News roundup: Teladoc’s improved Q3, PursueCare resuscitates Pear’s apps, AMA removes 16-day RPM requirement in 2026, PatientPoint intros Innovation Network, PeopleOne’s $32B raise, Cigna-Humana again a no-go

October 31, 2024 | by

Teladoc beat the Street for Q3–even with a still gasping BetterHelp. Their Q3 under new CEO Chuck Divita was an improvement over their dismal Q2 [TTA 1 Aug] where Teladoc posted a $838 million net loss, largely made up of a $790 million impairment on BetterHelp’s sinking performance. BetterHelp, the direct-to-consumer mental health portion of their business, continues to sink in an overcrowded market even though telemental health remains in or near the lead in competitors’ recent funding rounds. Revenue this quarter decreased 10% to $256.8 million. CFO Mala Murthy admitted that BetterHelp is a “business in transition,” although the from-and-to remain opaque. 

That bit of bad news aside, Q3’s net loss was only $33.3 million, a big improvement over Q2 2023’s $57 million loss. This quarter also included $3.6 million in restructuring costs related to severance and office space reductions. Revenue declined by 3% to $640.5 million, following on Q2’s 2% decline, which is not a good trend. Adjusted EBITDA was $83.3 million, down 6%. Integrated Care (their main business) segment revenue increased 2% to $383.7 million.

For the nine months of 2024, revenue was off 1% versus prior year at $1.9 billion with a cumulative net loss of $952.8 million. Integrated Care’s revenue grew 5% to $1,138.2 million, with BetterHelp again declining 8% to $790.9 million. 

Divita and Murthy both attributed slowing growth to increased acquisition costs which impact the DTC model of BetterHelp–and that isn’t expected to change. They see greater opportunities for overall growth in international business, which also has less expensive international ad spending. The analyst quoted by FierceHealthcare believes that Teladoc is still in the process of adjusting to a slower growth model and focusing on profitability. Shares remain up slightly at around $9 since yesterday’s report, an improvement over their August lows at $6-7. Release

PursueCare revives Pear Therapeutics’ two FDA-cleared addiction apps. Both RESET and RESET-O have been relaunched by PursueCare, a Connecticut-based addiction recovery and behavioral health virtual care service. The two apps were cleared under Pear’s ownership and to date are the sole the only FDA-cleared prescription digital therapeutics (PDTs) for substance use disorder (SUD) and opioid use disorder (OUD). They provide a self-guided 12-week course of cognitive behavioral therapy (CBT), in which patients are incentivized to complete lessons, adhere to treatment, and abstain from drug use. PursueCare’s virtual clinic model uses a smartphone app and utilizes a care team model to provide telehealth treatment for opioids, alcohol, stimulants, and other substances, including medication assisted treatment (MOUD), counseling, psychiatry, case management, pharmacy, and treatment for addiction-related health conditions. Mobihealthnews, PharmaPhorum, Release

Not covered by Mobihealthnews is the backstory on PursueCare’s acquisition of Pear’s PDTs. As we reported when Pear was sold off by the US District Court in Delaware in bankruptcy to four companies, one of the big acquirers of Pear assets was its former CEO, Corey McCann MD, doing business as Harvest Bio LLC. Harvest paid $2 million for the ISF licenses and patents, plus Pear assets related to schizophrenia, multiple sclerosis, depression, and the remaining pipeline projects. They also bought the corporate trademarks, the PearConnect commercial platform, and the rights to the FDA-cleared reSET and opioid-specific reSET-O programs/apps. The two RESET apps were then sold to PursueCare last December along with RESET-A for alcohol addiction for an undisclosed price. This has FDA breakthrough device designation but is not yet marketed by PursueCare. PursueCare also raised $20 million in a Series B in January led by T.Rx Capital. McCann, one of T.Rx Capital managing partners, joined PursueCare’s Board of Directors at that time. Healthcare IT Today  Does this begin to resemble about three degrees of separation?

The American Medical Association (AMA) made life a little more marketable for remote patient monitoring (RPM) companies. As of 2026, the AMA in its remote physiologic monitoring CPT codes will no longer require 16 days of continuous monitoring within 30 days in order to qualify for coding reimbursement. It’s a pity it won’t kick in for over a year, so RPM companies will just have to hang in there till then. FierceHealthcare

PatientPoint launches Innovation Network, names chief experience and innovation officer. The digital health company that provides health information at 35,000 patient point-of-care locations announced at HLTH that their new CEO, Sean Slovenski, will be forming a network that connects leaders from various industries with a vision of transforming healthcare. The founding partner is Verizon joined by LG, GoodRx, and Thrive Global. Its purpose is to “foster collaboration to develop patient-first solutions that address some of healthcare’s most pressing challenges.” PatientPoint’s new chief experience officer Shawn Nason joined from his own consultancy six months ago as chief of staff and head of experience and is considered to be expert in disruptive innovation and human-centered design. Release

PeopleOne Health‘s value-based primary care hybrid model received a nifty $32.3 million Series B funding. It was led by GV (Google Ventures), with participation from investors including healthcare entrepreneur and Transcarent CEO Glen Tullman. Their nine clinics are presently in Pennsylvania with their newest expansion in Palatka, Florida, south of Jacksonville. Their model is employer-focused; employees are fully covered by employers with no copays, deductibles, or coinsurance. It’s claimed that they save up to 30% on healthcare costs. Mobihealthnews, Release

Cigna quashes Humana buy rumors–again. These revived in late summer like pumpkins, but on an investor call Thursday (today), Cigna CEO David Cordani said that instead, their free cash would be used to buy back shares. Unlike other payers, Cigna beat the Street with total revenue of $63.7 billion, up 30% versus prior year. Shareholders’ net income for Q3 was $739 million, less than prior year’s $1.4 billion. The positive picture was powered by strong demand for specialty drugs in Evernorth Health Services but dragged down by a May $1.8 billion write-off of Cigna’s investment in VillageMD [TTA 1 May]. Healthcare Dive, Release

Some thoughts on the takeaways from HLTH

October 31, 2024 | by

HLTH, which was in Las Vegas last week (19-22 Oct), has moved from an ‘also-ran’ to a lead dog in healthcare conferences for the innovation oriented set, along with sister conference ViVE (with CHIME) for digital health in February. They offer an alternative to the broadly tech-focused CES and the HIMSS leviathan, which seems to have lost a bit of its mojo since HIMSS turned the management keys over to Informa. 

Like all industry meetings, there were the usual rash of announcements, panel meeting interpretations, and tea leaves reading by reporters on the scene. Both MedCity News and Healthcare Dive covered HLTH. MedCity News’ Katie Adams had seven hot takes resulting from conversations she had with various leaders from health systems, digital health, and VCs/investors. They were candid and as she put it, ‘refreshingly honest’. Your Editor’s comments follow.

AI could be worsening health disparities. This came from FDA commissioner Robert Califf who believes that health systems are using AI to segregate profitable patients from those who are not. “What we need is for AI to bring up the people who are currently disadvantaged.” Absent any proof at this stage that health systems are actually doing this while they are in at best early stages of attempting to integrate AI into an absurdly complicated network of systems without breaking them, this strikes me as Chicken Little-ism and Finger Wagging. 

Retail companies should stop trying to be something they’re not. A hospital CEO is quoted as stating that retailers are trying to apply their model to the healthcare space because healthcare delivery is wholesale. This deduction has some truth and then veers into the woods. Yes, Walgreens and CVS tried to apply a transactional model to primary care and got into Big Trouble. From the customer (patient) perspective, that person wants to get in, get fixed or examined–and get out with maximum speed and convenience. This didn’t happen. Will Amazon, a far bigger retailer, pull this off with One Medical brick-and-mortars, or run it as a membership ‘division’ linked with Amazon Prime? Their building of relationships with 20+systems like Cleveland Clinic for specialty care referrals (and in return primary care referrals) indicates they have the flexibility that Walgreens and CVS lack.

And since when is healthcare wholesale? It surely isn’t to the end user, the patient. This mindset is puzzling.

Strict abortion laws are likely already resulting in economic consequences. It seems that states with few to no limits on abortion are attracting OB/GYN residents and practices versus states with restrictions. This is a sad commentary on both the state of medical practice and public perception in dealing with human lives. There are alternatives.

Many investors have realized they backed products, not companies. The bloated investments and valuations that we saw in 2021 and 2022 (in actuality, 2020 into early 2022) could not be sustained. Well, yes, and the bubble burst last year. There was more to this. Easy IPOs through SPACs and the Fear of Missing Out (FOMO) led otherwise sensible retailers into buying brick-and-mortar primary care practices as extensions of their stores, investors into another iteration of ‘value-based care’, copycat virtual mental health providers, and digital health businesses that were essentially sinkholes, like Babylon Health. The companies may have had a good product or a nucleus of same. Then investors woke up and started to think about how impossible their exits were.

Healthcare leaders should remember they’re in the customer service industry. Exactly the opposite of the ‘wholesale’ delivery model. Patients are customers–but a special type of customer.

Next year, exit activity will likely still be lifeless in the digital health space. “Private equity firms might start acquiring more healthcare businesses.” Agreed. We’ll be seeing a lot more mergers of convenience to rationalize services and in some cases, survival–below the line of DOJ/FTC scrutiny.

We need to stop treating AI like a buzzword. In this view, it’s a tool that can transform healthcare delivery and make it better for both providers and consumers in speed and efficiency. In this Editor’s view, AI still needs to prove it can do this in a way that it is trustworthy, secure, and easily integrated into present systems.

Healthcare Dive highlighted a report by Silicon Valley Bank (SVB) and a Monday panel discussion on the decline of healthcare sector funding after the highs it reached during the Covid pandemic. It was a ‘sugar high’ that drew in non-healthcare sector “tourist” investors. Even at that time, it was not considered sustainable. Now the funding buzzwords are ‘pruning’ and ‘consolidation’. Investors are also looking for senior leaders with financial acumen and for companies that can create a fast path to profitability. SVB’s Megan Scheffel said that “One opportunity is for private equity firms to buy up multiple companies to create a platform” and create synergies. However, as this Editor has previously noted, this is yet another area where the DOJ and FTC are also scrutinizing. 

Big Tech–Microsoft, Google, Amazon, GE Healthcare and Nvidia–also saw opportunities at HLTH to promote their AI offerings, emphasizing use cases and partnerships with health systems, to solve a range of problems in documentation and scheduling, creating platform solutions customized to a specific health system. The big questions out there are readiness of clinicians to use the tools and how to offer them to systems responsibly. The tech providers do step back from telling health systems what to do. As Google’s Greg Corrado put it in the Healthcare Dive article, “It does need to be pioneered by healthcare systems that are willing and able to do the research on the ground, and not every health system can do that.” Exactly, as well as the implementation research and modifications.

One last thought–it was surprising how little news was generated at HLTH, versus before and after.

News roundup 23 Oct: views on a CVS breakup and CEO replacement, Amwell’s interesting new CFO, CopilotIQ/Biofourmis merge (updated), raises by HealthEx, Counsel Health, Oshi Health

October 23, 2024 | by

How CVS Health grew into a juggernaut…and why it may pull back to survive. October kicked off with the bombshell [TTA 1 Oct] that CVS Health was considering a breakup into at least two units. Based on Reuters’ insider information, CVS was considering separating their Aetna health plan side from their retail operations. Up in the air was where the now problematic pharmacy benefits management (PBM) units would reside. CVS’ revenue and profitability crunch is biting hard, with Glenview Capital Management and other investors tiring of declining share value (-25% YTD).

Last week’s bombshell was the immediate (17 October) replacement of CEO Karen Lynch with CVS Caremark’s (PBM) president, David Joyner. Lynch, one of the US’ most powerful top female CEOs, took the helm after Larry Merlo’s February 2021 retirement. She had been Aetna head and with the company a total of 12 years, including the pandemic. In August, trying to stave off a two-headed decline that has hit both health plans and retailers, she ousted Aetna’s president Brian Kane and took over direct control. It didn’t take long for this to be viewed as not working. Joyner is a CVS Health ‘lifer’, having started with Aetna as a rep close to 40 years ago, then with an independent Caremark and rising through the ranks. His tenure is starting at a low point with the medical loss ratio (MLR) topping 95%, medical costs soaring, MA ratings cratering, competition from other PBMs, Amazon, and Mark Cuban Cost Plus, plus Federal scrutiny of PBMs on insulin pricing. This is causing a reset on their FY financial guidance which won’t be revealed until early November. FierceHealthcare

MedCityNews did a smart analysis on this, going back in time to 2018 when CVS laid out $70 billion for Aetna. Last year, CVS, in pursuit of integration/expansion goals laid out by top management, acquired Signify Health (home health) and then Oak Street Health (OSH) primary care practices for a combined $18-19 billion. The experts they consulted largely look on a breakup/spinoff as a short term fix, though CVS is right now, to quote Dr. Robert Pearl of Stanford, FTA: “They’re sitting in the place where all the headwinds are.” Will they stick it out or will their investors like Glenview, facing their own headwinds, go for the short term solution?

Over at Oscar Health, their CEO Mark Bertolini, engineer of the Aetna/CVS deal and later ousted from the CVS board, must be smiling as Oscar is Back In Black.

Amwell, which is facing headwinds of hurricane force, named a new CFO. Mark Hirschhorn joins from his most recent spot as CEO of TapestryHealth, a post-acute care telemedicine provider. He is replacing Robert Shepardson, who stated last week he would resign effective Friday 11 October.

Hirschhorn was formerly with Teladoc, from which he resigned in 2018 under reports of insider trading and on top of it, an inappropriate relationship with a subordinate [TTA 20 Dec 2018]. He then was president/COO for two years at cracked SPAC Talkspace, from which he resigned after an internal review regarding his behavior at an offsite company event. Talkspace and Amwell discussed a merger back in the palmy days of 2022 [TTA 22 June 22] which never happened.

Hirschhorn’s last company, TapestryHealth, announced their new CEO effective a little over a month ago on 16 September, with Craig Anderson joining from UnitedHealth Group [TapestryHealth release]. In their release, Hirschhorn was described as pursuing other opportunities with Sopris Venture Capital. Fintel does not list Sopris as an investor or shareholder in Amwell, but this information could be outdated.

This Editor will restrain herself from further comment and wishes the best for Amwell. Healthcare Dive

Two home healthcare-focused companies, CopilotIQ and Biofourmis, announced their merger at HLTH this past Monday. CopilotIQ’s focus has been on in-home delivery of connected care including RPM and nursing for chronic conditions through an AI-assisted software platform, while Biofourmis’ system and market has concentrated more on health systems, payers, and pharmaceutical companies for in-home delivery of complex care. The combined company will be headed by CopilotIQ’s CEO David Koretz. Merger transitions and costs were not disclosed. Investors in both companies–General Atlantic, Openspace Ventures, and Bessemer Venture Partners–are listed as investing into the combined business. Release 

Update: What’s interesting is that CopilotIQ appears to be a relatively small company with only two funding rounds listed on Crunchbase. It was listed as one of Fast Company‘s most innovative companies of 2024 back in March and closed 2023 with 10,000 members, up from 200 at the start of 2022.  Biofourmis, founded in Singapore and moving to Boston in 2019, at one point was a unicorn with $464 million in 10 rounds of funding up to a Series D. Yet the company will be headed by the smaller company’s CEO. It could be a merger arranged, as nowadays many are, by the funders. It also may not be, because the release does not disclose the financials of these two private companies and positions it as a merger. But this is one merger that makes sense to provide wider availability of integrated in-home services. What is odd: Crunchbase is listing it as an acquisition by Biofourmis, which is not what the release states nor other sources.

Meanwhile, Biofourmis’ former CEO and one of their founders, Kuldeep Singh Rajput, has founded a health tech company based in Singapore that is focused on generative AI. OutcomesAI is using a LMM (large multi-modal model) called Glia to work with SingHealth for clinical companion AI. Mobihealthnews Update: Rajput transferred his 96.6 million shares in Biofourmis to 19 existing investors immediately prior to the merger, according to filings with ACRA, Singapore’s Accounting and Corporate Regulatory Authority. DealStreetAsia

A quick rundown on fundings touted at HLTH:

HealthEx, a company with a tech model for healthcare organizations to manage data around patient preferences and consent, announced a $14 million seed/Series A funding. It was “hatched”, according to the release, by General Catalyst. 

Counsel Health scored $11 million in Series A funding. Counsel provides on-demand, high-quality, personalized medical advice from expert physicians within minutes. It apparently is a blend of an advice, counseling, and telehealth model. Counsel currently claims to serve tens of thousands of patients through its health plan and provider partnerships in California, New York, Massachusetts, Florida, and Texas. Funding will be used for platform development and nationwide expansion..The round was led by Andreessen Horowitz (a16z) Bio + Health, with participation from Asymmetric Capital Partners, Floodgate Fund and Pear VC. Release

Oshi Health won this week’s Big Raise with a $60 million Series C. Oshi is a virtual-first gastrointestinal care clinic integrating evidence-based medical care and behavioral health support for patients with Crohn’s Disease, irritable bowel syndrome (IBS) and ulcerative colitis. Funding was led by Oak HC/FT with existing investors CVS Health Ventures, Flare Capital Partners, Takeda Digital Ventures, Bessemer Venture Partners, and First Cressey Ventures. Mobihealthnews, Release

News roundup 16 Oct: Walgreens shuts 1,200 stores–500 in ’25, CVS exiting core infusion biz, Masimo v. Apple update, DEA recommends 3rd telehealth extension, Change hack costing UHG $705M, Owlet back in NYSE compliance

October 16, 2024 | by

A roundup of chickens coming home to roost? But some chickens are just happy to come home.

Walgreens’ Mound of Misery just grew a little higher. The headlines today were all about Walgreens’ closing 1,200 stores over the next three years. Their current store location roster is about 9,000, according to their website. 500 of these will be closed during their upcoming FY2025.  Their release stated this would be “immediately accretive to adjusted EPS and free cash flow”. (Were they making any money at all?) This helped to give their share price a nice bump from $9 to above $10 at market close today. Last year, Walgreens’ shares were priced above $22.

Q4 (closing 31 August) closed with a 6% boost in retail sales. However, losses were $3.0 billion versus a net loss of $180 million in the prior year’s Q4. The reasons cited in their release were a higher operating loss, a $2.3 billion non-cash charge for valuation allowance on deferred tax assets primarily related to opioid liabilities recognized in prior periods, and a non-cash impairment charge related to equity investment in China. The operating loss related to a non-cash goodwill impairment charge for CareCentrix. 

The full year was not cheery. Sales were $147.7 billion, an increase of 6.2% from a year ago (in constant currency, 5.7%). But losses in their FY2024 were $14.1 billion, a stunning increase of 104.5% compared to prior year.

VillageMD is being monetized along with other assets. “CEO Tim Wentworth said in the earnings call that the company is focused on “monetizing non-core assets to generate cash,” naming VillageMD as an example, to focus on its core retail pharmacy business.” HIStalk 16 Oct Can Walgreens shrink itself to profitability? Fierce Healthcare

Over at CVS, they’re doing their own shrinking. CVS is closing its core infusion services business, with plans to either close or sell 29 related regional pharmacies. Infusion services were bought from Coram LLC in 2013 for $2.1 billion. This Reuters exclusive was based on an 8 October memo and confirmed by a CVS press representative. Patients relying on antibiotics, drugs supporting muscular health, and intravenous nutrition services will be transferred to other providers. CVS will continue to provide certain services: specialty medications and enteral nutrition, or tube feeding, at pharmacies in Minnesota, Pennsylvania and San Diego, with nationwide nursing services. Hat tip to HIStalk 16 Oct.

Masimo wins one big patent challenge, loses one (or four), to Apple. 

The Win: Apple had sued Masimo in the US District Court of Delaware for patent infringement of Apple’s utility patent 10,942,491 B2 (“the ‘491 patent”). Masimo was charged as violating Apple’s patent on 19 features. Masimo appealed to the Patent Trial and Appeal Board (PTAB) of the US Patent and Trademark Office (USPTO) for an inter partes review (IPR) of the patent on the grounds of ‘unpatentability’, a very high proof. Masimo succeeded in this, rendering Apple’s ‘491 patent useless. Apple can appeal but the likelihood of success against the PTAB ruling that required three administrative patent judges to review, at this level of proof, is low. In this Editor’s view, this may spur other developers to come up with innovations now that these 19 features have been deemed unpatentable.

The Loss (I think): In review in the Delaware District Court are four complicated lawsuits between the two combatants, with Apple’s premise that Masimo has infringed upon other patents. Masimo alleged “inequitable conduct” by Apple in their patent filings with the PTO, essentially alleging fraudulent filings on multiple patents. Apple has been granted a summary judgment on Masimo’s claims, throwing them out.

Interestingly, Masimo–never shy to announce wins versus their foe Apple under the prior leadership of Joe Kiani–has remained strangely mum. (Perhaps everyone is waiting for the takeover dust to settle?) Will the ‘new’ Masimo be so combative against Apple? A far more detailed analysis for the patent mavens is in Strata-gee. A very large hat tip and bow to their editor, Ted Green, who writes about marketing primarily in the audio/visual business but has been 100% on top of The Masimo Saga–thank you!

To no one’s surprise, DEA kicks the telehealth waiver can down the road–for the third time. The Drug Enforcement Administration (DEA) sent to the White House’s Office of Management and Budget (OMB) a proposed rule to extend telehealth prescribing of Schedule II and higher controlled substances without changes. These waivers which removed the in-person examination requirement under the Ryan-Haight Act were instituted during the Covid pandemic and extended twice [TTA 11 Oct 23, 11 May 23] with a final expiration of 31 December 2024. In September, reports indicated that DEA not only wanted to restore prior restrictions but also wished to introduce additional ones. However, their timing (September!) given Federal standards of publishing draft rules and lengthy comment periods before a final rule was impossible to be achieved by year’s end. [TTA 13 Sept]

Whether OMB will approve the extension (to a date that cannot be confirmed since the text is unavailable, but reportedly one year) is not certain, as it may be disputed by the Department of Health and Human Services (HHS). Since the waiver is due to expire at the end of the year, this may help to assure the multitude of mental health and other telehealth companies dependent on legal remote diagnosis and prescribing controlled substances that their businesses can continue. FierceHealthcare

UHG didn’t have a happy quarter either due to Change. The total hit to UnitedHealth Group of the Change Healthcare hack is now estimated at $705 million, or 75 cents a share. Their 2025 guidance on profit is a lackluster $30 per share–below Wall Street estimates of $31.18. Government plans’ cuts in payments for Medicare Advantage plus and low state payment rates for Medicaid are affecting UHG as well as nearly every other payer. UHG’s share price on the news reacted negatively, falling 9% and dragging down other payers as well. UHG must rue the day they bought Change Healthcare, as it has been largely bad news ever since. CNBC

And winding up on a happy note–Owlet is back in good graces with the NYSE. Last year, they faced a NYSE notification that they were out of compliance with the $50 million minimum valuation of the company over a consecutive 30-day trading day period. They are now in compliance and their Class A shares can trade without the ‘BC’ black mark and no longer be listed as such on the NYSE website. The NYSE will be following its standard procedure of a 12-month follow-up on compliance. Release, Mobihealthnews

The baby sock and baby monitoring company has had a rough couple of years between a cracked SPAC (2021), FDA notifying them at the end of 2021 that they considered the Smart Sock a medical device, forcing the company to pull it from distribution [TTA 4 Dec 21], mounting losses, layoffs, and rebuilding with an FDA-cleared BabySat and enhanced Dream Sock [TTA 21 June 23]. Usually, this concatenation of events means the company either shuts or sells, but Owlet has done neither and bootstrapped itself. Revenue in their Q2 ending 30 June was up 58% year over year with a narrower operating loss of $2.2 million, compared with $6.7 million in prior year. It recently expanded their European distribution of the Dream Sock after CE Mark certification in May to a total of 11 countries [TTA 18 Sep]. 

FTC drops the hammer on premerger notification requirements–what will be M&A and investment effects?

October 15, 2024 | by

Premerger Notification just got a lot tougher. As the Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division promised us back in June 2023, FTC has now finalized their changes on the Premerger Notification rules. Changes were pared back after public review and comments, notably by the American Hospital Association (AHA) but thousands of others. The Final Rule will take effect 90 days after publishing in the Federal Register. 

Premerger Notification applies to mergers and acquisitions that fall under the 48-year-old Hart-Scott-Rodino Act (HSR). Companies larger than the threshold (previously $111.4 million) must submit information based on standard forms in advance of filing the merger or acquisition. Both agencies then have 30 days to determine whether or not the M&A is legal or not especially around antitrust and restricting competition. Either agency can request additional information from the companies, extending the process through a Second Request. The purpose is to deny M&A in advance that may violate primarily antitrust law–an approach that has had mixed results in the past decade or so.

This is the first time in just under 50 years that there have been other than minor changes to the Premerger Notification Form. The new rules considerably tighten requirements–and increase paperwork. The Final Rule changes from the FTC press release were clearly highlights and not a full list:

  • Additional transaction documents from the supervisor of each merging party’s deal team as well as a small set of high-level business plans related to competition. 
  • A description of the business lines of each filer to reveal existing areas of competition between the merging firms (including for products or services that are in development) and supply relationships
  • Disclosure of investors in the buyer, including those with management rights. According to Healthcare Dive’s analysis, this will also include minority stakeholders and investors. FTC has recently focused on the rise of private equity investments across all M&A, which have increased to over 40% of transactions (2022), but less in healthcare varying by sector (e.g. 8% hospital, up to 11% of nursing homes).

The Healthcare Dive analysis, unlike the FTC release, confirmed that both acquirer and acquiree have to detail their prior acquisitions within a five-year window. FTC is going after “roll-ups,” the small, under-the-HSR-wire serial acquisitions that private equity groups and some companies utilize. Previously, only the acquirer had to disclose this information. Roll-ups have become popular in healthcare and health tech as startup companies with similar or complementary technologies attempt to grow and in some cases survive market evolutions.

The FTC’s Premerger Notification Office (PNO) will provide future compliance guidance in advance of the final rule’s effective date on the PNO’s website. The FTC estimates that the additional information required will increase the time required to complete the form to 105 hours from the current 37 hour average. In June, the proposed rule changes were estimated to require 144 hours.

The AHA’s objections centered around the extensive Federal disclosures hospitals already make in the course of business and transactions and the additional time taken administratively away from care.

Another online wrinkle to M&A: FTC’s new online portal for M&A commenters. FTC will collect comments on any and all proposed transactions submitted for premarket notification review. This will enable a long list of parties–consumers, workers, suppliers, rivals, business partners, advocacy organizations, professional and trade associations, local, state, and federal elected officials, academics, and others–itemized in the release to say their piece to the FTC about how the proposed M&A will affect competition. FTC can then point to the ‘public uproar’.

What will be the effect on M&A?

  • Possible end of year rush to complete any deals before the Final Rule takes effect
  • Rollups or complementary transactions will take place at earlier stages, under the HSR limits, but companies will limit them until they determine what is permissible and not if down the road they are acquired.
  • Longer term, it may overall further depress healthcare M&A from small to large, and investor exits–already barely recovering.
  • It may also affect large-scale funding for growth beyond Series A and B. Beyond that point, investors get larger, get on the FTC radar, and ultimately look to Other People’s Money to exit–if not an IPO, then to be acquired. 

One wonders what creative solutions VCs, PEs, and Mr. Market will concoct.

News roundup: Omada Health files S-1 for IPO in 2025–and a look at 2024 healthcare IPOs, Philips debuts new smart baby monitor, ActiveAlert launches in UK, ATA Nexus 2025 calls for speakers, abstracts

October 4, 2024 | by

Omada Health plans exit into the public markets. Omada, which has virtual health diabetes and hypertension management programs, reportedly filed an S-1 with the Securities and Exchange Commission (SEC), according to a Business Insider source. The IPO may be planned for 2025. Omada has been on a hot streak lately, inking deals with Amazon for their health condition programs, adding GLP-1 management, plus accreditation from NCQA and URAC.

Unlike the bare shelves of 2023, 2024 has racked up a few healthcare and digital health IPOs. Waystar’s IPO landed in June and closed today at $26.80, above its $21.50 opening price. This is for a decidedly unglamorous but revenue-generating part of healthcare–RCM and payments management. Tempus AI, in the far glammier AI in precision medicine sector, also IPO’d in June at $37, and after some initial summer sag recovered to $48.96 today. But June also saw yet another formerly hot healthcare tech company, Sharecare, go private after three years of a cracked SPAC. It was bought at 13% of its peak valuation. [TTA 26 June] Another supersonically sad summer story was Tel Aviv-HQ’d Nuvo, which developed and markets a digital pregnancy monitoring system. It went public on Nasdaq via a SPAC on 1 May–then filed for Chapter 11 reorganization by 22 August. Has this finally, finally put paid to SPACs? Bloomberg News, The Middle Market

Virtual MSK provider Hinge Health reportedly is testing the IPO market, having hired Morgan Stanley to start the process. [TTA 3 Oct]

Omada investors since 2011 have poured $525 million into the company over 11 rounds, ending with a debt financing in January 2023. There are 33 investors, including eight lead investors such as Fidelity, Cigna, and Andreessen Horowitz. Crunchbase

If one is to believe the analyst and investor quotes in this Business Insider article, once we get past 2024 and into Q1 2025, the ‘clogged pipe’ of waiting IPOs will roar back into the market like a hungry beast. Aside from wincing at the heckuva mixed metaphor, this Editor tends to be a lot more sanguine about next year. She believes that there are a lot of hungry investors waiting, all right–to offload years of risk to the public and other investors and recoup some if not all of their investment money. Mr. Market may, or may not, feel the same. Hat tip to HIStalk 4 October

On a lighter note, Philips is introducing its most advanced monitoring system to date, the AI-assisted Avent Premium Connected Baby Monitor. The system includes a camera/mic, ‘parent unit’, and app. The camera/mic tracks the baby’s chest motions in sleep and breathing without a wearable. It also has Cry Detection + Translation, which uses AI-assisted and machine learning to interpret baby’s cries. Parents can set up notifications via the parent unit or the app to better understand if baby is tired, gassy, hungry, uncomfortable, or irritated. Release, Mobihealthnews

At the other end of the age spectrum, the Taking Care personal alarm (PERS) company in the UK is introducing ActiveAlert. It adds an AI-assisted twist to personal assistance by triggering a wellbeing check-in call when it detects changes in the frequency, timing, or nature of alarm calls. Their models use 30 years of alarm call data. If there is a change, families are notified. According to their release (PDF), the patterns of alarm call usage can be used to take a more proactive approach to elder care in alerting for concerns or red flags to families before emergency scenarios arise. 

Planning ahead to 2025, the American Telemedicine Association will be returning south–to New Orleans. ATA Nexus–Redefining Care Delivery will be 3-5 May at the New Orleans Convention Center. Deadline is 1 November for speakers and general content proposals, as well as research abstracts for oral and poster presentations. Information for applications is here. The form for requesting the sponsorship and exhibit prospectus is here. Release

Breaking: another exit at Teladoc, with COO resigning effective 31 December

October 3, 2024 | by

The corporate exits and reorganization at Teladoc continue. Mike Waters, chief operating officer (COO) of Teladoc since mid-2022, has handed in his resignation effective 31 December. The reason given by Teladoc in an SEC 8-K regulatory filing (see item 5.02) is “a change in the Company’s executive reporting structure” which under US law is a resignation ‘for good reason’ as explicitly specified in his employment agreement. He is off the executive leadership webpage.

The parting will not be a difficult one. Mr. Waters will have:

  • nine months of continued base salary
  • up to nine months of premiums for continued medical, dental or vision coverage pursuant to COBRA
  • any earned but unpaid annual bonus in respect of 2024
  • accelerated vesting of all time-based equity awards granted to Mr. Waters prior to the Separation Date, which are unvested as of the Separation Date and are scheduled to vest in the nine months following the Separation Date
  • continued eligibility to vest in awards subject to performance-based vesting conditions if and to the extent the performance conditions are satisfied during that nine-month period.

In return, Mr. Waters will remain an employee through the 31 December separation date. He also has to execute a separation and release agreement that releases any further claims against Teladoc. It also includes a post-termination nine-month non-compete and non-solicit agreement. General non-compete agreements are controversial with new laws limiting them but if baked into an older employment agreement are likely spelled out.

Mr. Waters’ business operational roots are in health systems and practices. He was previously with the Providence health system in Washington, first with Swedish’s practice groups, then in senior executive positions with the system, for a total of over 14 years. 

Teladoc’s top-level executive churn has been substantial this year. At the CEO level, Chuck Divita replaced ousted Jason Gorevic in June after a short under two-month vacancy. Richard Napolitano, the chief accounting officer, departed in May and joined Thomson Reuters where he is now chief accounting officer (LinkedIn). He was replaced by Joseph Catapano from Pitney Bowes in September.  Laizer Kornwasser, the president of enterprise growth and global markets, formerly president of CareCentrix prior to its acquisition by Walgreens, was terminated in July in another reorganization and apparently has not been replaced.  Healthcare Dive

Industry news short takes: fundings for Qure.AI, Centivo, Rippl, Surescripts; M&A closings for GE Healthcare-Intelligent Ultrasound, LetsGetChecked-Truepill. And is Hinge Health going public soon?

October 3, 2024 | by

The waning days of summer wrapped with a few moderate-sized fundings:

India’s Qure.AI scored a $65 million Series D, bringing their total funding to $125 million. Leading the raise: Lightspeed and 360 ONE Asset, followed by Merck Global Health Innovation Fund, Kae Capital, Novo Holdings, Health Quad, and TeamFund. Qure.AI uses AI to analyze radiology images and ultrasound scans, against billions of clinical image datasets. It currently is used in over 90 countries and 3,100 locations including NHS Trusts. While headquartered in India, Qure.AI has international HQs in NYC, London, and Dubai. The fresh funding will be used to expand its US presence, invest in foundational AI models, and interestingly, acquire medtech companies. Another emphasis of the company is to expand skilled radiology to locations which are resource-constrained, such as healthcare facilities in developing nations or in global rural areas. It is also being used in clinical trials by Johnson & Johnson, Astra Zeneca, and Viatris. MedCityNews 

Centivo added $75 million in equity and debt financing, bringing their total funding to $226.4 million. Centivo provides a primary-care centered health plan directly to employers in all 50 states by partnering with local health systems and direct contracts with ACOs in 18 markets. Centivo replaces traditional health plan and broker relationships. What they offer to employers is an advanced primary care centered model through Centivo Care, an in-house virtual primary care practice. They claimed as of 2023 results of 71% reduction in member out-of-pocket costs compared to commercial plans offered to employers, saving employers 15% or more, and increasing utilization of primary and specialty care. Whether this will “fix America’s broken healthcare model” (a meme we’ve heard many times before) is debatable, but the siren song of reduced healthcare costs for employers is evidently attractive to a raft of funders. It attracted new strategic investors Cone Health Ventures and MemorialCare Innovation Fund, plus existing financial investors including B Capital, Cox Enterprises, F-Prime Capital, Ingleside Investors, and Morgan Health (a division of JPMorgan Chase). Debt financing was provided by Trinity Capital and ongoing banking partner, JPMorgan Chase.  Release, Mobihealthnews, MedCityNews

It’s a $23 million Series A for Rippl to advance virtual on-demand dementia and senior-focused behavioral care. The new funding will be used to expand the company’s geographic footprint, currently Washington, Texas, Illinois, and Missouri, to California, Florida, and Arizona. The company’s key partners are the Alzheimer’s Association, Medicare Advantage Plans, ACOs and other payors and payviders. Rippl is also a participant in the Centers for Medicare & Medicaid Services’ (CMS) eight-year alternative payment model, the Guiding an Improved Dementia Experience Model (GUIDE Model). It started in July with 390 healthcare providers. The Series A was led by Tina Hoang-To, Kin Ventures Founding General Partner, with participation from Rippl’s seed investors ARCH Venture Partners, General Catalyst, GV (Google Ventures), F-Prime, Mass General Brigham Ventures, and 1843 Capital. JSL Health also joined the round. Release 

E-prescriber Surescripts now has a majority investment from private equity TPG Capital. The investment amount was not disclosed and regulatory approval is pending. Its current ownership is 50% by the National Community Pharmacies Association and the National Association of Chain Drug Stores, with the other half Express Scripts and CVS Caremark. It was not disclosed how the ownership shares would be adjusted among the five entities, as CEO Frank Harvey said that all will remain. Surescripts brought in Triple Tree to explore a sale back in April. This Editor noted then that Surescripts has about 95% of the e-prescribing market, enabling it to obfuscate their real business in the vagueness of “health intelligence sharing”. Certainly the PBM owners can use the cash, if cash they’ll get. Release, FierceHealthcare 

Closing M&A deals kick off the fall:

On Tuesday, GE Healthcare closed their $51 million purchase of Intelligent Ultrasound’s clinical AI business [TTA 25 July]. Intelligent already partnered with GEHC on its ScanNav Assist AI technology to power its SonoLystlive and SonoLyst X/IR for GEHC’s Voluson Expert and Voluson Signature ultrasound devices, plus the Voluson Swift. GEHC plans to incorporate Intelligent’s solutions across its ultrasound portfolio through improving workflows and enhancing ease of use for clinicians and patients. MassDevice

And the Optum-arranged ‘marriage’ of LetsGetChecked and Truepill wasted no time in closing on Tuesday. Truepill, a digital/mail order pharmacy, will operate as a subsidiary of LetsGetChecked, an at-home diagnostic with testing kits. Earlier reports indicated that Truepill would be the surviving entity.  Both companies have substantial investments from Optum Ventures and have been losing money for years. Truepill was caught up in the Cerebral and Done Health Schedule II as a fulfillment pharmacy for both and fell under DEA scrutiny with a ‘show cause’ action. TTA extensively analyzed the structure of the “$525 million” acquisition by LGC and the Optum role in it at the time of the announcement TTA 22 August. Interestingly, the closing announcement does not reiterate the acquisition cost. Release, Mobihealthnews

Will virtual MSK provider Hinge Health go public soon? Blake Madden in his Hospitalogy blog 1 October confirms that Morgan Stanley has been hired to run the long-rumored IPO process. Undoubtedly, their management is looking at Sword Health’s nifty recent raise and $3 billion valuation. Investors have been pushing for an exit for some time. In April, the last time that Hinge was on the TTA radar, it had cut 10% of its 1,700 employees yet at that time was rumored to be considering an IPO. Hinge’s last raise was an October 2021 $400 million Series E led by Tiger Global and Coatue Management for a total funding of $826.1 million over 10 raises (Crunchbase). At that time, their valuation was a bubbly $6.2 billion, which despite $400 million in cash reserves (as of April) and its popular niche, in today’s market would be drastically revised downward. Stay tuned….

Two ‘oops’ at VA: OIG finds VA, Oracle performance misalignments, makes 9 recommendations; VP candidates’ EHR records improperly accessed by VA employees

October 1, 2024 | by

Another OIG audit still finds plenty of inconsistencies between VA and Oracle Health in the EHRM implementation–and makes another set of recommendations. The VA’s Office of Inspector General (OIG) conducted a review of the ongoing EHR Modernization (EHRM) at the VA, and once again found shortcomings in processes not addressed in the May 2023 revision of the 10 year contract.

It’s all about controls and consistency in response. The report identified that VA and Oracle Health still do not have adequate controls to prevent system changes from causing major incidents. Regarding response, both organizations are not uniform nor thorough. Controls were not adequate to mitigate incident impact by providing standard procedures and interoperable downtime equipment. VA lacked a formal process for linking delays to specific major performance incidents.

The auditors analyzed 360 major performance incidents—outages, performance degradations, and incomplete functionality—that occurred between 24 October 2020 and 31 August 2022, plus additional incidents through March 2024. Even though deployments halted in VA facilities except for the joint MHS/VA rollout at Lovell Federal Health Care Center in March, major performance incidents continued, including at Lovell which experienced a major problem in filling 60% of prescriptions.

The OIG made nine recommendations in their report. Grouped together, they include the following actions:

  1. Real-time data sharing to give VA greater awareness of potential problems in system operations
  2. Prioritizing major performance incident response in a clear and consistent manner
  3. Developing and enforcing response and other performance metrics to hold the contractor accountable
  4. Requiring sufficient detail in post-resolution reports
  5. Raising staff awareness of procedures
  6. Acquiring appropriate backup systems for downtime
  7. Better identifying and addressing major performance incidents linked to negative patient outcomes.
  8. Identifying the appropriate backup system and develop a training strategy to ensure clinicians can use the system during downtime.
  9. Assessing facilities’ patient safety reports identified during this audit, determining if additional actions need to be taken and, if so, providing an action plan.

VA release, Healthcare IT News

Some VA employees got very naughty in looking up information on the two VP candidates. Both Ohio Senator JD Vance and Minnesota Governor Tim Walz are both veterans (Marines and Army National Guard, respectively). The breaches were discovered in August during a security sweep of high-profile health accounts held in the VA’s EHR. 

  • 12 employees used their VA computers to access information on Vance and Walz.
  • These included physicians and a contractor viewing for an “extended time”.
  • The curious employees may face charges including dismissal and criminal charges. The length of access and intent will be taken into account.
  • Unknown is whether any of the information was shared outside of VA.

Their respective campaigns were notified and the investigation continues. The VA sent a memo to all employees on 30 August from VA Secretary Denis McDonough with a restatement of official data privacy and conduct directives plus the results of a failure to comply. Original reports were in the Washington Post and CNN. Healthcare IT News, Becker’s

Two follow ups: Steward Health CEO resigns–and sues the Senate HELP committee, Wojcicki will take 23andMe private

October 1, 2024 | by

Ralph de la Torre MD hasn’t sailed the $40 million boat south yet–but he doesn’t have to go into his office anymore, only the lawyers’. Yesterday (30 September), Dr. de la Torre stepped down from his CEO and board positions of the bankrupt Steward Health. He had submitted his resignation on 19 September, the day that the Senate Health, Education, Labor and Pensions (HELP) Committee voted to hold him in criminal and civil contempt due to his failure to appear before the committee on 12 September. The full Senate voted to refer the contempt charges to the Department of Justice (DOJ) on 25 September. [TTA 26 Sept]

de la Torre filed his own lawsuit on 30 September in the District of Columbia US District Court against each member of the HELP Committee, charging them with violating his Constitutional rights, specifically the Fifth Amendment on self-incrimination, in seeking to subpoena him for a hearing which “was simply a device…to attack Dr. de la Torre and publicly humiliate and condemn him” as part of a “coordinated campaign to villainize and scapegoat him.” The lawsuit seeks to have the subpoena and the contempt referral invalidated and declared unenforceable as a result, seeking declaratory and injunctive relief. He had previously asserted his Fifth Amendment rights before the Committee in view of the company’s Chapter 11 proceedings. Given the threatening and extreme language of several of the committee Members and the actions that de la Torre’s filing singles out, the DC District Court hopefully will give this a fair hearing.

It is unknown if anyone will replace de la Torre as CEO even on an interim basis, as the company is selling its assets via the US Bankruptcy Court for the Southern District of Texas.

“While Dr. de la Torre has amicably separated from Steward on mutually agreeable terms, he will continue to be a tireless advocate for the improvement of reimbursement rates for the underprivileged patient population,” a Steward spokesperson said to Becker’s in a 28 September statement. “Dr. de la Torre urges continued focus on this mission and believes Steward’s financial challenges put a much-needed spotlight on Massachusetts’ ongoing failure to fix its healthcare structure and the inequities in its state system.” (Our Readers will not be blamed for being slightly amazed at this last statement, as most of Steward’s troubled hospitals, including two hospitals that no one would buy, were in that state–and Steward’s interests ranged all the way to London and Malta.) FierceHealthcare, Healthcare Dive 

She’ll do it herself, because nearly 50% of voting shares says she can–No Third-Parties Need Apply. Per an SEC regulatory filing yesterday (30 September), beleaguered 23andMe CEO Anne Wojcicki declared that she is no longer seeking proposals from third parties and is moving forward to acquire the company. “It has become even clearer to me that the best path forward for the (company) is for me to take the company private.” Since the board of directors is vacant–except for her–and she holds effective voting control, it is hard to contradict her. While the company is public via a SPAC that cracked hard, with shares hovering around $0.37, her $0.40 bid per share was rejected by the board in no uncertain terms. However, Wojcicki is the only one who counts here, as she has sole voting power over 9.7 million shares and shared voting power over 101.1 million shares of the company equaling 24.8% of the company’s shares. Replacements have not been made for the seven departed independent directors–and this Editor doesn’t expect any until (and if) Wojcicki buys the company [TTA 17 Sept].

In the SEC filing, Wojcicki said “Importantly, I remain committed to our customers’ privacy and pledge to maintain the (company’s) current privacy policy in effect for the foreseeable future, including following completion of the acquisition I am currently pursuing.” This Editor ironically notes that had that position on site and database security prevailed a year or so ago, none of this would have happened.

Wojcicki may be buying a near-empty shell of a company that preferred to blame users versus clean up its security act, but it will be All Hers. There you go. Reuters, The Business Journals, Yahoo News

Now CVS Health may be reviewing ‘options’–including a possible breakup–report

October 1, 2024 | by

Perhaps CVS needs to take a medication for Corporate Indigestion. It turns out that CVS did not entirely avoid the agita that is sickening Walgreens. Instead, it has other reasons. Reuters reported that according to their sources (unnamed), their management, board, and financial advisers are exploring ‘options’ that may lead to a partial breakup of the company. Prominently mentioned: a spinoff of their insurance businesses from their retail business. CVS acquired Aetna for this back in 2018 for a pricey $69 billion. Being debated: where the Caremark pharmacy benefit manager (PBM) unit will reside, under retail or insurance. PBM feeds into both retail and the insurance plans.

Glenview Capital Management is reported to be one of the financial institutions in talks with management on an improvement plan. Glenview owns 1% of CVS stock according to the Wall Street Journal, but that 1% accounts for over $700 million of its $2.5 billion war chest. That gives them cause for concern–and leverage.

CVS has confirmed none of this, going to the Boilerplate Folder to pull copy about “driving performance and delivering high quality healthcare products and services enabled by our unmatched scale and integrated model.”

Industry observers aren’t expressing anything more than mild surprise about this, based on a concatenation of recent events and backwash from their 2022-2023 spending binge.

  • CVS cut its 2024 outlook again in August for the third quarter running…and has lost 25% in share value YTD.
  • The kneejerk of a $1 billion cost-cutting plan is being implemented; this week, about 2,900 corporate jobs will be cut. This is after a 5,000-employee layoff that was announced in October 2023, taking place into 2024.
  • Aetna’s Brian Kane was booted in August after less than one year on the job due to his numbers going the wrong way–and his job filled in and not replaced [TTA 8 August]. Who’s next?
  • The outlook for Medicare Advantage is glum into 2025 and later, with utilization costs soaring, new lower Federal reimbursement rates for diagnoses, and Federal clawbacks on overpayments from 2018 on. 2025 plan exits have multiplied with CVS’ affecting about 10% of their membership.
  • PBMs are under attack. The latest is a 20 September FTC administrative complaint (= suit) against the Big Three (CVS Caremark, Express Scripts/Cigna and Optum/UHG plus their respective group purchasing organizations for inflating insulin drug pricing. Insulin is the prime example of inflated drug costs in the FTC view. The latest action doubles down on FTC’s mid-year report. MedCityNews  Readers should note that drug costs have been consistently under attack in Washington not only with this administration, but the prior one, which makes the current election a continuation of the same negative atmosphere.
  • In May, CVS openly sought private equity partners to expand their Oak Street Health locations to a promised 300 by 2026. No partner nor expansion has been announced to date. OSH was bought for a stunning $10.6 billion only 17 months ago.at the very tail end of the ‘buy anything/FOMO’ boom.  This Editor noted that this summer, there were direct response TV commercials to rustle up members airing on various cable channels that target the mature demographic. OSH was regarded as the runt of the litter of primary care practice groups since the larger ones had already been bought by Walgreens and Amazon. Its drawbacks in addition to small size: its model was overly wedded to Medicare value-based (ACO REACH) and Medicare Advantage models, and it had never turned a profit nor was about to. Even at the time, CVS was heavily criticized as making “a deal that made no sense” and “CVS better have a plan they implement in 18 months or they’ll get slaughtered” by an industry figure. [TTA 2 Mar 2023,16 Mar 2023]  We’re at 18 months. Is OSH quietly on the block?
  • Signify Health was another expensive 2022 buy that sounded good on calls to support the “integration” objective ($8 billion, cash). It put CVS into burgeoning home health and practices–but cost not only the inflated purchase price but also part of the cost of unwinding Remedy Health’s failed Episodes of Care model. CVS also put $100 million into Carbon Health which had to unwind several lines of business including public health before their Series D [TTA 11 Jan 2023], and earlier this year had both their CEO and their president depart. Biotech Networks

Is it time to call healthcare the Sick Man of the American Economy? Or just these big pillars? Crain’s Chicago Business. FierceHealthcare, Healthcare Dive