Another antitrust shoe drops: FTC, DOJ publish Draft Merger Guidelines for comment–what are the effects?

July 20, 2023 | by

The Department of Justice (DOJ) and the Federal Trade Commission (FTC) have published for public comment a draft of revised corporate merger guidelines. These update prior guidelines from 1968 which have been revised six times since. These are stated as incorporating comments from hearings and comments that started in January. 

The Draft Merger Guidelines on FTC.gov are open for comment for the next 60 days (18 September), cleverly during a time when most of Washington DC is repairing to cooler climes for summer holidays. They are centered on what DOJ Antitrust and FTC loftily call The 13 Guidelines. These will be used singly or in combination for these agencies to determine “whether a merger is unlawfully anticompetitive under the antitrust laws.” 

  1. Mergers should not significantly increase concentration in highly concentrated markets;
  2. Mergers should not eliminate substantial competition between firms;
  3. Mergers should not increase the risk of coordination;
  4. Mergers should not eliminate a potential entrant in a concentrated market;
  5. Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete;
  6. Vertical mergers should not create market structures that foreclose competition;
  7. Mergers should not entrench or extend a dominant position;
  8. Mergers should not further a trend toward concentration;
  9. When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series;
  10. When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform;
  11. When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers;
  12. When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition; and
  13. Mergers should not otherwise substantially lessen competition or tend to create a monopoly

Assistant Attorney General Jonathan Kanter of the Antitrust Division stated in the DOJ/FTC release, “Today, we are issuing draft guidelines that are faithful to the law, which prevents mergers that threaten competition or tend to create monopolies. As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a manner that reflects the intricacies of our modern economy. Simply put, competition today looks different than it did 50 — or even 15 — years ago.” Not to be outspoken, FTC Chair Lina M. Khan, got her dibs in: “With these draft Merger Guidelines, we are updating our enforcement manual to reflect the realities of how firms do business in the modern economy.” Here the DOJ Antitrust Division takes the communications lead but the draft is published by FTC. These guidelines require no ratification by Congress as they are administrative in nature.

To this Editor, it is hard to see that any merger or acquisition of like companies or even complimentary organizations could pass. Consider the following scenarios: a leading telehealth or remote patient monitoring company offers to buy a struggling early-stage AI/ML or data analytics company to expand its capabilities, a larger health system buys a failing community hospital, one hotel looks to buy another down the street, VCs or equity investors look to exit just about anything through a sale. Every one of these situations triggers one or more of these guidelines.

Coupled with the proposed changes to the Premerger Notification under the Hart-Scott-Rodino Act (HSR Act) [TTA 29 June] now published in the Federal Register (29 June), open for comment until 28 August, we may be looking at the last few years as the Last Good Time for M&A, even with current restrictions in place.

As your Editor said last month, “For those surprised that FTC is taking the lead on this, this once-sleepy agency woke up late last year in a heckuva bad humor and is now taking a far more activist role in corporate oversight in areas such as privacy.” This was powered by a 2021 executive order by the current president for any and all mergers to be scrutinized. Earlier, FTC and DOJ withdrew antitrust policy statements that they now feel are overly permissive. FierceHealthcare

Already industry machers such as the American Hospital Association, Federation of American Hospitals, Pharmaceutical Research and Manufacturers of America (PhRMA) have asked the FTC mildly and politely for a further 60-day extension of the comment period. This includes non-healthcare organizations such as the American Hotel & Lodging Association and the Consumer Technology Association which runs CES. (Don’t hold your breath) FierceHealthcare

crystal-ballIn the cloudy crystal ball, this Editor sees a rush to complete acquisitions 1) below the HSR threshold ($111 million) and 2) in general before the new antitrust guidelines are adopted–and they will be as they are administrative measures and not laws. To reiterate previous comments, overall it will further depress M&A and investor exits, especially in healthcare and with mid-size private and public companies, funding beyond Series A/B, and valuations.  If you start a business, inherit one, or are trying to turn around one that has lost its markets or unprofitable–but can’t sell it in the future, what you have is a ton of frozen value and uninterested lenders. Will a thousand flowers bloom, like they did in airline deregulation 1980-1995–drive businesses to friendlier countries like Ireland or Poland–then lead to stagnation? Perhaps a new era of conglomerates of unrelated businesses a lá LTV and Gulf+Western in the 1960s? Tell your Editor and fellow Readers below.

Mid-week roundup: Colorado terms Friday Health Plans; Cano 3 continue to savage board; Amazon Pharmacy layoffs; hacking attacks: QuickBlox, Barts Health; Phreesia buys MediFind; financing pops for K Health, Amino

July 20, 2023 | by

Colorado liquidates, terminates insolvent insurtech Friday Health Plans. The Colorado Division of Insurance (DOI) had placed it into receivership in June after the company declared it would close, unable to find funds to operate its plans. On Monday, the DOI moved to liquidate its operations and terminate the plan effective 31 August. Their 30,000 policyholders on individual Affordable Care Act (ACA) exchange plans will be scrambling to find new coverage. In the receivership move, DOI had hoped that Friday had enough funds to keep the state plan solvent through end of year, but they did not. According to the Colorado Sun, Friday still owed unpaid Federal taxes as well as roughly $2 million in fee payments to the state’s insurance exchange, Connect for Health Colorado, which left the DOI without much hope. Friday had previously just about shut down its headquarters in Alamosa. This leaves not only 30,000 individuals scrambling, but also out eight months and perhaps thousands of dollars in deductibles as these plans tended to be high deductible. Colorado DOI opened a special enrollment period (SEP) for Friday policyholders and insurance brokers starting immediately through 31 October.  Providers are protected somewhat through the state’s Colorado Insurance Guaranty Association but many stopped taking Friday-covered patients last month. Friday’s crash-and-burn is the worst example of an insurtech’s demise to date and not promising for policyholders in other states such as Texas, Georgia, Oklahoma, and Nevada. Healthcare Dive

The Cano 3 attack in the continuation war with the Cano Health board. In the latest episode of this telenovela, resigned directors Barry Sternlicht, Elliot Cooperstone, and Lewis Gold, who among them have about 35% of the company’s shares, are still supporting interim CEO Mark Kent but pressing hard to oust three of the directors reelected at the last shareholder meeting, including Marlow Hernandez, the founder and former CEO. What’s new is that they have declared war on Sol Trujillo as chairman and Angel Morales as chair of the audit committee as allies of Dr. Hernandez. In addition to divesting five directors and the interim chief legal officer plus ending their high monthly equity awards, they support divesting non-core assets. Mark Kent will have to be Clark Kent ducking into the phone booth to succeed in this. Press release  Mr. Sternlicht cannot be in a good mood, as Starwood Capital Group is in default on a $212.5 million mortgage on an Atlanta office property, Tower Place 100, in the continuing souring of the commercial real estate market. Fortune

Amazon Pharmacy has laid off 80 employees, mostly pharmacy technicians and team leaders, in continuing cutbacks there. This is the former PillPack. One would think that it would be expanding based on the growing medical needs of One Medical and Amazon Clinic. About the latter which was to roll out nationally today but was questioned on data privacy grounds, as of today there is no update announcement. To date, Amazon has released an amazing 27,000 workers. Semafor, Becker’s

Cybersecurity also racked up some hacks in the past week or so:

  • A popular software framework used in telehealth and financial applications, QuickBlox, was found to have several critical security flaws. The QuickBlox SDK (Software Development Kit) and API (Application Programming Interface) that are used for developing chat and video applications had a vulnerability that led researchers to take over multiple accounts and compromise the user database and extract PHI. The vulnerability also permitted a hacker to impersonate a physician or patient and alter health records. This was reported by Team82 and Check Point Research (CPR) teams but have since been fixed. Blow-by-blow with screenshots in Cybersecuritynews and overview in Becker’s.
  • Barts Health NHS Trust was hacked by BlackCat, a/k/a ALPHV. What was stolen was about 70 terabytes of data, which BlackCat claims as the largest breach in UK medical history. ALPHV listed the stolen data, including employee identification documents, including passports and driver licenses, and internal emails labeled “confidential”, around 30 June. Barts runs five London-based hospitals and serves more than 2.5 million patients. The Barts Health hack adds to NHS misery with an earlier attack on a University of Manchester NHS dataset with information on 1.1 million patients across 200 hospitals. The same CLOP Russian ransomware gang that got Johns Hopkins [TTA 19 July] also got Ofcom, the UK’s communications regulator.  TechCrunch

Yes, there is good news in M&A and funding:

Phreesia is buying MediFind. No purchase price or management transition was disclosed. Phreesia is a patient intake platform that grew from a tablet used in practices for scheduling and patient check-in to a fully featured platform for workflow, claims, outreach and patient education. MediFind uses machine learning and analytics to connect patients with leading experts, clinical trials, health systems, and healthcare technologies. Phreesia is one of the few 2019 vintage IPOs to not crater–it’s trading on the NYSE at above $32 though as recently as end of 2021 its share price was double. Phreesia release.

K Health gained an unlettered venture round of $59 million from Cedars-Sinai, its new partner, plus current investors, including Valor Equity Partners, Mangrove Capital Partners, and Pico Venture Partners. This brings funding for this Israeli company to $330 million through a Series E. K Health’s platform uses a chat function that pre-screens patients with symptoms, uses AI to suggest possible diagnoses based on that person’s medical history, age, and gender, and will connect with a doctor or nurse if needed–which sounds somewhat like Babylon Health and Zipnosis. The chat can be used for primary care, some pediatric areas, urgent and chronic care management. K Health claims that 10 million individuals have interacted with K Health’s AI, and 3.1 million patients in 48 states have chatted with a doctor or nurse. FierceHealthcare

Amino, a navigation platform, received $42 million in credit financing from Oxford Finance. This was the final part of its $80 million venture raise in May. Amino connects physical and mental healthcare providers and benefits programs with members at self-insured employers and health plans, managed by third-party administrators, brokers, and human resources. Members access recommendations for providers and relevant benefits. Amino’s total funding is $125 million, mostly in venture rounds. Its last letter round was a Series C in 2017. It’s a busy sector with similar companies like Accolade, Rightway, and Transcarent.  Mobihealthnews

Legal roundup: Teladoc class-action suit dismissed; NextGen EHR $31M Federal settlement; significant AliveCor-Apple antitrust ‘spoiliation’ update; class action suits filed against HCA, Johns Hopkins

July 19, 2023 | by

The latest legal activity in digital health and cybersecurity:

Teladoc’s pending class action lawsuit by shareholders was tossed. This was originally filed in June 2022 after the crash of Teladoc’s shares after The Big Livongo Writeoff in May 2022. Shareholder Jeremy Schneider, represented at the time by Jeremy Alan Lieberman of Pomerantz LLP, filed a lawsuit in the US Federal Court for the Southern District, located in downtown Manhattan, representing shareholders who purchased Teladoc shares between 28 October 2021 and 27 April 2022. The lawsuit cited materially false statements that Teladoc made on its business, operations, competition, and prospects that were overly positive and inflated share value. Judge Denise Cote agreed with Teladoc’s 20 January motion to dismiss based on specific disclosures that Teladoc made in multiple SEC filings in that period from the 2020 10-K on that countered claims made in the class action lawsuit.

Reading Judge Cote’s decision, Teladoc used specific limiting and warning language (what marketers call ‘downside’ language) on the risks around the merger. Their executives in public statements indicated that operations and competition were challenging.  The class action suit failed to prove conclusively that the statements it identified were ‘materially misleading’ and would mislead a reasonable investor. Other statements made by executives were “largely non-actionable statements of opinion and/or expressions of corporate optimism”, a/k/a “puffery”. Class action suits of this type that go to Federal courts (versus state courts) rarely succeed due to the high bar of proof and volumes of case law at the Federal level.

This Editor noted that this particular class action did not include Mr. Schneider nor Pomerantz LLP. Different plaintiffs were represented by Labaton Sucharow LLP and The Schall Law Firm. Teladoc reportedly had no comment.  Judge Cote’s opinion (Casetext), Mobihealthnews, Healthcare Dive

Easier to settle for $31 million than fight the Feds. Charged with violating the False Claims Act (FCA) and providing illegal incentives for referrals (the Anti-Kickback Statute that applies to Federally funded healthcare), NextGen Healthcare decided to settle with the Department of Justice (DOJ) for a whopping $31 million. The settlement does not admit wrongdoing by NextGen, which in its defense told Healthcare Dive that the claims made were over a decade old–and they were. At the time, their EHR used an auxiliary software that was designed only to perform the certification test scripts, thereby gaining 2014 Edition certification criteria published by HHS’s Office of the National Coordinator (ONC). In this Ur-time of EHRs, fixes like this weren’t (ahem) unusual. Compounding it was that the EHR then lacked certain additional required functionalities, including the ability to record vital sign data, translate data into required medical vocabularies, and create complete clinical summaries. Making NextGen’s decision the proverbial ‘no-brainer’ was that the controversial US Supreme Court ruling in June ruled that under the FCA, defendants are now liable for claims they suspect or knowingly believe are false, versus the previous objective standard. The Anti-Kickback Statute violation was blatant.  NextGen was giving credits often worth as much as $10,000 to current healthcare customers whose recommendation of NextGen’s EHR software led to a new sale, along with incentives such as tickets to sports and entertainment events. Anti-Kickback is one of those ‘biggies’ that the average healthcare employee is trained on within their first 60 days. DOJ release

The AliveCor-Apple Federal antitrust case had a small but important split decision regarding ‘spoiliation’ in the discovery process that could impact the case’s outcome–and future litigation. This June US District Court for the Northern District of California order went against AliveCor in part of what it sought–that Apple’s deleted emails to and from Apple’s then Director of Health Strategy should be considered adverse by a jury. But Apple was then found at fault for deleting them despite their relevance to the case with a ‘duty to preserve’ that started on 25 May 2021 with the antitrust litigation. In general, emails such as these to and from relevant people are subject to a litigation hold.

  • The director departed Apple only one week prior, 14 May 2021. His emails were auto-deleted at some point in accordance with company policy. In the discovery process, through other documents, AliveCor determined over a year later that the director was, indeed, relevant to the case.
  • The order states that Apple should have preserved his emails from the start as he was an individual with potentially relevant information. From the order, “[the director] worked on strategic health initiatives, and the record shows that he regularly corresponded about the Apple Watch and AliveCor with individuals Apple did identify as relevant.” “Apple did not take reasonable steps to preserve electronically stored information that should have been preserved in the anticipation or conduct of litigation…” While it may have been “irresponsible and careless”, it wasn’t purposeful which then would have been considered for sanctions, but there is considerable strong language in the order that Apple’s counsel didn’t disclose the loss of this information even while under oath in a deposition. 
  • In the ‘adverse’ consideration, AliveCor did not gain what it wanted, which was an assumption that the lost emails were prejudicial–that they contained relevant material to AliveCor and Apple’s strategy of eliminating competition. “To the extent they existed, additional emails relevant to these topics may have been useful to enhance AliveCor’s case, but AliveCor has not shown that the absence of these emails will prevent it from proving its antitrust claims.”

AliveCor provided this Editor with a statement on the order:

“The Northern District of California judge’s description of Apple’s actions as ‘irresponsible and careless, and perhaps even grossly negligent’ in their handling of emails belonging to its former Director of Health Strategy that supported our pending antitrust case speaks to Apple’s usual playbook of shamelessly using legal tactics to steamroll innovative companies like AliveCor. Even though the judge stopped short of granting our motion to instruct the jury that they should assume the deleted emails were negative for Apple’s case, we are confident in the outcomes of our antitrust case and grateful for the outpouring of support we have received as we continue to hold Apple accountable.”

Editor’s note: she thanks an AliveCor representative for sharing this information along with the redacted court order. Apple is free to contact this Editor with its own statement.

Recent AliveCor versus Apple coverage on patents: ITC presidential review, ITC vs. PTAB, PTAB decision

Last but certainly not least, a class action lawsuit against HCA. To no one’s surprise, it was filed last week (12 July) in the US District Court for the Middle District of Tennessee, as HCA is headquartered in Nashville. The plaintiffs are named Gary Silvers and Richard Marous, two HCA patients living in Florida, and was filed by two law firms, Shamis & Gentile and Kopelowitz Ostrow Ferguson Wieselberg Gilbert. The suit claims that HCA failed in their duty of confidentiality to protect sensitive information– personally identifiable information (PII) and protected health information (PHI)–that was contained in the hacked records. While HCA has released that the records did not include the most sensitive clinical information as it was used for email communications, the volume of 27 million rows of data that was apparently unencrypted potentially affects 11 million individuals [TTA 12 July]. The suit charges HCA with failure to safeguard ‘Private Information’ as a reasonable expectation using reasonable security procedures in light of current regulations (HIPAA, FTC), plus the susceptibility of healthcare organizations to cyberattacks which is well known. It seeks monetary damages plus injunctive and declaratory relief. This lawsuit is likely the first of many. Healthcare Dive, Healthcare IT News, HIPAA Journal

These lawsuits based on hacking and cybersecurity responsibility are becoming routine. On 7 and 10 July, Johns Hopkins was sued twice. This was for a May ransomware data breach on a software vulnerability called MOVEit that was exploited by a Russian ransomware group called CLOP. This may have compromised, according to the first suit, tens to hundreds of thousands of records, including sensitive PHI. Both suits allege negligence, breach of fiduciary duty, breach of confidence, invasion of privacy, breach of implied contract, and unjust enrichment. They seek monetary damages and injunctive relief. Both were filed in US District Court for the District of Maryland.  Becker’s, Healthcare Dive, HIPAA Journal

News roundup: MHS Genesis EHR completes US rollout, telehealth selective savings by disease, CarePredict’s $29M funding, Amazon Alexa *Spying on You*

July 14, 2023 | by

At least one part of Oracle Cerner’s work is done. The Military Health System (MHS), which covers 9.6 million active duty beneficiaries and 205,000 medical providers, announced yesterday that the rollout of the Genesis EHR is complete in the continental US. The final go-live was at Wright-Patterson Air Force Base, which covers 6,800 clinicians and providers in military hospitals and clinics across Ohio, Virginia, Maryland, Indiana, Texas, and Kentucky. It was also deployed at the National Oceanic and Atmospheric Administration, NOAA Corps, which is under the Department of Commerce. The final 14% of the MHS system is overseas. That rollout will start in September 2023, including Landstuhl Regional Medical Center in Germany and Royal Air Force Lakenheath in the UK. Bases in Guam, South Korea, and Japan will follow in October. DOD’s one joint facility with the VA, the James A. Lovell Federal Health Care Center in Chicago, will deploy in March 2024. All other VA healthcare centers are on hold indefinitely. With the wrapup of MHS Genesis and the pause on VA’s Millenium rollout, Oracle has reportedly laid off over 500 staff on these Federal projects [TTA 16 June]. DVIDS release

 Telehealth’s selective savings. A new study out of the University of Texas-Austin McCombs School of Business found, like other studies such as Epic Research’s, that telehealth visits reduced future outpatient visits, in their study within 30 days, by 14%. This saved $239 per patient in outpatient costs. But telehealth was more effective for some specialties than others. It had the most impact on cost reduction for behavioral health, metabolic disorders, dermatology, and musculoskeletal (MSK) disorders, with a significant reduction of 0.21 outpatient visits per quarter (an equivalent cost reduction of $179). This suggested to the researchers a substitution of telehealth versus traditional clinic visits. But telehealth’s impact was nearly nil when it came to circulatory, respiratory, and infectious diseases, not significantly reducing the number of future visits or costs. The study sampled hospital-based outpatient clinics in Maryland from 2012 (not a typo) to 2021. Becker’s, UT News, Informs Pubonline (abstract only)  

Senior living monitoring system CarePredict adds $29 million from four main investors. This is a Series A-3, which one assumes adds on to an existing Series A, which was $9.5 million in 2019. The round was co-led by SV Health Investors’ Medtech Convergence Fund and Aspire Healthtech Partners with existing institutional investors Secocha Ventures and Las Olas Venture Capital plus private family offices and individual investors. CarePredict pioneered a wearable bracelet, the Tempo, that wirelessly tracks residents’ activities of daily living (ADLs) in assisted living (AL), independent living (IL), and continuing care (CCRC) settings. Interpretation of ADLs in a platform can predict changes in health and wellbeing leading to better health and extended residence. CarePredict has expanded its platform reporting with other tracking such as context beacons, visitor and wander management, PinPoint digital contact tracing, and family communication apps. CarePredict release, Mobihealthnews

How much does Amazon have on you? If you are a user of Amazon’s Echo system, you already know that Alexa is always listening to you. What you may not know is that Amazon stores that information in a database, including parts of overheard conversations that have nothing to do with Alexa, since Alexa is always on. Even if you (like your Editor) don’t have an Echo but have a Kindle (unlike your Editor) or use the app residing on most smartphones, Amazon knows what you read, what you flip through, and your start and stop times. The Amazon Sidewalk mesh network, used with Alexa and Ring cameras, extends the reach of your router and shares your network with your neighbors. This is in addition to your shopping and even what you look at. In the context of the rollout of Amazon Clinic pending, delayed to 19 July [TTA 27 June], where Amazon is 1) only an intermediary to providers but 2) demand access to all your PHI and PII before allowing access to them, can we as professionals admit this is a glaring privacy violation and that the FTC is actually right?

Kim Komando, well known for her radio and online shows advising non-techies on tech, has an excellent article on how Amazon is piling up information on us all. This is based on a 2021 Reuters investigation and also contains a link to her interview with the two Reuters reporters. The article also describes how to find out what Amazon has on you. Warning–they don’t make it easy. She also addresses the Amazon clinic issue in a FoxNews article.

Thursday short takes: Fold Health VBC $6M round, Vivalink’s RPM in Burma rural health, Vytalize adds two to board, layoffs at TytoCare, IntelyCare

July 13, 2023 | by

Fold Health celebrated its first birthday by securing a $6 million round. Investors were Iron Pillar and global angel investors for total funding of $12 million. Fold’s platform is for primary care providers transitioning to value-based care and outcome-based payment models and need to manage workflow, care management, and patient data. Their claim is that it is the first end-to-end platform of this type that seamlessly integrates with EHRs. The founders originally came from athenahealth via their Praxify acquisition. Athenahealth provided the initial $6 million seed funding round. Fold release, TTA 21 July 2022

Vivalink, an RPM developer with a suite of medical wearables including a multi-function ECG patch, is part of a rural healthcare initiative on the border of Thailand and Burma. They have donated multiple sets of the rechargable ECG monitor which pairs with a real-time patient monitoring mobile app that can operate ‘off the grid’ in what appears to be a store and forward mode. It is lightweight and small at 7.5 grams in weight and 3.5 inches in length. In this remote area, clinicians can use the ECG patch to monitor patients in the preoperative assessment area, during the surgical procedure under sedation, and during the recovery period. The company promotes both conventional RPM monitoring and decentralized clinical trials. Vivalink release

Vytalize Health, a management services organization (MSO) that organizes independent primary care practices into Medicare accountable care organizations (ACOs) that enjoyed one of the few mega-fundings in H1 at $100 million, added two board members with substantial payer, quality reporting, and provider experience: David Wichmann, the former CEO of UnitedHealth Group from 2017 to 2021; and Amy Compton-Phillips, MD, currently the chief medical officer at Press Ganey and former Providence Health executive. Vytalize is in a highly competitive Medicare ACO/MSO segment with competitors such as Aledade, Privia Health, Evolent Health, CVS Health, Optum, and Collaborative Health Systems (Centene). FierceHealthcare, Vytalize release

Layoffs continue to affect healthcare both in the US and overseas.

  • New York/Tel Aviv-based TytoCare has laid off 20 employees, 10% of its 200-person workforce. 10 are in Israel, where it employs 135 people. TytoCare, which TTA has covered since 2016 as it’s diversified from home-based telehealth + device diagnostics primarily for child home care into providers and health plans and most recently for respiratory wheeze detection, had a last round of $50 million in March 2021. CTech/Calcalist (Israel), Becker’s, Jewish Business News
  • Boston-based IntelyCare, which helps providers organize nursing shifts, manage workflow, and staffing, has laid off staff after a reorganization. The number was not disclosed but was estimated at about 30. Most information is paywalled, but its last funding was a Series C at $115 million. Boston Business Journal

 

“Hope is not a business model”–advice from two VCs, with a bit more advice on basic banking

July 12, 2023 | by

With yesterday’s article on how digital health funding is resuming its 2019 ‘long and winding road’ trajectory, with 2020-2022 now revealed as a complete aberration (though Rock Health is having trouble admitting it), your Editor returned to two saved articles in her ‘pinned tab file’ to glean some advice for the funding-lorn. 

Funding advice for health tech and digital health companies was the theme of this recent article in MedCityNews. Two Merck Global Health Innovation Fund executives spoke at a late June NYC conference, the fund’s president, Bill Taranto, and vice president Joe Volpe. They highlighted three key points but more between the lines. Editor’s comments follow:

Don’t be afraid of down rounds (or flat rounds) if you need to survive  This referred to the inflated valuations digital health companies received in 2021-22, whether they were profitable or not. The down-round stigma is why we are now seeing a wave of unlabeled and lower-amount rounds for companies that raised Series A and B rounds only 12-24 months prior. “Lack of cash causes bankruptcy.” Quite true, but what if the company never hits the ‘inflection point’ and putters along longer than funders expected at breakeven or mildly profitable? They admitted that unlabeled rounds are a survival tactic. As noted yesterday, they cannot go on forever or even for another 24 months. Prediction: valuations will be coming down in a second-order effect by next year, as well as more companies going private, selling lines of business or IP, or being acquired for unknown amounts.

Expect slower timelines   Startups used to plan six to eight months in advance of fundraising, now they are advised to start a year or more. This reverts back to the norm this Editor personally observed in the first hype curve of 2006-8 where early-stage companies would no sooner close a round or private financing than plan for the next. Note rounds–equity offered in return for notes convertible into shares–are popping up. Volpe described this as frustrating for larger investors like Merck because other investors are taking due diligence to the max and once committed, Merck is having to fund or bridge the company longer. This is a repeat of 2007-8. Investors have lost the fear of missing out (FOMO) that drove 2021-22 funding. They are often happier to walk away and keep their powder dry–if they have any. [TTA 5 Apr]

Get your narrative right  “The most important thing a company has to do before pitching to investors is ensure that it can clearly and honestly describe its narrative, Taranto explained.” More than that, a company has to be realistic about its future. Don’t tell a story that investors will have difficulty believing. Identify what’s the inflection point, when will it be, and is it a hockey stick or a garage lift? Here is where the old saw ‘underpromising and overperforming’ come in handy, as well as running lean. Do this enough and investors will like you a lot. You may also want to get some outside help in crafting and wordsmithing that narrative from a person not invested in the company’s future or your parents.

Now that you have the money, some basic banking and money management advice for founders and company management. We are already seeing amnesia around the events of March-April when four US (SVB, First Republic, Silvergate, and Signature) and one Swiss bank (Credit Suisse) went belly-up, putting a giant hole in the fisc of both startups and VCs. Founders and startup execs can be forgiven for concentrating on The Big Idea, though they seem to be in abundance lately and is no guarantee of success. Now, your Editor has no special financial expertise but as a marketer, has always been dependent on good relations with the financial folks for her budget. Companies come and go, whether small or large, healthcare to car rental to airlines, but there’s much in common when it comes to money.

Your little company may be better off with a big bank. Healthcare Dive looked at this while the collapses were happening. Their article’s point was that dealing with a major bank can be reassuring to investors. A big bank may be what is left in some markets. The downsides are that they move slowly and may not be agreeable to short-term cash loans or bridges. 

Nest your eggs in multiple baskets. Diversify your banking business and keep it below FDIC insurance levels. Spread accounts among a major bank and your regionals. Develop multiple relationships. It’s not being disloyal, it’s being smart. This may also affect where you locate your business. Ask your funders for contacts, but avoid what funders urged prior to March–to go to one bank like SVB or Signature and put all your business there as part of a quid pro quo. It didn’t turn out well for those who did.

Trust but verify. Expect that a bank will be an honest and skilled steward of your precious funds, payables and receivables. But your financial head/CFO should spend a fair amount of time regularly checking that they are and remain so. As to your bank, community responsibility can be positive, but it’s management time taken away from their main business which is stewarding your money. Be insistent on this. If you see their management has many unfilled spots, spends more time on ‘issues’ than on banking, plays in politics, grows too fast, has a lot of investments in crypto, is in play or taken over, execute Plan B and go elsewhere. 

Don’t skimp on your financial staff, policies, and procedures. You may be able to contract for sales, marketing, and R&D, but financial governance–probably not, unless you’re very small and willing to go fractional. Hire a good CFO and give him or her the right staff and power. Adopt rigorous budget and reporting procedures that are adhered to from top down. Don’t assume you or your partners can do it all alone, even if you have Harvard MBAs, or your accountant can do it. And watch your CFO like a hawk. One of the best combinations I’ve observed is a CFO and general counsel. 

Thoughts? Comment below. 

Mid-week roundup: telehealth success in opioid use disorder treatment, Epic sees fewer followup visits from telehealth vs in-office, telehealth usage slightly lower, HCA data theft may affect 11 million

July 12, 2023 | by

Success reported in opioid use disorder (OUD) treatment using telehealth in conjunction with medication-assisted treatment (MAT). A recent study presented at the annual ASAM Conference indicates that in a study published by a telehealth MAT provider, Ophelia, that telehealth+MAT can achieve retention rates significantly higher than traditional in-person care. Published in The American Journal of Drug and Alcohol Abuse, their findings were that 56.4% of Ophelia’s OUD patients remained in treatment for six months, with 48.3% remaining for one year. Their MAT is based on the Massachusetts Collaborative Care Model adapted to telemedicine and providing a framework for licensed MAT providers. Ophelia is licensed to provide care in 36 states plus has national and regional insurance contracts covering 85 million lives, including bundled rates across Medicaid, Medicare and commercial populations. A second study presented at ASAM indicated that home-based buprenorphine inductions guided by telehealth are both feasible and well tolerated, with 90% of patients returning for one or more follow-up sessions and more than 80% met HEDIS engagement criteria. While OUD is statistically down among adults according to the National Survey on Drug Use and Health, overdose fatalities have increased due to the deliberate contamination of opioids with fentanyl.  HealthcareITNews

Telehealth users aren’t doing in-person follow up for most specialties–is this good or bad? Epic Research’s original study noted that most telehealth appointments didn’t require an in-person follow-up appointment in the next 90 days. Their new study compares in-office visits to telehealth and finds pretty much the same. Follow-up rates for telehealth and office visits in primary care were within two percentage points of each other. The largest difference was in mental health care, the majority of telehealth currently, with 10% of telehealth visits and 40% of in-person visits having in-person follow-up within 90 days. Epic Research, Healthcare Dive

Telehealth utilization is down slightly but remains above 5%. FAIR Health’s monthly national survey of claims from private insurance and Medicare Advantage has telehealth declining from 5.6% to 5.3% (-5.36%). Mental health is again in the far lead with 68.4% of all diagnoses. A new breakout is asynchronous telehealth (store and forward) where acute respiratory diseases and infections lead with 21.6% of diagnoses with 12.6% related to hypertension in second place. Another new breakout is audio-only telehealth comparing urban and rural usage, both near or over 5%. FAIR also breaks out data by four regions. Becker’s

Some post-July 4th fireworks came with the announcement of a data breach at HCA Healthcare, one of the largest provider networks in the US. The hacking took place through an external storage location exclusively used to automate the formatting of email messages. The information up for sale by the unidentified hacker on a ‘deep web forum’ had some personally identifiable information (PII) including patient name, address information, emails, telephone numbers, date of birth, and gender. Some of the data posted included medical appointment dates and locations. The unidentified hacker (unusual) notified HCA on 4 July with a list of unidentified demands to be responded to by 10 July. It was flagged on Twitter by Brett Callow, an analyst at New Zealand-based Emsisoft. What wasn’t included was typical personal health information (PHI)–sensitive clinical information, payment information, or other PII such as driver’s license and Social Security numbers that can be cross-referenced with other hacked data. The sheer scope of the breach–reportedly 11 million records for patients across 24 states and 171 healthcare facilities, perhaps one of the largest breaches ever–while limited in harm to patients, is still going to create a big headache for HCA. CNBC, Becker’s, HealthcareITNews, DataBreaches.net, 

Rock Health’s first half funding roundup adjusts the bath temperature to tepid, the bubbles to flat

July 11, 2023 | by

The ‘new normal’ continues, as the bubbles vanish and the poor duck’s feathers are getting soggy and cold. Rock Health’s roundup of digital health funding (US only) continues the chilly flat-to-downward trend to funding. What money and fewer funders are out there which persist in their dedication to healthcare are betting cautiously, minimizing their risk on the table in lower unlabeled funding rounds and pre-vetted concepts. 

  • First half 2023 (H1) funding closed at $6.1 billion across 244 deals. Average deal size was $24.8 million, the lowest since 2019.
  • Breaking down by quarter, Q2 2023 funding hit a new low– $2.5 billion in funding across 113 deals, lower than Q4 2022’s ‘hole’ of $2.7 billion. By comparison, Q1 2023 funding totaled $3.5 billion over 131 deals, adjusted from the earlier report of 132 deals [TTA 5 Apr]. The collapse of three banks, most notably Silicon Valley Bank in March, clearly affected Q2.
  • Given the trend, Rock Health projects that 2023 funding will fall well below 2022, between 2019’s $8.1 billion and 2020’s $14.3 billion

Delving into the numbers:

  • Those ‘generalists’ who jumped into the digital health pool in 2021-22 jumped out. H1’s 555 investors had a 71% repeat rate, meaning that those who knew the water saw some opportunity or put on their wet suits. The overall total dropped from 775 in H1 2022 and 832 in H1 2021.
  • Unlabeled raises were suddenly the way to go. 101 of 244 deals–41%–had no series or round attached. This unprecedented move avoids the spectre of down rounds for companies needing to raise funds–down rounds affect valuation. Interestingly, 67% of these companies’ prior raises were in 2021 and 2022. 37 of them were Series B or lower. 
  • Mega deals inhabit a different territory. H1 had 12 mega deals, 37% of total funding dollars, and was at the 2021 norm of $185 million. Half were at Series D and growth/PE. They clustered in value-based care, non-clinical workflow, and that former mouse in the pumpkin coach, in-home and senior care. This level of funding also gravitated to the pre-vetted: incubated by VCs included Paradigm (clinical trials) and Monogram Health (kidney care).  Recently funded Author Health, long in stealth, will operate in a narrow slice of mental health funded by Medicare plans.
  • Zero IPOs, but acquisitions and shutdowns/selloffs continue. Acquisitions continued on a track of about a dozen per month, down from 2022’s average of 15. On the gloomier side, quite a few companies simply ran out of runway after raising a little or a lot of funding. These hit the lights at the end resulting in hull loss: Pear Therapeutics, SimpleHealth, The Pill Club, Hurdle, and Quil Health. If they were lucky, they had intellectual property worth something to someone–Pear to four buyers including a former founder, 98point6’s AI platform business to Transcarent–or subscriber bases worth acquiring, such as Pill Club to Nurx, SimpleHealth to TwentyEight Health. This does not count Amazon shuttering Halo and leaving subscribers in the lurch. (Nor Amazon’s dodgy approach to privacy getting Federal and private scrutiny, which this Editor explores here and here.)

To this Editor, 2023 will be a ‘grind it out and survive’ year for most health tech and digital health companies. Survivors will carefully tend their spend, their customers (who will be doing their own cutbacks), and watch their banks. The signature phrase this year was written in 1950, another uncertain time, by Joseph L. Mankiewicz and uttered with flair by Bette Davis in a classic film about the theatre, ‘All About Eve‘: “Fasten your seatbelts; it’s going to be a bumpy night.”   Rock Health Insights

Short takes: FDA seeks feedback on home care tech; Japan care homes piloting AI; Author Health’s $115M bet on senior mental health; Alertacall’s Batchelor on ‘right fit’ finance support; Headspace in the wrong (layoff) space again

July 7, 2023 | by

Short takes for a short (US) week

FDA seeks public comment on home care tech–an opportunity for developers and home care. The US Food and Drug Administration’s (FDA’s) Center for Devices and Radiological Health (CDRH) has a request for public comment on technologies that could improve home care, both in the traditional sense and in hospital-to-home transitional care. Their two key questions of nine are: “How can the FDA support the development of medical technologies, including digital health technologies and diagnostics, for use in non-clinical care settings, such as at home?” and “What factors should be considered to effectively institute patient care that includes home-based care?” The FDA’s language around this is anodyne as couched in ‘health equity’ but it’s seriously around increasing access to all, supporting innovation, reducing barriers to care, and empowering people to make better decisions around their health. All public comments must be submitted to FDA’s docket (FDA-2023-N-1956), available at Regulations.gov. Important–the public comment period will end on 30 August 2023. Healthcare Dive

In Japan, a nursing home operator/insurer is adopting analytics to track residents and reduce caregiver workload. The operator/insurer is Sompo Holdings (LinkedIn) and the analytics company is Palantir. The jointly designed software platform, egaku, integrates artificial intelligence and analytics with proprietary data on sleep, diet, medical treatment, and exercise. Sompo Care uses minimally intrusive devices such as sensor-equipped beds to evaluate sleep conditions via tracking of body movements, respiration, and heart rate. They are claiming a 15% reduction of caregiver workload in a typical 60-person capacity care facility, saving as much as $60,000 annually. Unfortunately, the FT article is paywalled but a partial citation is available on ACM TechNews   On the Palantir website, there is a fragmentary article on how Sompo used the Palantir Foundry platform to streamline gathering information for care plans by linking local resident data t0 additional care data to create ‘a single source of truth’. Sompo press release

Speaking of seniors, Boston-based Author Health launched at the end of June with a unique mission–reaching out to older adults with serious mental illness and substance use disorders–and with a tidy startup kitty. The company provides specialized physicians, nurses, therapists, and community health workers to deliver a mix of virtual and in-person care. Their first partnership is with Humana Medicare Advantage (MA) plans in Fort Lauderdale and Miami, Florida metros in conjunction with CenterWell Senior Primary Care. Author Health helps to treat conditions such as depression and anxiety, schizophrenia and psychosis, bipolar disorder, Alzheimer’s Disease and other dementias, and substance use disorders. Author is led by CEO Dr. Katherine Hobbs, a psychiatrist and former health insurance executive. The $115 million in initial financing was led by General Atlantic and included participation from Flare Capital Partners. Author Health release, FierceHealthcare, MedCityNews

TTA has previously profiled James Batchelor, CEO and founder of Alertacall. He is an old friend of TTA from early days with Editor Steve and Alertacall is one of the pioneering companies in UK telecare. Most recently (May 2022) Alertacall achieved the Queen’s Award For Enterprise: Innovation. This short interview with him in New Business UK discusses the importance of finding the right fit in long-term funding. If your buyers are in a sector with lengthy, complex sales cycles, it’s vital to find a backer that understands the selling space, which for Alertacall is ‘property management’. Even more important now!

Apparently in the wrong space is Headspace Health. The Los Angeles-based telemental health company is laying off 181 additional employees, or 15% of its current workforce. This follows on their December layoff of 5% or 50 employees. In the palmy days of mid-2021, Headspace acquired Ginger for a $3 billion valuation at that time [TTA 27 Aug 2021] to enter the enterprise market and acquired Sayana and Shine in 2022. It’s been a struggle ever since though they did not go the SPAC route, stayed private, and now claim 70 million members (actually downloads of their app), both individual and enterprise. Headspace expanded to the UK in January. Too much lookalike/soundalike competition and now a very hard road to that cliché, ‘a path to profitability’. LA Times, Mobihealthnews

Why the ‘insurtechs’ didn’t revolutionize health insurance–and the damage they may have done

July 7, 2023 | by

crystal-ballIce water on hopes that many placed in ‘insurtechs’. This is the umbrella term that healthcare dubbed the upstart tech-enabled, health tech-friendly US payers which were supposed to deliver health insurance plans more efficiently (buy online!), more conveniently using apps and telehealth, with strong networks and at a lower delivery cost to consumers, from those who needed individual plans to Medicare Advantage. Around 2019-2020, these insurers gained billions in funding before going public through IPO or SPAC: Bright Health’s $500 million Series E in 2020 was only a chunk of their total $2.4 billion; Oscar Health raised $1.6 billion, Clover Health $1.3 billion. All three have struggled to stay clear of the insolvency precipice, with Friday Health Plans going over [TTA 23 June]. Bright Health Group will be exiting the insurance business after this year with the stock sale of their plans to Molina Healthcare–provided they survive to Q1 2024 [TTA 6 July]. Oscar and Clover have exited states and cut back offerings. In April, in a real retrenching, Oscar hired on Mark Bertolini, late of Aetna, pushing back a founder to an operational role. 

This Editor, in a marketing assessment for a client two years ago, believed as many did that Insurtechs Were The Future. At the very least, their practices would be adopted by the legacy insurers: easy online enrollment, lower premiums, predictive analytics, machine learning, digital documentation, online health education via apps, outsourcing areas such as customer service 24/7 and even marketing. Even those like Cigna through their Ventures arm bet some millions on insurtechs redefining payer-member relationships and payer structure, gaining better margins at profitable lines of business like Medicare Advantage (MA) and special needs plans (SNPs). After all, these plans did have people with decades of experience at insurers in their management, didn’t they, and they’d know what NOT to do. (And that’s the problem with gazing into crystal balls…eyestrain.)

Marissa Plescia’s article in MedCityNews is an excellent review on why the insurtechs’ centre did not hold. Key points made from her dive among the experts:

  • They underpriced and took heavy losses to grow their member base
  • They didn’t understand that some ‘inefficiencies’ in the health insurance market exist for reasons–perhaps not good ones, like state mandates through their departments of banking and insurance, but they exist and cannot be ignored. [Ed.–health education for MA has to be provided or at least available in written form in most if not all states]. Compliance can’t be skirted or ignored. Were they paying attention to the compliance of their plans?
  • They didn’t pay provider claims efficiently or at all [the SSM lawsuit of Bright]–a nifty way to lose networks and be sued by states, very damaging if the network wasn’t all that competitive to begin with.
  • Contracted rates with providers weren’t competitive. Were they managing risk adjusting coding well? 
  • Did they leverage sales channels beyond online such as brokers and their provider network? What about customer service?
  • The plans were not sticky enough to create some loyalty to an infamously non-loyal product

The insurtechs perhaps expected the technology to do too much–and for legacy payers to not catch up to them if they weren’t already moving there. Another problem–they (largely) were.

Disruption–but not the Clayton Christensen definition. Their disruption so far has been financial and legal (insolvency, cracked SPACs, lawsuits, share prices below $1.00, and delistings pending), loss of coverage for members; unpaid providers. With this track record, investors will avoid this category beyond the legacies. States won’t approve new plans from new companies. (This Editor believes that there are some overlooked positives such as inclusion in marketing of specialized and underserved groups, as well as some forced streamlining of processes.) There will be survivors–Alignment Health, kind of a below-the-radar operation and an afterthought in funding at $375 million, is in a few states and is mentioned. It’s also hard to bet against Bertolini leading Oscar–except that this is maybe Act V for him and he’s had his share of bunts and misses (bunt–ActiveHealth Management, misses–Healthagen, CarePass, iTriage) before his contentious departure from CVS. But in this particular widening gyre, while more revelations will be at hand, innovative newcomers in health plans won’t be seen for a long time, if ever. If the saga of airline deregulation (1980-1995) is a model, payer disruption just took a fraction of that time.

Bright Health to exit insurance business, selling California plans to Molina for up to $600 million–contingent on surviving to 2024

July 6, 2023 | by

Over the slow July 4th holiday weeks, Bright Health perhaps staved off the inevitable. Maybe. Molina Healthcare agreed to pick up all of Bright Health’s California Medicare Advantage plans, Brand New Day and Central Health Plan. The deal: purchase 100% of the issued and outstanding capital stock of the two plans. Molina’s valuation is $510 million plus a $90 million tax benefit. It is contingent on the usual government approvals, of course–and Bright Health surviving into Q1 2024 for the closing.

For Bright, of the $600 million, approximately $500 million will eventually go to JP Morgan to pay off their outstanding and overdue credit facility with the remaining proceeds to be used towards liabilities from its discontinued ACA (Affordable Care Act-individual plan) insurance business. Bright also announced a waiver extension and amendment to its credit facility.

There is no mention of a bridge loan from Molina or any other lender. As Ari Gottlieb of A2 Strategy pointed out in the Fierce Healthcare article, Bright Health must absorb any and all losses from the California plans, their operations, and survive into Q1 2024 for the deal to execute. Given their current situation, that is still a mountain for Bright to climb. According to Bright’s release, they do not intend to comment or disclose further developments until the transaction is closed.

As of today, the Bright plans cover 125,000 members in 23 California counties. They include Medicare Advantage prescription drug plans (PDP), dual eligible special needs plans (D-SNP), and chronic conditions special needs plans (C-SNP). There is a 60% overlap with Molina’s Medicaid footprint in California.

Molina using ‘on hand’ funds, and the deal depends on Bright Health staying solvent into 2024. In Molina’s release, they stated that “Molina intends to fund the purchase with available funds including cash on hand. The transaction is subject to federal and state regulatory approvals, the solvency and continued operation as a going concern of Bright Health Group throughout the pre-closing period, and other closing conditions. It is expected to close in the first quarter of 2024.” Molina is atypical–it is the largest ‘pure’ health plan group serving over 5 million members. Unlike UHG, CVS Health, and Cigna, it long ago shed healthcare-related service businesses to concentrate on plans and plans only. The deal adds about $1 to their $5.50 share price.

What’s left at Bright Health Group is NeueHealth, also called their Consumer Care Delivery business. That will now be part of a provider agreement with Molina to serve Medicaid and ACA Marketplace populations in Florida and Texas starting in 2024. Bright Health stopped nearly all plans at the end of 2022 and will cease coverage of members in their Texas ACA plans at the end of July.   Healthcare Finance, Becker’s   More on Bright Health’s health status here

Ireland’s Clare Island as multimodal rural telehealth and telemonitoring testbed

June 30, 2023 | by

A ‘feel-good’ story figuratively and literally. Clare Island is an island off the west Irish coast in the Atlantic. It is located at the entrance to Clew Bay, part of County Mayo, with a lighthouse and abbey ruins that are tourist attractions. Its connection to the mainland is a 20-minute ferry service to Louisburgh on the mainland, generally adequate for its 138 people scattered in its 5 x 3-mile terrain. Galway, the largest city in the area, is nearly two hours south, and Westport is four hours. This makes it difficult when islanders need healthcare beyond their single small medical clinic with two resident nurses and weekly visiting GP.

The islanders are now part of a Digital Health Project designed by the University of Galway that can best be described as multimodal. The university’s Health Innovation via Engineering (HIVE) laboratory has been working on rural health projects at least since 2019 since the HIVE lab delivered via drone insulin from Galway to Inis Mór in the Aran Islands. On Clare Island, the HIVE lab has worked with islanders to connect them to better healthcare access on and off island, and also with each other.

  • Enabling video consultations with remote physiological monitoring, including blood pressure, weight, and blood glucose. This connects to clinics on the mainland, freeing up local clinic time. Irish company MyPatientSpace provides the platform.
  • The RPM for islanders is augmented by an artificial intelligence algorithm that allocates clinic slots if data readings for blood pressure or glucose readings indicate the need for an in-person clinic visit.
  • A recent demonstration showed how a drone could deliver an epipen to the local clinic, while MADRA the robot (Medical Autonomous Droid Remote Assistance–above left) scaled mountainous terrain to deliver first aid.

A private 5G wireless system was installed to facilitate video and RPM, as well as to connect a number of isolated islanders and their families on the mainland with always-on video, primarily to counter loneliness. Withings has also equipped islanders with Pulse HR watches. These enable self-monitoring both via the watch and through a supplied tablet. Over 80 islanders, aged from 18 to 90, have already signed up to the project, which began in September 2022.

The project is funded through a public-private partnership led by technology company Cisco and Cúram (Merative) software, the Science Foundation of Ireland Research Centre for Medical Devices at the University of Galway, in partnership with Ireland’s Health Service Executive (HSE).  The €1 million remote health project is intended to be a template for other rural areas in Ireland. The head of the project is Professor Derek O’Keefe, a physicianeer (physician and engineer) with resident Dr. Ian McCabe as project manager. His grandmother moved to Clare Island in 1939 as an operator connecting the island to the mainland via radioed Morse Code. Irish Times, RTÉ, University of Galway news archive (2022), EuroPMC paper 

Photo credit: Kevin Johnson/Clare Island Home Health Project. ‘Madra’ the robot (center). Jack Pinder (Public Patient Involvement), Dr Jennifer Doran (Project Physician), Dr. Ian McCabe (Project Manager), Prof. Derek O Keeffe (Project Lead), and Hemendra Worlikar (Project Engineer) 

FTC, DOJ float enhanced information requirements for HSR premerger notification filing process–what will be M&A effects?

June 29, 2023 | by

FTC, DOJ are now coming after M&A–and you thought they were tough before? New information disclosure requirements proposed by the US Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division for mergers and acquisitions that fall under the Hart-Scott-Rodino Act (HSR) may put a damper on an already stagnant business area. On Tuesday 27 June, FTC, notably taking the lead with the concurrence of DOJ, released multiple proposed changes to the premerger notification filing process, the most extensive since they were first published in 1978 after HSR was passed in 1976. HSR premerger notification is required for transactions that exceed the threshold currently set at $111.4 million.

These changes will be formally submitted for the standard 60-day public review and comment later this week in the Federal Register. Changes are typically made after that time before final rules are published, a process that may take months.

From FTC’s release, the proposed changes fall under these areas.

  • Provision of details about transaction rationale and details surrounding investment vehicles or corporate relationships.
  • Provision of information related to products or services in both horizontal products and services, and non-horizontal business relationships such as supply agreements.
  • Provision of projected revenue streams, transactional analyses and internal documents describing market conditions, and structure of entities involved such as private equity investments.
  • Provision of details regarding previous acquisitions.
  • Disclosure of information that screens for labor market issues by classifying employees based on current Standard Occupational Classification system categories.
  • These proposed changes also address Congressional concerns that subsidies from foreign entities of concern [North Korea, China, Russia, and Iran–Ed.] can distort the competitive process or otherwise change the business strategies of a subsidized firm in ways that undermine competition following an acquisition.

The National Law Review goes into far more detail on exactly what additional information will be required. This includes disclosure of what foreign jurisdictions are reviewing the deal. The rationale for the changes is that transactions have become far more complex since the original requirements were set and that the additional information will “more effectively and efficiently screen transactions for potential competition issues within the initial waiting period, which is typically 30 days.” According to FierceHealthcare, the FTC said it expects the proposed changes will take merging entities 144 hours per filing, up from the current 37-hour average. It’s clear that the mountain of information already needed to file a pre-merger notification and the time needed to gather such information will be much higher, perhaps to months and reveal far more than perhaps some companies want to disclose.

For those surprised that FTC is taking the lead on this, this once-sleepy agency woke up late last year in a heckuva bad humor and is now (more…)

Embedding ECG sensors to a supermarket cart (trolley) handle as ‘first-line’ screening for atrial fibrillation

June 28, 2023 | by

Not coming soon to a supermarket near you, but an interesting test at Sainsbury’s in Liverpool. The 2022 study by a team from Liverpool John Moores University (LJMU) was designed to move atrial fibrillation (AF) screening closer to everyday routines. At least one weekly routine is to go to the supermarket.

In the ‘SHOPS-AF’ study first/proof-of-concept phase designed in 2022, the LJMU team installed a single-lead ECG designed by them, the MyDiagnostick, into the cart (US)/trolley (UK) handles at four local Sainsbury’s with pharmacies. This idea is similar to the pulse monitor handle that you find in most sport treadmills. The study over the past two months recruited 2,155 adult shoppers who used the carts and placed hands on the equipped handles over the 60-second monitoring time required to get an accurate ECG. About 220 were ‘red-lighted’–an irregular heartbeat was picked up by the sensor in the handle that alerted the in-store pharmacist, who then took a manual pulse measurement and a static control sensor reading. Of the 220, it confirmed AF in 59 individuals–26%. 20 already knew they had AF, meaning that 39 did not know. The average age of the 59 participants with atrial fibrillation was 74 years and 43% were women. To the positives, the pharmacist offered a cardiologist consultation referral.

The results suggested to the LJMU team that results in phase 1 were not very accurate, and the second phase required a more accurate diagnostic tool. Accessibility and acceptability were favorable. Ian Jones, one of the researchers and a professor at LJMU said, “Nearly two-thirds of the shoppers we approached were happy to use a trolley, and the vast majority of those who declined were in a rush rather than wary of being monitored.” The second phase of the study would also give a designated spot to place the hands continously and halve the time of the ECG to 30 seconds based on ESC (European Society of Cardiology) guidelines.

The results above were presented at the ACNAP (Association of Cardiovascular Nursing & Allied Professions) Congress 2023 in Edinburgh on 23 June (session listing). European Society of Cardiology (ESC) release, Interesting Engineering, Manchester Evening News,    Study proposals: abstract and full text in PubMed.

Mid-week roundup: Optum buying Amedisys home care for $3.3B; Clover Health settles 7 shareholder lawsuits around SPAC non-disclosures; Walgreens cuts 2023 outlook, stock plummets 11%

June 28, 2023 | by

UnitedHealth Group expands home health again, aces out Option Care Health in all-cash deal. Amedisys had previously accepted Option Care’s all-stock deal in May valued at $97.38 per share. Optum’s offer is at $101 per share in cash, a dollar higher than its previous offer, creating a valuation for the company at $3.7 billion. Amedisys will add to UHG’s $5.4 billion acquisition of the LHC Group in February, including the hospital-at-home market from its acquisition of Contessa Health for $250 million in 2021. 

Option Care is a public (Nasdaq: OPCH) post-acute and home infusion care company for which Amedisys in-home care delivery would have been an exceptional fit. It was last heard from in August making a run at Signify Health for home health and ACO providers. At that time, the not-well-known company was discovered to have some impressive backing from Goldman Sachs. Walgreens Boots Alliance also backed the company but cut its stake in March and sold the rest for $330 million earlier this month. Option Care will receive a termination fee of $106 million. Healthcare Dive, FierceHealthcare

Insurtech Clover Health settles seven lawsuits around its 2021 SPAC. Clover, with Medicare Advantage plans in eight states, went public in January 2021 at the very peak of ‘blank check’-dom. Almost immediately, after an explosive report by Hindenburg Research that revealed that the Department of Justice (DOJ) had been investigating the company on investor relationships and business practices starting in fall 2020 [TTA 9 Feb 2021], there were multiple lawsuits filed by shareholders (derivative litigation) over not revealing this material fact. Shares took the expected dive from their intro of $15.90 to today’s $0.85. The seven derivative lawsuits were in Delaware, New York, and Tennessee courts and are being settled without payment. According to Clover’s release, “the defendants in the derivative lawsuits will receive customary releases and the Company will implement a suite of corporate governance enhancements. The settlement does not involve any monetary payment, other than payment of an award of fees and expenses to plaintiffs’ counsel, which has not yet been set. The defendants have denied all wrongdoing and have entered into this settlement to avoid the burden, expense, and distraction of ongoing litigation.” In April, Clover settled a securities class action in which the class will receive $22 million, $19.5 million paid by the company’s insurance. Mobihealthnews

Walgreens Boots Alliance missed Wall Street expectations and lowered its outlook for the year. In their Q3, net earnings fell 59% to $118 million, mostly due to lower operating income. Their topline was healthy–$35.4 billion, up 9% year over year–driven by the US health provider segment (VillageMD, Summit Health, and CityMD plus at-home care provider CareCentrix and specialty pharmacy Shields Health Solutions) which was up 22%. However, both retail consumer sales and CityMD underperformed due to the absence of COVID and a mild respiratory illness winter. Together with VillageMD’s clinic expansions, this led to an adjusted operating loss of $172 million for US Healthcare. WBA cut its earnings guidance for the year to $4.00 to $4.05 per share from its previous outlook of $4.45 to $4.65. Walgreens has been selling off businesses or investments that are peripheral to providing healthcare services, such as its investment in Option Care (above). FierceHealthcare, Healthcare Dive

Amazon Clinic delays 50-state telehealth rollout due to Federal data privacy, HIPAA concerns on user registration, PHI–is it a warning?

June 27, 2023 | by

Amazon delaying Amazon Clinic national rollout from today (27 June) to 19 July. Amazon Clinic, which debuted last November as an asynchronous, message-based telehealth consult or prescription renewal referral platform [TTA 16 Nov 2022], has run once again into Federal scrutiny. This time, it’s two Senators from New England–the well-known Elizabeth Warren (D-MA) and the little-known Peter Welch (D-VT)–who are poking Amazon with the stick of whether sensitive health and personal data are flowing into Amazon’s other databases.

Their letter to CEO Andy Jassy was fair warning that, as this Editor predicted last February (see the list of open issues) after the One Medical buy closed to high-fives all around, the government is nowhere near finished with scrutinizing Amazon and how personal data, including health data, flows between their units and is monetized. 

In a two-page letter dated 16 June based on reporting in the Washington Post (100% owned by Amazon’s 12.6% shareholder and controller, Jeff Bezos–the irony runs deep here), the two senators believe that they have caught Amazon but good–and with some of the goods. 

  • Users of the Amazon Clinic service are asked, in the registration form, to authorize the “use and disclosure of protected health information.” They are told that agreement to this gives Amazon access to the “complete patient file” and that this information “may be re-disclosed,” after which it will “no longer be protected by HIPAA”. By agreeing to this, users waive any HIPAA personal health information protections.
  • If the user declines to agree, they are redirected and unable to complete Amazon Clinic registration and denied care. HIPAA regulations specifically prohibit conditioning care on agreement to disclose patient information. (This is known by anyone who has taken required training or certification on HIPAA when working for health plans or other regulated healthcare providers including RPM and telehealth vendors.)

The letter raises the sensible, usual questions on why personal data is being collected and what Amazon is doing with it. For instance, it requests responses on how patient data is used by Amazon, what data is shared with third-party entities, and what data is used in any analytics or algorithms. It cites as a non-compliance example the $1.5 million that GoodRx paid in an FTC penalty on their past Meta Pixel usage for ad tracking. (Interestingly avoiding the $7.5 million Teladoc paid for similar ad tracker misuse by BetterHelp.)

The $30/visit service has been available in 33 states since last year and currently through asynchronous messaging, provides care for minor conditions such as UTIs, herpes, and skin infections. The expansion will cover all 50 states and add synchronous video telehealth.

One would think that with billions on the line with One Medical, Amazon would be more cautious about poking the Antitrust Bear. They have already been put on notice by the Federal Trade Commission, the Department of Justice (DOJ), Congress, and multiple states. For Amazon Clinic, requiring individuals to waive their right to protect their PHI in registering for the service is downright brazen. How this got past their legal and compliance departments boggles the mind. Why Amazon is not ‘hiving off’ PHI collected through this small service is another question. Doing so would show to FTC and DOJ that Amazon can play by the rules. Instead, it confirms the widely held belief of those in healthcare that Amazon culturally cannot deal with the restrictions that come with the territory. Are they deliberately ‘playing chicken’ with the Feds? Pollo loco? This up-to-the-line behavior tends not to end well, as the telemental health providers that over-prescribed controlled substances found out.  POLITICO, The Hill, mHealth Intelligence