HTN | Weekly Health Tech Reads | 8/13

August 13, 2023

Weekly Newsletter

Welcome to this week’s free weekly newsletter, where we share our perspectives on some of the key healthcare related news of the week.

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Sharing our perspective on the news, opinions, and data that made us think the most this week

Oscar's Q2 earnings call provides a glimpse into the Aetna-ification process underway

Summary: The earnings call presented solid progress toward the profitability targets Oscar previously outlined. Bertolini laid out four strategic pillars for the organization moving forward: sustained profitability and margin expansion, member engagement as Oscar's key differentiator, diversifying insurance product types, and +Oscar platform growth. Bertolini also mentioned he brought in two former Aetna colleagues as execs as he institutes a new management process from Aetna days.

Our Reaction:

  • It seems pretty clear at this point that Oscar will indeed make it through this rough stretch, albeit with a very different identity coming out of it. We go into more detail on our takeaways from the call in the Slack thread below, but Bertolini is clearly reshaping Oscar into an organization that looks more like the type of business he ran at Aetna. From talking about the new executives that he brought in who used to work at Aetna, to the new management process he's installed, to the new compensation structure he's taking from Aetna and implementing in +Oscar - it all feels very much like Bertolini had a playbook for operating an insurance business from Aetna and has installed the playbook here. For an organization that grew on a foundation of being different than any other insurers, to be implementing the same management processes as one of the largest insurers in the country feels like a huge internal cultural shift. That being said, it also feels like the unfortunate reality of needing to get the business to profitability.
  • One of the more interesting points Bertolini made a few times was Oscar’s increasing focus on growth via provider partnerships. This appears true both in the individual markets and the MA markets - will be worth watching as you get the sense we should be seeing some bigger deals with health systems announced in the coming months.

HTN Slack Convo


Sharing a visual or two from the week that made us think

This KFF report on Medicare Advantage enrollment trends includes the chart above highlighting the growth of Special Needs Plans over the last several years. You can see why there has been growing interest from public insurers and investors targeting this market given the trajectory.

Ok, one more chart from that report just because there’s so much interesting stuff in it. Check out the market share for all insurers in MA over the last decade. If you're one of the big incumbents looking at that chart, is it any wonder you're not actually worried about VC-backed plans disrupting your core business? The top four plans had 72% market share in 2023, up from 60% back in 2010, while all other insurers share declined from 24% to 16%.

Ok, ok. One more KFF chart this week, we promise. This one from a different but equally excellent KFF report looking at quality payments to MA insurers. You can see why hitting 4 Stars his such a big deal for these plans - UHG is receiving almost $4 billion in payments from the government associated with hitting these bonuses. Centene also stands out in the chart for the wrong reasons - it’s bonus per enrollee is significantly lower than any other payor, at only $251.


A round-up of other newsworthy items we noticed during the week

Babylon's take-private transaction with MindMaze fell through, and Babylon will now need to find a new buyer for its businesses or it will initiate bankruptcy proceedings. As part of this news, Babylon will be exiting the US market and transitioning its patients elsewhere. As Katie Jennings tweeted, the transition of patients to new providers has not been as seamless as one might hope. It’s always disappointing to see a conclusion like this, primarily for patients, but also the employees of Babylon.
Link / Slack

Bright Health had an eventful week, announcing it secured additional funding to make it through the MA business sale and posting earnings. The earnings session was again lacking as Bright leaders dodged analyst questions for the second quarter in a row. Reading the tea leaves, it seems like they are ready to be done being a public company. The one interesting comment from their earnings call was that Bright is planning to move away from full risk contracts and to shared risk contracts on the exchanges now that it has external payor partners. Seems like a pretty clear indication that when it had both entities in house Bright was forcing providers to take risk that wouldn’t otherwise be wise, presumably in an effort to compensate for a mis-priced insurance product.
Link (earnings) / Link (funding)

Cano Health’s stock plummeted as it had a quarter that I think could generously be described as disastrous for the business. It is planning to sell / divest all non-core assets and focus solely on Medicare Advantage and ACO REACH in Florida, and even with this plan Cano management noted that it is unsure it will survive the next year. Cano was hit by a bunch of surprises this quarter. Kudos to their leaders for showing up and sharing transparently sharing the current state of the business - there’s a lot to learn from some of the things they shared, including the OTC flex card discussion (as mentioned in Slack, OTC flex cards cost Cano $66 million in 1H 2023).
Link / Slack

Doximity had a challenging quarter as it lowered profitability forecast for FY 2024 and announced a 10% reduction in headcount, causing the stock to drop 25%.
Link / Slack (h/t Matthew Holt)

Better Life Partners, a virtual SUD platform, raised $26.5 million.

Daybreak Health raised $13 million for a school based mental health model.
Link / Slack

Endear Health raised $8 million to build an engagement platform focused on the Medicare Advantage value-based care market. Optum Ventures and Blue Cross of Idaho are participating in the round.
Link / Slack (h/t Michael Ceballos)


A round-up of posts from the HTN community that made us think

Primary Care Innovation Doesn't Work - Here's Why by Max Marchione
This piece looks at various venture-backed approaches to building new primary care models and highlights the many challenges each of the models have. It's worth checking out and underscores the changing sentiment investors have toward investing in primary care as we've all learned from public market failures over the last several years.

Vital Signs Podcast with Sunil Kantaria on ICHRA, etc by Jacob Effron & Nikhil Krishnan
The ICHRA market has been an interesting one for some time now, and organizations like Oscar see big potential in it. This podcast with Savvy’s CEO Sunil Kantaria provides some interesting insight into the market.