TTA’s Mid-Winter Update: CVS board boots Bertolini , VA’s exec suite revolves again, a clean look at Digital Health 2019 investing, Outcome Health exec settles, NHS snoozes, more!

 

 

February is here, can Spring be far away? It might be an early one for Mark Bertolini, booted from the board of the company he worked so hard to put together. Ashik Desai of Outcome Health may be looking at a Club Fed ‘vacation’. And James Byrne of the VA got an early furlough from Washington for that Florida holiday. So we can take a Mid-Winter’s nap courtesy of NHS, dream of digital health investments for 2020, and won’t buy into a company paying a $1 million monthly rent.

But do wake up in time for DHACA Day on 18 March! A good reason to be in London….

Considering 2019’s digital health investment picture: leveling off may be a Good Thing (Less froth, more quality)
Outcome Health’s Desai reaches settlement with DOJ, SEC (Another cautionary tale of Young Entrepreneurs Gone Wrong–somewhat like Theranos)
Comings and goings, wins and losses: VA’s revolving door spins again, NHS sleep pods for staff, Aetna’s Bertolini booted, Stanford Med takes over Theranos office

Practice Fusion costs Allscripts another $145 million–and leads a closer look at the boundaries between ethics and revenue. AR contact lenses on the way? Outcome Health’s small fish plead guilty. And in the UK, CQC’s recommendations and DHACA Day in March.

Mojo Vision’s really smart vision correcting/AR contact lenses (A bit of a moonshot)
A Practice Fusion coda: an insider’s perspective on the pressure to ethically breach an ‘objective’ service for revenue (How far is too far?)
Allscripts’ $145 million settlement with DOJ on Practice Fusion’s ‘kickbacks’ on opioid prescribing, other charges (Why PF was so cheap)
Outcome Health analysts plead guilty, cooperate with Federal prosecutors (Trap the small fish…)
Digital triage in health service – CQC’s initial recommendations (Moving towards regulatory clarification)
Calling all digital health entrepreneurs: DHACA Day on 18th March is for you! (NHSX, AI, and more)

Acquisitions and funding raises lead off with Teladoc and InTouch Health, DrChrono, and CareBridge. Where are the hottest startups?–not on either coast. But Proteus continues on the Road to No-teous. Femtech’s hot but unvalidated. And events from Dallas to Dubrovnik!

News roundup: Proteus dissolves with Otsuka, EHRs add 16 min. per patient, DrChrono mobile EHR raises $20M, CareBridge LTSS launches, ‘flyover healthtech’ soars
Femtech’s huge potential global healthcare market–but needs to connect with payers and employers (That Old Validation Again)
Consolidation crunch time in telehealth: Teladoc acquires InTouch Health for $600 million (Enterprise telehealth is the charm)
European Patient Experience and Innovation Congress (EPIC 2020) invites world health tech to Croatia (And beautiful Dubrovnik)
Texas Healthcare Challenge WISH-es on women in February hackathon (Dallas TX) (Health Wildcatters’ latest)

To kick off the New Year, we take a Gimlety view of CES and the state of health tech innovation, Babylon Health’s diagnostics, Germany’s health ID system, and the cratering value of many HIT companies.

News roundup for the New Year: NHS £40m diet on login times, Germany’s ‘cheesy’ health ID security, Livongo and Higi partner, MTBC picks up CareCloud (For a knockdown price)
CES roundup: what happened to the excitement around ‘innovation’, robots, VR, and voice assistants? (A Gimlet Eye view of CES)
Babylon Health criticized by Manchester CCG, cardiac activists in UK, Canada (Scaling and AI problems lead to more)
The CES circus opens its largest tent yet in health tech, AI, 5G, and more (Step right up…)

Our windup for 2019: the ACA mandate was found to be unconstitutional, Babylon Health’s entering the US market in January, Appello acquires Medvivo Careline. Will Outcome Health’s execs dodge Club Fed? And calendar DHACA/HTF’s pitch event on 5 February.

The last news roundup for 2019: ACA mandate unconstitutional, more $ for health research, PartnersHealthcare rebrands, Hackensack Meridian pays ransom, breaches>heart attack deaths, telepsychiatry merger, more (Bidding farewell to ’19, and a happy, healthy New Year to our Readers)
Babylon Health to enter US market with two large strategic partners: report (What $550 million will do)
Calling all pitchers! Join us at Baker Botts on 5th February for a great evening (DHACA/HTF London pitch event)
Appello acquires Medvivo Careline telecare in second major move this year (UK)
Outcome Health founders Shah, Agarwal plead not guilty in Federal court
(Dodging the Club Fed Outcome will take years)

Barely two weeks to Christmas, but a blue one for Proteus Digital Health employees and six former Outcome Health execs. HHS leadership mixes it up in public, malware bites Hackensack, but it’s lovely in Leeds–and if you have a new job.

News roundup: Proteus may be no-teous, DOJ leads on Google-Fitbit, HHS’ mud fight, Leeds leading in health tech, malware miseries, comings and goings (Proteus runs out of road for 300, DOJ looking at Fitbit acquisition, HHS execs no lika each other, malware 2020, and it’s Leeds leading)
“There were practices going on there that were wrong”: Outcome Health’s Desai pleads guilty, cooperates with DOJ. (One pleads guilty, three not guilty, with the major players pleading on Monday)


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Outcome Health’s Desai reaches settlement with DOJ, SEC

Ashik Desai, the former chief growth officer of point-of-care advertising firm Outcome Health, settled the charges against him brought in Federal court by the Securities and Exchange Commission. The filing was on 4 February. Monetary relief and/or penalties against him will be disclosed at a later date.

Last month, Mr. Desai pleaded guilty to the charges and announced cooperation with the authorities on the criminal charges of securities fraud related to Outcome Health’s capital raises of about $1 bn during 2011 into 2017. Similarly, his former analysts Kathryn Choi and Oliver Han did the same at the end of January.

Remaining are the senior executives who have all entered pleas of  ‘not guilty’: founders Rishi Shah and Shradha Agarwal, both of Chicago, and Brad Purdy, their former COO and CFO, all in their 30s. All of them blame Mr. Desai, who is presently 26 and started at Outcome Health as an intern.  Pass the popcorn for a dramatic tale of complex and multi-layered fraud, likely in the spring. Becker’s Health IT and CIO Report, Chicago Tribune  Also TTA 17 Dec and 3 Dec

A Practice Fusion coda: an insider’s perspective on the pressure to ethically breach an ‘objective’ service for revenue

From both sides: an insider at Practice Fusion, then a regulator at ONC. Mentioned briefly in POLITICO Morning eHealth is a blog posting from a former ONC (Office of the National Coordinator, HHS) official, Jacob Reider, MD, about Practice Fusion. Before he was Deputy National Coordinator of Health IT, he was CMIO of Practice Fusion circa 2009-11. His blog has some interesting insights on even ten years ago, how aggressive pharmaceutical companies were in wanting to ‘bend’ (Editor’s term) clinical decision support (CDS) in the EHR to promote a drug category, and in a young, growing, and revenue-hungry company, the temptation for ‘growth’ teams to do so. Fast forward a few years, and Dr. Reider is working to write the certification requirements for EHRs and the evidence (via citations) for CDS. His conversations with the then-CEO, Ryan Howard, about the ethics of their advertising model and their rationale illustrate the conflict between ethics and revenue–as in right up to the line and looking over. While this is familiar to any media observer–after all, why buy advertising if not to change behavior?–when decisions are being guided by an EHR, the CDS shouldn’t be rigged, visibly or invisibly. Dr. Reider places the crossing of the line after Mr. Howard’s departure with a new pharma-minded team. The evidence in the CDS lies in the citations funded by–pharma and biomed companies. The inevitable result: Allscripts, now the owner, settling for $145 million with the DOJ and having ‘kickbacks’ attached to their business. Dr. Reider is now CEO of the Alliance for Better Health in Albany, NY. Docnotes: When sponsored CDS is a crime

This is hardly the first instance of the blurring of boundaries between ethics and revenue. All those paying to get their genetic history from 23andme or Ancestry.com ought to consider that they may also be signing on to have their information used by a medtech company for research. It may be stripped of PII and ‘de-identified’, but there are ways of cross-referencing some of that information. Why else would GSK own 50 percent of the company? [29 Aug 19, 31 Oct 15

Allscripts’ $145 million settlement with DOJ on Practice Fusion’s ‘kickbacks’ on opioid prescribing, other charges

The US Department of Justice announced on 27 February that it reached a $145 million settlement with Practice Fusion on what DOJ termed “kickbacks from a major opioid company in exchange for utilizing its EHR software to influence physician prescribing of opioid pain medications”. Allscripts, which now owns Practice Fusion, will be paying out penalties of $25.4 million in criminal fines, $113.4 million to the Federal Government, and up to $5.2 million to individual states, as well as forfeiting criminal proceeds of nearly $1 million from the ‘kickback’. The specific charges relate to two felony charges related to the Anti-Kickback Statute (AKS) and for conspiring with its opioid company client to violate the AKS.

The opioid company is widely believed to be Purdue Pharmaceutical, manufacturers of Oxycontin, according to HISTalk. The high dudgeon generated in the DOJ press release is related to opioid prescriptions and physician usage which are and remain highly controversial. Apparently, Purdue wasn’t the only pharma company that benefited from this type of influence.

In this Editor’s analysis, ‘kickbacks’ is a legalism to prosecute under the AKC what marketers would term a sponsorship deal. Practice Fusion was from inception advertiser supported. What is different here from pop-up screen adverts is that Practice Fusion created sponsorship packages in which not only advertising was featured, but also clinical support decision (CDS) alerts were created, aimed at increasing prescription sales of companies’ products. In addition, Practice Fusion allowed companies to participate in the design of the CDS software. These sponsorships took place between 2014 and 2019. None of this is unusual in AdLand in general, but in pharma and healthcare which play by far stricter rules about marketing programs, this goes against the expectation (and regulation) that an EHR is unbiased.

Allscripts had ‘leaked’ this back in August on their Q2 investor call. Buried in the DOJ release after the opioid ire is the settlement of Practice Fusion’s violations of Office of the National Coordinator for Health Information Technology (ONC) regulations concerning the voluntary health IT certification program, and the Centers for Medicare & Medicaid Services (CMS) regulations around EHR incentive programs, presumably Meaningful Use certifications and payments. This was the origin of the earlier announcement of a $145 million settlement on Allscripts’ Q2 2019 investor call, which in retrospect strikes this Editor as a nice try at minimizing far more serious charges. [TTA 14 August] CDS favoring opioid prescription is far more disturbing.  

It does seem that Allscripts bought itself a bargain basement of trouble with Practice Fusion. Mobihealthnews, TechCrunch

Outcome Health analysts plead guilty, cooperate with Federal prosecutors

Two financial analysts who worked at Outcome Health and reported to former EVP of business operations/chief growth officer Ashik Desai, changed their ‘not guilty’ pleas to ‘guilty’ earlier this month. Kathryn Choi and Oliver Han were charged with wire fraud by Federal prosecutors. As part of their guilty plea, they will cooperate with prosecutors, as did their former boss Mr. Desai.

As reported in our earlier articles, Ms. Choi and Mr. Han are alleged to have created statements to deceive company auditors and providing advertisers with false patient engagement metrics on Outcome Health’s tablets. Both were hired in 2014 and placed on leave in late 2017. While the charges they face carry a maximum penalty of five years, their cooperation may lead to far lighter sentences.

Their change of plea was rather predictable, given that two fairly young and junior staffers faced Federal charges in a classic squeeze play to obtain further information on the big fish, former Chief Executive Rishi Shah, former President Shradha Agarwal, and former executive Brad Purdy (COO/CFO), who face real prison time and large financial penalties. All three have pleaded not guilty.

Outcome Health’s principals are charged with 26 criminal charges of fraud in their funding raises of over $1 bn from 2011 to 2017. Advertisers were defrauded for ads which never ran in medical audiences and third-party studies were manipulated to enhance their results. The indictment details deception of their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery of actual advertising in doctors’ offices. 

Chicago Tribune, Crain’s Chicago BusinessEarlier TTA articles: 3 Dec, 12 Dec, 17 Dec

“There were practices going on there that were wrong”: Outcome Health’s Desai pleads guilty, cooperates with DOJ.

Perhaps the smartest move, under really, truly bad circumstances. Ashik Desai, the former executive vice president of business operations/chief growth officer of point-of-care health information/advertising company Outcome Health, ‘copped a plea’ this past Monday to felony wire fraud charges. According to the Chicago Tribune, Assistant US Attorney Matthew Madden told Judge Thomas M. Durkin of the Northern District of Illinois Federal Court in Chicago that Mr. Desai is cooperating with the investigation. “When I was at Outcome Health, there were practices going on there that were wrong,” Mr. Desai said, understatedly, during his court appearance Monday. “I participated in those practices that ended up defrauding Outcome’s customers.”

According to the article and other sources (WTTW), Mr. Desai is only 26; he started at Outcome as an intern when it was still Context Media and departed in 2017. With continued cooperation, the prosecution is recommending only 10 years in prison, half of what a conviction might bring at the statutory maximum of 20 years. He was released on bond and surrendered his passport.

The multiple and most serious charges in the indictment are for the two founders, Rishi Shah and Shradha Agarwal, both of Chicago, and Brad Purdy, their former COO and CFO, all in their early 30s. These are criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017, deceiving their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery performance.

On Monday 9 December, Mr. Purdy pleaded not guilty to six counts each of mail fraud and wire fraud, two counts of bank fraud and one count of making false statements to a financial institution. His counsel, not unexpectedly but amusingly for those of us who are experienced in the corporate pecking order and what exactly a CFO is responsible for, stated: “Ashik Desai and several of his underlings committed a massive fraud. The evidence will show Brad Purdy was not part of that fraud,” he said. “Evidence is going to show Ashik Desai repeatedly lied to Brad and others to conceal his fraud from people like Brad.” Mr. Purdy also was released on bond and surrendered his passport.

Two of those underlings, Kathryn Choi and Oliver Han, pleaded not guilty on Thursday 5 December to their respective charges of wire fraud. They face five years maximum if convicted. In this Editor’s opinion, they were indicted to bring forth additional information to buttress the major charges on Mr. Desai and the three top executives. As ‘small fry’ with at most a little profit sharing, they are sideshows–easy to pressure. They may truly spill the beans if they and their counsel sense that things are going badly–if they have any more beans to spill. 

Mr. Shah and Ms. Agarwal are scheduled to appear in court next Monday, 16 December. They have previously stated that they will plead not guilty (FiercePharma). Flight risk is undoubtedly a concern for the prosecution regarding Ms. Agarwal. According to this Refinery29  interview from 2017, Ms. Agarwal is an Indian citizen and, while a long-time legal resident, not a naturalized American. Mr. Shah was born in the US. This cautionary Tale of the Unicorn, told in the Chicago Way, warns us all to be careful of what we see, are asked to do, sign on to–and sign off on.

SEC, DOJ charges Outcome Health founders Shah and Agarwal, others, with $487 million fraud, 26 counts of indictment (updated)

All the points of information here. While we here in the US were enjoying our Thanksgiving feasts of turkey, steak, lobster, and lasagna, Outcome Health founders former Chief Executive Rishi Shah, former President Shradha Agarwal, and former executives Brad Purdy (COO/CFO), and Executive VP Ashik Desai, were being served a vastly different dish on 25 November. Underreported in the run-up to the holiday were two major legal actions against these individuals:

  • SEC charges of $487 million in investor fraud by “misrepresent(ing) the company’s business successes while raising hundreds of millions of dollars from unsuspecting investors”, billing clients (primarily pharmaceutical companies) for ads that never ran in medical offices, and manipulating third-party studies to make the company’s ad delivery look more effective than it actually was to create the impression of meteoric growth. The falsification trail was such that even they had trouble matching up their claims versus actual in their ‘selling of futures’.
  • 26 counts from a Department of Justice grand jury indictment on criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017 and their business practices. The indictment alleges deception of their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery of actual advertising in doctors’ offices which they may or may not have had, in extreme and additional detail to the SEC complaint. Arraignments for the defendants started on Tuesday 3 Dec.

Two young analysts, Kathryn Choi and Oliver Han, reported to Mr. Desai and are being charged with wire fraud. They are alleged to have created statements to deceive company auditors and providing advertisers with false patient engagement metrics on Outcome Health’s tablets. Both were hired in 2014 and placed on leave in late 2017. This action is highly unusual in reaching down to this level and naming two young subordinates.

One-time unicorn Outcome Health is, of course, still in business, selling advertising and educational materials at point-of-care, having settled with the SEC in October for $70 million in advertiser make-goods [TTA 31 Oct]. It also restructured/recapitalized in May by selling a majority stake to private equity firm Littlejohn & Co. In coming down to earth, the posturing of the executives should be less than two years ago, when Outcome was going to build its own Chicago office building–but this early October article from FiercePharma hardly moderates the healthcare change-agent hype for what is really POC advertising to inform and mostly distract patients who wait…and wait.

Additional information:

In this Editor’s view, once both SEC and DOJ are double-teamed on an indictment, avoiding Club Fed will be extremely difficult for the four main executives. (One assumes their US passports have been confiscated.) There is a huge amount of financial fraud leading to losses by some powerful companies. Even when losses are small, the Feds get their man most of the time. This Editor had a view of this at a distance, as the CEO of a company where she formerly worked was convicted of financial fraud in an enterprise formed after that company. He and his accomplice are serving five years in a Federal prison. Not even Elizabeth Holmes is facing the full fury of both Federal agencies, and she’s facing only nine counts in her indictment. 

The Theranos Story, ch. 61: Elizabeth Holmes as legal deadbeat

Did her lawyers expect otherwise? This weekend’s news of Elizabeth Holmes’ legal team at Cooley LLP withdrawing their representation services due to non-payment should not have caused much surprise. Cooley’s attorney team petitioned the court to withdraw from the case, stating that “Ms. Holmes has not paid Cooley for any of its work as her counsel of record in this action for more than a year.”

Cooley was representing Ms. Holmes in a class-action civil suit in Phoenix brought against her, former Theranos president Sunny Balwani, and Walgreens, charging fraud and medical battery. (When they withdraw, will she seek public representation based on poverty?)

Perhaps Ms. Holmes is the one who’s setting priorities, as the civil suit would be for monetary damages, and no money means there will be none for the plaintiffs to collect. The DOJ charges are a different story. She is on the hook for nine counts of wire fraud and two counts of conspiracy related to her actions at Theranos. Conviction on these could send her to Club Fed for 20 years plus a fine of $250,000 plus restitution for each charge. [TTA 16 June]

Last Wednesday, both Ms. Holmes and lawyers for her and Mr. Balwani were in Federal court in San Jose on the wire fraud and conspiracy charges, demanding that the government release documents from the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) that allegedly would clear them. After an hour, Judge Davila set 4 November as the next hearing date. 

Defending oneself does not come cheap, but after your company’s value crashes to $0 from $9bn, one might be looking for change in your Roche-Bobois couch and wondering if your little black Silicon Valley-entrepreneur formal pantsuit/white shirt ensembles will last through the trial. CNBC 2 Oct, CNBC 4 OctFox Business, Business Insider

Allscripts reaches deal with DOJ on Practice Fusion in compliance settlement for $145 million

EHR giant Allscripts settled with the US Department of Justice on compliance charges made against Practice Fusion. Allscripts acquired Practice Fusion, a free/low-cost EHR targeted to primary care practices, in January 2018. A year earlier, Practice Fusion had received an inquiry from the US Attorney’s Office for the District of Vermont examining the company’s compliance with the EHR certification program. According to Fierce Healthcare, after Allscripts acquired Practice Fusion, the inquiry expanded…and expanded…to include additional certification and Anti-Kickback statute charges. Since then, Allscripts has rebranded the EHR as Veradigm.

The announcement was made during their 2019 Q2 results investor call. Their president claimed the $145 million settlement, at this point an agreement in principle with DOJ, is in line with other EHR-DOJ settlements. 

Consider it a final payment on the knockdown price ($100 million) Allscripts paid for Practice Fusion.

Their Q2 bookings were $276 million, up 31% from the prior-year period, but revenue at $445 million was lower than expectations. 

The Theranos Story, ch. 58: with HBO and ABC, let the mythmaking and psychiatric profiling begin! (updated)

This Editor thought that her next articles about Theranos would be trial coverage. There are court dates pending for Elizabeth Holmes and Not-So-Sunny Balwani–with the DOJ for 11 counts of wire fraud [TTA 16 June] and, for Mr. Balwani, with the SEC on (civil) securities fraud [TTA 15 March]. 

Instead, Theranos hits the headlines again. On 18 March, there’s the debut of an HBO documentary on Theranos. Titled The Inventor: Out For Blood In Silicon Valley (YouTube preview), we can treat ourselves once again to the SteveJobs-esque presence of Ms. Holmes, down to the unnaturally deep voice, blondined hair, and wide blue eyes, unpacking the deception and fraud that was part of the company from early days. But that’s not all! There’s a six-part ABC Radio ‘Nightline’ docu-podcast that started on 23 Jan and airs in six parts through February, which includes audio of depositions taken of board members, whistleblower Tyler Shultz, and patients affected by bad test results. (This Editor will give a listen on this alone.) Episode 5 and links to 1-4 are here via Yahoo.

On websites, we’re regaled with rehashes. The articles range from Teasing the Doc to Where The Ex (Balwani) Is Now (they don’t know) to What Is Her Net Worth (not $4.6 bn). There’s even a flurry of sensational podcasts and videos on YouTube–just Google them. 

Fascinating Fraud. There’s fascination in The Long Con perpetrated by the principals, and less examined, our tendency to Want To Believe. Many of us like legal procedurals and the drama inherent in them (the eternal appeal of the long-running Law & Order in several countries.) Let’s face it, there’s a substantial dollop of schadenfreude mixed in.

What we are witnessing is the building of a myth, increasingly divorced from the real world where it happened, and not improbably or with superpowers. 

Where it goes a little off the cliff. There is a curious article in Forbes that is written by a contributor who writes and teaches courses on stocks and entrepreneurship. He interviewed a former neighbor of Ms. Holmes, Richard Fuisz, MD. It turns out this psychiatrist, inventor, and former CIA asset knew her in childhood. The families were friends and Dr. Fuisz helped out her father when he hit a bad patch. There’s some sketchy profiling in this article, but it does make a fair attempt to get to the heart of the forces that put the gap in Elizabeth Holmes’ ethical makeup, including the Big Steal of Ian Gibbons’ IP. His position is somewhat complicated by a patent dispute (settled) between Dr. Fuisz & Son and Theranos. He’s still hammering on at it on Twitter (@rfuisz).

What’s missing? Much credit to the estimable John Carreyrou, who broke the story in the Wall Street Journal and got his livelihood (and perhaps a few other things) threatened a few times by Tough Guy Lawyer David Boies.

(Updated) At least it is here in a Vanity Fair article on the Last Days of Theranos, where they had to move to downscale Newark (California) and Ms. Holmes’ dog pooped where he wanted to poop. Her ‘persecution’ doesn’t seem to faze her from living in SF, frequenting cafes with said dog, and her new romance with a ‘younger hospitality heir’–a far cry from her former employees who wear the months or years of their lives at Theranos like a Scarlet Letter as they look for work and loose cash in the sofa.

We’ve gotten to the point where the hard business analysis ends and the looser parts of psychologizing begins, as we attempt to understand why. Beyond a certain point, does why matter when damage to real patients has been done? Collateral damage persists in funding of startups and for entrepreneurial women in health tech.

For this Editor, she looks forward to the warmer weather, when it’s expected when the Legal Action–and reality–resumes. 

News roundup: Walgreens Boots-Microsoft, TytoCare, CVS-Aetna moves along, Care Innovations exits Louisville

Walgreens Boots finally does something. Their teaming with Microsoft to migrate their IT infrastructure to the Azure platform will eventually lead to “more personalized care experiences from preventative self-care to chronic disease management. WBA will leverage the cloud for wellness and lifestyle management programs.” It was important enough to both companies to have a photo op with twin CEOs: Walgreens Boots’ Stefano Pessina and Microsoft’s Satya Nadella. The ‘consumerization of healthcare’ and ‘transforming healthcare delivery’ phrases liberally sprinkled throughout the article and the press release are today’s prevalent clichés, as ‘synergy’ was the buzzword of say, 1999. Healthcare IT News, CNBC  In the long run, this IT overhaul may actually mean more to their customers than, say, the Amazon-JP Morgan-Berkshire Hathaway hydra.

A vote of confidence in diagnostic telehealth pioneered by young Israeli company TytoCare. They added $9 million to their Series C from investors including Sanford Health, Itochu and Shenzhen Capital Group (and its affiliates). This adds to last year’s round led by Ping An Global Voyager Fund for a total Series C of $33.5 million. TechCrunch. TytoCare also was named one of Wired’s Best of CES (CBS TV video, at 1:35) and earlier this month announced the integration of Health Navigator’s symptom checker into their system.

The judge says ‘No Delay For You’! In the CVS-Aetna hearing, Federal Judge Richard Leon refused to give the Department of Justice any more time to submit comments in the CVS Health and Aetna merger case. The deadline remains 15 February despite the government shutdown furloughing much of the antitrust division. Judge Leon is reviewing the decree under the Tunney Act requirement that the merger meet the public interest. Healthcare Finance

Care Innovations ankles Louisville. A modest and mainly paywalled item in Louisville Business First may point to something larger at Care Innovations. After two years of operation and a much-touted expansion to one of Louisville’s better addresses, the telehealth/RPM company has quietly vacated its 7,200 square foot space at Brown & Williamson Tower and pulled its operations from the city. Reporters from the publication were unable to obtain a statement from Care Innovations, which is now in Folsom, California, closer to majority owner Intel. At the time of their Louisville expansion in April 2017 (still on their website), Care Innovations received a $500,000 KBI tax incentive to create 24 high-paying jobs, which now are departed. It is ironic as Louisville is a health hub dominated by insurer Humana but has successfully campaigned for health tech. Last July [TTA 17 July], CI sold its Validation Institute and their VA win disappeared from their website. Of late, there has been no news from the one-time Intel-GE partnership.

News roundup: CES’ early beat, CVS-Aetna pauses, digital health fizzes, Yorkshire & Humber Propels

The start of January can be a slow–or busy–time. There are, of course, the avalanche of announcements made at JPM and just starting CES, which has become a part-healthcare show with hundreds of health-related exhibitors. At this point, this Editor confesses that there is not much that has caught her attention or that she–and Readers–haven’t heard about before, but the bulk of the coverage will come out next week. A lot of what is on the floor are still gadgets–and they come and mostly go. In better news, there was a Hospital at Home panel kicking off the 10th year of the Digital Health Summit on till Friday which illustrates their maturing into issues such as AI, workplace wellness, and aging. All this may be moving forward and coming a lot closer to reality than say, in 2017. But Jake, it’s CES–this year, if it folds, rolls, is retro, has a healthcare spin, and 5G, it’s on trend at CES.

CVS-Aetna grinds to halt. The partial government shutdown has affected the DOJ’s filings with DC Federal Court Judge Richard Leon on the consent decree from October. Judge Leon is reviewing the decree under the Tunney Act requirement that the merger meet the public interest. It turns out that the DOJ cannot supply documents as the Antitrust Division was furloughed–non-essential . This means little for the actual merger as it has already happened, but it slows down a fair amount of functional integration. Prediction: DOJ will not move forward with this until at least one month after the shutdown ends–our bet is April, with the cherry blossoms. Seeking Alpha

Fizzy, not bubbly. That’s Rock Health’s verdict on This Year In Digital Health Funding. No Bubble Here! While Rock only takes a piece of the picture (US only deals, over $2 million), it came in at $8.1 billion–a full $2.3 bn or 42 percent–over 2017, as projected in Q3 [TTA 11 Oct]. The deals continue to be bigger and fewer–368 versus 359 for 2017, which is barely a rounding error. More on this next week.

Propel@YH debuts. Returning to the UK, Yorkshire and Humber’s Academic Health Science Network’s (AHSN) first digital health accelerator program will be providing guidance and support services for pioneering developers with innovative digital and patient solutions. Eligible organizations will have either an existing presence in the region or are willing to establish one. Six organizations will be chosen to take part in a six-month program focused on human-related design, clinical safety by design and understanding NHS procurement. Announcement and AHSN website.

The Theranos Story, ch. 54: cue up ‘Tainted Love’ in the courtroom

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2018/07/Rock-1-crop-2.jpg” thumb_width=”150″ /]Tainted Love, Labs, and Lucre Indeed. Drop the needle on the Gloria Jones version from 1964 or the Soft Cell version from 1981.

Consider that the very fates of Ms. Elizabeth Holmes, the now not-so-Sunny Balwani, and the formerly $9 bn Unicorn Theranos may hinge on the nature of their personal relationship and its influence on the governance of the company.

There are two legal actions against the company and the two principals, one by the DOJ for criminal fraud [TTA 16 June] and by the SEC on (civil) securities fraud [TTA 15 March].  Both are out on $500,000 bail on the DOJ charges. The possibilities on the latter can be up to 20 years in Club Fed, plus $250,000 in fines and clawing back of investor funds, if any can be found.

While Ms. Holmes settled with the SEC, paying a fine and exiting the company, Mr. Balwani did not and is fighting the charges, though this declaration was made before the DOJ charges.

Bloomberg Markets brings up an interesting set of dynamics which can play well with potential jurors and make the prosecution’s case far more convincing for a Northern California jury. To wit, in 2009 when she started running out of money, Ms. Holmes turned to Mr. Balwani, her boyfriend, for a $12 million line of credit. In return, he became president and COO. The nature of their relationship was kept strictly hush-hush to the board and investors. Secrecy was ratcheted up at the company and management started to break down. And the timing: a week after Mr. Balwani left, the news of bad patient test results and problems with their lab started to break big.

Jurors, even in Silicon Valley, love drama and personal intrigue–especially the type that underscores deception and $900 million in fraud perpetrated by a Stanford dropout who clumsily attempted to channel Saint Jobs and a somewhat schlubby dude who Should Have Known Better. Far more than gullible corporate suits at Walgreens and hedge funds….add to it the personal stories of patients harmed by bad Theranos tests and you get an emotional story worthy of Law & Order.

Do expect Ms. Holmes to bring up her Saint Joan if not a female Saint Sebastian analogy. Burning at the stake versus being shot full of arrows are too memorable images which she’ll try out. Add a #MeToo spin of a young woman coerced by an older man–a tale of at least tit-for-tat to get the $12 million. 

The rompin’ soap opera is likely to start next year. Stay tuned…. 

CVS-Aetna: DOJ requests additional information at deadline (updated for CVS earnings)

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2017/12/canary-in-the-coal-mine.jpgw595.jpeg” thumb_width=”150″ /]The Canary Tweets. The sources [TTA 8 Dec] were correct that the Department of Justice (DOJ) would take the lead on reviewing the CVS-Aetna merger. Yesterday (1 Feb) they did, requesting additional information. This extends the waiting period for an additional 30 days or more.  The CVS Form 8-K (SEC), which reports the request for information, is here courtesy of Seeking Alpha.

The US law governing this is the Hart-Scott-Rodino Act Antitrust Improvements Act of 1976 (HSR). A pre-merger notification and report was filed with DOJ and the Federal Trade Commission (FTC) on 2 January. There’s a 30-day period for an additional information request and that was taken by the DOJ yesterday. The length of the compliance process may extend for 30 days but may be less if the request is satisfied or more if requested by the parties involved. 

CVS and Aetna still hope to complete the merger by the second half of 2018. The respective shareholder meetings are already scheduled for 20 March. Our previous coverage here.

Editor’s thoughts: CVS-Aetna, despite its size, is a relatively straightforward merger, but because of its nature and size, expect some political haymaking and delays to come. This will be a preview of the action around the Amazon-Berkshire Hathaway-JPMorgan Chase cooperative partnership, in whatever they decide to create, if they create: “there’s many a slip twixt cup and lip.”

Updated for 4th Quarter Financials: CVS is reasonably healthy and nimble. Their earnings report is positive in earnings, operating profit, and reinvestment versus prior year. Under US securities law, it’s silent on Aetna. Form 8-K and press release via Seeking Alpha.

CVS-Aetna: the canary says that DOJ likely to review merger–plus further analysis and developments

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2017/12/canary-in-the-coal-mine.jpgw595.jpeg” thumb_width=”150″ /]The canary is still tweeting. News reports indicate that the US Department of Justice (DOJ) will be in the lead reviewing the CVS acquisition of Aetna. This should be no surprise to our Readers. This Editor’s first analysis noted regulatory necessity and earlier this week, more explicitly predicted either the Federal Trade Commission (FTC) or the DOJ would be reviewing.

The New York Post’s Beltway sources (for ex-US readers, it’s the mass market News Corp. paper/site) are talking up DOJ:

President Trump’s Department of Justice appears to be the agency that will review CVS Health’s $69 billion merger with Aetna, sources tell The Post. While the decision is not yet final, the move would not be good news for the merging parties, sources said. “I think they would prefer it to be at the Federal Trade Commission,” one Washington, DC, source said.

The article explains that it’s a tossup as to bailiwicks–FTC reviews retail and drugstore mergers, DOJ insurance mergers. A sound but (by CVS) unwelcome reason for DOJ to review the merger is their familiarity with Aetna after DOJ opposing its failed merger with Humana in Federal court less than a year in the past. Their expertise would be wasted and politically, a cup that FTC would wish to pass inasmuch they are also short on commissioners.

As the Third Century Greek philosopher Sextus Empiricus stated, ‘The mills of the gods grind slowly, but they grind small’ (or ‘exceeding fine’ in more modern citations), which means that justice, at least in the Federal definition, will be served eventually.

  • The Trump Administration has let DOJ question the AT&T/Time Warner merger on antitrust reasons up, down, and sideways, to the point where it is nearly derailed. Much the same can be expected here.
  • The businesses create a new type of healthcare system. Expect HHS to have a say.
  • Congress is already demanding hearings, which given the short time to Christmas break will likely be January. 
  • What may help Aetna’s cause is that the merger with Humana was a friendly one; the decision, at least in the press, was accepted with grace. 

But as wags have said for at least two centuries, you can always tell the pioneers by the arrows in their back. When you’re redesigning the Conestoga Wagons, it has to be expected–which is why the experts gathering here in NYC over the past week have had not much to say about it to date.

Certainly it has been a downer for investment pickers, though both companies had significant profitability challenges facing them in the future. We refer here to several articles in Seeking Alpha where it’s predicted that the acquisition will boost CVS’ growth, but saddle it with huge debt: $45B in new debt, $21B in new equity, plus using $4B in available cash. Are they overpaying? Will it reduce internal cost and boost profitability? Will it do what they say they’ll do, which is to bend the cost curve down by start-to-finish engagement with customers? What pieces are missing? And time is a critical factor–how long this will take to realize is not projected. If you like stock and value charts and graphs, here’s the place. Seeking Alpha (by author): Ciura, Arnold, Ward

Other retailers will have their say. We’ve noted earlier that the vast supermarkets like Publix, Wegmans, Shop Rite or Ahold (Stop & Shop, Giant) are likely looking at opportunities with logical alliances or buy-ins to insurers like Oscar, Clover, Bright Health, or the smaller Blues. Target is already allied with CVS for their in-store drugstores. And then there is retail/online giant Walmart. The Wal-Martians need plenty of healthcare and Humana, based on local Louisville-area reports, is in play after not merging with Aetna.

Looming over all this is Amazon. A little-noticed report in Becker’s from July indicated that their 1492 unit has set about extracting data from legacy EHRs and to build a telehealth platform on Amazon hardware such as Echo. Already noted has been their buying of pharmacy licenses in various states. None of which can make any of the usual healthcare suspects happy.

The Theranos Story, ch. 44: Walgreens settles lawsuit, cash box empties further

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]Walgreens realizes Theranos’ funds are not bottomless. Confirming the June Wall Street Journal report [TTA 26 June] that Theranos had advised its investors of a negotiated settlement with Walgreens Boots Alliance, Tuesday’s announcement offered few specifics. According to the Theranos release, the settlement resolves all claims by Walgreens and dismisses the lawsuit, with no finding or implication of liability. Terms were not formally disclosed, but sources told the WSJ (FoxBusiness) that the settlement was over $25 million. In June, it was estimated to be less than $30 million, so the over/under wasn’t very wide. Payment timing was not disclosed.

As we noted in June, Walgreens had invested an estimated $140 million between direct funding (a $40 million loan convertible into equity), and an “innovation fund’ designed to fund the store location rollout. The lawsuit filed last November was intended to recoup that amount. The thorn that Walgreens and its attorneys grasped was that even with insurance, there was not $140 million left in Theranos and nothing of equivalent non-cash interest. As a public company, certainly the realization that putting $25 million on the books this year was better than nothing. It is also likely that $110+ million has already been written off.

Not much left in Theranos’ till, other than some dollar bills and coins. In June, Theranos disclosed that their cash on hand was $54 million with a monthly burn of $10 million, leaving as of today $44 million. Even if the Walgreens settlement is covered 100 percent by insurance, at best Theranos has about four months of life–if nothing extraordinary happens. There are also ongoing SEC and DOJ investigations, plus the Colman/Taubman-Dye suit in California, which may result in more fines and settlements.

While Theranos makes much of its new management structure and commercializing new technologies (of which there is no word), there are no signs that beyond recapitalization earlier this year that there is fresh investment. Reports indicate they are trying, at long last, to exit real estate they no longer need–subleasing their expansive (and expensive) Palo Alto headquarters and relocating to their former lab in an industrial park in less tony Newark, California. As this Editor concluded in June, it is increasingly difficult to see a future for Theranos without Chapters 11 or 7 in it. It is rapidly arriving at a familiar place for startups, but not former Unicorns: Flat Brokedom.

Meanwhile, Walgreens Boots Alliance, barely dented in the exchequer, has closed on a $1.4 bn joint investment with KKR for institutional pharmacy company PharMerica. Drug Store News