Theranos, The Trial of Elizabeth Holmes, ch. 10: Holmes testifies about the salad days of Theranos, setting up cognitive dissonance

November 23, 2021 | by

Setting up a defense of cognitive dissonance. Today, in a brief appearance in Federal District Court in San Jose, Elizabeth Holmes returned to the stand to testify in her defense after a start last Friday. Her attorney Kevin Downey walked her through Theranos’ salad days, when the labs were numbered 1.0, cartridges stuck together, and the drug company studies were preliminary. Returning to her deep voice according to reports, she recalled Theranos’ Completed Successes, circa 2009, as many, and the performance as “really good.”

But 2009 was before the fraud with investors really got going. The falsifying of reports from Pfizer and Schering-Plough, for instance, was later. But every single drug company approached for the preliminary studies in those early days, including AstraZeneca at London’s Royal Marsden Hospital, never followed through with Theranos for more, such as a clinical trial or advanced study. Whether Holmes knew from an employee that Constance Cullen of Schering-Plough was less than enthusiastic about Theranos and found Holmes ‘cagey’ is beside the point, when the company later forged the Schering-Plough logo on a report to make it look as if Schering found Theranos’ labs acceptable. Downey took some care with Holmes not to introduce the later forgeries. Yet she was nothing if not persistent with other companies. Holmes pursued a partnership with Pfizer as late as 2015, in conjunction with Walgreens’ Theranos locations as clinical trial sites. 

She also testified that the series 4 lab could run any test, despite testimony from her last lab director Kingshun Das, MD that the series 3 could run perhaps a dozen at best and not reliably, leading him to void all tests made in 2014 and 2015. Earlier testimony stated that the series 4 never ran tests on patients.

Holmes’ testimony will continue tomorrow. Then the courts will be in recess for the Thanksgiving holiday until the 29th, which is when the prosecution will have its turn to cross-examine.

“Trying your hardest and coming up short is not a crime,” Lance Wade, another of Holmes’ many attorneys, said during opening arguments. But Holmes has already admitted to a repeated fraudulent claim of legitimacy–having the Department of Defense as a customer where the labs were on medevacs and the battlefield. But if the defense can introduce enough reasonable doubt, also known as cognitive dissonance or plain confusion, about Holmes and her ‘long con’ in the minds of the jury–that she was an entrepreneur with a dream just ‘trying harder’ and she didn’t know or mean to defraud investors as the prosecution claims but caught up in pursuing her noble aims–and add to that mind control by Sunny Balwani, Holmes does not have to be innocent to, as they say downtown, skate. CNBC, The Verge, FT, Mercury News (paywalled)

TTA’s earlier coverage: Chapter 9, Chapter 8, Chapter 7, Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

Short takes: Athenahealth close to sold, Teladoc wants More of the Patient, CVS fewer store customers

November 19, 2021 | by

Some thought starters for your weekend…

Reportedly, EHR and systems provider Athenahealth is thisclose to being sold. Via Becker’s Health IT, Seeking Alpha, a stock analysis site, connects the dots. In September, Bloomberg reported that private equity firms Veritas Capital and Elliot Investment Management (Evergreen Coast Capital) were considering selling Athenahealth for $20 billion or filing an initial public offering (IPO), two dramatic ways to exit. They entered in 2019 for $5.7 billion when it was already public, taking it private and combining it with a GE acquisition, Virence Health.

Timing is now Q1 2022. The most interested investors apparently are Hellman & Friedman, Bain Capital, KKR, Thoma Bravo, and Brookfield Asset Management. While no longer the powerhouse it once was in EHRs and related systems, it still can fetch a good return and provide a favorable exit for the two companies. Athenahealth had no comment for Becker’s. 

Teladoc and Big Telehealth wants More of the Patient, but will it be profitable? Our Readers are well aware of the War of the Roses (because it’s gone on so long) among the traditional telehealth players: Teladoc, Amwell, Included Health (Grand Rounds-Doctor on Demand), MD Live, with other smaller players jumping out of the juggernauts’ way and sticking to their knitting. With the addition of primary care (and, one can assume, the pandemic push), health systems and companies like Amazon Care and Babylon Health have jumped into the mix with ‘hit them where they ain’t’ offerings–Amazon offering house calls and services direct to employers, and Babylon 360 being offered to health plans and employers. Babylon and Teladoc’s Primary360 cover much the same ground, though, in connecting the patient users with an assigned doctor and primary care team for ongoing care.

As noted last month [TTA 7 Oct], the walls between payer and provider in primary care are collapsing in multiple ways in telehealth and payer models like insurtechs. Another model is Amwell’s reinforcing behavioral health capabilities (SilverCloud) and sliding into care management (Conversa and Amwell’s Converge platform).

Readers do not have to go far for confirmation that Teladoc aggressively wants most or all of the patient and isn’t going to settle for less. This is conveniently summarized by HISTalk from Teladoc’s Investor Day (with Editor’s emphasis): 

image

Teladoc’s investor day presentation predicts that consumers will expect virtual-first encounters whose quality equals in-person ones and that offer them a variety of coordinated care services. The company says it has evolved from fee-for-service video visits and will become a partner with its customers in offering whole-person care at under value- and risk-based arrangements. It says it will be “the first place consumers turn to for all healthcare needs” for “whole-person care that is personalized, convenient, and connected.” TDOC shares dropped 8% on the day and have shed 25% in the past 12 months, with the company’s market value being $20 billion versus the $18.5 billion in cash it paid to acquire Livongo in late October 2020.

As we’ve previously noted, Teladoc has never made a profit. Many felt it overpaid for Livongo and cut loose too many in the leadership with truckloads of gold. Investors weren’t quite on board with the whole-person vision either, looking at the share price trends. 

CVS Aetna, on the other hand, wants fewer store customers, more patients. Their announcement this week is that they are closing 10% of their stores (900 of 9,900) to focus on urgent/chronic care HealthHUBs, expand those services, and cut down on the brick-and-mortar. This responds to Walgreens buying a majority interest in VillageMD/VillageHealth with adjacent full-service primary care practices and CareCentrix for home care [TTA 14 Oct]. Reuters

Say goodbye to the local, easily navigated ‘boulevard’ CVS, often furnishing food, writing tablets, wrapping paper, and paper towels along with prescriptions and shampoo, often patronized by an older age group, for a barn-like, coldly-lit superstore that you have to drive to. (And say goodbye to pharmacy head Neela Montgomery.) And why is every HealthHUB this Editor has seen unimpressive–strangely under-staffed or no-staffed, tatty waiting areas with a couple of plastic chairs, expanded with ugly outside trailers that cut down on parking spaces?

Cui bono? According to CNN Business, it’s Dollar General, which loves those local locations and has been planning to beef up its health-related OTC meds. They also now have a chief medical officer who is evaluating in-store eye exams, telemedicine, and partnerships with local pharmacies. Given inflation, more customers will be checking Dollar General out.

Alcuris acquired by the Access Group (UK)

November 19, 2021 | by

The Access Group and social care digital connectivity/alarm developer Alcuris announced Thursday that Alcuris has been acquired by the Access Group to be part of their Health and Social Care business. The Access Group is a diversified business management software company with products in construction, education, not-for-profit, hospitality, legal, recruitment, and visitor attraction management. Alcuris founder and head Alex Nash said that “The Alcuris team is thrilled to be joining The Access Group, whose Health and Social Care division is the leading provider to the local government, health and social care sectors in the UK. Earlier this month we announced our partnership with Medequip Assistive Technology Ltd and Wirral Council; the first local authority to deploy next generation telecare services at scale. As part of the Access family, we look forward to setting the standard in a digital care system that connects people, data and services and enables intelligent care decisions at the speed of life.” 

The connection between Alcuris and the Access Group is an interesting one, through Loughborough University Science and Enterprise Park (LUSEP). Alcuris started up there in 2017 and Access one year earlier. Mr. Nash is a Loughborough graduate who studied Product Design Engineering and started Alcuris in 2015 during his studies there, following his grandfather’s diagnosis of dementia. Access is based at LUSEP and opened a £20 million headquarters there earlier this week, though it has operations outside the UK in Australia, New Zealand, Singapore, and Malaysia. Transaction cost and management transitions were not disclosed.

We wish them both bonne chance! Access (short) release, Loughborough University news site

News and deal roundup: Amazon Care lands Hilton, Lightbeam buys CareSignal RPM; aptihealth’s $50M, MedArrive’s $25M, Ribbon Health’s $43.5M

November 19, 2021 | by

Amazon Care nabs a big one in Hilton Hotels (US). Hilton Worldwide Holdings Inc. will now offer Amazon Care to its US employees on a corporate health plan starting in 2022.  Text chats will be free, with virtual or home visits with providers available for a small fee. Availability will depend on where the employee is. Care Medical will provide national virtual visits, while house calls are in limited metro areas: greater Seattle and the Washington-Baltimore metro area at present, with expansion plans to Los Angeles, Chicago, Dallas, Philadelphia, and Boston. Hilton is only the second company (after Precor) disclosed by Amazon. At the end of 2020, Hilton had 141,000 employees, but that includes worldwide properties so the US number remains in Amazon style–opaque. Amazon’s Kristen Helton announced it at Reuters Total Health on Monday. FierceHealthcare

Lightbeam Health buys CareSignal. Lightbeam, a population health analytics and management platform, closed its acquisition of CareSignal, a ‘deviceless’ remote patient monitoring (RPM) system that uses phones for patient reporting via SMS and (hold your beer or wine!) interactive voice response (IVR). CareSignal adds direct RPM reporting data for chronic conditions, behavioral health, social determinants of health, maternal health, and additional monitoring to the Lightbeam platform used by ACOs, payers, provider groups, health systems, and other healthcare organizations. Financial and organizational terms were not disclosed. Lightbeam’s backers are Hearst Health Ventures and 7wire Ventures through a Series A and undisclosed venture round five years ago (!), with CareSignal barely out of seed with $7.5 million invested. Release

And Series A and B raises continue… 

Behavioral health tech continues to attract substantial investment. Boston-based aptihealth’s (not a typo) $50 million Series B will be expanding its clinical science, technology, and services for higher acuity behavioral health conditions. Funding was from Takeda Digital Ventures, Pivotal Life Sciences, Vista Credit Partners, Olive Tree Ventures, Claritas Capital, and What If Ventures for total funding of $65 million. aptihealth coordinates patient access to care teams from any point of care. The company has signed 27 health plans, health systems, and physician practice customers to date. Release. 

MedArrive’s $25 million Series A continues home care’s hot streak. Section 32 led the round with participation from new investors, 7wireVentures and Leaps by Bayer, and existing investors Define Ventures, Kleiner Perkins, and Redesign Health. MedArrive connects telehealth from payers and providers to a network of EMTs, paramedics, and other skilled healthcare workers for hands-on care. The New York-based company currently operates in California, Florida, New Jersey, North Carolina, and Texas, partnering with SCAN Health Plan, Clover Health, Bright HealthCare, Molina Healthcare as well as ACOs and government entities such as the LA Department of Health. Release, FierceHealthcare  Hat tip to HISTalk for this and aptihealth

Ribbon Health’s Series B funding of $43.5 million will be used to further develop team expansion and technology investments around their API layer, using data on doctors, insurance plans, costs, and quality of care for predictive care decisions. The raise was led by General Catalyst, with participation from Andreessen Horowitz (a16z), BoxGroup, Rock Health, and Sachin Jain. Since 2016, the company has raised $53.8 million. Release, FierceHealthcare

Theranos, The Trial of Elizabeth Holmes, ch. 9: the cold $96 million (updated 19 Nov)

November 18, 2021 | by

On which may well hang how many years Elizabeth Holmes spends in prison. Yesterday’s testimony by Brian Grossman, chief investment officer at PFM Health Sciences, may be the prosecution coup de grace in drawing a picture in bold colors, no pale pastels, of deliberate deception and fraud.

Previous testimony spun tales of family offices and highly wealthy individuals such as Rupert Murdoch (and not so wealthy such as Alan Eisenman) being easily lulled by the Social Network spinning. They were gulled by the whiz-bang technology–Elizabeth Holmes’ and Sunny Balwani’s nanotainers, miniature Edison labs–as well as their fake claims of Theranos labs on Army medevacs and false letters from multiple international pharmaceutical manufacturers vetting their technology. Safeway and Walgreens executives had a more complicated tap dance, coming on board at not much past the idea stage, and staying in through a combination of Wanting To Believe, Competitive Embarrassment, and Heads Wanting To Stay In Place at having to write off hundreds of millions of dollars in public companies. 

Mr. Grossman in fact was and is the managing and founding partner, as well as CIO, of PFM. It’s located not on Sand Road but in (relatively) sober San Francisco. Founded in 2004, PFM specializes in early-stage and diversity health-focused investment, and currently manages over $2 billion in public and private funds. Lark Health is one of their recent investments [TTA 14 Oct]. Their Crunchbase profile demonstrates active investment in multiple operating companies. He and his firm are of some substance.

Something about Theranos got his attention–not the social networking, but the all-in-one miniature labs that condensed thousands of feet of lab into a small box. He was told that the entire Phoenix market could be served with labs fitting into about 200 square feet. Grossman knew a competitor, Quest Diagnostics, would need hundreds of thousands of square feet of space to match that. 

What caused him not to be skeptical? Of course, the mythical military involvement and pharma endorsements first, but then….

  • Projections of $30 million in 2014 income from pharma companies–alone. Needless to say, no income in 2012 or 2013 would raise a red flag for some, but not necessarily for PFM in early-stage companies.
  • Four-hour turnaround on lab results in retail, one hour in hospitals–carefully concealing the wildly uneven results from the Edison labs resulting in third-party labs being used for retail, and his own personal result of over a day on a full venous draw, not a finger stick.
  • Holmes was “very clear that this technology was not a point-of-care test, not a point-of-care testing platform, it was a miniaturized lab,” he said. That alone smelled like a 20-ounce porterhouse steak off the grill. 
  • While Balwani nixed Grossman speaking with Walgreens and UnitedHealth, Channing Robertson of Stanford, who helped Holmes start Theranos, vetted their labs as extremely advanced technology–one with which competitors would spend years catching up–for a serious investor, sauce, potato, vegetables, and trimmings on that sizzling steak

Unlike the picture the defense is painting of Balwani controlling Holmes, Grossman took care to note that Holmes, not Balwani, did most of the talking at the time. While he found the company highly secretive, he, unfortunately, discounted it. So in went PFM’s $96 million in February 2014, which included $2.2 million from a designated ‘friends and family fund’ which had investments from low-income people.

Three years later, PFM also won its own fraud case against Theranos, settling its lawsuit for about half–an estimated $40-50 million (WSJ; CNBC claims $46 million). The timing was good–it was while the company still had some money to claw back [TTA 26 June 2017].

What happened to PFM and other investors shook up Silicon Valley for years and, as much as some may deny it, health tech investment plus tarnished the image of women heading health tech companies. Some of the reasons why this case has received international attention. CNBC, The Verge, NBCBayArea

Updated. Where the prosecution would go in its final days of its case–they may be wrapping this week–would they have trouble topping this for the jury, after piling similar fraud high and wide? But, in this Editor’s estimation, they brought it all back home for the jury by putting Roger Parloff, author of the 2014 Fortune cover story, ‘This CEO Is Out For Blood”, on the stand. His articles, recordings, and notes put into sharp relief and in summary the full fraud–all the fraudulent statements the company presented, versus the reality presented by the witnesses and evidence in the courtroom. At the time, the Fortune article fueled the current investors and served to bring in more, such as the DeVos family. Parloff over a year later wrote a column stating that he had not only been misled, but also failed to get to the bottom of what he termed “certain exasperatingly opaque answers that I repeatedly received”. Parloff was also the “beating heart” of a 2019 HBO documentary, “The Inventor”. CNN Business

Updated 19 Nov: But now it will be the defense’s turn to surprise. 

The New York Times, in a well-padded piece, speculates on the obvious–whether Holmes will be put on the stand to directly testify about  “how Sunny made her do it”–Sunny Balwani’s private psychological manipulations, all of which seemed to be well-hidden at the time. Stand by, it may get lurid.

But first for hilarity. The prosecution rested. The defense’s first move was to request that the court acquit Holmes on the grounds of insufficient evidence. Then amazingly, Holmes took the stand. Judge Davila dismissed one fraud count against Holmes, leaving only 11. We’ll pick this up next week.

To be continued….

TTA’s earlier coverage: Chapter 8, Chapter 7, Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

Theranos, The Trial of Elizabeth Holmes, ch. 8: choosing investors with more money than sense a winning strategy

November 16, 2021 | by

The prosecution continues to pile up defrauded investors–but this one may backfire on them. Alan Eisenman invested about $1.2 million in Theranos in 2006 on behalf of himself and his family–after a five-minute phone call with Elizabeth Holmes. As an early investor, he also believed he was entitled to special treatment, such as direct talks with Holmes, frequent enough to the point where she offered to buy out his shares for five times their value and cut off contact. 

Later, he had other opportunities to sell his shares up to nearly 20 times their purchase price, but held on stating he didn’t have enough information on what was apparently a ‘liquidity event’. Lack of information was a persistent red flag, with gaps in communication from 2010 to 2012 and a contentious relationship with Sunny Balwani. Despite this, when Theranos needed money in 2013, he then invested an additional $100,000 despite no audited statements since 2009. This last investment became one of the government’s counts of wire fraud.

In his testimony, Eisenman testified that like others, he was initially impressed that Oracle founder Larry Ellison was involved with the company and that Theranos had contracts with six international pharmaceutical companies including Pfizer and Novartis–which was blatantly false.

This incredible narrative becomes more understandable when you understand Holmes’ strategy of choosing only ‘high-quality investors’ of the family fund sort. She targeted funders who weren’t knowledgeable and meticulous in examining the company books and the technology. The funders were also oh-so-socially connected. According to The Verge, Eisenman was ‘wired’ into Theranos–“he was friends with the Holmes’ family’s financial advisor [David Harris], who had also invested. Plus, his wife’s father, who had also invested, was friendly with [Bill] Frist, who was on the board.” Eisenman contacted Frist as well when he was essentially cut off from Holmes about 2010. 

Surely Eisenman was entitled to be upset and more than a little embarrassed, as a former money manager and financial planner. But then his actions dealing with the prosecution left a Mack truck-sized opening for the defense on the cross-examination. He sent an email to the prosecution team perhaps 15 hours after he finished his direct examination last Wednesday, strictly against instructions. He did it again on Friday, ostensibly about travel plans. An assistant US attorney called him to remind him not to contact them again. The defense leveraged this into the compromising position of being biased against Holmes beyond his actual loss, for instance a purported statement he made “upon entering the courtroom” about wanting Holmes to go to prison.

Coming so late in the trial–the prosecution may rest this week–the abrasive impression that Alan Eisenman left may leave an opposite impression on the jury that favors the defense interpretation of naïve investors who didn’t do their due diligence homework, and by extension, deserved to lose their money. CNBC 15 Nov, 10 Nov

To be continued….

TTA’s earlier coverage: Chapter 7, Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

Short takes: Now J&J splits up, a Color(ful) $100M, Cue Health goes DTC, Amwell’s busy Q3, Teladoc’s Investor Day 19 Nov

November 12, 2021 | by

Breaking up seems to be the thing this month. Now Johnson & Johnson is spinning off its consumer brands into a separately traded public company, retaining the pharmaceutical and medical device businesses. The consumer business includes such J&J global signature products such as Band-Aids, Neutrogena, Q-tips, Baby Powder and Shampoo, and the Listerine line of products. It’s expected to take 18 to 24 months. The pharma/med device business will retain the J&J brands, sub-brands like Janssen, and development in AI and robotics. The consumer products divisions will have to hunt around for a new one. Outgoing CEO Alex Gorsky must be heaving a sigh of relief and dreaming of a long vacation, as he won’t have to shepherd this one– incoming CEO Joaquin Duato starts in January. Pharma/med device is much larger, with $77 billion in revenue. Consumer accounts for $15 billion, with four products alone accounting for $1 billion each. The reason behind it, of course, are the talc lawsuits around Baby Powder and Shower to Shower which have been adroitly hived off, but continue. CNBC, Reuters

Population health and genomics is more Color(ful) than ever, with the company’s $100 million Series E topping off last year’s $167 million Series D for a total of $497 million since 2014 (Crunchbase). Valuation of the company is now at $4.6 billion. Color’s platform is targeted primarily to the public sector–health agencies, research institutions, employer organizations, health systems, and others for custom-built software that can integrate patient information and genomics with lab results and education.  It previously teamed up with the National Institutes of Health for the ‘All of Us’ project collecting research data from a broad scope of the US population. Mobihealthnews

San Diego-based Cue Health, which up to now was known for a molecular COVID-19 at-home test, is expanding its direct to consumer market with a virtual health platform featuring their COVID-19 test (on FDA EUA, CE marked) starting on 15 November. It’s expanding ‘on cue’ with a membership offering, Cue+, with 24/7 online medical consults, e-prescriptions, what they term CDC-compliant test results for travel through in-app video proctoring, and same-day delivery of their products. Membership starts at $49.99 per month for the lowest level plan, escalating to $89.99/month for supervised COVID-19 testing. To make this work requires a Cue Reader that costs $249 along with testing packs priced at $225 for three. Cue also has in development testing for other factors–where it started prior to the annus horriblis of 2020. Not for those on a tight budget, but if you need it…. Cue release, Mobihealthnews

Amwell’s busy Q3 in visits reflected the uptick in the ‘delta’ variant of COVID-19, but was disappointing on the earnings side as urgent care brings in less revenue than behavioral health or specialty care. Amwell’s year-to-year revenue was down less than 1% to $62.2 million, but the decrease is forcing a revision in 2021 full year forecasted revenue. The Converge platform [TTA 29 April] has reached 4,000 providers and 43 enterprise clients which was far more than forecasted. Newly acquired SilverCloud and Conversa Health [TTA 29 July] are integrated into Converge and already cross-selling. Amwell, however, remains in the red with a quarterly net loss of $50.9 million. Healthcare Dive  

The Telehealth Wars continue to see-saw, with Teladoc’s Investor Day on Thursday 19 Nov next week. According to Seeking Alpha, a stock analysis site, “Bank of America is cautious on TDOC ahead of the event, citing questions about the near-term margin trajectory and competition. Shares of Teladoc rose 22% in the three weeks following its last investor day.”

News roundup: GE Healthcare spins off, Mercy Health accused of telehealth tech theft, NHS’ proposed $8.1bn bump for backlogs–with a 83 y/o in a 7am queue

November 12, 2021 | by

Breaking up GE is so very hard to do–or is it? The long-rumored spinoff of GE Healthcare will be happening by early 2023. Leadership will also be changing, with Integra LifeSciences CEO Peter Arduini becoming president and CEO on 1 January, replacing Kieran Murphy who came from the Life Sciences business and the UK. A GE connection will remain since GE chairman and CEO Lawrence Culp will serve as non-executive chairman of GE Healthcare after spinoff. Also spinning off by 2024 will be the power and energy business. What remains of General Electric will be the commercial aviation and defense aviation business. 

A spinoff of GEHC was in the works in 2018, but faltered when the then-CEO left. It currently is a $17 billion business which, like its competitors Siemens Healthineers, Philips, Fujifilm, Toshiba, and Hitachi, has been affected by supply chain disruption. In third quarter, there was a 6% decline in revenue to $4.3 billion in the period compared to a year ago. Barron’s estimates that the valuation of GEHC would be about $54 billion after spinoff, even with debt and related costs.

For GEHC and its people, at least one decision about the future is resolved. And one could hope that GEHC could finally free itself of the Welch (and later) ‘take it or leave it’ legacy that never seemed to fit healthcare, the brutal GE internal culture, and chart its own course of innovation and improved customer service.  CNBC, Healthcare Dive

Mercy Health, a health system headquartered in St. Louis, is being sued by former telehealth provider LifeScience Technologies LLC (LST) for misappropriation of trade secrets, breach of contract, civil conspiracy, and more . LifeScience’s m.Care was being used by Mercy from 2015. In the lawsuit filed by LifeScience, Mercy is being accused of giving Myia Health’s software development team improper access to LST’s virtual health software using @Mercy.net credentials. Mercy then invested $5 million in Myia Health and replaced m.Care with Myia’s ‘derivative’ software. The lawsuit was filed in the United States District Court for the Eastern District of Missouri, Eastern Division on 25 October. Springfield News-Leader, LST release

Last month’s proposed NHS budget from the Finance Ministry included a $8.1 million boost to help resolve patient waiting lists and modernize technology. The ‘boomerang’ of cases from the pandemic lingers on. The increase represents $3.2 billion for testing services, $2.9 billion to improve technology, and $2 billion to increase bed capacity. VOA. Perhaps the increase will help a gentleman like Keith Pratt, aged 83, who faced at London Road Community Hospital first a lost blood test that was part of his diabetes checkup, and then, because he had no computer nor access to log in for a new appointment, was forced to queue at 7am at the walk-in clinic. Derbyshire Live reported that “Keith feels that people without internet access are being overlooked when it comes to accessing NHS services in Derbyshire. He said: “I’ve not got a computer and I am like thousands of other people who haven’t got a computer, not just older people like myself.” Will the technology improvements include not losing tests, and phone backup for appointments? Wouldn’t that be nice?

Theranos, The Trial of Elizabeth Holmes, ch. 7: Edison labs consistent–in deficiency and strange results

November 11, 2021 | by

And Elizabeth Holmes knew. The last two years of Theranos’ existence, were, to put it mildly, fraught, for anyone honest. Job 1 for the very last in a parade of lab directors, Kingshuk Das, MD, was to respond to CMS on substantial deficiencies found in a November 2015 on-site inspection. The CMS deficiency report, sent to the prior lab director in January 2016, two months before Dr. Das’ start, had a subject line that would grab anyone’s immediate attention: “CONDITION LEVEL DEFICIENCIES – IMMEDIATE JEOPARDY.”

The report went on to say that it was determined that your facility is not in compliance with all of the Conditions required for certification in the CLIA program.” and concluded that “the deficient practices of the laboratory pose immediate jeopardy to patient health and safety.”

Dr. Das found some interesting things in his early days on the job, such as the Edison labs producing results detecting abnormal levels of prostate-specific antigen (PSA)–in female patients. When he brought this to Holmes’ attention, she quoted a few journal articles stating that certain rare breast cancers in women might present that result. This didn’t seem quite plausible to Dr. Das. Holmes then told him that it wasn’t an instrument failure, but rather a quality control and quality assurance issue. Nevertheless, Dr. Das went back and voided every Edison lab test made in 2014 and 2015, stating to Holmes that the Edison labs were not performing from the start. Most Theranos results sent to patients were produced on third-party machines made by Siemens and others, often on inadequately sized blood samples. 

As Dr. Das testified to the defense, many skilled people at Theranos earnestly tried to fix the problems with the Edison lab machines, but, as The Verge put it in part, if Holmes didn’t believe Dr. Das, other employees, or multiple preceding lab directors that the machines were really, truly broken, did it matter?

The defense is maintaining that Holmes didn’t really understand the lab details and was heavily influenced (ahem!) by president Sunny Balwani. However, the Babe in the Medical Startup Woods defense falls apart when there’s no Sunny to blame–he departed shortly after Dr. Das’ arrival. 

The actual theme–a long-term pattern of deception aimed at those who wanted to believe, and ponied up Big Bucks--was reinforced by a witness before Dr. Das. Lynette Sawyer was a temporary co-lab director for six months during 2014 and 2015, but never came to the Theranos site. It seems that her main duties were signing off remotely on documents using Docusign and backing up then-lab director Dr. Sunil Dhawan, Balwani’s dermatologist who came to the lab a handful of times. Even more amazingly, she was unaware of Theranos’ signature ‘nanotainers’ and the backup use of third-party devices. After her six-month contract was up, she departed, uncomfortable with Theranos’ procedures.

Kicking off the day was Judge Davila’s regular admonition to those in the public section of the courtroom to type vewy, vewy quietly. Then the video display for exhibits broke down. This led to a two-hour delay while the court found an antique projector to show the images to the jury and the public on a blank wall.

One wonders if the tapping plus the tech breakdown topping off the Parade of Fraud is leaving the jurors numb–or wanting to jump into the well above, even if there is no bottom. CNBC, Wall Street Journal (15 Oct), 5KPIX

TTA’s earlier coverage: Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

To be continued….

 

 

Short takes: Papa Health’s $150M Series D, Hinge Health’s $600M Series E, Teladoc’s revenue up 81% but continues in the red

November 5, 2021 | by

Senior care provider Papa Health gains a Series D of $150 million, for a total of $240 million. Home care and older person support continues on its hot streak, after the blockbuster Honor-HomeInstead and Humana-Kindred at Home acquisitions plus smaller ones like ModivCare-VRI, Walgreens investment in CareCentrix, and Sharecare-CareLinx. The company’s valuation is now estimated at $1.4 billion. Papa’s technology connects older people with trained Papa ‘Pals’ for companionship and light home work through to Papa ‘Docs’ who serve to coordinate that person’s care. Their business model is to contract with payers such as Aetna and WellCare to offer its service as a benefit. They claim that they have added over 25 health plans as partners in the past seven months. This funding round was led by SoftBank Vision Fund 2 with participation from TCG, Tiger Global Management (which seems to have a bottomless bucket of funding), Canaan, Initialized Capital and Seven Seven Six. Mobihealthnews, Papa release

But Papa should envy Hinge Health, with its $600 million Series E for a total of $1 billion. In January, they had a $300 million Series D [TTA 14 Jan]. Their valuation is now boosted to an eye-blinking $6.2 billion, up from $3 billion. Tech and musculoskeletal seem to be a hot match, with Hinge’s virtual MSK Clinic for back and joint pain care and rehab including access to physical therapists, physicians, health coaches, and wearable sensors to guide exercise therapy. Existing investors Coatue and Tiger Global led the round, with new investors Alkeon and Whale Rock taking a $200 million stake.   FierceHealthcare 

Teladoc’s strong Q3 growth outstripped Wall Street’s forecast, but the competition is ever more fierce–and it continues in the red. Teladoc’s Q3 revenue grew 81%, to $522 million from $289 million prior year, beating a projection of $517 million by Zachs. Organic revenue growth (excluding acquisitions) was 32%. 2021 is now projected to be $2.02 billion, up 85% compared to 2020 revenue, and a 2022 projection of $2.6 billion. However, Teladoc continues to lose money, with an $84.3 million Q3 loss compared to $36 million in last year same quarter. Teladoc stated that it was primarily attributable to increased stock-based compensation and amortization of acquired intangibles, usually the case with acquisitions. Their stock value logically has taken a hit.

As previously reported, Teladoc has entered into the primary care sector with Primary360, now being pitched to health systems as a white-labeled “virtual front door” in addition to existing agreements with Aetna and Centene for 2022 exchange plans in four states. But as FierceHealthcare notes, the competition is equally hot, with care startups such as One Medical, Oak Street Health, Privia Health, and Forward. Accolade, which is a benefits platform, is acquiring PlushCare, and payers are setting up their own virtual-first primary care.

Legrand’s new global brand: Legrand Care

November 5, 2021 | by

Autumn must be the season for relaunches and rebrandings. Legrand is now consolidating its global brands in assisted living and healthcare under one name, Legrand Care. This unifies their separate brands, Intervox, Tynetec (a supporter of TTA for many years as Legrand is now), Aid Call, Jontek, and Neat. All the separate brands bring their technology and history to the new brand, and the release emphasizes the corporate commitment to technology-assisted, connected care. “The coming together of five highly regarded, customer centric, long established assisted living and healthcare brands into Legrand Care is a significant milestone in our journey,” stated CEO Chris Dodd in the release.

The new division will specialize in the innovative development of connected solutions for the health and social care sector, for home, group living, nursing home, and hospital markets. From the website, NOVO Go is their newest product to be introduced shortly, a mobile-connected wrist-worn or pendant form with geo-locating and reminder capabilities. Legrand has businesses in 90 countries with revenue of €6.1 billion in 2020.

In announced management alignments, Arturo Pérez Kramer is now Deputy CEO from his prior position of CEO of Neat, and Caroline Mouminoux will be Sales Director of Legrand Care and Silver Economy manager in France from Director of Intervox. More certainly to come! Hat tip to our Legrand communications manager contact, Kathryn Burton

Theranos, The Trial of Elizabeth Holmes, ch. 6: the decision maker was Holmes–and she was ‘cagey’

November 5, 2021 | by

Judge Davila is speeding up the trial, adding hours and days–perhaps because the damning testimony has become depressingly similar. Were the investors sloppy, or did Theranos–and Holmes–deliberately deceive?

Maybe…both.

Documents and slideshows from Theranos glowed.

  • The company faked memos and reports from both Pfizer and Schering-Plough, which was in the process of being acquired by Merck. Schering-Plough’s Constance Cullen said she found CEO Elizabeth Holmes’ answers to technical questions “cagey” and she was blocked by Holmes from asking questions of other Theranos employees.
  • Presentations describing the Theranos lab capabilities were written in present, not future, tense. Example from the prosecution reading from an investor deck: “Theranos proprietary technology runs comprehensive blood tests from a finger stick.” Another slide was 10-Pinocchio-worthy: “Theranos has been comprehensively validated over the course of the last seven years by 10 of the 15 largest pharmaceutical companies, with hundreds of thousands of assays processed.”

These were good enough for investors like Lisa Peterson of the DeVos family office, who testified last week about their decision to put in $100 million. In fact, investors were Social Networking right to Theranos’ door. The well-connected Daniel Mosley, who invested “a little under $6 million” in Theranos, after his client and friend Henry Kissinger, a Theranos board member and $3 million investor, asked him to evaluate the company, in 2014 recommended it to his other clients–the DeVos, Walton ($150 million), and Cox ($10 million)  families. Black Diamond Ventures founder Chris Lucas invested $7 million in Theranos. He believed that Theranos’ analyzers were being used by the military in the Middle East. Presumably, his uncle Don Lucas, who sat on the Theranos board, backed up the claim. They were additionally impressed by Holmes’ intensity and insistence that the company was on a mission to revolutionize blood testing. Risk can be fashionable for ‘high-quality families’ who aren’t hands-on with their money and won’t experience hardship if the investment doesn’t pan out.

The investors like Peterson and Mosley believed what they were shown was steak, not marshmallow, like projected revenue of $140 million in 2014 after zero revenue in the two prior years. They didn’t examine the books, other key corporate records, or make a technical evaluation of the labs. Why? “We were very careful not to circumvent things and upset Elizabeth,” Peterson of the DeVos office said. “If we did too much, we wouldn’t be invited back to invest.” Ooof. But on their side, in 2014-2015, the winds of hype were blowing fair, the skies were blue on CNBC, and Walgreens plus Safeway were lashed to the mizzenmast. The Verge, CNBC, KTVU Fox 2

The defense keeps pinning blame on the investors for being naïve, which is taken up by the NY Times. With 20/20 hindsight and infinite wisdom, the article blames the investors for not being scrupulous in their due diligence. A fair point made is that in ‘hot’ startup markets, no one looks too closely for the Fear Of Missing Out (FOMO)–something we see this very day.

Holmes’ chances of pinning the blame on president/boyfriend ‘Sunny’ Balwani and evading any lengthy time are low at best.

  • The defense sub-strategy of painting Holmes as controlled by Balwani appears to be augering in. CNBC uncovered a 27 June 2018 videotaped deposition in an investor lawsuit, eventually settled, where Holmes, in between taking the Fifth Amendment, also claimed she was the ultimate decision-maker at Theranos.
  • An analysis published in the Mercury News (PDF), through the paywall, is not sanguine about Holmes beating the odds and walking free, or with minimal time. However, juries do strange things in assessing fraud, even when piled high and wide by the prosecution, out of sheer boredom or cussedness. Holmes is also surrounded by family, friends, baby on breaks, and baby papa, all of which can sway some jurors.

So as the trial passes the halfway corner, we observers are waiting for a final bombshell–or two.

TTA’s earlier coverage: Chapter 5, Chapter 4 (see new comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

To be continued….

US telehealth usage increases slightly in August, reversing months of decline

November 4, 2021 | by

A permanent or temporary lift for telehealth claims? FAIR Health, which is the non-profit that analyzes healthcare costs and health insurance information, has been tracking telehealth claims monthly since January 2020. This Editor has previously noted the peaks coming during the height of the pandemic (April 2020, 13%) and the rapid deflation after then to settling down during the summer to about 5%. In August, claim volume increased to 4.3% from 4.2% in July. It’s 2.4% mathematically, but still a decline from May’s 5%.

Of all telehealth claims, COVID-19 reappeared in the list of top five telehealth diagnoses nationally in August 2021 at 2%, the first time it had done so since January 2021. The vast number of claims–58.8%–were for mental health conditions, a slight change from July’s 60.7%, and decreased across every region. Also increased: acute respiratory diseases and infections, rising from 3.5% to 4.2%.

The largest increase in telehealth claims occurred in the Southern states, rising from 3.1% percent of medical claim lines in July to 3.5% in August. 

FAIR Health’s monthly tracker includes claims from the private (commercial) insurance population, including Medicare Advantage, and excluding Medicare fee-for-service and Medicaid. FAIR Health release, Becker’s Hospital Review

Wirral Council investing £1.5 million in next-generation digital and ‘preventative’ telecare (UK)

November 3, 2021 | by

Deploying sensor-based digital telecare starting November. Wirral Council announced that as part of their transitioning from analogue to digital next-generation telecare, they will introduce devices that are capable of detecting changes in behaviors such as smart plugs and movement sensors. The pilot will be delivered alongside Wirral’s commissioned community equipment and telecare provider, Medequip Assistive Technology, and care technology specialists, Alcuris.

The new devices and systems from Medequip Connect and Alcuris will support residents living at home plus families and informal carers:

  • Movement sensors, placed within the home, will enable family members and support services to detect activity and ensure the safety and wellbeing of people.
  • Smart plugs will help to indicate whether devices like microwaves and kettles are being used to ensure that vulnerable people are eating and drinking

Wirral’s evaluation of residents indicates that more than 3,500 residents are eligible for these services. Hat tip to Adrian Scaife of Alcuris for sending us the release (PDF) for first past the post break and correcting my fractured headline!

News & deal roundup: Oak Street adds telespecialty RubiconMD, ATA plumps for wider telehealth access, yet claims fall to 4%, West Suffolk NHS adds Zivver mail/file security, Northwell’s $100M for AI–and miss industry shows yet?

October 29, 2021 | by

Primary care network Oak Street Health acquired virtual specialty telehealth provider RubiconMD for $130 million. Oak Street is a 19-state network of physicians in care centers who specialize in Medicare patients. RubiconMD has 230 specialists who provide doctor-to-doctor teleconsults (eConsults) in 120 specialties, with an emphasis on cardiology, nephrology, and pulmonology, which is a strong fit for Oak Street. RubiconMD also has separate offerings for specialty care panels and behavioral health. The $130 million includes up to $60 million in cash or cash/stock, subject to achievement of defined performance milestones. Management transitions were not disclosed. Release, FierceHealthcare

The American Telemedicine Association wants to preserve wider telehealth access into 2022–even if the public health emergency (PHE) for Covid has to be extended. Although the Medicare Physician Fee Schedule proposed by CMS for 2022 includes areas of wider telehealth access and reimbursement (temporary access under Schedule 3 added in 2021) into 2023 regardless of the PHE, Congressional action is required to permanently expand telehealth beyond the existing programs mostly for rural areas. If necessary, ATA is advocating that Health & Human Services (HHS) extend the PHE through 2022 so that telehealth access and reimbursement are preserved. ATA release, FierceHealthcare

While this Editor can understand ATA’s frustration and the sincerity of its aims, it distorts the emergency meaning of a PHE that is just about nonexistent except for mandates. And telehealth claims, even with current access, have sunk down to a tick above 4%, 60% of which are mental health codes (FAIR Health July national data). Too many providers, too little demand? 

The West Suffolk NHS Foundation Trust (WSFT) has selected Zivver UK to secure its mail and file transfer systems, as it migrates from NHS Mail to Microsoft 365. It includes encrypted email to patients as a core requirement meeting NHS digital standards, and ease of use for both sender and recipient in MS Outlook. 4,800 staff at WSFT, which covers 280,000 people who live in West Suffolk. Release. Hat tip to HISTalk for this and the next two stories.

Northwell Health backs AI health startups via joint venture with Aegis Ventures with $100 million stake. The JV between the two New York-based companies “will ideate, launch, and scale AI-driven companies to address healthcare’s most challenging quality, equity, and cost problems” with stakeholders across Northwell’s extremely large system. According to the release, “Northwell has a track record of success in AI research, including the development of a landmark algorithm that predicts patients’ overnight stability to reduce the need to wake them for vital sign checks.” Nice to know that a health system appreciates patient sleep. 

And finally–miss the grip and grin of a F2F industry trade show and presentations? Your Editor, who was once a habitué of meetings from Boston to Florida, does. Really! Virtual conferences, once fun, are now tedious. So enjoy this walk through of HLTH21 by Ben Rooks, the Investor Man, at the Boston Seaport (a great venue, though not precisely central), right down to the barbers, puppy rescue, disco ball, and juice shots. Courtesy of HISTalk

Theranos, The Trial of Elizabeth Holmes, ch. 5: how to easily fool rich people and their investment offices

October 28, 2021 | by

It seems like smart people with big money like to jump into wells with no bottom, too. Yesterday’s testimony by Lisa Peterson in the Elizabeth Holmes trial indicated that Ms. Holmes knew her ‘marks’ as well as any grifter at the horse track. She concentrated on Very Rich People, whose Very Large Private Investment Funds are handled by ‘family offices’. Those offices handled investments for families such as DeVos (one of the top 100 richest families in the US), Walton (Walmart), and Cox (media). Holmes targeted five or six of these family offices, with the come-on line that she was seeking them because, after all, institutional investors wanted to recoup their investment via going public too soon for the Miracle Blood Lab.

Perhaps it was the prospect (and prestige) of backing a revolutionary healthcare technology, or large denominations falling from the sky, or just leaving it to their advisors, but they believed the sizzle, didn’t check that the steak was soy–and lost up to nine-figure sums. For these family offices, and for Rupert Murdoch, the losses were embarrassing, not life-affecting.

The former Secretary of Education Betsy DeVos did not testify either, leaving it to Lisa Peterson, who oversees private equity investments for RDV Corp., the DeVos family office. Ms. Peterson, who wouldn’t have the job if she weren’t decently savvy, drew a picture for the prosecution of being consistently lied to by Ms. Holmes and Theranos executives before committing to a $99 million investment through its legal entity Dynasty Financial II, LLC on 31 October 2014:

  • Holmes and Balwani showed financial projections of $140 million in revenue in 2014 and $990 million in 2015. Peterson testified she did not know that both 2012 and 2013 had zero revenue–a real lapse on her part, in this Editor’s view
  • Theranos claimed validation by ten major pharmaceutical companies, including Pfizer (in last week’s testimony, revealing that their validation was forged)
  • The RDV Corp. group was told multiple times that Theranos would offer hundreds of tests via finger stick with the analyzer at 50% of the cost
  • The DeVos investors supposedly never knew that third-party analyzers were doing all the testing. Both the pharma company validation and testing were critical in the underwriting agreement, Peterson said.
  • Holmes told Peterson the analyzers were being used in military helicopters (false) and that the company did not buy third-party analyzers (false, again).
  • Prior to the investment, three members of the DeVos family and Peterson’s boss Jerry Tubergen met with Holmes at Theranos’ Palo Alto headquarters on 14 October. Cheri DeVos had her blood drawn and tested using the Theranos lab. The family subsequently doubled their investment.

The binders were thick, the press articles at that stage were effusive, and both Safeway and Walgreens were going to roll it out in their stores. All the risk was on those companies for the execution, according to Petersen’s notes. 

So what we see is a classic ‘fake till you make it’ strategy, designed to play on two major retailers looking to buck up their pharmacy areas and select private investors with major funds. The articles in the WSJ and Fortune were fulsome to the point of parody. Holmes made an impact on supposedly cynical writers and Jim Cramer of CNBC’s ‘Mad Money’, who was highly influential on markets and investors at that time. It was to Cramer that Holmes made the famous statement, “This is what happens when you work to change things, and first they think you’re crazy, then they fight you, and then all of a sudden you change the world.” Whether she was scripted or really thought she was The Second Coming of Steve Jobs, it’s an audacious statement worthy of Napoleon or George S. Patton–which she had to walk back to Mr. Cramer and others in the press by early 2016 when the John Carreyrou/WSJ reporting made its own impact. The family offices questioned Holmes, of course, based on the email trail–and Theranos consistently downplayed the news to them as well as denying anything was wrong to the press.

What this Editor would like to know is once the signals went sideways, did any of these private offices’ investment managers get into Theranos to do some overdue due diligence and turn over some rocks, knowing that snakes might well fly out–or just let it ride?  CNBC, KTVU Fox 2 tweetstream 

What is somewhat risky may be the jury. The possibility of a mistrial has increased with halfway to go.  There have been three jurors removed, with their seats filled from the five alternates selected. Three more losses would lead to fewer than 12 jurors. Now the prosecution and defense could agree to go on–not a likely scenario. Judge Davila has increased the jury day by an hour daily to speed the trial up, but reports indicate the usual work and family problems. One juror was recently dismissed for playing a sudoku puzzle in the jury box due to “fidgetiness”. Choosing a jury was difficult in this tech area as few with the background and intelligence to understand financial fraud would be willing, for work and personal safety reasons, to appear on the jury. The defense is looking to unseal the juror questionnaires for their own strategic reasons. But CNN makes a mountain out of a speed bump, since Judge Davila is unlikely to pave any roads towards a mistrial.

Unfortunately, the Mercury News, Bloomberg, and WSJ, which would be primary sources, are paywalled.

TTA’s earlier coverage: Chapter 4 (see new comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

To be continued….