HTN | Weekly Health Tech Reads | 11/5
November 5, 2023
A review of key Q3 calls from the week
Humana delivers a mixed quarter with outperformance in Medicaid and primary care, but higher than expected utilization in MA
Humana reported higher-than-expected utilization, driven by COVID admissions as well as an uptick in non-inpatient utilization beyond what was noted earlier in the year. Medicaid outperformed because redeterminations are moving along favorably to expectations, and it is managing medical better than expected. Humana is growing faster in its primary care clinics than expected, increasing full year growth estimates to 34k – 36k patients in 2023 versus 20k – 25k. This is more than double the growth Humana saw in 2022. Similar to CVS, Humana touched on how its primary care clinics have a plan to mitigate the impact of the v28 risk adjustment model. Humana touted the quality of its MA offering – it mentioned that it has had the highest percentage of members in 4 Star or higher contracts for six straight years. In 2024 it will be at 94% in 4 Star plans, and Humana more than doubled its membership in 5 Star plans in 2023. The investments they’ve been making in a revised sales strategy appear to be paying off, as Humana has seen a 50% increase in internal sales year-to-date, which it notes is its highest LTV sales channel. But it’s interesting to note that Humana shared that Humana expects fewer consumers shopping for new plans than initially expected as there was less of a drop in benefits from competitor plans than it had expected. So it’s tempering sales growth expectations for next year – walking back from taking a disproportionate share of industry growth to growing at industry average.
The earnings call featured lots of discussion around the creation of Cordavis, a new wholly-owned entity CVS created to bring biosimilars to market. CVS noted it is making progress on Stars ratings, expecting its hit in 2025 to come in at the low end of guidance, closer to $800 million than $1 billion. On the individual exchanges, CVS is picking up more members than it expected during SEP, which it expects to drive MLR higher during the year. But they did note they are confident with the individual business moving forward – in 2024 they expect it to be a profitable $6 billion P&L for the business. On Oak and Signify, updates were pretty light. But they did share the interesting anecdote that by having CVS pharmacists pitch the Signify offering, they’re seeing that Signify reaches 50% of patients that Aetna was previously unable to reach. In Q&A there was a bit of discussion on Oak Street strategy. CVS execs talked about how they feel pretty good about Oak Street’s ability to withstand the impact of V28 risk adjustment changes, noting that those will have a ~2% revenue impact next year for Oak. CVS also noted they’re continuing to plan on opening 50 – 60 new clinics next year, and that the focus is on execution versus any other M&A. It sounds like the conversation from this summer around finding ways to move losses off CVS’s book are now a thing of the past.
agilon stock drops 15% as Adjusted EBITDA expectations improve but agilon revises medical margin downward
agilon kicked off the earnings call explaining its decision to sell its Hawaii business, MDX Hawaii. Details on the buyer were not disclosed, other than it being described during the earnings call as “an experienced, California-based organization that's really strong in delegated model services“. The rationale provided was that Hawaii’s model was different than agilon’s typical markets - in Hawaii, there is no JV relationship with provider group, there is a small senior patient base, and a delegated MSO structure. It seems like the bigger issue, however, was that Hawaii was a $12 million hit to EBITDA in Q3. In 2024, Agilon expects its new class of providers to bring in 25,000 new ACO REACH members as well as 110,000 Medicare Advantage members (up from 100,000). They note that the class of 2025 will include provider partners that are both independent groups and health systems. agilon is revising medical margin outlook down for FY 2023 by $50 million to $455 - $470 million. The Hawaii business accounts for $20 million of this, and the remainder appears due to utilization and being more conservative in how they’re accounting for utilization trends. It’s interesting to see in the Q&A how this change is due to data issues they’ve had with one payor, which agilon is hoping is now resolved, but analysts in general seemed a little confused by this move from agilon.
Alignment Healthcare's Q3 beats expectations, and highlights how they feel well positioned despite MA headwinds
Alignment highlighted how they’re well positioned in the MA space and see the two key headwinds for most - Stars rating changes and V28 risk adjustment – are a relative advantage to Alignment versus other MA players. On the Stars front - they note they’re one of four plans in California with a four star rating, two are integrated delivery networks, and the remaining plan only has 20% of membership in California. On the v28 front, they note that they’ve been very conservative from a RAF perspective and have low RAF scores, meaning this headwind is an advantage for them and will continue to be an advantage for 2024 and 2025 bids. There was also an interesting Q&A about a community center in California that Alignment recently opened (see here), with an analyst curious about what growth plans are for that model. Alignment views it as a “hub-and-spoke” approach with in-home engagement for chronic patients – with these hubs being mixed use for clinical and concierge type purposes. They tempered expectations for this approach noting they won’t be over-investing in bricks-and-mortar, but will be pursuing this approach selectively.
CHART(S) OF THE WEEK
Sharing a visual or two from the week that made us think
Mario Schlosser (Co-Founder and CTO of Oscar) posted some interesting data on X (fka Twitter) looking at the percentage of Oscar member conversation threads that contain mentions of various GLP-1s, such as "Ozempic" and "Wegovy". As Mario mentions in his thread, the percentages are shown relative to the seasonal mentions of the flu. Interesting to see that in 2023 around 1% of member conversations they're having mention either Ozempic / Wegovy, which looks to be >2x higher than in 2022.
A round-up of other newsworthy items we noticed during the week
Walmart Health is partnering with a health system and payor in Florida to help coordinate care via its 23 Walmart Health centers. On the insurance side, Walmart will be partnering with Ambetter Health, which is owned by Centene. It appears that relationship first got legs earlier this year as a way to help make individuals aware of Medicaid redeterminations and drive exchange enrollments for Ambetter. Orlando Health is the health system partner, and Walmart will work to coordinate care for patients with Orlando Health. The press release is light on details of what exactly this means, but it seems like a logical spot for Walmart Health to play.
Olive, a healthcare AI startup, is winding down operations as it is selling its two remaining business units. Waystar will be acquiring Olive's patient access software, and Humata Health will be acquiring the prior authorization business. These two transactions mark the end of the road for Olive, a company that raised $400 million at a $4 billion valuation back in 2021.
Link / Slack (h/t Jim Doscher)
Pixel tracking is a topic that comes up a bunch amongst the marketing and growth Nerds in the community. In recent news, the AHA is suing the federal government over rules regarding pixel tracking and information sharing. The provider group argues the HHS rules impede hospitals' ability to share important healthcare information with the patient communities they serve. The lawsuit directly challenges the Dec '22 HHS Bulletin titled, Use of Online Tracking Technologies by HIPAA Covered Entities and Business Associates.
CMS finalized the 2024 Physician Fee Schedule rule, bringing a 3.4% cut to physician Medicare reimbursements for 2024.
A collection of notable startup financing rounds across the industry
Covera Health, an AI diagnostic platform, raised $50 million in Series C funding to build upon its payer-provider marketplace. In addition to the funding, Covera announced its acquisition of CoRead, an AI quality assurance company.
Link / Slack (h/t Kevin Wang)
Jona, an AI-enabled gut microbiome platform, secured $5 million in funding. The startup offers at-home gut microbiome profiling kit, which enables consumers to analyze their unique microbiomes.
Link / Slack (h/t Kevin Wang)
A round-up of posts from the broader healthcare community this week that made us think
2023 Primary Care Pulse Report by Pearl Health
The Pearl Health team published the results of a survey of 200+ primary care providers that aims to understand the most pressing challenges PCPs face today. The report touches on three key themes: 1) Compensation and Payment Models, 2) Value-Based Care Adoption, and 3) Systemic Barriers to Value-Based Care.