is supporting? As someone who hasn’t followed federal budgets that closely, it is an eye opener to see that CMMI has a budget of roughly $1 billion to spend a year – but then again as noted in Slack, you compare that to other federal spending and it seems like a drop in the bucket. Despite the CBO’s previous estimate that CMMI would generate $80 billion in savings over the next decade for CMS, that doesn’t seem like it was ever a particularly realistic target as the last decade of experience has shown. As noted in the Slack convo, without mandatory participation for providers, those targets seem challenging to hit. As also noted in Slack, though, this whole analysis misses the indirect effects that CMMI might be having in terms of having more providers gaining experience in these models.
CHART(S) OF THE WEEK
Sharing a visual or two from the week that made us think
This was an interesting study in JAMA Health Forum looking at differences in utilization of behavioral health visits for Medicaid patients associated with value-based payments and non-VBP in New York state. The study assessed utilization across various behavioral health conditions, including depression, bipolar disorder, and schizophrenia.
As we know, Medicaid beneficiaries with mental illness are among the most complex patient populations, but one that historically has been notoriously underserved. In an effort to improve the population's outcomes, the state implemented a Medicaid VBP reform in July 2015 - this study analyzes its performance over the years.
As highlighted in the charts above, VBP were associated with a reduction in behavioral health visits for folks with depression and bipolar disorder, while primary care visits saw no changes. In the schizophrenic population, VBP were associated with a reduction in PC visits. Further, VBP were associated with reductions in BH emergency department visits for all diagnostic groups. It's encouraging to see VBP demonstrating significant positive outcomes for a much deserving population.
A round-up of other newsworthy items we noticed during the week
Optum and ProHealth Care, a health system in Wisconsin, announced a strategic partnership where Optum will take over ProHealth Care's revenue cycle management, IT, informatics, and inpatient care management teams. As part of the move, 800 existing ProHealth employees transitioning to work in these Optum departments.
Link / Slack
SCAN Health is launching a 10-year VBC partnership with ApolloMed to co-create a new provider specific health plan called Compass. The full-risk plan - which will be offered to individuals in Los Angeles, Riverside, and San Bernardino counties - will provide members with access exclusively to ApolloMed's network of 12,000 physicians across primary care, cardiology, OB-GYN, outpatient behavioral health, and more.
Link / Slack (h/t Samir Unni)
Providence Health launched its fourth incubated company, called Praia Health, which provides a platform-as-a-service model for health systems seeking to engage patients digitally. Praia has an Identity and Engagement Platform that Providence has been using for over a year, with three million user accounts. The article notes that Praia has delivered Providence $20 million in value in 2022 - will be interesting to watch and see what other health systems sign up for this.
Link / Slack (h/t Bethany Vick)
Athelas, an RCM software company, is merging with EHR platform Commure. General Catalyst backed the merger, infusing the joint business with a reported $70 million of capital valuing the business at $6 billion. The combined company is on a $100 million revenue run rate, meaning the business is currently valued at ~60x revenue.
Link / Slack (h/t Samir Unni)
Cigna recently settled two Medicare Advantage fraud lawsuits, resulting in the company paying $209 million in compensation across the two lawsuits for violating the False Claims Act. The cases were related to Cigna artificially inflating its payments from Medicare by submitted inaccurate diagnosis codes for MA enrollees.
A collection of notable financing events across the industry
7wireVentures closed a $217 million growth fund to support existing portfolio companies and new orgs in later stages of funding. Three investments have already been made out of the fund - NOCD, FOLX Health, and Parsley Health.
Link / Slack
Headway raised $125 million in Series C funding at a $1 billion valuation. The startup's platform helps patients find in-network therapists and psychiatrists, and has made significant headway through its payer partnerships with the likes of BCBS NC, NY Empire BCBS, BCBS MA, and more.
Link / Slack (h/t David Cooper)
Connections Health, a behavioral health company, secured $28 million in growth financing to expand new market entry. The company operates a network of VBC-based behavioral health care systems, including emergency psychiatric units, outpatient clinics, and support programs.
Link / Slack
Diana Health, a women's health startup, raised $34 million in Series B funding to expand its network of women's health clinics. The company currently operates 3 clinics in Tennessee, providing a range of services, such as gynecology, maternity, mental health, wellness coaching, and more.
Link / Slack
Cortica, a VBC autism services company, secured $40 million in Series D extension financing to continue scaling nationally and support further technology investments. The company is on track to serve 12,000+ children and families this year.
Link / Slack
Ounce secured $5.2 million in seed funding to expand its efforts in the housing and health space. The startup leverages community health workers to help folks in the D.C. area with various health and lifestyle services - such as Medicaid enrollment, applying for energy assistance, scheduling doctor's appointments, transportation, and more.
Link / Slack (h/t Michael Ceballos)
Partum Health, a maternal health startup, raised $3.1 million in seed funding to expand its services, including lactation support, physical therapy, mental health services, nutrition counseling, and double care.
Link / Slack (h/t Rik Renard)
A round-up of posts from the broader healthcare community this week that made us think
Mental Health Crisis Care for Anyone, Anywhere, Anytime: Investing in Connections by David Whelan and Hui Cheng
This was an interesting peek behind Town Hall Ventures recent investment in Connections Health. The investors dig into the recent trends in mental healthcare driving the 'why' behind investing, unpack the details of Connections' business model, and what's to come for the company.
The recent issues surrounding deceptive Medicare marketing tactics is a topic that has come up a lot across the HTN community and one that is even more timely as open enrollment quickly approaches. This was a helpful overview of how both CMS and the State Health Insurance Assistance Program (SHIP) are tackling the misleading ads with new policies and resources for beneficiaries.
What Walmart’s Look at Ozempic Users Tells Us About Health/Care Consumers by Jane Sarasohn-Kahn
A good perspective on the news this week that Walmart and big food companies are seeing GLP-1s negatively impact demand for snack foods and the like.
Hospitals and digital health companies: making an emulsion from oil and water by Julie Yoo and Paul Uhrig
This was a helpful framework outlining the steps health tech companies need to take to successfully sell into health systems - from getting your foot in the door to pitch best practices to understanding the ins and outs of piloting.
Medical Tourism Market Map by David Paul
A solid overview of the medical tourism startup market, including categories like Travel Management, Treatment Sourcing, Language Translation, and more.