Short takes: both Clover and Oscar in the black; Aetna prez booted after 11 months; Ava-VSee bedside robot; updates on Change, OneBlood ransomware, Masimo proxy fight

August 8, 2024 | by

Clover Health’s milestone–a first-ever profitable operating quarter. Not only that, but it was an impressive turnaround from the prior year. With results in their Q2 operating net income of $7.2 million, versus a $28.9 million loss in 2023, these results were far more favorable directionally than the adjusted EBITDA which was $36.2 million versus $9.9 million for the prior year. Insurance revenue was also up 11% to $349.9 million, attributed to member retention and an improved medical cost ratio (MCR) of 71.3%, down from 77.9% in the prior year. Additional revenue from other operations, such as the recently introduced Assistant AI, is minimal. The 2024 forecast stays ‘in the clover’ with raised forecast revenue of $1.35 to $1.375 billion and adjusted EBITDA of $50 million to $65 million. Also helpful is their lifted Star rating from 3 to 3.5 for 2025. FierceHealthcare, Clover earnings release

Rival Oscar Health also stayed Back in Black for the second quarter running–CEO Bertolini wouldn’t have it any other way (or else–see below right). Q2 net income rose to $56.2 million which was a a $71.7 million improvement versus prior year. Adjusted EBITDA also nicely improved to $104.1 million, a $68.6 million improvement. Revenue increased to $2.2 billion, a 46% increase over the prior year. Their MCR went down .9 points. The overall forecast for the year wasn’t provided. Membership was up over 600,000 in their main business of individual and small group insurance, with Bertolini pointing out that this was powered by plan growth in 80% of the states where they operate. Oscar exited Medicare Advantage at the end of 2023, and is shifting to marketing ICHRA, or individual coverage health reimbursement arrangements that permit small businesses to offer employees individual health plans subsidized by employer contributions. After this year, the 58,000 members left in the unprofitable Cigna co-branded small group program will exit [TTA 10 May]. Oscar release, FierceHealthcare

Back in Mr. Bertolini’s old stand, Aetna, results weren’t so cheerful–and their president walked the plank after less than one year. The reorganization announcement was made on the earnings call yesterday, effective immediately. CVS Health CEO Karen Lynch will oversee the daily operations of the health benefits segment along with Aetna’s CFO. CVS VP/chief strategy officer Katerina Guerraz will move over to become Aetna’s chief operating officer.

What initiated it: while health benefits’ revenue stayed in the black, going the wrong way were operating income decreasing 39.1%, the medical benefits ratio (MBR) soaring to 90% from 86% in prior year and the medical loss ratio (MLR) going up to 89.6% from 86.2%. These were attributed to increased utilization, the decline in Medicare Advantage Star ratings, Medicaid acuity, and a revised risk adjustment in the individual exchange business. Something in this immediately doomed now former president Brian Kane, who joined only last September. His last post was at Humana as chief financial officer and leader of their primary care business. CVS Health release, FierceHealthcare, Healthcare Finance

Marrying robots with telemedicine, VSee is partnering with Ava Robotics to create an autonomous robot for telepresence use in hospital intensive care units. This would enable remote emergency physicians to be present at the point of patient care, interact with patients, consult with onsite staff and make treatment decisions. The projected market is smaller regional hospitals and ICUs.  VSee already markets telemedicine carts and portable diagnostic and home care kits. Availability is not disclosed. VSee release, Mobihealthnews

VSee also announced a partnership with Wichita, Kansas community health provider Stand Together for its Aimee telehealth services. Telehealth at their centers will be available to participants for a monthly charge of $4.99 or a single virtual urgent care appointment for $9.99. VSee release

Ransomware strikes again. Non-profit blood donation organization OneBlood was hit on 29 July by a despicable ransomware attack that disabled much of its blood collection services for over 250 hospitals in the southeastern US. They continued to operate at reduced capacity and called for donors of O positive blood, O negative blood and platelet donations. The perpetrator, ransom demands, and breached information were not disclosed. On Monday 5 August, systems were partially restored in time for Tropical Storm Debby’s assault on many southeastern states. From a OneBlood spokesperson: “Our critical software systems have cleared reverification and are operating in a reduced capacity. As we begin to transition back to an automated production environment, manual labeling of blood products will continue. Additionally, we are beginning to return to using our electronic registration process for donors.” DataBreaches.net, FierceHealthcare, HealthcareITNews

Hard-hit Change Healthcare is still playing games with reporting to HHS’ Office of Civil Rights (OCR). Parent UnitedHealth Group reported the ransomware shutdown and data breach to OCR, a full five months after its occurrence. The number reported is the OCR minimum of 500, when it is well known that it affected millions of patients. UHG started direct patient notification on 31 July after weeks of delay, but stated to OCR that they are still determining the number of individuals affected. Provider notifications started in late June [TTA 21 June]. This followed after a hostile dispute earlier that month where UHG tried to push patient notifications onto providers, which HHS decided was 100% UHG’s responsibility. [TTA 5 June]. OCR FAQ update, HealthcareITNews

Masimo and activist shareholder Politan Capital continue to slug it out down to the 19 September shareholders meeting. Back in mid-July, Masimo postponed the meeting, originally scheduled for 25 July. At that time, Masimo filed a complaint in the US District Court for the Central District of California against the two Politan representatives on their board of directors plus Politan’s two nominees that proxy materials contained false statements and violations of the Exchange Act. The suit added that board member Quentin Koffey, also Politan’s chief investment officer, was secretly conspiring with a plaintiffs’ bar law firm currently in litigation with Masimo.

The latest revelation per Strata-gee 7 August: Politan’s countersuit in the Delaware Court of Chancery states that the charges filed by Masimo in the District Court are based on ‘unnamed sources received from a third-party opposition research firm…’ and Masimo’s outside counsel does not know the identity nor ever spoke to the sources. This was filed against CEO Joe Kiani, independent director Craig Reynolds, and director Bob Chapek as a breach of Delaware law.

To date, Masimo has not confirmed their sources to the Delaware court. 

As previously reported [TTA 17 July], the proxy fight was triggered by the value of the company, reduced substantially after Masimo’s snakebit 2022 acquisition of Sound United’s consumer audio brands, Politan’s move to control the company, and kick out the CEO Joe Kiani.  The fight on the Masimo board of directors for two open seats pits the Masimo slate of CEO Joe Kiani and outside candidate Christopher Chavez, against Politan’s Darlene Solomon and William Jellison. Politan already holds two seats and with a win of two additional seats will control the company. Masimo plans to sell the consumer audio and healthcare (baby monitoring) businesses to another unnamed investor, retaining their professional healthcare and pulse oximetry products.

Stay tuned to the next episode of this soap opera.

HHS reorganizing ONC, ASTP in tech funding, talent bid; FDA’s Digital Health Advisory Committee named; GAO scores progress on VA Telehealth Access Program

August 8, 2024 | by

Time to make lemonade? The US Department of Health and Human Services (HHS), in the midst of technical challenges such as AI and cybersecurity, has turned its weary eyes to a reorganization of a function that goes back two decades to the GW Bush administration. Technology has been under the purview of the Office of the National Coordinator (ONC) for Health Information Technology (HIT), currently Micky Tripathi, within HHS–but not entirely. The HHS solution is to rename ONC-HIT as the Office of the Assistant Secretary for Technology Policy, or ASTP, and to add in IT functions distributed to other offices within HHS. 

  • Not unexpectedly, HHS will hire three new technical experts: a chief technology officer (vacant for several years), a chief AI officer (currently held by Tripathi). and a chief data officer.
  • The new ASTP will also absorb the IT functions within HHS’ Assistant Secretary for Administration (ASA).
  • Another shift is being made to the HHS 405(d) Program, a partnership between the health sector and the federal government to align healthcare  cybersecurity practices. That moves from ASA to the Administration for Strategic Preparedness and Response (ASPR).

With this, ASTP hopes for more funding. Since the early 2000s, their budget has remained stagnant at $50-65 million, not including ‘paste ons’ for initiatives such as HITECH and 21st Century Cures. Healthcare Dive, Fierce Healthcare

Another alphabet committee formed to advise the Food and Drug Administration (FDA). The Digital Health Advisory Committee (DHAC) has been named to advise FDA on topics such as AI/ML, virtual reality, wearables, digital therapeutics, and remote patient monitoring (RPM). The chair will be Ami Bhatt, MD, chief innovation officer of the American College of Cardiology. A full list of the committee is in FierceHealthcare and the DHAC industry representative pool is here.

The Government Accountability Office (GAO) has more than a few reservations about the Veterans Health Administration’s Telehealth Access Program. The VA has had in place since 2019 a distributed telehealth program to enable veterans without internet access at home to obtain clinical telehealth services at outside locations. The Accessing Telehealth at Local Area Stations (ATLAS) pilot program works with private organizations, such as veterans service organizations, to provide locations where veterans can connect with VA clinicians for video consults. The problem is that 14 of 24 ATLAS sites active at the time had no veteran visits in Federal FY 2022 and 2023. Of the active 10, reports were favorable but not measurable. Where GAO scores VA is that the program lacked performance goals and related measures. VA going forward will implement goals and measures based on leading good practices and assess the effectiveness and efficiency of the ATLAS program on an ongoing basis. GAO report.

Breaking: Walgreens considering sale of entire stake in VillageMD

August 8, 2024 | by | 2 Comments

The other shoe just dropped. Walgreens Boots Alliance filed today (7 August) Form 8-K with the Securities and Exchange Commission (SEC) that confirms that they are considering a VillageMD sale. On page 2, Walgreens is considering the “sale of all or part of the VillageMD businesses, possible restructuring options and other strategic opportunities.”

The broad reason why is that VillageMD has “substantial ongoing and expected future cash requirements”. The specific event is VillageMD’s default as of 2 August on the VillageMD Secured Loan, a senior secured term loan and credit facility amounting to $2.25 billion. Currently (6 August), the loan is in a forbearance agreement while the companies work out terms. The 8-K also reiterates that Walgreens “is actively engaged in discussions with VillageMD’s stakeholders and other third parties with respect to the future of its investment in VillageMD”.

None of this should be surprising given recent statements made by CEO Tim Wentworth on the dismal Q3 earnings call [TTA 2 July], disclosing that Walgreens plans to lower its Village MD ownership below a majority holding (currently 63%). This signaled a partial sale at least–and that Walgreens was giving up on VillageMD as an integral part of the company. Between the direct investment of $5.3 billion and subsidizing Village MD’s purchase of Summit Health/CityMD with an additional $3.5 billion plus development costs, the Village MD Money Pit has disappeared roughly $10 billion of Walgreens’ fisc. Closing 160 locations did not, and could not, unsink this ship. While VillageMD is not the only dark spot for Walgreens’ business (retail is crashing, pharmacy is going soft), the plunging stock price has kicked off multiple shareholder class action lawsuits.[TTA 17 July]

It’s going to be tough to find any buyer at all at even a fraction of what Walgreens invested. An industry analyst estimated VillageMD’s 2023 losses at $800 million last April. WBA took a writedown last quarter, a $12.4 billion non-cash impairment charge related to VillageMD goodwill. Cigna also wrote off $1.8 billion of its 2022 $2.2 billion investment which gave it a ‘in the teens’ share [TTA 2 May]. Even CVS is trying to amortize its $10.6 billion buy of its own Money Pit–much smaller Oak Street Health–by finding a joint venture private equity partner [TTA 29 May].

This filing, coupled by the announcement of a third sale of Cencora stock to generate cash [TTA 7 Aug], points to no end in sight of Walgreens’ troubles. The SEC filing took place after markets closed; investors can expect a very down morning in an unstable market. Crain’s Chicago Business, Forbes 

Midweek wrap: Walgreens sells off $1.1B Cencora shares, R1 RCM goes private for $8.9B, Steward’s unwinding with 2 hospital closures, 1,200+ laid off, $30M state funding, bids due for physician group, CEO Senate hearing

August 7, 2024 | by

Retrenching is the theme this (crazy) week.

Walgreens sells another 2% of Cencora shares, raising $1.1 billion of much-needed cash. Walgreens reduced its ownership share of the drug distributor formerly known as Amerisource Bergen to 10% by selling the remainder of their unencumbered shares, approximately 2% of the common stock. Known as a Rule 144 sale of restricted or control stock, the proceeds as of 1 August are $818 million followed by a concurrent share repurchase by Cencora of $250 million. This is the third sale this year: in May Walgreens sold 1% for $400 million and in February 2% for $990 million. All these sales were to fund operations and pay down debt. Despite the further reduction, Ornella Barra, COO International of Walgreens Boots Alliance, will continue on Cencora’s board. The partnership agreement remains in place. Release, Healthcare Dive, Reuters

Revenue cycle management company R1 RCM finally found investors to take it private.  TowerBrook Capital Partners and Clayton, Dubilier and Rice are the winners, acquiring R1 for $8.9 billion. They will purchase outstanding shares at $14.30 per share in an all-cash deal expected to close by the end of 2024. Private equity investor TowerBrook already owns 36% of the company. This shuts out rival New Mountain Capital as their 23 February bid was offered at a lower $13.75 per share. At that time, New Mountain owned 32%; that bid valued the company at nearly $6 billion. The purchase will be financed with a combination of committed debt financing and equity from investment funds affiliated with TowerBrook and CD&R. Large shareholders Ascension Health Alliance (also R1’s major customer) and Coliseum Capital Management were not mentioned in the acquisition release.

In March, a special committee was formed by their board to evaluate strategic alternatives, code for ‘we believe it’s undervalued’. The company is currently traded on Nasdaq and closed today at $13.96. R1 closed 2023 profitably with net income of $3.3 million, flipping a $63 million 2022 loss, on a revenue increase of nearly 25% to $2.3 billion. Q1 and Q2 2024 are a more mixed picture. Q1 had revenue of $603.9 million, up 11% year-over-year, but with a net loss of $35.1 million caused in part by $10 million in losses created by the Change Healthcare ransomware attack. Q2 continued the trend, with revenues of $627.9 million up 12% versus prior year, but a widening net loss of $7.6 million versus $1 million in the prior year. Q2 earnings release, Q1 earnings release, FierceHealthcare, Healthcare Dive

Seeking ‘strategic alternatives’ for current investors and going private seems to be the new fashion in the crowded healthcare business process outsourcing (BPO) and RCM sectors. Profitable but problematic companies such as Veradigm [TTA 28 May] and GeBBS [TTA 17 Apr] both up for sale or investment. To date, Veradigm has not gone public with any offers, but GeBBS was scheduled last month to have binding offers submitted by Carlyle Group, Hillhouse Investment, and CVC Capital Partners. ChrysCapital, India’s largest private equity firm, owns 80% of GeBBS. Economic Times (India)

The messy unwinding of Steward Health Care in the US Bankruptcy Court for the Southern District of Texas continues.

  • The court approved the closure of two Massachusetts hospitals, Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer, at the end of August. Neither hospital received qualifying bids in the sale process and both hospitals, serving primarily low-income patients, are among the worst performers in Steward’s anemic portfolio.
  • Based on WARN notices filed with the state, over 1,200 people will lose their employment as well as communities losing services. 
  • Yesterday, the Commonwealth of Massachusetts agreed to provide $30 million to keep the six remaining hospitals in the state running in two tranches: $11.3 million on 9 August and $18.7 million on 16 August. 
  • Those hospitals are being handed over to NYC-based Apollo Global Management, a global alternative asset manager, to facilitate their sale from current landlords Medical Properties Trust and partner Macquarie Infrastructure Partners to new operators.
  • Auctions pushed forward include the Arizona hospitals, with a new bid deadline of 12 August with a 19 August sale objection deadline and a 22 August sale hearing. Other hospitals in Ohio, Pennsylvania, Arkansas, and Louisiana have not been rescheduled after their canceled auctions.
  • The Stewardship Health practice group now has a bid deadline of 6 August, with the sale objection deadline now 9 August and the sale hearing set for 13 August. Optum walked away from its deal back in April with the Chapter 11 filing and there is no word if they are bidding in bankruptcy.

Additional updates: the Senate investigation of Steward is going forward with a subpoena issued to CEO Ralph de la Torre. The public hearing of the HELP Committee and his appearance are scheduled for 12 September. FierceHealthcare No further developments in the US Attorney’s Boston office investigation of violations of the Foreign Corrupt Practices Act about Steward’s business dealings in Malta between 2018 and 2023. One wonders whether Dr. de la Torre will sail off on his 190-foot superyacht to one of the few places where extradition is difficult, such as Ecuador, Bolivia, Venezuela, or Iceland.

Healthcare Dive, Becker’s 31 July, Becker’s 6 August  Most recently in TTA 2 July, 18 July, 25 July

Breaking: Teladoc’s Q2 sinks on $790M BetterHelp impairment; Wojcicki files to take 23andMe private

August 1, 2024 | by

Teladoc posts Q2 loss of $838 million, takes $790 million impairment on BetterHelp’s sinking performance. New CEO Chuck Divita had nothing but bad news to deliver to Mr. Market (right below). It was so bad that they withdrew their FY2024 outlook for both consolidated operations and BetterHelp stated in April and all three-year outlooks. TTA Q1 Teladoc results and outlook  

  • Q2 revenue declined 2% versus prior year to $642.4 million. Integrated Care (main business) segment revenue increased 5% to $377.4 million while BetterHelp declined 9% to $265 million. Readers will recall that previous CEO Jason Gorevic assured investors that BetterHelp would carry Teladoc to profitability. Au contraire, along with his job.
  • The bright spot was that adjusted EBITDA increased to $89.5 million, up 24% versus prior year, but adjustments reflect all sorts of financial legerdemain, including impairments.
  • First half results were essentially flat versus prior year, with revenue up 1% to $1,288 million with Integrated Care up 7% to $754.5 million–but BetterHelp again sinking results with a decrease of 7% to $534.0 million.

BetterHelp’s rolling failure is almost inexplicable, with telemental health being the ‘IT’ clinical category in digital health funding. Spring Health just scored a $100 million Series E [TTA 31 July]. Younger companies such as Talkiatry and Brightside Health seem to have no problem raising funds or gaining partners/customers. One would think that with established customers in the enterprise space, Teladoc would have no problem adding on telemental services. This Editor has previously analyzed the problems that have led to the decline of both Teladoc and Amwell, but Teladoc stands apart in one factor. It is still recovering in its huge failure in buying and failing to integrate Livongo. But in the telemental health space, the profitable companies are largely in the enterprise and payer space. Even DTC, they have slicker solutions and extensive networks. It’s a cost-sensitive market, both to benefit admins and to prospective members. 

Here’s the pivot. On the earnings call, CEO Divita and CFO (former acting CEO) Mala Murthy announced a pivot for BetterHelp to international, non-English-speaking markets, where customer acquisition costs are lower. (This Editor would add that competition is also less.) They also blamed advertising cost inflation and jacked-up acquisition costs during a US election year–something that is completely predictable and should be baked in the 2024 marketing expenses. Unbelievably, if advertising costs remain high, Murthy stated that they expect a low double-digit revenue decline, whatever that means.

The shocker here is that it finally dawned on them that the big problem with BetterHelp is that it does not accept insurance and has a high DTC cost. Their leavers in research cite both as reasons why. Hellooooo? What took so long?  So their fix is to negotiate insurance coverage–but that won’t take effect till 2025. 

From FierceHealthcare in an on-point close of their article: “Divita was adamant that Teladoc runs BetterHelp well and that it’s an important part of the company.”  Morningstar (Teladoc release)  How much more can Mr. Market stomach? This story is developing.

As we predicted, CEO/founder Anne Wojcicki has made an offer to take 23andMe private. She has filed with the Securities and Exchange Commission (SEC) amendments to their Schedule 13D form that confirm that on 29 July, she sent a non-binding proposal to the Special Committee that has been looking at alternatives since late March [TTA 20 April]. The Exploding Plastic Inevitable offer of $0.40 per share is to shareholders of Class A and B common stock. It became public yesterday (31 July). The current price is around $0.40, so there is no premium. 23andMe is also on a six-month delisting deadline with Nasdaq from November, which they have since passed but may have been extended due to the Special Committee formation.

Wojcicki holds supervoting privileges that have always given her effective control of the company. According to analyst TD Cowen, she currently holds 22.5% of the company’s outstanding Class A common stock and 59.2% of outstanding Class B common stock. In going private, she would be right in line to be paid out by outside funders (Other People’s Money). Other alternatives to her buyout, such as Chapter 11 or 7 bankruptcies, are even more bleak and would leave shareholders with effectively 0.

As TTA noted in our April coverage, the company is yet another cracked SPAC (2021) hitting a $4.8 billion valuation, acquiring companies, and falling precipitously. It never found a recurring revenue model, being largely ‘one and done’ on ancestry and genetic reports. Recently, it lost a lucrative contract with GSK for research data. It stumbled badly after a major data breach in Fall 2023 that exposed 6.9 million records. Then, they blamed members for their poor cyberhygiene and lack of security. This once bright light has burnt out; is it even relevant anymore other than giving the CEO a job? Yahoo Finance, CNBC, MedCityNews  Developing. Our recent 23andMe coverage: 29 May (FY24 earnings and the committee’s poor choices), 2 Feb (data breach timeline, financials)

Short takes: states curbing healthcare cyberattack liability, North Korean hospital ransomwareiste indicted, Walmart leases out 23 clinics to Humana’s CenterWell, Nuro robot delivery revives, $100M Series E for Spring Health

August 1, 2024 | by

News that class-action specialist law firms won’t like. States are considering limiting hospital cyberattack liability if they adopt cybersecurity measures. Currently, four states–Tennessee, Connecticut, Ohio, and Utah–have laws that curb liability for cyberattacks and data breaches. A fifth state, Florida, is considering it with the governor, Ron DeSantis, pushing for a tougher version to encourage strong cybersecurity adoption. The state lawmakers’ rationale centers on the admission that cyberattacks on hospitals are inevitable and that when hospitals have security in place, they are not negligent. On the opposite side, law firms that specialize in consumer class-action lawsuits argue that hospitals would rather profit than put into place expensive protection for consumer data. 

This Editor’s view tends to be even stronger than that of Governor DeSantis. How can state regulators actually know that a hospital has strong, effective cybersecurity? Hospitals not only have to spend money to constantly update their monitoring, but also have to hire the humans to implement it. In other words, what people or agency on the state level can assess that a hospital or health system has adequate cybersecurity in place and is acting in good faith to protect consumers against predatory data breaches or ransomware? The article in Politico is unfortunately very scant on how these laws work, the liability limitations, and the mechanisms for judging hospital cybersecurity. More to come on this. Also DataBreaches.net–this Editor’s go-to spot for research.

A North Korean ransomwareiste indicted, but he’ll be hard to serve if convicted.  A grand jury in the Federal District Court for the District of Kansas has indicted Rim Jong Hyok of ransomware attacks on 17 hospitals and systems across 11 states plus attacks on government entities from May 2021 through April 2023. The US Department of Justice (DOJ) charge is that Mr. Rim was working for the North Korean intelligence agency, the Reconnaissance General Bureau (RGB), in a cyberhacking group known as Andariel. Andariel developed the Maui ransomware type and used it to attack healthcare and governmental entities.  The ransoms collected from the hospitals were then used to fund cyber attacks and data exfiltration on government agencies, military bases, and multiple companies supporting the US military. The State Department is offering a reward of up to $10 million to locate Rim and others infiltrating US systems. It is highly unlikely that even with a conviction, Rim will serve any US time, but a conviction could initiate sanctions and other national measures. FierceHealthcare, US District Court indictment, US State Department ‘Rewards for Justice’ release

Walmart gives Humana a crack at reopening in-store clinics. After their well-publicized failure in retail health, Walmart is leasing out nearly half of their former Supercenter clinics over to Humana’s CenterWell healthcare services operation. By first half 2025, 23 of the 51 closed Walmart Health clinics in Florida, Georgia, Missouri, and Texas will convert to CenterWell Senior Primary Care and Conviva Care Centers. The focus will be on senior coordinated care with a staff of board-certified physicians, nurse practitioners, medical assistants, social workers, and other staff. Clinics are planned for Tampa/St Petersburg, Orlando, Jacksonville, Atlanta, Dallas/Fort Worth, and Kansas City. Medicare Advantage plans and Original Medicare will be accepted, though no mention is made of the ‘duals’ who are on both Medicare and Medicaid. Walmart will continue to operate pharmacy and optical locations. The CenterWell/Conviva network at present serves 318,000 seniors in about 300 centers across 15 states. Financial terms of the agreement were not disclosed. In retrospect, they should have done this several years ago. CenterWell release, MedCityNews

Another revival–the Nuro robot vehicle delivery service. Some years back, these driverless cars were envisioned to carry everything from pharmacy deliveries to groceries to prepared food, but the robot vehicles had problematic fully autonomous driving software that proved to be unsuitable for crowded urban areas as well as satisfactorily retrofitting or specially designed EVs. Now in another AI-assisted generation with the R3, about 100 retrofitted Toyota Priuses able to go up to 45 mph will be tested in the California Bay Area in Mountain View, Palo Alto, Los Altos, and Menlo Park. Other vehicles to be upgraded to the new software are from Chinese EV manufacturer BYD, which has become famous for exploding cars in its home market. Timing after the California Motor Vehicle approval now is set for Uber Eats deliveries in test in early fall. TechCrunch

Telemental health fundings continue on a roll with Spring Health. Their $100 million Series E has increased their valuation from $2.5 billion to $3.3 billion. This round was led by Generation Investment Management with participation from existing investors, including Kinnevik, William K Warren Foundation, RRE, and Northzone. Their $71 million Series D was in drought-ridden April 2023. Their total funding now is $466.5 million. Spring Health’s concentration is in mental health support and care management as part of employer benefits and for payers, covering 10 million lives through 450 directly contracted employers, strategic payer relationships, and 27,000 groups that access the solution through a channel partner. As noted in Rock Health’s H1 report [TTA 30 July], the competitive telemental health category still leads by far as the most funded clinical category, with about $700 million in raises, over double that of cardiovascular and oncology, and will likely surpass 2023. Release, Mobihealthnews, FierceHealthcare

News roundup: 4.3M HealthEquity member data breach, CrowdStrike health fallout, more Congress pounding of VA/Oracle; Flo app now unicorn (UK), fundings for Clarapath, CoachCare; AvaSure buying Ouva

July 31, 2024 | by

Health savings account (HSA/FSA) provider HealthEquity had a three-month breach that compromised 4.3 million member accounts. The breach originated with an undisclosed third-party vendor, in a pattern that has become familiar. According to HealthEquity’s filing with the Maine attorney general (though HQ’d in Utah), the breach occurred in that vendor’s “unstructured data repository” at HealthEquity, outside of their core systems, after the hacker stole the password out of a vendor user account. Unfortunately for HealthEquity, the hack that started in March wasn’t discovered until 26 June, giving the hacker free rein in that database for three months. What’s surprising is that the breach wasn’t worse.

HealthEquity is a third-party administrator for companies of FSA/HRA, Commuter, COBRA, and Lifestyle plans.

The Maine AG filing states that information stolen may include customer names, addresses, phone numbers, their Social Security number, information about the person’s employer, benefit type, diagnoses, prescription details, the person’s dependent (if any), and some payment card information. With HealthEquity claiming 15 million+ members, the breach affects a substantial 29% of its membership. Actions they are taking are to notify members and provide them with credit monitoring services through Equifax with a reference guide. HealthEquity notification page, TechCrunch, HealthcareITNews

CrowdStrike’s antivirus software update that went waaaay sideways continues its fallout. As most know, it happened when they pushed an update and patch to Falcon, a cloud-based anti-cyber attack product that uses AI to detect intrusions. Well, Falcon’s AI wings were fractured on that 19 July push where testing was apparently lacking. BSOD became their new thing. What made the news was the devastating effect on 8.5 million Windows devices, only about 1%–on Delta Air Lines’ aircraft scheduling and the shutdown of many systems such as 911 and police within cities and states, but apparently a curtain was drawn around the healthcare bed. EHRs were affected at major systems such as Kaiser Permanente, Providence, Henry Ford Health, Nationwide Children’s Hospital, the Dana-Farber Cancer Institute, Mass General Brigham, RWJBarnabas Health, Penn Medicine, and Seattle Children’s Hospital, causing postponements of medical procedures. At Providence, it totaled 15,000 of the organization’s servers, as well as about 40,000 of its 150,000 computers. It was the equivalent of a cyberattack without being a cyberattack. According to industry analyst Parametrix, US Fortune 500 companies (excluding Microsoft) lost a total of $5.4 billion. MedCityNews

With this kind of devastation, it’s no surprise that these companies and the government are rethinking their approach to cloud computing. They’re very concerned about the oligopoly of three providers: Google, Microsoft, and Amazon. Microsoft has 40% of the cybersecurity market with CrowdStrike 15% concentrated in larger organizations.“We’re reaching the point where over-centralization makes us less ‘healable,’ and less resilient,” Robert Thomas, owner of cybersecurity company 180A Consulting said. “We’re losing our resiliency as a nation.”  Systems are still not back up and neither is the CrowdStrike stock. Rumors do persist that they were hacked. Epoch Times   Microsoft also published a recovery tool for IT administrators to expedite the repair process. FierceHealthcare

The House Committee on Veterans’ Affairs Subcommittee on Technology Modernization hearing on 22 July had some further flak-gathering from committee members. Most of the criticism concentrated on the joint MHS/VA rollout at Lovell Federal Health Care Center and the amount of work it required to get the Oracle Cerner EHR to work mostly right. While VA and Oracle leaders insist that Lovell went better than anyone expected, the resources used at Lovell cannot be duplicated at the remaining VA facilities. VA is already facing a $15 billion shortfall for FY 2024 and 2025. The Lovell center had a persistent problem in processing prescriptions, with 60% going unfilled. In member Sheila Cherfilus-McCormick (D-Fla.) words, “I think we are far from ready to endorse further go-live activities. The two departments threw more resources at this go-live than will ever be available at any future VA facility.” Healthcare Dive  Earlier coverage TTA 24 July

The UK women’s health app Flo is now a unicorn. Their Series C of $200m (£156m), funded solely (and unusually) by General Atlantic, put them at a valuation of over $1 billion. Their total funding is $275 million. Two General Atlantic executives will be joining Flo’s board, Tanzeen Syed, managing director, and Jessie Cai, principal. Flo helps users track ovulation and menstrual periods, enabling calendaring of fertility, and monitoring of over 70 symptoms. It also assists with pregnancy health guidance. The raise will be used to expand into new user segments including perimenopause and menopause. Its current base is 70 million monthly active users (MAUs) and close to 5 million paid subscribers. Flo is marketed in 66 countries, including the US, India, Indonesia, and Nigeria, with centers in Lithuania and the Netherlands.  Release, UK Tech News

Funding/M&A wrap:

Clarapath, a medical robotics developer based in White Plains, NY, scored $36 million in a Series B-1 funding round from Northwell Ventures with participation from new investors Ochsner Ventures, CU Healthcare Innovation Fund, and Mayo Clinic. Clarapath automates pathology lab work. Its SectionStar platform sections biopsy tissue with improved accuracy. It is pre-revenue with a total of $75 million in funding. Axios, Mobihealthnews

CoachCare, a remote patient monitoring/virtual health monitoring developer for practices and health systems, added $48 million in an unlettered venture round funding led by Integrity Growth Partners with participation from Topmark Funding. The platform combines software and connected devices with outreach for RPM, chronic care management, and other virtual care for about 150,000 patients. Funding to date is $49 million. It has acquired four companies in the past year: NVOLVE, CareSpan Health, Alertive (formerly part of Carbon Health), and WebCareHealth. Release, Mobihealthnews

Another virtual care company, AvaSure, is acquiring Ouva’s smart hospital room solutions. Ouva has been partnering with AvaSure to supply AI-enhanced care automation technology. The acquisition will expand the ambient AI capabilities of AvaSure’s Intelligent Virtual Care Platform and double in-house AI engineering resources. AvaSure’s primary market is hospitals. Ouva will continue as a separate company with its pediatric and wayfinding business. Cost is not disclosed. Release, HIStalk 7/31

First half digital health investment — a true rebound or a ‘dead cat bounce’? A Gimlety look at Rock Health’s H1 report.

July 30, 2024 | by

Gimlet EyeFirst, your Editor assures our Readers that no felines were harmed or poorly thought of. It’s just words expressing concepts!

In ever-dapper Mr. Market’s picturesque and blunt language of finance, a ‘dead cat bounce’ is a temporary improvement, a short-term recovery that does not reverse the reality of the long-term downward trend, which resumes shortly thereafter the pick-me-up. It’s applied to assets, stock prices, market sectors, and even political polling. 

So…let’s debate the point. Is digital health investment in the US recovering, or taking a few lungfuls of air at the surface before sinking again?

Rock Health’s first half (H1) report. It is, like most of theirs, heavy on the optimistic ‘glass half full’ view. Its headline ‘Resilience Leads to Brilliance’ is certainly a catchy rhyme or meme, but in this Editor’s Gimlety View, an overstatement. It does look like the logjam in funding and M&A has broken, but where’s the brilliance?

Let’s take a cold look at the Rock Health findings for the first half (H1) of 2024. Rock Health only looks at US digital health fundings above $2 million and includes some companies those of us in the professional field do not consider ‘digital health’. FTR:

  • US digital health startups raised $5.7B across 266 deals. Average deal size: $21.4 million.
  • The action was in Series A and B raises, which were roughly comparable to prior years. Series C and D were anemic, with Series C especially lagging even anemic 2023.
  • 40% of H1 2024’s fundraises (107 deals) were unlabeled; by quarter, Q1 47% and Q2 33%. This is only slightly down from the 44% for full year (FY) 2023.
  • The top ‘value propositions’ for fundraising companies were disease treatment (including food as medicine), non-clinical workflow, R&D, clinical workflow, on demand healthcare and precision medicine. The first two are no change from FY 2023. The biggest shifts up from FY2023? Clinical workflow, on-demand healthcare, and precision medicine. These categories are not defined by Rock Health.
  • The top ‘clinical indications’ are mental health, cardiovascular, oncology, weight management, reproductive/maternal health, and neurology. Again, the first three are basically little changed from FY 2023. The big upward shift was funding for reproductive health.
  • “AI momentum underpinned deals in categories next on the list, including nonclinical workflow ($896M), R&D for pharma and medical devices ($737M), and clinical workflow ($639M).”
  • Until Q2 2024, there had not been any into the public markets for 21 months. Starting in May and June, there were three: fetal monitoring Nuvo (public exit via SPAC (!!) in May) and two in June: revenue cycle management company Waystar and precision diagnostics Tempus AI.
  • There were only 66 acquisition deals made in H1, about half between digital health companies. Private equity acquired 10 companies and 12 in “other”. 

In nearly every metric above, H1’s trends are comparable to 2023 extrapolated to a full year, as well as in line in numbers to pre-inflationary 2019–the investments in absolute terms are worth less. 

But overall, it is as if the boom of 2020-2022 never happened except in the wreckage of overfunded/foolish funded companies. And 2023 was marked by four tech bank lender bankruptcies and many high profile bankruptcies such as Babylon Health, Quil Health, and Pear Therapeutics. 2024 should look better than 2023, by that logic.

But let’s factor in the following for 2024 H2:

  • The raises are there and they’re fairly steady–but with only a few exceptions, usually AI related, they are far less than in the past, again using 2019-2020 as a baseline.
  • At the same time, layoffs are also prevalent and substantial at all levels, indicative of retrenching. And there is little real hiring versus resume collection.
  • This is an election year like no other in the US, UK, and France, as well as political and terror turmoil worldwide. 
  • Two active wars in Ukraine and Israel, possibly a third on the horizon with major impact (Taiwan)
  • Drying up of now unwanted Chinese capital that fed into Sand Road VCs
  • The very underdiscussed FTC/DOJ pre-merger notification and Merger Guidelines–and a hostile FTC

Socially and physically, there’s little respite, from the fool’s spectacle of the opening Olympic ceremony to increased volcanic activity worldwide seen from Yellowstone to Italy. Natural disasters add to nervousness. 

As usual, there are two metrics missing from Rock Health’s analysis: companies in deep trouble or bankrupt. Capital destruction matters. Granted, Rock’s report is about digital health investment, but considering what and why it fails is part of the investment picture. What comes after all those rounds and exits? 

  • Bankruptcies: Cue Health, Cano Health, Invitae, SmileDirectClub (late Dec 2023)
  • On the way: 23andme, NeueHealth (probably 2025), Amwell (which avoided delisting by a reverse stock split)

There is also the shutdown of Walmart Health’s telehealth / remote health unit, formerly MeMD, acquired by Fabric. There is also the Veradigm mystery–delisted and as of May, up for sale, despite having positive revenue. Added context: the failure of melding retail health with clinic operations–Walgreens’ VillageMD, CVS scaling back Oak Street, Amazon folding Clinic into One Medical.

AI is also proving to be ‘not all that’. Health systems are using them to automate procedures and some interfaces with patients. But the investment/payout equation is still tilted heavily to the former.

Conclusion: this Editor is leaning towards ‘dead cat bounce’ through this year unless something drastically changes, as in improves.

Agree? Disagree? Comment below!

Referenced: Rock Health FY 2023 report, Rock Health Q1 2024 ‘flat spin’ report, Mobihealthnews

Midweek news roundup: Steward cancels hospital auction, investigations mount; GE HealthCare’s Intelligent Ultrasound $51M buy; $100M for Headway; $80M for CytoReason AI

July 25, 2024 | by

Steward Health Care’s bankruptcy hits a wall. They canceled auctions for hospitals located in Ohio, Pennsylvania, Arkansas, and Louisiana according to documents filed last Sunday. They successfully had bids on one hospital each in the latter two states: Glenwood Regional Medical Center in Louisiana for $500,000, and Pafford Health Systems has bid on Arkansas-based Wadley Regional Medical Center for $200,000. The low prices reflect the assumption of the facilities’ existing liabilities. They will also exit rental agreements with Steward’s landlord arm, Medical Properties Trust. Most of the 31 Steward facilities are failing to find any interest, and Optum weeks ago exited its pre-bankruptcy bid for the practice arm, Stewardship Health. According to the filing, Steward will announce an alternate approach to the sales process. The debtors-in-possession, which provided financing to continue to operate the hospitals during the bankruptcy process, are awaiting. Healthcare Dive, FierceHealthcare

Three Senators demand an investigation into Steward’s practices. Bernie Sanders (I-VT), Bill Cassidy MD (R-LA), and Ed Markey (D-MA). They are respectively the chairman, ranking member, and subcommittee on primary health chairman of the Health, Education, Labor and Pensions (HELP) Committee. There will be a vote this busy week on subpoenaing CEO Ralph de la Torre about the financial arrangements leading up to its insolvency. Dr. de la Torre has refused previous requests to appear before the HELP committee. Becker’s, FierceHealthcare

The US Attorney’s office based in Boston has reportedly jumped into the Steward investigation act, citing fraud and violations of the Foreign Corrupt Practices Act about its business dealings in Malta between 2018 and 2023. Steward operated three hospitals for the Maltese government and also engaged in a $7 million spy operation of its critics through its operation there. Malta stripped Steward of their hospital management contracts in 2023 [TTA 2 July]. CBS News 

M&A/funding roundup

GE HealthCare is buying Intelligent Ultrasound’s clinical AI software for a tidy $51 million. Intelligent Ultrasound is already partnering with GEHC with tools available on their Voluson Expert and Voluson Signature ultrasound devices. The buy is scheduled to close in Q4 and GEHC is funding with cash on hand. Intelligent will continue in business with software for ultrasound simulation technology. GEHC release, Healthcare Finance

Mental health remains hot with $100 million heading to Headway–more on this from last week’s sketchy reports. It’s not an unlettered round but a Series D. Also confirmed: their valuation is now $2.3 billion, surely making backers Spark Capital, a16z, Thrive Capital, Accel, and new investor Forerunner Ventures, most happy. The raise will be used for service expansions to all 50 states and to members in Medicare Advantage, commercial, and Medicaid plans. Headway closed a $125 million Series C round in droughty October 2023. Release,  Mobihealthnews

AI is even hotter, with Israeli startup CytoReason scoring $80 million in an unlettered round. CytoReason develops computational disease models for predictive asset insights, increasing the speed and accuracy of R&D decisions for biotech companies. It already has partnerships with Pfizer and three other pharmas, and claims six of the world’s top ten pharma companies use their technology for immunology, inflammation, immuno-oncology, metabolism, and other therapeutic areas. Funders are Pfizer, OurCrowd, NVIDIA and Thermo Fisher Scientific. They plan to open a US headquarters in Cambridge, Massachusetts later this year. Release, Mobihealthnews

Class action legal action by pharmacists, providers ramps up against Change Healthcare/UnitedHealth Group

July 25, 2024 | by

More litigants in a legal pile-on in Minnesota. The National Community Pharmacists Association (NCPA), with 19,000 pharmacy members, and around 40 providers have filed suit against UnitedHealth Group, Optum, and Change Healthcare in the US District Court for the District of Minnesota. The 140-page document charges that UHG/Optum/Change had substandard network security in their clearinghouse operations, leading to the Blackcat/ALPHV breach, and that the plaintiffs might have chosen another clearinghouse and revenue cycle management platform had they known this. The pharmacists and providers all suffered monetary damages from the outage that are still unresolved.

From the press statement, NCPA CEO B. Douglas Hoey: “NCPA was against UnitedHealth’s acquisition of Change from the start. This breach proves that bigger is not better and that consolidation often leads to inefficiencies. Companies are so big they cannot protect every entry point and cannot respond quickly due to internal bureaucracy. The fact issues remain unresolved is a testament to this point. This breach has cost our members a significant amount of money and time and it is still not resolved months later.” He also pointed to the pharmacies’ losses remaining unpaid, financial losses, and taking losses for vulnerable patients with high-cost prescriptions.

According to Healthcare Dive, the multiple lawsuits against UHG must be centrally filed in Minnesota, as ordered by a Federal judicial panel, since UHG is headquartered there. Nothing will move quickly, as class action suits typically take two or more years to be heard and then appealed.

Change started its HHS-OCR mandated process of notifications around 20 June with hospitals, insurers, and other customers. Individuals and practices were not scheduled to be notified until late July but no date has been announced. The Change website also contains a very carefully worded ‘HIPAA Substitute Notice’ that reads like a consumer data breach notification. TTA 21 June

The DOD-MHS/VA Lovell ‘success story’ can’t process 60% of pharmacy prescriptions: House Committee

July 24, 2024 | by

Here we go again. The Department of Defense’s Military Health System (MHS), the Department of Veterans Affairs (VA), and Oracle have all cited the Captain James A. Lovell Federal Health Care Center in North Chicago as a successful joint implementation. It is the only joint, fully integrated MHS/VA facility, was the only exception to the full pause on Oracle Cerner implementations in going live on 9 March, and so stands alone in complexity and importance. Oracle EVP Ken Glueck, in excoriating Business Insider, pointed to Lovell as a successful implementation to prove It Could Be Done! [TTA 31 May].

Except…except. House Representative Matt Rosendale (R-Mont.), the chairman of the House Committee on Veterans’ Affairs Subcommittee on Technology Modernization, a skeptic from Day One, investigated with other committee members. Several unnerving findings: 

  • “The pharmacy is completely reliant on outside help to operate”. 
  • “The Oracle Cerner pharmacy software functions so poorly that the permanent pharmacy staff can only process about 40% of the prescriptions.”. That means 60% of prescriptions go unfilled.
  • “The Committee staff visited James A. Lovell twice, and the employees are reporting the same frustration, hypervigilance, and burnout that the managers of the other four facilities testified about last September.”
  • 100 new staff have been hired at Lovell, with another 100 on the way.
  • About 800 experienced staff from other facilities and VA’s central office pitched in after the 9 March go-live.

Rosendale, in his opening remarks, expressed great concern that VA Secretary McDonough could realistically resume Oracle Cerner EHRM go-live at any scale, given the Lovell experience. He also noted that “the Veterans Health Administration is facing a $12 billion budget deficit, the financial impacts of the EHR on the organization’s staffing have never been budgeted or seriously reckoned with.” 

His conclusion was strong language: “Veterans and taxpayers deserve to know how large the Oracle Cerner bill truly is. Congress as well as the public need all of the information in order to make an informed decision about whether this is worth it, and whether the inevitable sacrifices are truly justified. Anything less is dereliction of duty.” Hat tip to HIStalk 7/24/24

Perspectives: Embracing the Power of EiPaaS in 2024 and Beyond

July 18, 2024 | by

TTA has an open invitation to industry leaders to contribute to our Perspectives non-promotional opinion and thought leadership area. Today’s article is by Scott Sirdevan, co-founder and CEO at Vorro. In this article, Mr. Sirdevan explains the concept of EiPaaS and how it can integrate the digital programs and tools used by healthcare providers, securely, to enable customers to bring together data from any system to the point of decision. He holds a master’s degree in computer information systems from Kansas State University and was the lead inventor on Vorro’s three BridgeGate patents.

Vorro empowers businesses with seamless integration solutions to connect, transform, and automate their data processes, ensuring efficiency and innovation in the digital landscape.

Despite the increasing risk of using digital tools in healthcare due to faulty systems and cyberattacks, the booming health tech sector is becoming more vital for healthcare systems than ever before, delivering efficient, proactive, and more accurate solutions to providers.

Today, one of the most popular health tech solutions is Enterprise Integration Platform as a Service (EiPaaS), with its market expected to reach $10.26 billion by 2027. Essentially a data integration solution, EiPaaS streamlines healthcare provider processes by creating a centralized space in the cloud for all programs and tools to work in unison.

EiPaaS has become increasingly critical as healthcare systems seek increased collaboration between insurance companies, suppliers, and patients and deal with more software programs than ever. This integration connects all operations, making tasks automated, timelier, and safer.

Let’s examine three reasons modern healthcare providers should embrace EiPaaS:

1.    Seamless Data Integration

Delivering seamless data integration in healthcare is crucial for patient care. Fragmented care, often due to delayed communications between suppliers, providers, and insurance companies or human error, creates adverse effects on patients with chronic illnesses.

EiPaaS in healthcare operations ensures efficient communication and minimizes human errors, from typos to delayed manual processes. Providers can seamlessly share information with suppliers quickly, ensuring low-latency system responses.

Access to up-to-date patient data, such as allergies, prescriptions, and other patient information, helps physicians make informed decisions.

2.    Enhanced Scalability & Security

Cybercrime rates have skyrocketed since 2020, with 2023 witnessing the most attacks on record. Cybersecurity is paramount in healthcare, and EiPaaS solutions address these concerns by providing robust security measures. The “enterprise” in EiPaaS signifies a higher grade of fault tolerance, scalability, and cybersecurity, meeting standards like HIPAA and other government-mandated compliance requirements.

Often, healthcare providers hire vendors without vetting their cybersecurity stance, which puts their services and patients’ information at risk. In 2023, there were 725 large data breaches in the healthcare sector, exposing over 133 million records. Hacking incidents accounted for 79.72% of these breaches​ (The HIPAA Journal)​​ (HHS.gov)​​ (The HIPAA Journal)​. EiPaaS solutions feature up-to-date compliance, secure data sharing, and encryption, ensuring that digital services are safe and trusted.

Scalability is another significant advantage of EiPaaS. One of the biggest benefits is the ability to grow and shrink based on customer demand. This flexibility allows healthcare providers to handle large data loads efficiently. For instance, several of our customers have needed to load a large amount of data in a short time, and EiPaaS can scale up to support these large one-time bulk loads and conversions. This scalability ensures that healthcare providers can dynamically manage their data needs without compromising performance or security.

3.    Optional Fully Managed Services

A significant advantage of EiPaaS is its optional fully managed services. These services are beneficial for healthcare organizations in many ways. Healthcare organizations can focus on their core business, utilizing the EiPaaS provider to handle all Integration responsibilities and support. Managed services are more cost-effective and in sync with the specific systems healthcare organizations use daily.

As health tech solutions become more critical and scrutinized by regulators, data integration services like EiPaaS are taking center stage. EiPaaS’s robust cybersecurity practices, full audited chain of custody of data, and fault-tolerance scalability integration are what modern healthcare systems need today, leveraging technological advances to elevate service quality, resulting in excellent patient care.

For Perspectives editorial and other promotional opportunities, contact Editor Donna.

Short takes: fundings for Huma, Truvian, Headway, ThymeCare, Freshpaint; Headspace’s new CEO; UK M&A RLDatix-Carebeans; Elevance earnings news, another Steward shocker; Meta’s Reality Labs AR unit sinking–is Meta?

July 18, 2024 | by

Rounding up the fundings first, as signs of life persist through AI disruptions, hacking, and layoffs:

Huma, the former Medopad, now up to a Series D and over $322 million in total funding. The $80 million funding represents a share issuance. Funders included AstraZeneca, Hat Technology Fund 4 by HAT SGR, HV Fund by Hitachi Ventures and Leaps by Bayer. London/New York-based Huma’s last major round was in May 2021 with a jumbo $130 million Series C, not unusual for that time. That round had a $70 million add-on option; looking at Crunchbase, there was a corporate round of £25 million and a debt financing of $30 million between the Series C and D. In 2020, Huma renamed, relogo’d, and pivoted then from something ill-defined around predictive diagnostics to a platform that supports ‘hospital at home’ plus pharma and research companies in large, decentralized clinical trials.

With the funding, Huma also announced the Huma Cloud Platform, designed to benefit their own projects and those of digital health developers with a library of pre-built modules and device-connectivity capabilities. The platform is FDA Class II, EU MDR Class IIb and Saudi FDA Class C cleared.  Huma release, Mobihealthnews

Truvian Health, developer of an automated digital benchtop blood-testing and diagnostics system, scored a $74 million raise in a venture round. The round was led by Great Point Ventures and Wittington Ventures, with participation from existing investors Medical Excellence Capital, Tao Capital, DNS Capital, 7wireVentures and TYH Capital. The company has raised over $208 million through this round and a 2021 (!) $105 million Series C. Truvian’s analyzer is not FDA cleared as of yet and the raise will be used to obtain that clearance. Truvian is also partnering with Shoppers Drug Mart, Canada’s largest pharmacy, as a commercial partner, having worked with Truvian last year on an onsite evaluation versus standard lab testing. Echoes of Theranos, except that it may work?  Release, Mobihealthnews

Behavioral health platforms are still getting financing, with Headway benefiting from a $100 million unlettered venture round. Spark Capital led the round with previous investors participating including Thrive Capital, Accel, Andreessen Horowitz and Global Founders Capital for a total funding of $325 million and a $2.3 billion valuation. Their last round was a $125 million Series C in October 2023 which was pretty impressive in the middle of a funding drought. Reports are a little scarce including no mention on their website, but Behavioral Health Business has what’s available via Bloomberg News. Headway’s niche is exclusively partnering with health plans to provide members with therapy and psychiatry.

One of Headway’s competitors, Headspace, named a new CEO, Tom Pickett, as their new CEO, effective 12 August. He joins from DoorDash, where he served as chief revenue officer, which is quite a leap. Prior to that, he was in digital media and the US Navy as F/A-18 pilot and “Top Gun” graduate. Pickett replaces Russell Glass, who resigned in March. Headspace has had a rocky time of it versus competition, with layoffs of 15% last July and a $105 million senior debt financing to get by [TTA 27 July 2023]. Release

Value-based cancer care platform Thyme Care announced a capital raise of $95 million. The Series B round of equity funding was led by Concord Health Partners with participation from all existing investors, including CVS Health Ventures, Town Hall Ventures, a16z Bio + Health, AlleyCorp, Echo Health Ventures, Frist Cressey Ventures, and Foresite Capital. Adding to this was a $40 million debt financing from Banc of California. The fresh funding brings their total to $178 million. According to MedCityNews, “Thyme Care manages over half a billion dollars in medical spend through its risk-based contracts and anticipates tripling that amount within the next year. The company has also doubled its oncology partnerships in the last six months and intends to expand nationwide by securing new contracts with health plans, employers and primary care groups that bear financial risk”. Release, Mobihealthnews 

Freshpaint took a slightly different tack with its announcement of a $30 million Series B round. Their CEO/co-founder’s blog for this healthcare-focused performance marketing/data infrastructure security company interestingly asks the question why they decided to obtain additional financing. Well, they want to cover the waterfront (Editor’s term) of healthcare beyond hospitals to payers, other providers, and retail health. The financing was led by Threshold with additional participation from SignalFire, Intel Capital, Zero Prime, and Y Combinator. Their Series A back in November 2022 was a modest $9.5 million, for a total since their start of $42 million. 

On the M&A front, we have the UK’s RLDatix acquiring Carebeans. Transaction cost and staff transitions were not disclosed. The two systems will be integrated with single sign in. RLDatix is a healthcare operations platform that captures data across risk, safety, compliance, provider lifecycle and workforce management. Carebeans also provides care management services software primarily in the domicilary, care planning, supported care, and social care management sectors. Release

Elevance (the former Anthem) had a decent quarter. Their Q2 notched $2.3 billion in profit but the company turned around and lowered their full year guidance due to weakness in the health insurance business that reduced total revenue slightly to $43.2 billion. While beating Mr. Market, the ongoing weaknesses in the payer market have analysts seeing yellow and red flags. Elevance’s Medicaid enrollment declined 5%: 2.2 million to 45.8 million. As UHG stated in their earnings results, they are swimming against a general trend toward elevated utilization rates and higher acuity populations, particularly in Medicaid, which was offset by increased premiums. For Medicare Advantage, they believe their plans will benefit from CMS’ rerun of the Star ratings and balance out reimbursement cuts. Healthcare Dive, FierceHealthcare

As if the Steward Healthcare story couldn’t get any more seamy (not steamy–that was earlier this month), 14 executives paid themselves $1 million + salaries and bonuses in the year prior to the company’s Chapter 11. MedCityNews did the math on the bankruptcy filing addendum (Statement of Financial Affairs Amendment). The CEO earned a $3.7 million salary, the president of Steward Health Care a $1.73 million salary plus a $500,000 bonus, and the EVP for human resources a $842,000 salary with a $300,000 bonus. Extremely high C-level/EVP salaries in healthcare are not unusual even for smaller organizations, but Steward was in trouble plenty for some years, and being sued right and left by vendors for long-delayed payments and bouncing checks. You wonder what the debtors-in-possession will make of all of this

Last but certainly not least are reports of layoffs and major restructuring at Meta (Facebook)’s Reality Labs, which is their unit for augmented reality (AR)/virtual reality (VR) headset and software development unit. It’s now separated into two units, Wearables (headsets, glasses such as smart Ray-Bans) and Metaverse (platform and Quest headsets). Reports that are primarily paywalled have said that multiple leaders have been laid off from the company, with The Information (paywalled) stating the late June layoff affected a dozen VPs and directors. Teams also have to cut spending 20% by 2026, with the bulk of the cuts this year. Meta, despite billions in investment and Metaverse hype by Mark Zuckerberg including a corporate name change, has largely failed against Apple’s Vision Pro and others. ABPLive, EM360Tech

Whither Meta? An Editor’s Opinion: This Editor believes that Meta requires a real housecleaning which may be beyond the abilities or interests of its controlling shareholder. The Reality Labs reorganization resembles rearranging deck chairs on a listing ship as AR/VR users in healthcare invariably use Apple and other headsets. While claiming 175 million users of an X-like platform called Threads, does anyone actually use it? Facebook is suffering from an aging user base and Gen X defection. Ads are down in overall share though still around 10%. Effectiveness in the past few years is also dropping due to fatigue factor. As a Facebook admin for a non-profit organization, their tools feel a decade old–clunky and hard to use. Facebook Marketplace is a modest success as an e-commerce adjunct to Facebook, but resembles CraigsList. Zuckerberg seems to care more for his charities and political influence, so perhaps it’s time for him to leave management to others–and retire.  

News roundup: UHG’s cyberattack hit now $2.3B, Senate bill on cyberattacks intro’d, VA’s AI tech sprint awards, AliveCor’s new CPT codes

July 18, 2024 | by

UHG reported earnings, profit reduced by $1 billion due to Change Healthcare cyberattack costs. On Tuesday 16 July UnitedHealth Group reported Q2 (ending 30 June) earnings of $98.9 billion, up $6 billion or 7% versus Q2 last year. Profit though didn’t move the same way, instead taking a hit at $7.9 billion, down from last year’s $8.1 billion. Despite strong performances in the UnitedHealthcare and Optum units, the drag from the Change Healthcare cyberattack is now estimated at an additional $1 billion from last quarter’s guesstimate, now at $2.3 billion. Also affecting the profit bottom line is inflating healthcare costs that are reflected in rising medical loss ratios (MLRs). Change is also obliged to do the patient notification which will start by the end of this month [TTA 21 June], having already started notifications of hospitals, providers, insurers, and other customers. Release, Healthcare Dive

But hey, now the Senate has a bill to coordinate agencies with the purpose of reducing those darn cyberattacks. The Healthcare Cybersecurity Act, sponsored by Senators Jacky Rosen (D-Nev.), Todd Young (R-Ind.), and Angus King (I-Me.), would direct the Cybersecurity and Infrastructure Security Agency (CISA) and the Department of Health and Human Services (HHS) to collaborate on improving cybersecurity. One important change would be creating an HHS liaison within CISA to coordinate incident response specifically for healthcare entities. An earlier version introduced by Sen. Rosen in 2022, S. 3904 (117th Congress), never made it into committee.  Sen. Jacky Rosen release, Healthcare Finance   But aren’t there other agencies involved in cyberattacks and ransomware like the FBI and the Department of Justice? And international agencies like the NCA and Europol since so many come from the darker parts of Europe and Asia? (The devil’s in the details…)

The Department of Veterans Affairs (VA) is taking a modest dip into the AI ocean. The award late last week of pilots for an AI-assisted healthcare dictation tool went to Abridge AI and Nuance Communications. The non-competitive, fixed-price contracts are as a result of the two companies winning the first track of the VA’s AI Tech Sprint which launched last October. The tools are designed to generate transcriptions from ambient recordings of patient encounters within specialty care, mental health care, and primary care settings, as well as integrating into the Oracle Cerner EHR. The notice does not specify start or end date. There is also a second sprint around developing an AI system to process documents generated in patient-provider encounters and other complex medical documents for continuity of care and sharing information with VA providers. FedScoop

AliveCor received CPT codes applicable to the company’s Kardia 12L ECG System. The Category III Current Procedural Terminology (CPT) codes are assigned by the American Medical Association (AMA).  The 12-lead system a few weeks ago gained FDA clearance for the combination of the Kardia 12L ECG System (left), a single cable with five electrodes that acquires 8 high-quality diagnostic bandwidth leads, with their KAI 12L AI-assisted diagnostic technology for clinician use only. The three new codes will be effective 1 January 2025 and will be published in the 2025 CPT Code book. Release

Masimo v. Politan goes into extra innings with two-month shareholder meeting delay, mucho maneuvering

July 17, 2024 | by

In the history of proxy battles and hostile takeovers, Masimo v. Politan may be one for the business and law school case histories. The latest moves by health tech monitoring (and sound) company Masimo are to sue–both metaphorically for extra time and literally in a Federal court.

  • Masimo postponed on Tuesday 16 July their shareholder meeting, originally scheduled for next week–Thursday 25 July–to Thursday 19 September. The revised proxy statement will be filed with the Securities and Exchange Commission (SEC). This not only allows shareholders additional time to review materials but also, as requested by Politan Capital Management, a later ‘record date’  (deadline for share ownership) of 12 August. 
  • The downside of the postponement is that any shareholders who have already voted their proxies must vote again. Downside #2:  in this Editor’s view, conceding this allows Politan to accumulate additional shares beyond their current 9%.
  • Another reason for the delay: in a California Federal court, Masimo has filed for an injunction that seeks to force Politan Capital to correct “material misstatements and omissions” in its proxy materials.
  • Masimo also alleges in the complaint that Quentin Koffey, Politan’s chief investment officer and the company’s representative on Masimo’s board of directors, has assisted Politan’s counsel in litigation against Masimo.

The fight on the Masimo board of directors for two open seats pits the Masimo slate of CEO Joe Kiani and outside candidate Christopher Chavez, against Politan’s Darlene Solomon and William Jellison. Politan already holds two seats and with a win of two additional seats will control the company. Two outside proxy advisors, ISS and Glass Lewis have recommended that Masimo shareholders support both Politan nominees. Glass Lewis in particular accuses Masimo and Kiani in a form of proxy manipulation called ’empty voting’ by a 9.9% shareholder named RTW, a $5.9 billion fund described by Joe Kiani on the RTW website as a decades-long ‘trusted partner.’

Countering this are multiple conditional resignations from managers to leadership that would be effective if Politan controls the company, which would constitute a pyrrhic victory.

The bone of contention started in 2022 with the tussle over Masimo’s $1 billion purchase of Sound United’s consumer audio business, which made their share price crater. Masimo announced last week [TTA 10 July] plans to sell a substantial portion of that consumer audio and healthcare business to a to-date unnamed investor. MedTech Dive, Strata-gee.com, Masimo release

A few days earlier, Strata-gee summarized Masimo’s preliminary financials for Q2 2024 as strong for the Healthcare division with revenues of $344 million, up 22% at $63 million or 22% versus $281 million in Q2 2023. But the Sound United unit sank these good results with a 13% decline in revenues to $152 million–a decline that has been fairly consistent. Masimo needs to find another investor or sell off Sound United.

Stay tuned!

Walgreens’ Mound of Misery piles higher with shareholder class action lawsuit, skeptical industry opinion

July 17, 2024 | by

Walgreens Boots Alliance (WBA) faces shareholder, analyst discontent. The securities class action lawsuit filed by investor Rizwan Bhailain on 12 July in the US District Court for the Northern District of Illinois alleges that WBA misled investors with “overwhelmingly positive statements” about its pharmacy division while “concealing material (sic) adverse facts” such as the pharmacy division being “not truly equipped to handle ongoing challenges in its industry” and that “Walgreens would require significant restructuring to create a sustainable model.” The proposed class is for those who purchased shares between 12 October 2023, right before CEO Tim Wentworth started, to 26 June 2024. Wentworth, CFO Manmohan Mahajan, and chief pharmacy officer Rick Gates are also named in the lawsuit. The law firms involved are Lubin Austermuehle P.C., the Law Office of Terrence Buehler, both in Illinois, and Levy & Korsinsky, LLP in NYC. Crain’s Chicago Business, Scribd (lawsuit full text)

Industry stock analysts aren’t crazy about what is happening either. As the stock remains in the doldrums below $12, Walgreens’ billion-dollar ‘cut and sell’ strategy under Tim Wentworth has not led to optimism. Full year guidance was lowered only weeks ago after Q3 results were in. [TTA 2 July] The assumption based from the Q3 call that one-quarter of Walgreens’ 8,700 US store locations are candidates for closure by 2027 hasn’t bolstered confidence from one influential firm, Raymond James, where an analyst remarked in a recent report: “We are unaware of any retailer successfully adopting a ‘shrink to survive’ strategy.”

MedCityNews’s dismal headline, “Walgreens’ Finances Are in Dire Straits — But All Hope Is Not Lost”, interestingly had no counter from Walgreens per author Katie Adams’s requests. She tried to find some optimistic voices but the best she could manage was a sanguine view from Stephanie Davis, senior equity research analyst at Barclays. She approved of shrinking VillageMD as the largest drag on Walgreens’ financials, but acknowledged that the ‘headwinds’ in retail pharmacy justified an underweight or sell rating.

UpScript Health’s CEO Peter Ax was quoted at length pointing out other factors affecting both the ‘front’ of the store and pharmacy. In the front, there’s theft, lack of staff, supply chain shortages, and consumer wallet shortages. Over in the pharmacy section, shrinking margins, lack of pharmacists, and the squeeze between the current cost of capital and Walgreens’ financials will likely hamper reconfiguring stores and adopting efficient technologies. Another factor is that the patient blending between the pharmacies and primary care has proved to be extremely difficult. Walgreens, in trying to create a pharmacy/VillageMD closed system, now sees it as low margin/high cost, and wants to offload the cost onto additional investors. (Not much different than CVS with Oak Street Health, except that CVS got to the JV point faster. TTA 29 May) 

Even when locations are closed, some leases may be difficult to terminate or ‘repurpose’–and in these closures, Walgreens will be dealing with the anger of communities believing they will be shortchanged in access to pharmacy and healthcare, which knock on to the political and bad publicity that’s not needed.

The ride continues to be rough for Wentworth and Company. What Mr. Market is saying is that some very good news needs to be forthcoming, quickly. If Walgreens is ‘too big to fail’, as the Trilliant analyst quoted in the article put it, well, that hasn’t proved true for other companies in similar situations.