More gimlety views on CVS-Oak Street Health, Amazon-One Medical acquisitions

March 2, 2023 | by

Perhaps this Editor is not that much of an Outlier in thinking that these deals don’t beat, say, sliced bread. Oak Street Health (OSH) disclosed its financials in an SEC 10-K filed on Tuesday. One must wonder what CVS is seeing in the company other than bulking up its primary care profile. Their loss grew to $510 million from 2021’s $415 million. While OSH grew impressively in 2022 with a 51% increase in revenue to $2.2 billion, driven by 40 new centers ending with a total of 169 facilities in 21 states, expenses grew exponentially for the new patients: medical claims expenses grew 48%, cost of care went up 49%, and sales and marketing up 38%. Scalable, so they claim; profitable, not till 2025 at earliest.

Other problems were revealed in the 10-K. OSH has substantial business from other payers, which may not be pleased that CVS owns a small payer called Aetna, though has pledged to keep OSH payer-neutral. OSH leases or licenses most of its care centers from Humana. That payer also accounted for 32% of its 2022 capitated revenue. Centene’s plans and HealthSpring made up an additional 23%. Other, more routine concerns are regulatory review, attrition of physicians and clinician staff, and last but not least, breakup fees ($500 million if CVS walks away, $300 million if it’s OSH). When you add these to other factors as outlined in our earlier article, such as the Medicare Advantage and high-need populations, CVS is cutting off a hefty slice of loaf, especially considering that the more complex Signify Health buy is due to close this quarter. Earlier opinions on the buy [TTA 16 Feb], Healthcare Dive

Now to Amazon and One Medical. This Editor received her invitation to buy a One Medical membership earlier this week (left). Countering this Editor’s analysis from last week, which maintains that Amazon is already under a broad antitrust microscope viewed by the Federal Trade Commission (FTC) and the Department of Justice (DOJ), Healthcare Dive counters, quite logically and in the view of their experts, that if either agency was going to object, they would have done so before the closing, and the grounds were likely too novel. The article concedes that the FTC could take action further down the road, for instance if Amazon violates HIPAA or consumer privacy with ad trackers. Instead, the focus is on objections by consumer groups, Amazon leveraging health data, privacy violations, and a general consumer unease around Amazon dealing with their health issues.

  • Consumer protection group Public Citizen urged regulators to block the deal in a letter to regulatory groups after it was announced last summer. For instance, it could bundle One Medical and Prime membership (a no-brainer). By tying the two together, Amazon could gain consent for using patient data from health records. Amazon could also serve ads for products related to medical conditions without that access (that old Pixel/ad tracker business again). These concerns are publicly shared by two FTC commissioners.
  • “Analysts said that data acquisition was likely a big driving factor for the deal. After linking One Medical’s data with that from its other products and services, Amazon can analyze petabytes of healthcare data in the cloud and use the findings to better manage the health of One Medical’s Medicare population, build new products and pinpoint people with rare diseases to solicit participation in clinical trials, according to (market research firm) Forrester’s (Natalie) Schibell.” [Editor] That would, of course, require patient consent. 
  • Forrester noted that the consumer unease around Amazon in healthcare is substantial. 34% of surveyed adults weren’t at all comfortable with Amazon for healthcare needs with an additional 17% only somewhat more comfortable (tier 2). Trust levels are low, and it would take only one or two incidents, such as a security breach or HIPAA violations, to destroy it. This Editor would add that if One Medical practices were not managed impeccably, that would go viral among individual and corporate members, in a way that Amazon Care did not.

Breaking: Amazon closes One Medical $3.9B buy, despite loose ends–and is the Antitrust Bear being poked?

February 23, 2023 | by

The Big Deal closes, but loose ends and larger issues remain. Today’s news of Amazon closing its purchase of the One Medical primary care group is being received in the press, especially the healthcare press, enthusiastically. This Editor cannot blame her counterparts, as since last year there’s not been much in the way of good news, compared to 2020-21’s bubble bath. Her bet as of a couple of weeks ago was that the deal would not go through due to Amazon’s financial losses in 2022 and/or that the FTC would further hold it up, both of which I was wrong, wrong, wrong on. (Cue the fresh egg on the face.)

Wiping off said egg, here is what Amazon is buying and their first marketing move. (Information on size and more from the 1 Life 2022 year end 10-K):

  • Amazon acquired 1Life Healthcare Inc. for $3.9 billion, or $18 per share in cash.
  • The practices are primarily branded as One Medical, closing out 2022 with 836,000 members and 220 medical offices in 27 markets
  • It is a value-based primary care model with direct consumer enrollment and third-party sponsorship across commercially insured and Medicare populations. Their Net Promoter Score (NPS) is an extremely high 90. (NPS is a proprietary research metric that indicates customer loyalty and satisfaction.)
  • They also have at-risk members from the $2.1 billion Iora Medical acquisition in seven states, in Medicare Advantage (MA) and Medicare shared savings value-based care (VBC) arrangements [TTA 27 July 22].
  • One Medical has contracts with over 9,000 companies, establishing Amazon at long last in the desirable corporate market.
  • One Medical also provides a 24/7 telehealth service exclusively to employees of enterprise customers where there are no clinics.
  • Amazon will be offering a discounted individual membership of $144 versus $199 for the first year, without an Amazon Prime subscription.

The Federal Trade Commission (FTC), which had additional questions about the buy as part of a Second Request in the Hart-Scott-Rodino Act reporting process, did not act in time to prevent the closing. Nor did the SEC or DOJ. This is CEO Andy Jassy’s first Big Deal at Amazon and certainly, the champagne and kvelling are flowing at HQ plus One Medical’s investors and shareholders for a successful exit. But should Amazon be looking over their shoulder? 

What are the open issues? Is a large, hungry Bear called Antitrust being poked, or lying in wait for its prey?

  • The FTC has the right to probe into the transaction despite the closing and a deadline passing for antitrust review. In FierceHealthcare and STAT, FTC spokesman Douglas Farrar is quoted as telling the WSJ (paywalled) in a statement that “The FTC’s investigation of Amazon’s acquisition of One Medical continues. The commission will continue to look at possible harms to competition created by this merger as well as possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical.”
  • As previously reported here, only in December did the FTC send out subpoenas to current and former One Medical current and former customers as part of its investigation. That’s late to stop a buy–unless FTC had something else larger in mind.
  • Early February reports in Bloomberg and the WSJ indicated that this may be part of a larger FTC action in developing a wide-ranging antitrust lawsuit against Amazon on multiple anticompetitive business practices. Their chair, Lina Khan, is highly critical of Amazon’s business practices. Amazon’s buy of iRobot, maker of Roomba, which at $1.7 billion was a comparative snack, is still not closed and has received a lot of negative attention for possible misuse of consumer information. 
  • Sidebar: This FTC is ‘feeling its oats’ on antitrust. GoodRx found itself making history as FTC’s first culprit of the 2009 Health Breach Notification Rule, used to prosecute companies for misuse of consumer health information. This was for their past use of Meta Pixel, discontinued 2019, to send information to third-party advertisers. One Medical is a HIPAA-covered entity which puts it at a far higher risk level. 
  • The Department of Justice (DOJ) has not publicly moved to approve or disapprove–yet. 
  • The change of ownership has not been reported as passing muster by regulators in multiple states. Example: Oregon approved it, but with multiple stipulations [TTA 6 Jan]–and there are only five One Medical clinics in Oregon. States like New York, Massachusetts, Connecticut, and California are not exactly pushovers for approval, with California alone having two approval entities.
  • Congress is increasingly feisty on data privacy–consumer health information and its misuse in telehealth [TTA 9 Feb]. 

Will this be ‘buy now, regret later’, a lá Teladoc’s expensive acquisition of Livongo, or Babylon Health going public with a SPAC? Is this a clever trap laid for Amazon?

  • Amazon is already under a Federal and state microscope on data privacy. Information crossing over from One Medical to their ecommerce operations such as Pharmacy and Prime will just add to the picture. 
  • Accepting Medicare/Medicare Advantage increases scrutiny on quality metrics and billing, to name only two areas. At-risk patients in Medicare and other VBC models, especially Medicare Shared Savings Program (MSSP) fall under CMS scrutiny. Amazon may take a look at that and spin-off/sell off the former Iora Health practices/patients.
  • Amazon has failed in healthcare previously, as a partner in the misbegotten Haven and in its own Amazon Care ‘home delivery’/telehealth model selling to companies, now closed. Its asynchronous virtual care service, Amazon Clinic, is too new to judge its success. 
  • Office-based, brick-and-mortar healthcare provided by doctors, nurses, and allied health professionals is an entirely new area for Amazon. Will they be satisfied with their new masters–and new metrics? It is also expensive. One Medical has never been profitable and did not project breakeven for years. (If one asks how this is different than CVS acquiring Oak Street Health, or Walgreens acquiring VillageMD and Summit Health, CVS and Walgreens have experience for decades in multiple aspects of providing healthcare–profitably and in compliance.)
  • One wonders how heavy of a hand Amazon will place on One Medical’s operations. How their management, doctors, and other professionals will feel after a year or two of Amazon ownership is anyone’s guess. This Editor doubts they will remain in place or silent if unhappy.
  • Selling to enterprises–and account retention–is a vastly different relationship-building process and buyer journey than 1:many consumer transactions. One Medical made a go of it with 9,000 companies and enrolling employees at about a 40% rate, so they did something right. By contrast, Amazon failed to sell Amazon Care well to companies. Humility and service, for starters, are required.
  • Last but certainly not least, is how Amazon will deal with regulation and compliance at multiple levels.

Expect that the FTC and DOJ will not be done with Amazon any time soon in what looks like a wider antitrust pursuit that may take some time, which they have. Amazon has tens of millions in government business (AWS) at stake and shareholders expecting a reversal of losses. Pro tip to Amazon: run One Medical as a separate operation with minimal integration and no information sharing until past this. And then some.  Healthcare Dive, Becker’s

Is CVS’ Oak Street Health deal genius? Or a waste of time and $10B?

February 16, 2023 | by

A sample of the split opinion. In the buccaneering between CVS and Walgreens, plus Walmart and Amazon, to add primary care, CVS definitely buckled the swash with three deals: Signify Health (being questioned by DOJ and FTC) [TTA 21 Oct 22 latest], a $100 million investment in Carbon Health [TTA 11 Jan], and Oak Street Health [TTA 9 Feb]. These are in line with their strategy of acquiring companies to expand their capabilities in primary care, provider enablement, and home health. The wisdom of the first–primary care–is being questioned by a few in healthcare. 

The basic argument is that primary care is money-losing, ‘unless you have significant ancillary revenue and downstream referral income’ according to Randy Davis, vice president and CIO of CGH Medical Center, based in Sterling, Illinois. Oak Street’s Medicare Advantage business is also money-losing because of its dependence on increasing severity scores (risk adjustment) and is generally an ‘uphill battle’. This Editor will add that as previously noted–and lauded in CVS’ release–Oak Street is notable for serving underserved patient populations–50 percent of Oak Street Health’s patients have a housing, food, or isolation risk factor. That equates to greater expenses that may or may not be reimbursable. Oak Street certainly has proven the money-losing part, forecasting a loss of $200 million for 2023 and not projecting a profit until 2025. Mr. Davis was blunt, calling it a deal that made no sense and “CVS better have a plan they implement in 18 months or they’ll get slaughtered.”

Another rap on the deal is that it is not big enough. Given the size of Oak Street at about 169 offices and the national figure is quoted as 600,000 ambulatory sites, it’s tiny. However, what isn’t considered is Aetna’s existing relationships with primary care physicians through ACOs formed as joint arrangements, and if Signify Health goes through, the Signify/Caravan ACOs. In fact, this may be a factor in the DOJ/FTC consideration of antitrust.

Others see opportunity in integrating primary care into CVS’ retail locations (Carbon Health) and serving historically underserved communities–much the same tack that Walgreens is taking with VillageMD (acquiring Summit Health) and Walmart with Walmart Health clinics. Becker’s Hospital Review

And as to Amazon, this Editor’s prediction is that Amazon will strike its Jolly Roger and sail away from the One Medical buy.

Ad tracker action heats up: Congress questions DTC telehealth companies on sensitive patient health data sent to advertisers

February 9, 2023 | by

It looks like telemental and addiction counseling telehealth sites are routinely sending patient information to media ad platforms–Google, Facebook (Meta), TikTok, Microsoft, Snapchat, Bing, Pinterest, and Twitter–to serve ads back to patients. Four Senators sent letters this week to three telehealth companies treating patients: Monument (alcohol addiction), Workit Health (opioid and alcohol), and Cerebral (ADHD and other mental health). The letters questioned the use of ad trackers (pixels) such as Meta Pixel that collect information from telehealth sites and then use the information to send users targeted ads based on that information. Except that this is not about curtains or shoes, but medical treatment. 

Kicking this off was The Markup/STAT study in December, examining 50 telehealth websites.

  • 49 of 50 websites shared user/patient tracking data to advertising platforms. This captured data as routine as URLs and IPs, and as extensive as name, email, phone, questionnaire answers, when users created accounts, and cart behavior, such as a prescription medication or treatment plan.
  • 35 were found by the study to have trackers sending individually identifying information to at least one media platform that included names, email addresses, and phone numbers
  • 25 had at least one tracker that indicated when users added prescription drugs and other items to their cart or when they checked out with a subscription for a treatment plan
  • 13 had at least one tracker that collected patients’ answers to medical questions

Ad trackers then send that information to platforms, which then serve targeted ads back to the telehealth companies’ users and patients. For the telehealth companies, the data is monetized. Because ads are served, there is a revenue stream back to the telehealth companies. 

From the senators’ letter: “This data is extremely personal, and it can be used to target advertisements for services that may be unnecessary or potentially harmful physically, psychologically, or emotionally.” Markup/STAT

Users may well assume that because the telehealth companies eventually connect them to a provider covered by HIPAA, or sends them a prescription from a provider, such as migraine treatment, that their data is protected along the entire journey. That assumption has now been demonstrated to be incorrect. This included major, heavily advertised DTC providers such as Lemonaid, Keeps, Hims & Hers, Talkspace, and Roman (Ro). Many of them are now examining their pixel policies.

The December article linked above has all 50 companies and what information they found was sent to ad platforms. The only website that did not was Amazon Clinic–brand new and of course not wanting to share their information outside of Amazon.

This follows on the FTC’s still to be approved by a Federal court, but apparently successful $1.5 million action against med discounter GoodRx using the never-used-before Health Breach Notification Rule, enacted in 2009 [TTA 3 Feb]. 

Why this is significant: first, the FTC action using an old rule, followed by the senators targeting three prominent (and in Cerebral’s case, beleaguered) telehealth companies, and the red meat documentation provided by The Markup/STAT study provide grounds for endless follow-up by not only Congress, but also private and public (DOJ) litigation. Stay tuned.

Amazon gets all tangled up on their $3.9B One Medical buy as FTC widens antitrust scrutiny

February 7, 2023 | by

Amazon’s ride towards being the #1 threat to healthcare hits an oncoming train. A report in stock analysis newsletter Seeking Alpha, picked up from other sources (the subscription Dealreporter), states that the Federal Trade Commission (FTC) hired outside economists to scrutinize Amazon’s $3.9 billion purchase of provider network One Medical (1 Life Healthcare). In a little-noticed action in early December, FTC also sent out subpoenas to current and former One Medical current and former customers as part of its investigation.

Both the Wall Street Journal and Bloomberg (paywalled) are reporting that this appears to be part of a larger FTC action in developing a wide-ranging antitrust lawsuit against Amazon on multiple anticompetitive business practices. In a recent example, FTC held up Amazon’s acquisition of iRobot (Roomba) during the summer, and in September, requested information from 1 Life and Amazon above and beyond the usual required Hart-Scott-Rodino Act (HSR) reports reviewed by the FTC and DOJ [TTA 15 Sept 2022]. This examination has been going on for some years, across two administrations, but may come to fruition as early as this spring. The main investigation is around Amazon favoring its own products, how it treats outside sellers on its platform, and copycatting the products of outside sellers. It may also cover Amazon Prime bundling practices. Prime also plays into its healthcare strategy. FierceHealthcare

Another factor: the highly profitable growth of Amazon Web Services (AWS) has taken a nosedive along with the cloud market, killing Amazon’s growth and value, according to Seeking Alpha’s analysis (may be paywalled). Amazon is also closing or pausing already built-out food stores–Fresh supermarkets and Go convenience shops–ending a long-term commitment to developing them.

When all of these factors are combined with Amazon’s 18,000 layoffs and huge 2022 net loss of $2.7 billion, it’s hard to believe that Amazon now has enough blue sky fisc to make the huge investment and long-term commitment that a largely new and cash-intensive business, delivering healthcare through real live providers in offices, will require. Amazon’s current health business is either transactional virtual retail (Pharmacy and the new non-face-to-face Amazon Clinic for virtual medical referrals) or hardware+subscription (Halo)–areas that Amazon knows well. But managing an entirely new and complex area that provides expensive and regulated provider services?

This Editor will go out on a wintry limb and predict that Amazon, facing FTC and state anticompetitive actions plus plenty of shareholder profit pressure , will cancel the deal with One Medical–leaving One Medical on another limb.

CVS works their plan in Oak Street Health buy talks, Carbon Health $100M investment + clinic pilot; VillageMD-Summit finalizes (updated)

January 11, 2023 | by

CVS, Walgreens, Amazon, Walmart all chasing the same type of companies to expand their service continuum. During their Q2 2022 earnings call, CVS Health announced that they were determined to enhance their services in three categories: primary care, provider enablement, and home health. And CVS’ CEO Karen Lynch was pretty blunt about it: “We can’t be in the primary care without M&A” (sic). So CVS’ latest moves should come as no surprise.

Oak Street Health: CVS is in talks with this value-based care primary care provider for primarily older adults in Medicare and Medicare Advantage plans. With 100 offices nationally, it’s not too small, not too large to combine with other operations. As a public company traded on the NYSE but puttering along in the $13-$22 per share range since the fall from a high of $30 in August, the news of CVS’ interest has boosted them above $28 and a market cap of just under $7 billion. Although Oak Street has previously maintained that they have no interest in a sale, it has never been profitable and is on track to lose $200 million this year. That is not a good look for CVS but they are working a strategy. Previously, CVS walked away from primary care group Cano Health [TTA 21 Oct 22]. Bloomberg News (paywalled) reported that CVS could pay $10 billion which would be over $40 a share. Healthcare Dive, Reuters

Carbon Health: CVS leads their Series D with a $100 million investment plus piloting Carbon Health operations in primary and urgent care clinics in their retail stores. However, the deal came at a price. Last week, prior to the investment announcement, Carbon announced that it would wind down lines of business in public health, remote patient monitoring, hardware, and chronic care programs, cutting 200 jobs in addition to a June cut of 250, at the time about 8% of their workforce. Carbon will now concentrate on their clinic core business. 100 are presently located across Arizona, Nevada, Colorado, Kansas, Florida, Massachusetts, and California (San Francisco, Bay Area, and San Jose).

In the last two years, Carbon raised $350 million and grew by acquiring four clinic chains. It diversified by buying Steady Health (chronic care management in diabetes) and Alertive Health (remote patient management)–both businesses they are departing. Reportedly last month they bought Inofab Health, an Istanbul-based digital health platform for patients with asthma, chronic obstructive pulmonary disorder, and cystic fibrosis. Crunchbase, FierceHealthcare, Mobihealthnews, SF BizJournal,

CVS is still working its Signify Health acquisition past the Department of Justice (DOJ) and the Federal Trade Commission (FTC). It went into a Second Request for information in late October under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), which adds 30 days to the review timetable after the Second Request has been complied with. There is some competitive overlap between CVS and Signify in home health management and accountable care organization (ACO) operations, and some divestitures may be necessary. A closing in Q1 as planned seems optimistic. Acquiring Oak Street may complicate matters since their clinics operate as a Direct Contracting Entity (DCE, now ACO REACH). This present administration is not friendly towards healthcare consolidation of any type, especially with entities participating in Federal programs. (See UHG’s acquisition of Change Healthcare, with court approval being appealed by DOJ.) Reaching (so to speak) deep into CMS programs could be a red flag.

Walgreens’ VillageMD finalized their Summit Health acquisition for $8.9 billion yesterday (9 Jan) (updated). Now with 680 provider locations in 26 markets and 20,000 employees, the group adds to VillageMD’s primary care practices specialty practices in neurology, chiropractic, cardiology, orthopedics, and dermatology plus 150 City MD urgent care locations. 200 VillageMD locations are already adjacent to Walgreens locations. Walgreens Boots Alliance (WBA) and Evernorth, the health services business of Cigna, were the two investors. WBA raised full-year sales guidance from $133.5 billion to $137.5 billion. The current chair and former chief executive officer of Summit Health, Jeffrey Le Benger, MD, will be the interim president until VillageMD finds a permanent president reporting to VillageMD CEO Tim Barry. Release, RevCycleIntelligence, Forbes  At this point, Walgreens hasn’t moved forward with the rumored acquisition of ACO management services organization Evolent Health [TTA 1 Oct 22], which would be far more complex. 

Amazon is still awaiting Federal approval for One Medical as well as in multiple states (Oregon only the first; expect scrutiny). It is also closing Amazon Care and opening asynchronous non-face-to-face telehealth service Amazon Clinic.  Walmart continues on an internal strategy of opening Walmart Health clinics in underserved areas. Earlier in 2022, they announced the opening of more health ‘superstores’ in Florida, having established 20 in Arkansas, Illinois, and Georgia starting in 2019. Walmart’s approach to retailing health services and products, since getting serious about it in 2018, has wavered with multiple changes of strategy and executive departures [TTA 22 Nov 22]

Amazon-One Medical gains conditional OK in Oregon–a preview of coming scrutiny?

January 6, 2023 | by

Amazon has approval for the $3.9 billion One Medical acquisition from the Oregon Health Authority (OHA)–but with conditions.  OHA’s task is to review transactions such as these in how they affect patient cost, access, quality, and equity. OHA’s key comments were positive on cost and access, equivocal on quality, and expressed concern on equity (28 December PDF here):

Cost: “…the transaction will not meaningfully change Amazon and One Medical’s market share for primary care services in Oregon. Commercial insurance payment rates for One Medical are negotiated through the partnership with Providence [Health & Services].” In the Conclusions, they noted that “Amazon, with its advanced supply chain and purchasing power, may generate efficiencies and savings for One Medical, though any savings would not necessarily be passed to consumers.

Access: The few One Medical clinics were found to be in urban areas where there is good access to healthcare. “The entities have also stated that they plan to expand One Medical’s network of clinics, which may provide additional access to services.”

Quality: “OHA has limited insight into quality for One Medical locations, since its [five] Portland clinics opened in 2020 and 2021 and One Medical does not participate in some programs that require regular quality reporting.” However, they noted that “Amazon’s business model also has the potential to impact quality.”

Equity: concern on “One Medical siphoning off commercially insured patients with higher payment rates from clinics that serve more Medicaid and Medicare-covered patients.”

Conditions for approval are in reporting on these areas. Amazon is to report on the services it provides and the quality of care, plus any governance or organizational changes, every six months for five years after the acquisition closes. OHA then must perform follow-up analyses on the impact of the transaction on the commitments Amazon makes on cost, access, and quality of care. 

One Medical’s limited Oregon footprint proved to be helpful to Amazon in gaining OHA approval–but may be a Preview of Coming Difficulties. One Medical operates in 29 markets including NYC, Los Angeles, Boston, and Atlanta, with 815,000 members and 8,000 company clients. States like New York, Massachusetts, Connecticut, and California are not exactly pushovers for approval, with California alone having two approval entities. Then there are the Feds. Back in September, Amazon disclosed the Federal Trade Commission (FTC) was scrutinizing the acquisition, with no resolution announced yet. One Medical also owns Iora Health, which has a full-risk value-based care model for patients in Medicare Advantage (MA) and Medicare shared savings across seven states–HHS and CMS territory. Two more shoes yet to drop: the SEC and the Department of Justice (DOJ). DOJ of late casts a gimlet eye on any healthcare merger–just ask UnitedHealth Group and Change Healthcare, which they are still fighting.

This Editor will stand by last year’s prediction: Iora will be sold either before or immediately after closing. The higher cost/higher care needs Medicare market doesn’t fit with Amazon’s monetization model. It is less profitable and requires advanced risk management, a skill set that Amazon doesn’t have and likely doesn’t want. MA and MSSP (Medicare Shared Savings Program) routinely face regular Federal scrutiny, which Amazon doesn’t do well either. Amazon can use the cash; it is facing major league bad press with its planned layoff of 18,000 workers, about 6% of its 300,000-person corporate staff. One wonders if many of its shareholders (other than Jeff Bezos) approve of this massive investment in a relatively small provider organization.  Reuters 

Mobihealthnews, FierceHealthcare

Short takes: Will there be an Amazon Clinic?, Transcarent and Teladoc, perfect together?, Get Well partners with Palomar Health, expands with Veterans Health Administration

November 11, 2022 | by | 1 Comment

Did Amazon prematurely leak an initiative? Or was it an error? The Verge reports that a video was uploaded to Amazon’s YouTube page on Tuesday–then taken down–describing a new service that would offer assessment, diagnosis, and treatment of common conditions such as allergies. The Amazon Clinic video depicts a user taking an online questionnaire about their symptoms, After paying a fee, a clinician reviews it, diagnoses, and prescribes as needed, sending to the patient’s pharmacy. The disclaimer: “Telehealth services are offered by third-party healthcare provider groups.” The video directs to amazon.com/clinic which is not live. Another Amazon Mystery. Amazon Care is shuttering and the company is jumping through Federal hoops to get approval to close their buy on OneMedical. Hat tip to HISTalk today.

HISTalk also pointed to a Forbes article on health navigator companies such as Castlight and Firefly Health, with a bit of a ‘sting’ at the end. Transcarent, a health navigator that takes on risk integrating its services into employee benefits, is the latest enterprise founded by Glen Tullman, a serial entrepreneur who founded Livongo, investor group 7Wire Ventures, and built up Allscripts as CEO. The writer speculates that Tullman should buy Teladoc to give Transcarent a distribution system–a built-in network of physicians and health system relationships. Yes, this is the same Teladoc that Tullman sold Livongo to for a tidy $18.5 billion, then earlier this year wrote off $6.6 billion as an impairment. This one drips with irony. With its stock down nearly 90% from its January 2021 high, it’s never been cheaper!

Get Well, an RPM, patient care management, and workflow automation company, announced new and expanding partnerships. The new one is with Palomar Health, a health system in Escondido, California. This will implement Get Well services in four phases in five areas to improve patient experience: digital care management (GetWellLoop), inpatient experience (Get Well Navigator and a workflow automation for hospital staff), emergency department experience, care gap closure, and health equity through additional features. Becker’s  The second is an expansion with the Veterans Health Administration (VHA) into 70 Veterans Affairs Medical Centers (VAMC) and a fifth Veterans Integrated Service Network (VISN) with nine facilities. They also now have a FedRAMP “In Process” designation for cloud services which is enabling expansion of GetWellLoop care plans with a VAMC. Release (Business Wire)

VillageMD opens the Walgreens purse, set to buy Summit Health for $8.9B

November 9, 2022 | by

Moving from rumor to deal in a New York Minute. Primary care provider VillageMD has moved to a definitive agreement to acquire specialty/urgent care provider Summit Medical in an $8.9 billion deal including debt. This was heavily rumored last week [TTA 1 Nov]

This will create a provider behemoth of 680 provider locations, 750 primary care providers, and 1,200 specialty care providers in 26 markets. The fun facts:

  • VillageMD has 342 total primary care clinics in 22 southern and northeastern markets covering 15 states, with 152 co-located with Walgreens; these will eventually increase to 200.
  • Summit Health has 370 locations in New York, New Jersey, Connecticut, Pennsylvania, and central Oregon. VillageMD and Summit do not overlap (except in NJ) on markets.  
  • VillageMD consists of primarily owned and affiliated primary care practices; Summit Health specialty practices (neurology, chiropractic, cardiology, orthopedics, dermatology) plus 150 CityMD urgent care locations.
  • VillageMD has successfully mastered value-based care models in Medicare and entered advanced Medicare ACO models early and vigorously (Editor’s information). Summit Health presently is primarily is fee-for-service with some participation in value-based programs.

The participation in this one is interesting: 

  • Walgreens Boots Alliance (WBA) will invest $3.5 billion through an even mix of debt and equity 
  • Cigna’s health services organization Evernorth will become a minority owner; the exact percentage is not disclosed at this point
  • It’s not disclosed at this time whether Summit Health’s current majority owner, Walburg Pincus, will retain an interest in the combined companies. 

WBA remains the largest and consolidating shareholder of VillageMD, but with this acquisition, reduces its ownership share from approximately 62-63% to 53%. WBA’s other US non-retail healthcare interests include specialty pharmacy company Shields Health Solutions and at-home care provider CareCentrix.

Based on their release, the acquisition is expected to close in January 2023, subject to the usual Hart-Scott-Rodino Act (HSR) premerger notification and report with the DOJ and the Federal Trade Commission (FTC) that initiates a 30-day waiting period.

Bet on VillageMD and Summit closing deeper into Q1–but closing. This Editor’s over/under is that this is overly optimistic given the current DOJ and FTC’s scrutiny and apparent dislike of healthcare acquisitions, even though the provider groups don’t overlap except in a minor way in NJ. But perhaps Amazon, with a healthcare footprint primarily in pharmacy and shuttering Amazon Care, thought OneMedical would move smartly. CVS thought the same with Signify Health, yet both are on information Second Requests that extend the waiting period. DOJ is after all smarting hard with a Federal District Court nixing their challenge of UHG’s Optum with Change Healthcare, but it’s hard to throw typical antitrust at this one.

Go big or go home, indeed.     Healthcare Dive, Becker’s

VillageMD considering $5-$10B merger with Summit Health provider group: reports

November 1, 2022 | by

Two large provider groups, VillageMD and Summit Health, reportedly are considering a merger. VillageMD, which now is majority owned (62%) by Walgreens Boots Alliance, has 342 total primary care clinics in 22 southern and northeastern markets covering 15 states, with 152 co-located with Walgreens eventually increasing to 200. Summit Health has 370 locations in five states, including specialty practices and CityMD urgent care locations. Summit Health is majority owned by Walburg Pincus.

This reinforces a trend of cross-healthcare sector buys, consolidations, and control. VillageMD’s move from a co-location deal with Walgreens to majority ownership (but controlled by an independent board) was one step starting during the pandemic in July 2020 [TTA article series here].

  • Amazon agreed to acquire OneMedical (1Life) for $3.9 billion at the end of July, and abandon Amazon Care, though now running into FTC/DOJ review headwinds with a second request for information [TTA 15 Sep].
  • CVS Health has made no secret of its desire to acquire primary care, provider enablement, and home health companies (Signify Health, also under DOJ scrutiny), but apparently has abandoned or put on hold a deal with Cano Health [TTA 21 Oct].
  • Walmart continues to go direct by opening full-service clinics, announcing the expansion of 16 based in the Tampa, Jacksonville, and Orlando areas in 2023 (Healthcare Dive, Healthcare Finance News).

Valued at $12.9 billion and with Walgreens’ backing, VillageMD has the ‘go big or go home’ resources to execute Walgreens’ version of this strategy.

Why this very well may happen. The two do not overlap (except in NJ) on markets. VillageMD is primarily owned and affiliated primary care practices; Summit Health specialty practices (neurology, chiropractic, cardiology, orthopedics, dermatology) and CityMD urgent care. VillageMD has successfully mastered value-based care models in Medicare and entered advanced Medicare ACO models early and vigorously (Editor’s information); Summit Health primarily is fee-for-service with some participation in value-based programs. More to come. Bloomberg, Becker’s, and a very big hat tip to research from Jailendra Singh of Truist Securities  (paper here)

Breaking: CVS’ Signify Health buy under DOJ scrutiny in ‘second request’

October 21, 2022 | by

Not unexpectedly, the US Department of Justice (DOJ) is taking a hard look at the Signify Health acquisition by CVS Health. The two companies were notified Wednesday on DOJ’s Second Request for information. This was disclosed on an SEC Form 8-K. The DOJ now has 30 additional days to investigate antitrust aspects of the merger, once that additional information is received. 

The timetable goes like this:

  • 19 Sept: CVS filed its premerger notification and report with the DOJ and the Federal Trade Commission (FTC) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). This initiates a 30-day waiting period.
  • 19 Oct: At deadline, the request for additional information initiated by the DOJ was received by both CVS and Signify (Second Request)
  • The Second Request extends the waiting period under the HSR Act by 30 days after both CVS and Signify have substantially complied with the Second Request. The DOJ can terminate the waiting period earlier, or move it to an agreed-upon later date. 

CVS continues to affirm closing the deal by first half 2023 as planned, which is a fairly wide window.

The current government’s DOJ and FTC have made no secret of their policy-driven yen for using antitrust in the name of lowering healthcare costs (even favored pharma). The crashing failure of DOJ’s antitrust motions against UnitedHealthGroup and Change Healthcare [TTA 20 Sept] must have smarted. What this usually initiates is the search for a quick and easy win to put said embarrassment behind them. CVS Health is certainly a high-profile target, though Signify even at $8 billion, like Change, is not except in the industry. 

Signify’s competitive overlap with CVS/Aetna isn’t as large or obvious as UHG’s Optum with Change, but there is some: home health management and (in this Editor’s view), ACO management services with Signify’s Caravan, which participates in multiple Federal shared savings models where Aetna also is. One wonders if some divestment will be demanded by DOJ. Even before the auction, Signify started the complicated and long exit from the failing Bundled Payments for Care Improvement (BPCI) programs inherited from the Remedy Partners buy.

Could the DOJ action have played a role in CVS’ sudden cold feet in acquiring Medicare/Medicaid primary care provider Cano Health? [TTA 20 Oct] The timing is certainly close. 

DOJ is not working alone. The FTC also has a yen for Amazon in their 2 September second request for information on their acquisition of OneMedical, which also added 30 days to the Hart-Scott-Rodino (HSR) clock after compliance. Amazon is already going through this with their iRobot acquisition [TTA 15 Sept]. Reuters, FierceHealthcare, Home Health Care News

News briefs, catchup edition: UnitedHealth/Change decision October?, CVS wins $8B Signify Health auction, Walgreens majority buy of CareCentrix, FTC requests more info on Amazon-One Medical

September 15, 2022 | by

Your Editor is semi-returned from Almost Two Weeks in Another Town, with a few more days to close out September (and summer into autumn) coming up. A lot of big news broke despite the usually slow Labor Day holiday week.

UnitedHealthcare Group/Change Healthcare Federal lawsuit to be decided in October–reports. The bench trial in the US District Court in Washington DC pitted the Department of Justice and state plaintiffs against UHG’s massive $13 billion acquisition of claims and EDI/data processing giant Change. It concluded 16 August with closing arguments presented 8 September. Dealreporter via Seeking Alpha reported that UHG and Change effectively countered DOJ’s antitrust objections to the acquisition. Change Healthcare had previously sold their claims editing business to TPG Capital to ease antitrust concerns.  Whether that will be enough in the current environment with greater sensitivities around healthcare consolidation remains to be seen. If approved, Change will be folded into OptumInsight. For a deeper dive into the issues, see TTA’s earlier reporting 3 August and 23 March.

CVS Health beat out other contenders with an $8 billion cash bid for Signify Health. It was a busy Labor Day for CVS as Signify’s board met and decided that day on CVS’ cash offer of $30.50 per share in their unusual auction. Amazon, UnitedHealth Group, and little-known Option Care Health were the other bidders. Signify is a strategic boost for CVS in becoming a major player in primary care, provider enablement, and home health as we’ve summarized here from CVS’ Q2 earnings call. Signify’s capabilities in in-home health delivery and provider services were cheaper to buy than to develop. Based on the weight given to it in the CVS release, Signify’s Caravan Health and their Medicare ACOs furnishing value-based care management services to 170 providers was a significant factor in the top price paid.

New Mountain Capital and their investors own 60% of Signify and will be exiting. Signify had in July announced their own exit from the costly and problematic Episodes of Care/BPCI business acquired with Remedy Partners back in 2019. This led to most of the over 480 staff layoffs announced last month. The sale is, as usual, pending regulatory approvals and isn’t expected to close until first half 2023. Kyle Armbrester, Signify’s CEO Kyle Armbrester will continue to lead the company as part of CVS Health. Healthcare Finance, FierceHealthcare

Rival Walgreens Boots Alliance completed their acquisition of a majority share of home care coordination platform CareCentrix. Walgreens’ final payment was $330 million for 55% of the company at an $800 million valuation. As noted previously, Walgreens ‘go big or go home’ strategy in primary care kicked off in 2020 with growing investments in VillageMD, culminating in last year’s $5.2 billion for 63% of the company. The plan is to co-locate Village Medical offices with 600 Walgreens locations by 2025 [TTA 14 Oct 2021]. CVS’ recent actions can be seen as a reaction to Walgreens’ aggressive moves. Healthcare Finance

Amazon now under FTC scrutiny for One Medical acquisition. If shutting down the much-publicized Amazon Care wasn’t quite enough last month, the Federal Trade Commission (FTC) will be reviewing Amazon’s $3.9 billion buy of One Medical. This was announced in a 1Life Healthcare (parent of One Medical) 8-K filing with the Securities and Exchange Commission (SEC). Both 1Life and Amazon received requests for additional information on 2 September, above and beyond the usual required Hart-Scott-Rodino Act (HSR) reports that will be reviewed by the FTC and DOJ. Effectively it extends the HSR waiting period by 30 days after One Medical and Amazon have substantially complied with the additional information ‘second request’.

The FTC isn’t winning popularity contests with Amazon’s legal department, as the agency is reviewing their acquisition of iRobot, maker of robot vacuum cleaners. Mobihealthnews

Babylon Health exits last NHS hospital contract as a ‘distraction’, looks to US market for growth

August 24, 2022 | by

Babylon Health’s rollercoaster ride continues. Today’s news was that their last of three NHS Trust contracts, with Royal Wolverhampton NHS Trust (RWT), was ended by Babylon two years into a ten-year contract. This follows the end of two other contracts that drew a fair amount of controversy (see our index here)–the 2020 one-year Royal Berkshire NHS Foundation Trust with an accident and emergency triage app that was discontinued by Babylon, and with University Hospitals Birmingham NHS Foundation Trust (UHB) for a virtual A&E app that was ended in July.

In the UK, Babylon will continue its GP At Hand service that took over a GP office in Fulham, London in 2016. It now currently covers about 155,000 patients. It will also maintain the AI-based chatbot used for triaging patients. GP At Hand is not profitable. GP practices work on a flat fee per patient that averages £155 ($183) per patient per year.

Babylon and RWT contracted in 2021 for a digital-first primary care service that would cover 55,000 patients, with a patient portal that would enable them to view their health records and view appointments. The app would also monitor conditions and like the AI chatbot, help to diagnose illness and actions. Babylon is ending the ten-year contract after two, which would make it 2023.

From the bubbly Digital Enthusiasm of former Health Minister Matt Hancock (left) in 2018 to the storm around @DrMurphy11, a GP who raised performance issues with the Babylon chatbot that escalated to BBC Two’s Newsnight in February 2020, founder and CEO Ali Parsa is now in an unenviable position in two countries. He 1) has semi-exited the UK market, 2) ruthlessly cut costs to the bone because the stock is down 90%, and 3) shifted to the far larger but unforgiving market of the US. The bright spot here is that US patients covered have already topped 6 years of effort in the UK. Parsa has now moved to the US.

Parsa noted in a recent results call [Seeking Alpha-Ed.] with analysts. “Those two or three small NHS contracts that you refer to—and those are not our significant primary-care contracts— those are marginal contracts for us, more in that category of contracts where we could not see a significant contribution to our profit margin,” he said. “And they also had a rather small contribution to our revenue. And therefore we saw them as a distraction and terminated those contracts.”

This Editor has previously noted Babylon’s layoffs/redundancies of at least 100 staff to save $100 million by Q3, which we are now in. Expansion in the US has to take place with static staff to make goal. And as to the US being unforgiving: VCs are snapping their capacious purses shut, Mr. Market’s gone into rehab, and inflation is shrinking healthcare budgets from providers to payers to self-insured companies. The Big Kahunas with Big Bucks–CVS Health, Allscripts, UnitedHealth Group, Amazon, Walgreens, Walmart–and out-of-left-field players like Option Care Health bidding on Signify Health, are snapping up, as we’ve earlier put it, “healthy health tech companies at the right (discounted) price that fill in their tech gaps”. And making life difficult for single players like Babylon Health. Wired. And a snappy hat tip to HISTalk.

Signify Health bidding war ensues, waged by Amazon, UnitedHealth Group, CVS, Option Care Health

August 24, 2022 | by

What a difference less than two weeks makes. We noted on 11 August that in-home health and value-based provider services company Signify Health was up for sale in an unusual auction, with CVS Health the first disclosed bidder. Yesterday, three more companies jumped into the mix, UnitedHealth Group (the 9,000 elephant of US health), Amazon (with One Medical still pending), and little-known Option Care Health, a public (Nasdaq: OPCH) home infusion care company.

Reports in the Wall Street Journal (paywalled) indicate Signify’s value in the auction may top $8 billion. Bids are due around Labor Day. The board will be meeting next Monday to discuss the bids to date. Signify’s current value is about $5 billion.

The share price closed today just above $27, a major rise from last week’s close of $21 (Yahoo Finance).

The UHG bid is above $30, with Amazon close by, according to Bloomberg News sources. The CVS bid is not known. A buy by Amazon would put the company in Instant Major Healthcare Player territory. This Editor believes that with UHG and CVS, antitrust may factor in, especially considering Signify’s recent ownership of the ACO MSO Caravan Health.  

Option Care may not be well known, but it has impressive backing from Goldman Sachs and has been profitable. Their interest is Signify’s home health network and access to providers through Caravan. Another backer, Walgreens Boots Alliance, just sold 11 million shares on the secondary market, reducing its holdings from 20.5 percent to approximately 14.4 percent.

There’s no bar, of course, to the board ending the auction at any time and awarding the company. Healthcare Finance, FierceHealthcare

Friday short takes: was there a bidding war for One Medical? A concussion risk wearable tested. Get Well’s monkeypox digital care plan

August 19, 2022 | by

Amazon’s scoop-up of One Medical apparently was not all Skittles, Rainbows, and Unicorns. Large companies like Amazon, Walmart, Allscripts, and CVS are on the hunt to fill gaps in their portfolio and technologies, but only “healthy health tech companies at the right (discounted) price that fill in their tech gaps.” Of course, some of these companies have more chips on the table and in the safe than others.

We know from earlier reporting [TTA 7 July] that One Medical and CVS had some talks, but that One Medical spurned the offer. It did establish that One Medical was in play. Some digging by Heather Landi at FierceHealthcare, taking a walk through SEC documents according to a regulatory disclosure with the US Securities and Exchange Commission (SEC) filed 10 August, found that CVS (identified as Party A) and 1Life Healthcare, the parent of One Medical, started their acquisition talks in October 2021. 1Life was short on cash, getting shorter, needing to expand, and was having trouble raising the $300 million they estimated they needed. Starting this past February, 1Life management started to negotiate with Amazon. On 1 June, CVS offered $17 per share, boosting it by $1 the following day, but were informed by 1Life that there was another suitor. By 2 July, Amazon put $18 in an all-cash deal on the table. When news leaked via Bloomberg on 5 July that CVS was in discussions, CVS bowed out. By the end of July, 1Life and Amazon closed on the deal [TTA 27 July].

It came down to this–Amazon needed One Medical more than CVS. Watch for CVS and Walmart to make more provider/primary care moves by the time the snow flies this year. We’ve already noted that CVS inked a deal with Amwell a few days ago as their provider for Virtual Primary Care and that Walmart outright owns a telehealth provider, MeMD, though their overall strategy remains a bit murky.. CVS also has resources through Aetna that are integratable, such as provider networks.

And speaking of Amazon, they just inked a deal with Ginger to add telemental health as an option for Amazon Care. Healthcare Dive

In the US, we are very close to football–and concussion–season. Multiple concussions lead to CTE, which took a long time to recognize as a cause of premature dementia. A mHealth wearable has been tested to measure head kinematics–head movement–and detect sudden neck strain, such as whiplash. Current systems are embedded in helmets or the X-Patch, which uses accelerometers.  According to the report in AAAS’ EurekAlert!, Nelson Sepúlveda of Michigan State University and colleagues developed a novel patch sensor using a film layer of thermoplastic material, a ferroelectret nanogenerator or FENG. “This produces electrical energy when physically touched or pressure is applied. The electrical signal produced is proportional to the physical strain on the neck and can be used to estimate the acceleration and velocity of sudden neck movement, two important markers for predicting concussion.” For this test, a dummy was used. Nature Scientific Reports, mHealth Intelligence

Monkeypox, its transmissibility, and treatment have also percolated this summer.  Get Well Network, which we noted last month in a JAMA study used its GetWellLoop RPM and monitoring in a Covid-19 home treatment study, released a new monkeypox digital care management plan. It will permit monitoring of symptoms from home using RPM, help direct patients to higher levels of care if and when needed, and aids hospitals in managing mandatory regulatory requirements for reporting and tracking infectious diseases. LifeBridge Health in the Baltimore area began offering Get Well’s monkeypox symptom monitoring tool last month. Release

Week-end wrapup: CVS plans to expand primary care, home health; Cera Care raises £264M; Linus Health’s AI enabled dementia screener, Cognito’s cognitive therapy slows brain atrophy

August 5, 2022 | by

The sandal (it’s summer) drops at CVS Health in primary care–and maybe more. On their Q2 earnings call, CVS discussed that they are determined to enhance their services in three categories: primary care, provider enablement, and home health. The footwear that dropped was from CEO Karen Lynch: “We can’t be in the primary care without M&A” (sic). It was inevitable, given that rival Walgreens has a $5 billion deal with VillageMD for freestanding Village Medical clinics, Amazon with the pending One Medical buy–which it passed on only weeks prior [TTA 7 July], and Walmart picking along the edges with in-store clinics and telehealth. CVS’ criteria: strong management team, strong tech stack, strong scale, strong ability to build a pathway to profitability. (Certainly not an easy set of hurdles) CVS’ urgent care and in-store MinuteClinics have been doing well, with business up 12% to 2.8 million patient visits year to date. HISTalk, FierceHealthcare, Motley Fool transcript of earnings call

London-based Cera Care Ltd. raised £263.6 million ($320 million) in an equally split debt/equity round. Equity funding came from existing investor Kairos HQ, then the Vanderbilt University Endowment, Schroders Capital, Jane Street Capital, Yabeo Capital, Squarepoint Capital, Guinness Asset Management, Oltre Impact, 8090 Partners, and technology investor Robin Klein. Debt was not disclosed. The fresh financing will go towards expanding patient capacity in the UK plus Germany from the current 15,000 to 100,000.  Cera delivers in-home care, nursing, telehealth, and prescription delivery services using a digital platform and AI algorithms that use the data gathered to predict changes in patient status. TechCrunch, UKTechNews

Two developments from separate companies in the vital areas of improving dementia and Alzheimer’s diagnosis–and outcomes:

  • Linus Health has debuted its cognitive assessment and patient questionnaire platform for clinical use by primary care providers. The assessment tests for subtle changes in cognitive function, which in the preclinical phase will often go undetected. The concept is to push forward diagnosis and therapies to slow disease progression. It is based on an iPad and includes their DCTclock, an AI-enhanced version of the traditional paper-based Clock Drawing Test using a digital stylus or pen that can also spot symptoms of early-stage Parkinson’s. The evaluation including the DCTclock takes about 10 minutes. Release, FierceBiotech
  • Cognito Therapeutics is still in the investigational stage with its GammaSense headset which delivers sound and light therapy to cognitively impaired patients. The sensory stimulation evokes gamma oscillations in the brain that reduces neurodegeneration and brain atrophy. Their paper delivered last week at the Alzheimers Association conference tracked subjects who used the headset one hour per day for six months. The therapy reduced white matter shrinkage to about 0.4%, compared to a historical tracking of about 2%. An earlier study also showed slowdowns in the decline of memory and cognitive function. FierceBiotech