Bad News roundup: DOJ drops the hammer on UHG-Amedisys, 23andMe lays off 40% and closes therapeutics, Lyra Health lays off 2% in restructuring, Forward primary care + kiosks shuts down abruptly

November 14, 2024 | by

Shoe drop! The long-anticipated Department of Justice (DOJ) lawsuit against UnitedHealth Group and Optum to prevent the acquisition of  home health and hospice operator Amedisys was filed yesterday (12 November) in the District of Maryland. UHG’s offer to acquire Amedisys was made in June 2023 for $3.3 billion in an all-cash deal, but approval was held up in DOJ review ever since. Even with location divestitures proposed in July to VitalCaring Group to reduce anti-trust concerns with Optum’s home health operations (acquired with LHC Group), UHG remained a DOJ target. The civil lawsuit was filed by DOJ together with the Attorneys General of Maryland, Illinois, New Jersey, and New York. No timeline is provided in the release.

The rationale cited is of course anti-trust and elimination of competition between Amedisys and UHG’s Optum. “We are challenging this merger because home health and hospice patients and their families experiencing some of the most difficult moments of their lives deserve affordable, high quality care options,” said Attorney General Merrick B. Garland. The fact that the US Attorney General was quoted first in their release indicates the importance of the case to the DOJ. It’s also a race to the finish as come 20 January 2025, there will be a new president appointing a new AG immediately.

The DOJ states that both companies are “fierce competitors” and that the divestiture is insufficient. “The proposed divestiture does not alleviate harm in over 100 home health, hospice, and labor markets, which generate at least a billion dollars in revenue annually, serve at least 200,000 patients, and employ at least 4,000 nurses.”  Their case is well-built in this Editor’s view. From the release:

 UnitedHealth’s market share after the transaction would make the merger presumptively illegal in:

    • Hundreds of local home health care markets, with an annual volume of commerce exceeding $1.6 billion annually, in 23 states and the District of Columbia;
    • Dozens of local hospice markets, with an annual volume of commerce exceeding $300 million annually, in 8 states; and
    • Hundreds of local markets for home health and hospice nurse labor, employing at least 8,000 nurses, in 24 states.

The lawsuit also seeks civil penalties against Amedisys for falsely certifying compliance with its obligations under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) by failing to produce millions of documents or disclosing the deletion of other documents. For each day that Amedisys was in violation of the HSR, DOJ is seeking a fine of up to $51,744 daily. Amedisys was originally set to be acquired by OptionCare, which does not directly compete in home health, but UHG won a bidding war.

As this Editor said at the time of the Change Healthcare acquisition win against DOJ in Federal court (and we know how that turned out long term), “DOJ has a long memory, a Paul Bunyan-sized ax to grind, and doesn’t like losing.” FierceHealthcare

23andMe continues their long jump down to…who knows where? CEO Anne Wojcicki is minusing out 200+ employees or 40% of its remaining workforce, and fully shuttering its therapeutics development unit. The latter is running two clinical trials which will be wound down ‘as quickly as practical.’ These cuts will save $35 million annually but incur $12 million in one-time severance and termination-related costs. The much-touted therapeutics discovery unit was shut in late summer [TTA 14 August].

What’s left? Not much–the Lemonaid remote prescribing unit, with an entree into GLP-1 prescribing, some published studies, a new AI chatbot called “DaNA”, and a longevity service dubbed Total Health. During their Q2 FY2025 earnings call and release, revenue sank to $44 million versus prior year’s $50 million (-12%)–slightly from Q1’s $40 million–operating expenses reduced 17% to $84 million versus prior year’s $101 million, but the company remained firmly in the red with a GAAP loss of $59 million, 21% less than last year’s $75 million and reduced versus Q1’s $69 million loss. The board, as previously noted, now consists of three financial non-healthcare people, replacing the seven who resigned. Meanwhile, customers wonder about the security and use of their genetic and personal information [TTA 8 Nov]. Release, AP, Healthcare Dive

Another telemental health unicorn, Lyra Health, laid off 2% of staff in a restructuring. 77 people on non-clinical operational teams were released. Some may receive severance for 12 weeks with health benefits, according to one of the anonymous released. Noted in the FierceHealthcare article are reported changes at Lyra, including larger provider caseloads demanded and deletion of seven core values that put clients and clinicians first. Lyra’s last raise was a $235 million Series F in January 2022 for a total of over $910 million (Crunchbase). That high valuation of $5.6 billion has been tough to maintain in the current funding environment–and to not take a down round that affects valuation. 

Health kiosk/primary care practice Forward goes backward, shuts immediately. Nearly on the first anniversary of a $100 million Series E raise from Khosla Ventures and four other investors to deploy self-serve kiosks (left) in major cities [TTA 17 Nov 23], tech-driven primary care practice Forward announced its sudden closure today, effective immediately. What remains on their website is a goodbye-and-good-luck note to patients canceling appointments and zeroing out its app. Patients can email clinicians for care support until 19 December. There is no information available on accessing records nor transferring to new providers, leaving patients in the lurch. 200 employees will lose their jobs immediately as well.

Forward had primary care practices in 14 markets such as New York, San Francisco, and others. Last year it claimed 100+ primary clinicians at 19 locations, with patients paying $150/monthly (no insurance accepted) for un­lim­it­ed vis­its to For­ward’s pri­ma­ry clin­ics. (Refunds, anyone?) The CarePods self-serve kiosks were designed to be self-contained units placed in malls, offices, and gyms. Inside, subscribing patients could access AI-powered health apps for disease detection, biometric body scans, blood testing in disease areas, including diabetes, hypertension, weight management, and mental health (depression and anxiety). They were scheduled last year to be deployed in the San Francisco Bay Area, New York, Chicago, and Philadelphia. Nice idea, but like the earlier HealthSpot Station of 2012-2016, they are equally defunct.

In its eight-year life, Forward had raised $325 million (Crunchbase), which also reported last year’s Series E as only $75 million. At the time of their Series D, Forward was valued at over $1 billion and had a roster of flashy investors such as music’s The Weeknd, Salesforce’s founder Marc Benioff, actor Matthew McConaughey, Eric Schmidt, and Softbank. What’s stunning? Reports indicated that it only gen­er­at­ed un­der $100 mil­lion in to­tal rev­enue since its founding. There has to be more to this, like lawsuits….    FierceHealthcare, Endpoints News

Babylon Health’s Parsa founds new AI medical assistant venture, Quadrivia, one year after Babylon Health’s failure

November 13, 2024 | by

Ali Parsa back in the news, just over one year after Babylon Health’s implosion.  Babylon’s CEO/founder Ali Parsa has a new and stealthy AI-related venture called Quadrivia. It was announced, unusually, by a personal post on LinkedIn yesterday (12 Nov). As one might surmise, it’s AI-related (this year’s flavor) and provides an AI assistant to clinicians. The company is incorporated in Jersey (Channel Islands) and is UK-based. It is seed funded by Norrsken, a Swedish VC. The amount is undisclosed. (More on this below from Sifted-FT and JFSC registry research)

Information on Quadrivia’s capabilities is limited to Parsa’s posting, their website, and a ‘first-person AI assistant’ narrated demo video embedded in the post and the home page of the website. Qu, the personal medical assistant in beta, is designed to support clinicians in multiple tasks as diverse as type 2 diabetes check-in, daily care coordination, menopause hormone therapy, flu vaccination education, and chronic kidney disease (CKD) follow-up. Quadrivia promises that its “AI agent for healthcare” capabilities will extend across the entire healthcare ecosystem for the clinician and patient, including hypotheses around diagnosis, investigation, clinician selection, treatment plans, monitoring, and more. According to Quadrivia’s information in TechFundingNews, the platform has a dual structure based on types of cognitive reasoning processes: “System 1 includes tasks that rely on quick decision-making, such as answering direct questions or following standard procedures. System 2 involves more complex, analytical tasks, like assessing patient symptoms and considering multiple possible diagnoses.”

Quadrivia attributes Qu’s capabilities to its clinical knowledge base, the patient’s medical records in the EHR, natural language (but not real time) text/audio conversation, and proactive/reactive care. Beyond providers, Qu can be used by payers, pharma for research, and startups, much as Babylon Health was originally positioned.

Clinicians are invited to test drive Qu using a signup form featured on the website. Seven clinicians listed on the website constitute Quadrivia’s Global Clinical Advisory Council and are investigating various use cases. Per the website, the assistant will not be released until it meets regulatory and safety requirements. Though the website states that “Qu is tested rigorously to ensure clinical accuracy and safety in every action it takes,” it does not state whether eventually it will be submitted to the FDA, Health Canada, or for EU CE Marking.

In the US, there is growing concern about the rigor of FDA testing for AI assistants and interpretative/diagnostic models, with many falling into what is lately being seen as the looseness of 2016’s 21st Century Cures Act ‘breakthrough device’ category. 

Returning to Quadrivia financials, Sifted’s research indicates that the Jersey filing for Quadrivia Limited is for the parent company of a UK-based entity. Parsa is termed as a “person with significant control”. The VC Norrsken holds 638k shares in the company.

This Editor then took a dive into the Jersey Financial Services Commission (JFSC) registry for Quadrivia. Both listings filed in 2023 establish the company, the first for a “reserved name company” on 10 October 2023 (essentially empty) and then on 31 October 2023 for a “registered company private”. The incorporation documents are singularly unrevealing and procedural save for the Special Resolution document (PDF) of 24 May 2024 that determines that the company now has 9,440,000 A shares of no par value and the more revealing Entity Profile that confirms Norrsken holds 638,297 shares between NVC Fund 2 (D) plus (E) and ALP Partners Limited holds 9,444,000 shares. A check of ALP Partners Limited’s LEI (Legal Entity Identifier code) identifies its registration in St. Helier, Jersey. Its other entity name is Babylon Partners (Jersey) Limited.

Returning to Sifted’s article, Parsa was listed at HLTH as CEO of the company and was scheduled to speak before canceling. Based on Companies House (UK) filings, Parsa is a resident of Spain and holds more than 75% of the company, which corresponds to the 9.4 million share owned by ALP Partners and not owned by Norrsken. Two former Babylon research scientists, Damir Juric and Adam Baker, are early hires and the company is hiring others. Of note: Swedish investors have a long relationship with Ali Parsa. Major Babylon backers that owned–and lost–over 42% of the company included Kinnevik, VNV Global, pension fund AMF, and Swedbank Robur.

This Editor’s opinion–and to be clear, it is only my opinion: The speed of development–less than a year–and the scope of the AI assistant service does leave this Editor in a state of mystified wonder. For starters, accurate, responsive AI and vast stores of data are extremely difficult to build up to a clinically testable form in a year, much less clinical validity. The company is still at seed/stealth, yet inviting clinicians to test it.

Let’s look back at the Babylon Health parallel. It started to gain notice as early as 2014 at various UK conferences and won over GPs with its chatbot app. By 2017, GP At Hand debuted in parts of London allied to select GPs and was promoted in a flurry of tube adverts and billboards. It received huzzahs from none other than UK Health Secretary Matt Hancock in 2018. It also claimed a great deal in automated diagnosis of routine illnesses, not all of which were valid and problems surfaced fairly quickly. By 2020, with the pandemic barely on, Babylon’s accuracy was debunked at multiple stages by Dr. David Watkins, a consultant oncologist, better known as @DrMurphy11, cardiac activists on both sides of the Atlantic, and Hugh Harvey, Babylon’s former regulatory affairs head from 2016 to 2017 [recap and links TTA 14 Sept 2023]. Babylon moved into the US market, never gained FDA approval, IPO’d via a SPAC that later cracked, bought up a supermarket blood pressure tester (Higi), a few practices, worked with the government of Rwanda to bring care to rural residents, cut deals with major insurers…and then by August-September 2023, went thoroughly, completely belly up in US and UK. It left 2.4 million Rwandans in the lurch. GP At Hand survives with an NHS practice group in London and the rest acquired by eMed.

Based on the dates, it took no time–less than one month–for Ali Parsa to step out of the Babylon wreckage and create a new AI-based diagnostic and care assistant entity–and find another Swedish backer within that next year. One year to a new AI-powered concept. The resilience is…amazing. And leads to more than a few questions.

M&A action news: Astrana Health buys up Prospect Health for $745M after Centene MSO unit buy, Veradigm nears $1B+ sale, Sword Health lays off 17% of clinicians prepping for IPO using AI instead, Cigna is not buying Humana–really! truly!

November 13, 2024 | by

A company most have never heard of is snapping up provider networks, health plans, and management services. Astrana Health, a Southern California-based value-based care (VBC) company formerly known as Apollo Medical Holdings, has agreed to acquire most of the assets of Prospect Health for $745 million:

  • Prospect Health System: 3,000 primary care providers and 10,000 specialists across Southern California, Texas, Arizona, and Rhode Island. It currently has 610,000 members across Medicare Advantage, Medicaid, and commercial lines of business.
  • Prospect Health Plan, licensed in California 
  • One hospital, Alta Newport Hospital dba Foothill Regional Medical Center in Tustin, California (Santa Ana area), a fully accredited acute care hospital with 177 licensed beds
  • Prospect Medical Systems, a management service organization (MSO) that provides administrative support to Prospect-owned affiliates and managed medical groups/independent physician associations (IPAs).
  • RightRx pharmacy

FTR: “Astrana plans to leverage its proven Care Enablement platform, a set of care management tools and technology, including value-based contracting and credentialing, AI-driven population health analytics, its NCQA-certified Healthcare Effectiveness Data and Information Set gaps in care engine, care management and disease management platform, and other administrative services to further advance improvements in patient outcomes.”

According to William Blair analysts Ryan Daniels and Jack Senft, quoted in FierceHealthcare, “Prospect is expected to generate $1.2 billion in revenue and $81 million in adjusted EBITDA on an annual basis in 2024, implying a transaction value at about 9.2 times adjusted EBITDA.” The $745 million purchase was financed by cash on hand and a $1,095 million 364-day senior secured bridge commitment provided by Truist Bank and JP Morgan. It’s not expected to close until mid-2025 and is subject to the usual Federal and multi-state regulatory reviews and approvals. Sounds like a deal that evades the new premarket notifications as complementary and not competitive. But we’ll see. Release, Healthcare Finance News

One wonders about that cash on hand as Astrana previously bought Collaborative Health Systems, a 17-state MSO with 129,000 original Medicare beneficiaries managed in 10 primary care shared savings accountable care organizations (ACOs in the REACH and MSSP models), a Maryland Care Transformation Organization CMS/state primary care model, and three independent physician associations (IPAs). CHS came with Centene’s acquisition of WellCare Health Plans in 2020 and was originally organized by Universal American in 2012. That closed in October at an undisclosed price paid to Centene, continuing its divestment of what they consider ancillary businesses to maximize cash. It was also positioned as Astrana remaining a key partner in Centene’s Medicare business, now known as Wellcare (Releases 25 July, 7 Oct).

Prior to that acquisition, Astrana was a relatively concentrated California/Western States diversified health services organization with about 10,000 providers and claiming a million patients, with one ACO in the ACO REACH program and another in the MSSP model. In absorbing CHS, they also divested a substantial number of people, mostly senior managers and leadership, who managed a wide number of ACOs in demanding CMS models at scale. (Disclaimer: Editor Donna was marketing director for CHS 2018-2020). One wonders if CHS will be merged into Prospect’s MSO, though in reality they offer vastly different services.

Back in August and prior, MSO Evolent Health put itself up for sale for an estimated $4 billion, with the most interested parties being Elevance and assorted private equity organizations. Nothing has publicly moved since then. But it did confirm that major money is now interested in this decidedly unsexy corner of the healthcare business.

Veradigm’s long-drawn-out sale may be reaching a conclusion. Reports this week state that McKesson, Oracle, and private equity bidder Thoma Bravo are all bidders for the company. CVS considered it but passed. It may be finalized by Thanksgiving for an estimated price in excess of $1 billion, its current market cap.

Veradigm put itself up for sale last May. In August, reported bidders included private equity Thoma Bravo, which took NextGen EHR private in September 2023, Roche, and Vista Equity Partners, owner of the Greenway EHR. Thoma Bravo is the only carryover from this initial list. Apparently, Roche and Vista have dropped out. As reported then, the company is apparently in good shape but unwieldy, with healthcare data services and systems that make it an interesting buy for one or more companies. Though outwardly crippled by years of financial reporting problems due to a still unsorted software problem, which led to its Nasdaq delisting last February, it has been profitable (though unaudited) and is trading OTC above $11. Axios  Hat tip to HIStalk 13 Nov

Virtual MSK provider Sword Health lays off 13 physical therapists, about 17% of its clinicians, as it preps for a mid-2025 IPO. Therapists contacted by Business Insider stated that the layoffs also coincided with a doubling-plus of clinician caseload from an average 2-300 at the start of 2024 to 700 by year-end. In a statement to BI, Sword maintained the cuts were ‘performance based’ and that they had open positions.

Information obtained by BI in interviews with Sword executives clearly states that they mean for AI to be the ‘master expert’ of their virtual therapy model, vetted (of course) by humans. According to the therapists interviewed by BI, “Sword began using AI-generated messages for patient conversations in the spring. The technology allows physical therapists to accept an AI-generated message, edit it, or reject it.” The big push is to scale Sword for more employer contracts in an outcomes-based model, paralleling Transcarent’s USP. Sword in June received a jumbo round of $130 million and now is valued at around $3 billion. Profitability is projected to be at the end of 2024 to preface the mid-2025 IPO. A competitor also considering its own IPO is Hinge Health [TTA 3 Oct]. MSN  Hat tip to HIStalk 13 Nov

And finally, truly, really–Cigna is NOT buying Humana! This was evident on the investor call 31 October by their CEO David Cordani [TTA 31 Oct] but it seems that the rumors persisted until Cigna issued an official statement that yes, it’s using free cash to buy back shares, yes, it will make strategic acquisitions, and no, it’s not buying Humana as it doesn’t fall into the second category. (It also is under Federal and FTC scrutiny about their pharmacy benefit management business under Express Scripts, TTA 1 Oct.) From the Cigna release: “Additionally, in light of recent and persistent speculation, The Cigna Group expects to communicate that the company is not pursuing a combination with Humana Inc. The Cigna Group remains committed to its established M&A criteria and would only consider acquisitions that are strategically aligned, financially attractive, and have a high probability to close.” You wonder who’s been fluffing along this rumor to this extent, and why. The tale of the tape? Cigna shares are up 4.5% in the past five days, while Humana’s are down 4%. FierceHealthcare

News roundup: Cerebral forfeits $3.7M on federal Rx charges, Aetna president named, Stewardship Health sold to Rural Healthcare, Oura buys data company Sparta Science, Brook Health-Linus Health remote cognitive assessment

November 8, 2024 | by

Cerebral settles its controlled substances distribution charges with DOJ and DEA. The $3,652,000 forfeited under the non-prosecution agreement (NPA) with the Department of Justice, Eastern District of NY, and the Drug Enforcement Agency acknowledges that Cerebral, between February 2021 and October 2022, had instituted internal measures to increase the prescriptions of controlled substances for ADHD such as Adderall, which are Schedule II drugs. The internal policies had the goal of boosting patient retention and, by extension, Cerebral’s revenue. “Today’s settlement holds Cerebral responsible for their failure to protect patients from the harms caused by the unnecessary or overprescribing of potentially-addictive ADHD medications. Cerebral’s exploitation of telemedicine flexibilities deceived patients who were legitimately seeking medical care, putting them at risk in exchange for profit,” said DEA Administrator Anne Milgram. 

There is an additional fine of $2,922,000 which Cerebral cannot pay at this time. It is being deferred for the term of the NPA (30 months) as long as Cerebral is in compliance with the NPA and waived at the conclusion, unless Cerebral is determined to be able to pay in part or full. If Cerebral violates the NPA, Cerebral can be prosecuted for any of the conduct that gave rise to the NPA and any newly discovered criminal activity. The DOJ-Eastern District release documents Cerebral’s violations.  Healthcare Dive

CVS Health reports mixed results, names a new Aetna president and CVS group president. Q3 revenue was $95.4 billion, up 6.3% versus prior year. Net income though fell to $71 million, versus $2.3 billion in prior year. The Aetna insurance unit was responsible for much of the reduction due to anticipated losses in Q4 2024 within the Medicare and individual exchange product lines. There were major miscalculations in Medicare Advantage utilization (higher than anticipated) with an increased medical loss ratio, plus lower payments for state Medicaid plan coverages. Release, Healthcare Dive

Named with the Q3 earnings were Aetna’s new president, Steve Nelson,  who will be expected to improve on this situation sooner, not later. He was previously the CEO of value-based primary care company ChenMed and CEO of UnitedHealthcare from 2016 to 2019. Also named as a new group president for CVS Caremark, CVS Pharmacy, and Health Care Delivery businesses is Prem Shah. He was previously EVP/president of Pharmacy and Consumer Wellness. Release

Stewardship Health closes sale out of bankruptcy. Practice group Stewardship Health was finally approved by the Massachusetts Health Policy Commission (HPC) for acquisition by Brady Health Buyer. This is an entity set up by private equity company Kinderhook Industries, LLC, on behalf of its existing investment, Nashville-based Rural Healthcare Group. The sale was originally submitted through the Texas Federal court handling the Steward Health bankruptcy and approved by the judge 22 August for a price of $245 million [TTA 16 Aug]. The practices have been rebranded as Revere Medical. Healthcare Finance

Oura buys Sparta Science. For health tracker ring Oura, it is its third acquisition in two years, following Proxy in 2023 and metabolic health developer Veri this past September. Sparta Science was acquired to bolster Oura’s enterprise offering, Oura Business and the Oura Teams platform. Sparta’s Trinsic platform tracks health vitals for enterprise clients collecting, analyzing, and delivering human health and performance information.  It will be integrated into Oura Teams which combines data from customer EMRs and other third-party data sources. The overall goal is to support population health through measuring and analyzing over 20 biometrics as factors in sleep, activity, readiness, stress, resilience, women’s health, and heart health. Oura Ring 4 was introduced last month. Oura will be sunsetting Sparta’s legacy force plates at the end of the year. Transaction cost nor financing were disclosed. Release, Mobihealthnews, TechCrunch

Brook Health partners with Linus Health for remote cognitive impairment assessments. Boston-based Linus Health, which has developed a series of digital cognitive assessment tools for Alzheimer’s and other dementias, has partnered with remote patient care software company Brook Health for a remote digital cognitive assessment tool that allows primary care physicians to screen and assess patients for mild cognitive impairments (MCI), sending them home with a treatment plan–all on the same day. It also provides support via a 24/7 remote clinical care team. The ability not only to diagnose MCI and initiate treatment are critical in supporting primary care physicians who generally do not have the tools or ability within their practices to perform this preventative screening. Release

Weekend reading: 23andMe’s up in the air future, including genetic data; Walgreens debates What To Stop and Start; what if healthcare pursued a zero-failure rate?

November 8, 2024 | by

While 23andMe figures out a future….what happens to the genetic data?  Troubled 23andMe today announced that it will be reporting its FY2025 Q2 numbers next Tuesday 12 November. An interesting part of their release is that shareholders can submit and upvote questions to management via the Say Technologies portal–and they’re blistering. They ask about the plan for recovery (132 votes, 60K shares represented), whether the company will be sold off piecemeal (128 votes, 73.5K shares) and a sale of the company (78 votes, 47.8K shares. Also questioned (38 votes, 3.4K shares): the addition of three new board members, none of whom have biopharmaceutical experience as all former CFOs outside of healthcare. These replace the seven that ankled on 17 September [TTA 17 Sept]. 

To Wojcicki, of course, with her reported 49.99% of voting control, shareholders’ questions aren’t really going to matter. Whether they will be addressed on Tuesday is anyone’s guess.

Many 23andMe customers have questioned how to remove their personal genetic data from their database, which if en masse will reduce the value of the company. This TechCrunch article explains how that data is not covered by HIPAA privacy regulations, but 23andMe’s own retention rules.

If 23andMe sells, the data goes with it. If there is no sale, apparently recent Wojcicki statements indicate that the model going forward for the company is the sale of that data to pharma developers and researchers, ditching its independent drug discovery, and moving into telehealth prescribing of GLP-1 drugs through its Lemonaid subsidiary. 

For those concerned about their privacy, or wary of a change of ownership, accounts can be easily deleted–but not the genetic information. TechCrunch gives how to delete your account–but apparently that won’t delete your genetic information, date of birth, and gender. 23andMe will also retain limited personal information attached to your account for an undefined time. Individuals can also reverse their consent for sharing that information with researchers, but cannot remove it. 12 million people have reportedly given consent–deliberately or not. A real lesson on oversharing for millions–if they care. 

What can Walgreens reasonably stop or reverse in its multiple series of Bad Decisions? A short interview at HLTH with US Healthcare head Mary Langowski indicates that there’s not much that hasn’t been already announced. We know that VillageMD is shuttering locations and is up for sale. 1,200 retail locations will be closed over the next three years. But what else to stop? “A lot of what I’ve fo­cused on in the first six months, is re­al­ly, it’s okay to stop stuff. What are we gonna stop?” While it’s totally fine to fail ‘at some things’, these weren’t small fails. Wentworth is concentrating on the new chief commercial officer selling Wal­greens’ ser­vices to pay­ers, providers, and life sci­ence com­pa­nies, such as clinical trials capabilities, CareCentrix, and Shields Health. There’s also some push towards “build­ing a stand­alone phar­ma­cy busi­ness rather than a ver­ti­cal­ly in­te­grat­ed busi­ness”. Endpoints News

Thinking about if healthcare adopted a ‘zero-failure’ rate. Michael Alkire’s (CEO, Premier Inc., a health system operational improvement provider) daughter was on Alaska Airlines’ Flight 1282 on 5 January 2024. That was the Boeing 737-9 MAX flight that had a blowout of a mid-cabin exit door plug placed there instead of an emergency exit door. The blowout was due to four improperly installed (loose) bolts. It occurred at 16,000 feet and the lower altitude, combined with no one seated in that row, contributed to a 100% survivability rate and a successful landing, though passengers were injured. Anyone with an interest in aircraft knows that one little thing, like a worn jackscrew on a rudder or an untightened bolt, can lead to a non-survivable crash.

Mr. Alkire’s point is that we should be striving, as the airlines and aircraft manufacturers have done (which failed in this case) for zero failure in healthcare.  He cites the well-known statistic that 98,000 people die each year from medical errors. We don’t have a culture of continuous performance improvement. For one, clinical innovations can take nearly two decades to become standard practice. Yet it works. Simple things, such as clinical surveillance in nursing homes, can reduce adverse drug events by 92%.  Much more to ponder in this Influencer contribution to MedCityNews. (And Boeing has a long way to go to restore trust–buying back Spirit AeroSystems, the former Boeing Wichita, is a necessary start they are finally making.)

Surprise! HLTH conference group sold to UK’s Hyve Group Limited

November 7, 2024 | by

HLTH sold one week after signature Las Vegas event. (That was fast!) The buyer is London’s Hyve Group Limited, an international event organizer across retail, marketing (POSSIBLE, acquired in July), education tech, fintech, fashion, and other manufacturing, mining, and engineering-related industries. HLTH is Hyve’s first conference in healthcare. HLTH as an organizer also encompasses HLTH Europe coming up in Amsterdam 16-19 June 2025 and for digital health, ViVE in Nashville 16-19 February 2025.

According to Hyve’s release and Trade Show News Network , HLTH is their #1 conference by revenue, with ViVE not far behind at #4. ViVE will continue to include the annual conference of CHIME, which split from HIMSS before their acquisition by Informa). It is also Hyve’s second acquisition from HLTH founder/CEO Jonathan Weiner, who sold ShopTalk to Hyve in December 2019. Weiner will remain at the helm of HLTH for the foreseeable future along with 80 employees in their New York, Dublin, and London offices. The acquisition also gives UK-based Hyve a larger footprint in the highly competitive North American and US trade show market, and introduces them to a fresh group of new contacts at major players such as Google, Meta, Johnson & Johnson, Microsoft, Amazon, and providers such as Mayo Clinic.

Acquisition terms were not disclosed. Surprisingly not covered by the healthcare business press, except for HIStalk 30 Oct to which we tip our hat. Also Trade Show Executive

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