HTN Weekly Health Tech Reads 8/28
August 28, 2022
News of the Week:
- It's another week where M&A bidding war news dominated the conversation, with WSJ and Bloomberg reporting that four bidders in the Signify Health auction are Amazon, CVS, UHG, and Option Care Health. Bloomberg reported that UHG is the leading bidder, and the majority of folks in our informal Slack poll think UHG (56%) will win the auction. I tend to agree, although can see good cases being made for any of these three. Lots of interesting strategic implications for each of Amazon, CVS, and UHG, which we go into more detail on in the article on our website. Of course Amazon's potential strategy here looms very large - is this a sign they're here to win in healthcare? If so, it seems like UHG all of a sudden might have some competitive threats.
Link (Bloomberg) / Link (HTN article) / Slack (convo) / Slack (poll)
- Amazon also made waves this week as it announced it is shutting down Amazon Care at the end of 2022. While Amazon's entry into virtual primary care was much ballyhooed, the failure here seems notable only in that it is Amazon's name plastered all over it. You shouldn't have to look much further than Amazon Care's limited customer list to spot the fundamental challenge here - it takes a really long time to build a meaningful product organically in healthcare. As everyone seems to realize in healthcare sooner or later, scale is the name of the game in healthcare, and if you're a big company sitting on a pile of cash, it makes more sense just to buy a company that has broken through and already achieved scale (i.e. One Medical) versus toiling for a decade burning cash while attempting to achieve scale. Keep in mind One Medical was founded in 2007, meaning it has been on this journey for 15 years, and is still struggling with its financial model. Why would Amazon spend 15 years building up Amazon Care when it can short circuit that process by just buying One Medical's existing platform?
Link / Slack (h/t Etan Walls)
- Political battle lines continue to be drawn over Medicare Advantage, as this week the Better Medicare Alliance pushed back on a senator's letter to 15 states requesting to see MA member complaints regarding potentially deceptive marketing practices. The Better Medicare Alliance not surprisingly cites the benefits of Medicare Advantage, and also the challenges of enrollment, while the senator's letter suggests member complaints doubled from 2020 to 2021. It certainly seems like all of those things can be true. Either way, it's starting to feel like Medicare Advantage is becoming more of a contentious topic on the hill.
- CMMI released the 110 provisionally approved ACO Reach participants last week, meaning that between this list and and the list of organizations currently participating in Direct Contracting, these are the organizations that can participate in ACO Reach (entities can still drop out). There are lots of interesting names on the new list of ACO Reach participants, including MSO startups (Aledade, Pearl Health, Vytalize), Rural Care Delivery Startups (Homeward, Main Street), Health Systems (Allina, Advocate Aurora), and Payors (Neue).
Link / Slack
- Alma, an MSO for independent therapists, raised $130 million at an $800 million valuation. Alma has had quite the interesting evolution over the past few years - first starting as a co-working space for independent therapists pre-COVID, then morphing into an MSO providing back-office services for therapists, and now it is aggregating those independent therapists it works with as an MSO and negotiating with payors as a network of mental health providers. In a world where payors are desperate to add more access to mental health providers, this seems like a slam dunk approach. Mental health seems like a unique market for this approach to work in for a few reasons, but will be interesting to see if other companies follow this approach now given Alma's success.
Link / Slack
- GI Alliance, a physician practice with 638 independent GIs operating across 14 states, is now valued at $2.2 billion after its physician owners repurchased 30% of the business owned by PE group Waud Capital.
- Plume, a virtual primary care service for transgender patients, raised $24 million.
- Fair Square Health, a Medicare brokerage, raised $15 million. I like the intent here of educating seniors versus just selling them plans, although think every broker would also suggest they do just that.
- Givers, a startup with a debit card that helps caregivers identify financial savings opportunities, raised $3.5 million. It's very cool to see a caregiver support model that isn't focused on selling to employers.
Link / Slack
- There's a new partnership in the ISNP market in Iowa, with residents of two facility chains (Care Initiatives and Accura Healthcare) partnering with American Health Plans.
- The latest UnitedHealthcare Accelerator launched this week, announcing ten new companies participating in the program.
- This is a really good New Yorker article on the impact of private equity ownership of nursing homes, exploring how nursing home deaths increase by 10% after private equity ownership takes over. The article does a good job noting how private equity firms generally employ the same strategies as everyone else who runs nursing homes, they are just more focused on generating profits. The way to do that, generally speaking, is to cut staff. But when you cut staff in nursing homes, bad things happen. It highlights the experience of Portopiccolo, which has quietly amassed more than 130 nursing home facilities, one of the largest chains in the country. It also appears to have awful living conditions inside many facilities (the article makes reference of a resident eating a mouse in front of staff). It's getting to the point where I don't know why we expect anything different to play out here - we know many of these private equity buyers are out to make a profit first and foremost, we know the playbook and the impact, and yet we continue to be shocked that this is the result. So if private equity groups like this are the only buyers who will keep these facilities open, it seems like we have a much more fundamental problem at hand.
- In case you've been wondering whether it's a good idea to cede healthcare questions to employers in this country, I'd suggest this WSJ article hints at the answer ("no"). New data suggests that employers are rolling back parental leave benefits. Companies offering maternity leave above what is required by law dropped from 53% to 35% since 2020, and companies offering any paternity leave has fallen from 44% to 27%. As one would expect, companies generally expand benefits when it is hard to hire people (i.e. at the beginning of the pandemic) and take away those benefits when they don't need to offer them. Expecting for-profit organizations to do anything other than what is in their best interest financially seems like a fools-errand.
Link (WSJ paywalled)
- Wired covered Babylon Health's decision to shutter most of its contracts with the NHS. As I mentioned in the Slack discussion, this is a good reminder that VBC contracts aren't a cure-all for the financial issues facing PCPs. The real challenge isn't so much a FFS versus VBC one, but rather that PCPs aren't paid enough in a FFS environment, and if a VBC contract doesn't pay them meaningfully more, they're still going to have the exact same financial issues that PCPs in a FFS environment face. In a nutshell, this is why Babylon is leaving the NHS for greener pastures in the US - there is more margin opportunity in VBC contracts in the US.
Link / Slack
- This is a good deep dive on the aging tech landscape. If you're looking for a general overview of market trends and what various companies are up to, it's worth checking out.
- Here's a nice overview of the infrastructure of healthcare payment flows and how health plans interact with providers, including this chart with the various transactions.
Link / Slack (h/t Tejas Inamdar)
- This is rather eye-opening data suggesting that insured patients accounted for 58% of bad debt in 2021, growing from only 11% in 2018. The increases in average patient pay portion are particularly staggering - patients with self-pay balances after insurance greater than $14,000 grew to 16.8% of all statements, quadrupling from 4.4% of statements from 2018. Thanks, high deductible plans.
Link / Slack
- Business Group on Health released a survey of large employers with lots of interesting data in here to peruse if you're selling to employers, but this stood out to me for virtual care offerings selling to employers: "To have influence on the quality of care, 84% of employers believe that integrating virtual health and in-person care delivery is essential and the most important action their partners can take." In addition, the top concern large employers highlight is siloed care between virtual care and providers in the community. It seems like a good bet that we're going to see a lot more "hybrid" care model activity over the next few years as well as MSO-style models that help incumbent providers look more like their VC-backed virtual care siblings.
Link / Slack (h/t Kevin Wang)
- 23andMe, a company building a genetics health platform, is hiring a Competitive Intelligence Manager. Link.
- Circulo Health, a startup providing home and community-based care for individuals with intellectual and developmental disabilities, is hiring a Senior Full Stack Engineer. Link.
- Elektra Health, a startup offering digital menopause services, is hiring a Content & Community Manager. Link.
- Humana, the large health insurer, is hiring a Director, Clinical Strategy Advancement. Link.
Access the HTN Jobs Board for the full list of job postings.