Mid-week roundup: Pear Therapeutics’ Chapter 11; Workit Health pinkslips 100; Outcome Health principals convicted of $1B fraud

April 13, 2023 | by

Pear Therapeutics ran out of runway and is in the drink. On Friday, CEO Corey McCann announced in a post on LinkedIn that the company filed for Chapter 11 bankruptcy and has laid off 170 employees, including him. Dr. McCann will continue on the board and as a compensated consultant, while chief operating and financial officer Christopher D.T. Guiffre will remain through the Chapter 11 process along with about 15 employees to manage the asset sale process, limited operations, and transition on behalf of the debtors.

According to their Securities & Exchange Commission (SEC) 8-K filing, terminated employees were paid through April 7, 2023, received two weeks’ salary as severance, and were asked to sign a separation agreement, which includes a general release of claims against the company resulting in a $1.2 million charge.

Only last month, Pear announced that it was exploring ‘strategic alternatives’ including a sale or being acquired. According to the release, the debtors are still seeking a sale of the whole business or to part out specific assets. Now such sales and the bidding process must be approved by the US Bankruptcy Court in Delaware. Release  The sale is anticipated for May.

Another behavioral health casualty in a model that proved unworkable. Pear developed and marketed Prescription Digital Therapeutics (PDTs) concentrated in behavioral health and substance use including opioid use disorder. While these seemed to be accepted by providers, patients, and some payers, payment didn’t materialize from the last, according to Dr. McCann’s LinkedIn post. According to Forbes, “There were more than 45,000 prescriptions written for Pear’s products in 2022, but only around half were filled and the company was able to collect payment for only 41% of those.” The other factors were price and reimbursement. Pear’s products averaged $1,195, which took them out of private payment. Only a limited number of commercial insurers and Medicaid plans would pay for them. Medicare did not. In 2022, Pear reported an operating loss of $123.4 million on $12.7 million in revenue, which doesn’t fly in 2023.

This is quite a change from the heady days of 2021, when Pear went public on Nasdaq via a SPAC in December, raising about $175 million in additional funding. A sign of trouble was that the raise was far less than the anticipated $400 million. At that time, Pear was valued at about $1.6 billion. Prior to the SPAC, they had raised about $284 million through Series D funding (Crunchbase)  Mobihealthnews, MedCityNews

Another virtual behavioral health company facing loss of business is Workit Health, This is due to the Drug Enforcement Administration’s (DEA) planned return to the in-person visit requirement for Schedule III-V non-narcotic controlled medications. Workit is a virtual therapy/treatment company for alcohol, stimulant, and opioid abuse, a crowded field. The company, rationally, is cutting 100 staff in anticipation of a drop in activity. To date, it has over $130 million in funding through a Series C, not a lot.  Behavioral Health Business  Also TTA 15 March on the DEA rule debate

Outcome Health–the other late 2010’s scandal after Theranos–had its denouement in a Federal court in Chicago yesterday (11 April). Convicted of $1 billion in fraud were:

  • Rishi Shah, 37, the co-founder and former CEO of Outcome Health: five counts of mail fraud, 10 counts of wire fraud, two counts of bank fraud, and two counts of money laundering
  • Shradha Agarwal, 37, the former president of Outcome: five counts of mail fraud, eight counts of wire fraud, and two counts of bank fraud
  • Brad Purdy, 33, former chief operating officer and chief financial officer: five counts of mail fraud, five counts of wire fraud, two counts of bank fraud, and one count of false statements to a financial institution

Each count carries specific maximums of between 10 to 30 years which are usually served concurrently. Sentencing for the three executives and for three other employees who had pleaded guilty to lesser charges will be at a date to be determined. SEC charges are pending against the executives, along with Ashik Desai, former chief growth officer, who testified against his former bosses in the criminal trial and was one of the three who pleaded guilty.

Outcome delivered patient education on screens in doctor’s offices and circa 2016 was one of the hottest companies in Chicago. During the pandemic, it merged with PatientPoint. Their problem was inflating their ad delivery numbers to their sponsors such as Pfizer, Biogen, and Sanofi. This puffery included third-party analyses of the ads’ effectiveness, e.g. for prescriptions written. This was exposed by the Wall Street Journal in October 2017. Advertiser makegoods and clawbacks from lenders in the millions resulted. TTA 29 Jan 2018   But the executive crew above plus the other three employees concealed the under-delivery problem, faked revenue numbers, and presented them for debt financing plus equity funding in 2016-17 that rewarded them richly–thus the Federal fraud charges. Mobihealthnews, FierceHealthcare, DOJ release  TTA’s coverage from that time here

Let’s hope for more cheerful news out of HIMSS next week.

The Theranos Two lose their fight for freedom on appeal as Federal prison surrender dates near

April 12, 2023 | by

It was not a happy Easter weekend for either Elizabeth Holmes or Sunny Balwani. 

Late on Monday, Judge Edward Davila of the Federal Court, Northern District of California, ruled that Elizabeth Holmes would not be able to remain free on bail while appealing her trial and sentence. In his 11-page ruling, he dismissed the defense claims that evidence around Theranos’ technology was not presented to the jury and affirmed that the key charges were related to financial fraud, the company’s financial status, and the false claim that the technology was validated by pharmaceutical companies. “Whether the jury heard more or less evidence that tended to show the accuracy and reliability of Theranos technology does not diminish the evidence the jury heard of other misrepresentations Ms. Holmes had made to investors.” He also noted that her defense had not introduced anything to make a reversal of the decision or a new trial likely, such as new evidence.

It’s anticipated that Holmes’ defense will quickly file an appeal of Judge Davila’s decision to the 9th Circuit Court of Appeals. However, this is the same court that denied Sunny Balwani’s same appeal last Friday. Holmes’ surrender to Federal prison is scheduled for 2pm on 27 April, a little over two weeks from now. She will be serving her 11+ year sentence at the Federal prison in Bryan, Texas unless the Bureau of Prisons changes this recommendation to another Federal prison. 

Her defense has filed multiple appeals of Judge Davila’s rulings and the jury’s guilty verdict on four counts of fraud of 11 on various grounds, including errors made during the trial [TTA 15 Dec 22], with the goal of securing a new trial. Those appeals are with the 9th Circuit and could go on for years. What it now looks like is that Holmes will be serving her time in Texas while these appeals go through, not free or under house arrest. Serving time will not be easy for her in a cell with three other women and duties such as stuffing bag lunches. Mercury News (paywalled), CBS Bay Area, The Hill, TechCrunch

Sunny Balwani had a long Good Friday, receiving the bad news late Thursday that the 9th Circuit Court of Appeals denied his bid to remain free while on appeal. The court denied the appeal on the basis that Balwani had not raised any substantial questions of law or new evidence resulting in a reversal on some of the charges that would shorten his sentence. He was found guilty on all 12 counts and was sentenced to 12 years and nine months. Balwani’s lawyers now have requested from Judge Davila a new surrender date of 20 April, stating that their client needs time to get his “affairs in order”. His original surrender date was 16 March, delayed by the appeal. Where Balwani will serve his sentence is still up in the air. Judge Davila had recommended the Federal facility at Lompoc in Santa Barbara County, but the Bureau of Prisons recommended the Atlanta penitentiary which has been dogged by years of scandals, security lapses, and prisoner abuse allegations. His defense is appealing this assignment. As of now, Balwani will surrender to Terminal Island near San Pedro in Southern California in a little over a week. Mercury News (paywalled), CBS News Bay Area 

Some reports have indicated that Judge Davila has finished with all his rulings, but what is still not finalized is the restitution both Holmes and Balwani must make to investors. Those rulings are scheduled for this month. The amounts being debated are largely theoretical as neither Holmes nor Balwani has much in the way of assets left. TTA 22 March

When ‘the centre cannot hold’: three board members exit at Cano Health, failure looms at Bright Health Group

April 7, 2023 | by

Surely some revelation is at hand? The first: the high-profile board troubles at primary care provider Cano Health. Last Friday, three directors resigned loudly from the board: Barry Sternlicht, Elliot Cooperstone, and Lewis Gold. Sternlicht, the chairman of Starwood Capital Group and for some years the CEO of Starwood Hotels in the 1990s, is a ‘name’ real estate and private investor. The other two are hardly slouches: Cooperstone is founder and managing partner of private equity firm InTandem Capital Partners; Gold is co-founder and board chairman of behavioral health company Advanced Recovery Systems. They resigned as a group due to differences with the CEO and management. 

The trio filed a 13-D with the Securities and Exchange Commission as a partnership to change things, “including, but not limited to, the replacement of the CEO, sale of non-core assets and enhancement of shareholder value.” Sternlicht’s release detailed their grievances with CEO Marlow Hernandez, including dubious transactions with a Miami medical claims recovery company, MSP Recovery (also known as LifeWallet), but mainly around the burn-through of the $800 million PIPE raised along with the June 2021 SPAC via Sternlicht’s JAWS Acquisition Corp.–an eye-watering total of $1.4 billion for a valuation at that time of $4.4 billion. From his release, Sternlicht apparently could not get the time of day from Hernandez. “I have never witnessed such poor corporate governance at any company, let alone a public company, and I have been involved in at least nine and served as chairman or CEO of six.”

Certainly, there is a case around shareholder value. The stock has cracked by over 90% from the initial price of $15. Sternlicht also had $50 million reasons to be mad as an investor of that amount in the PIPE. Cano Health called his “method of resignation particularly reckless.” But one wonders what Cano’s physicians are thinking, as well as the health plans with which they work, when three high-profile board members bolt the company, one of them with a stellar track record and some fame, with prejudice. Yet the majority of the board members were seemingly fine with how the company was run.

Last October, Cano, a 4,000 employee value-based primary care provider to mainly underserved markets, had its tires kicked by CVS Health [TTA 21 Oct 22] but the deal never got beyond discussions, and Humana, which has a right-of-first-refusal, made no moves. Share price fell from that time from just above $8 to today’s close of $1.25 on the NYSE. The time may be right for a payer or a provider group to make a cheap pickup, but not if the company has intractable troubles–and now there is a deep-pocketed rival. MedCityNews, New Times (Miami)  The New Times article digs deeper into the MSP Recovery relationship and CEO John Ruiz. MSP Recovery specializes in collecting from primary insurers that don’t pay and put the burden on commercial or public plans like Medicare or Medicaid. As of December 2022, the company owed Cano roughly $60 million in receivables, not a drop in their bucket.

Now to Bright Health Group, an insurtech which may well be on the brink of utter failure and the dubious distinction of being one of the largest failures of a Minnesota business, if their local media (Star-Tribune, unfortunately tightly paywalled) is accurate. Reports one month ago were dire: investors were told that Bright was facing credit insolvency, having run through $350 million in revolving credit. It also violated a liquidity covenant and desperately needed $300 million to cover it by end of April.  This did not stop the company from paying out about $4 million in bonuses to its management team–outrageously at 100%. Two of the bonuses are to ex-company members. Meanwhile, hundreds of their once 2,800+ employee group are being discharged.

18 months ago, Bright Health seemed to be the most promising insurtech out there, with a healthy Medicare Advantage (MA) plan base, family and individual plans, substantial growth, acquisitions of Zipnosis (‘white label’ telehealth triage for health systems), development of the NeueHealth value-based care provider management network, and a blue-chip management group. But it also lost $1.5 billion in 2022 on top of $1.2 billion in 2021 and has $1.2 billion in debt. Bright exited individual and family plans in six states plus cut back MA expansion plans and will no longer offer individual, family, or Medicare Advantage plans outside of California.

With Bright Health shares down to $0.20 and delisting looming, Bright asked shareholders to attend a 4 May meeting to approve a reverse stock switch “at a ratio of not less than 1-for-15 and not greater than 1-for-80.” It’s just a small problem of the share price….

Far more disastrously for Bright, state departments of banking and insurance are taking action. Tennessee and Florida placed the company under supervision; reportedly Illinois is considering the same. Texas may precipitate matters. According to strategic analyst Ari Gottlieb, the Texas Department of Insurance is preparing to place Bright Health’s Texas subsidiary into receivership. Such an action will constitute an immediate Event of Default under Bright’s Credit Agreement. Bright can then choose default–or seek bankruptcy protection.

Shockingly, over a million Americans have had to find a new health plan due to what is happening at Bright. Now, where’s the Barry Sternlicht they need on the board to take action? Are the directors from investors like Bessemer and New Enterprise Associates in cloud-cuckoo land with management?

FierceHealthcare. Both Fierce’s and this article quote liberally from Ari Gottlieb’s posts on LinkedIn, the most incisive coverage this Editor has seen so far: Since Bright Health’s executive compensation approach is best described as pay-for-failure from one month ago, Bright Health’s $4 million pay-for-failure cash bonuses… from two weeks ago, and from earlier this week, The Texas Department of Insurance is preparing for anticipated litigation…  Others are listed in his feed here. 

TTA Bright: THINKMD, Save the Children partner for digital child health assessment

April 6, 2023 | by

Putting digital diagnostics in the pocket of healthcare workers, worldwide. Isn’t a story that is bright and cheerful, about doing something good, needed right now? THINKMD is a digital clinical intelligence platform that uses machine learning (ML) to analyze key clinical data and to provide a dynamic evaluation similar to a physician’s assessment. It uses a web app that works offline as well. What THINKMD does is to basically transfer a knowledge base plus how a physician would logically approach the medical situation, followed by a care plan, to a health worker without those advanced skills in a remote area. Product demo

THINKMD already works with Save the Children in Bangladesh, Indonesia, and Kenya. Save the Children is a well-known, century-old international organization that is on the ground in 120 countries working for the welfare and health of children. Since 2017, in the existing partnership, they have achieved over 366,000 high-quality clinical assessments performed by over 400 frontline health workers. The agreement is to license THINKMD’s platform to Save the Children in order to expand the existing partnership between the organizations, enabling adoption and scaling of THINKMD’s platform to improve the health of children globally. It is the first such agreement for Save the Children. THINKMD is currently being used in a total of 10 countries. Hat tip to Nick Olsson of ‘We Are Explorers’. THINKMD release plus a blog post by co-founder Dr. Barry Finette about the agreement

Digital health’s funding time machine dialed back to 2019–before the SVB implosion: Rock Health

April 5, 2023 | by

Rock Health’s 2023 Q1 report tries to put a good face on an implosion. The good: Q1 followed their Retro Time projection; the 2020-first half 2022 bubble was over, but digital health was snapping back to 2019 funding levels. The bad: while things were snapping back, Silicon Valley Bank (SVB), the favored bank of most Silicon Valley VCs and the companies they funded, imploded due to mismanagement.  This Editor would add two corollary nervous-making bank failures on SVB’s heels: Signature Bank (some East Coast healthcare, but too many uninsured deposits and a lot in crypto, taken over by Flagstar Bank/NYCB) and Credit Suisse (pending a Swiss government shotgun marriage with UBS). Add another unnecessary Federal Reserve rate hike to kill growth and the end of the pandemic PHE regulation suspensions that fueled telemental health, plus inflation at about 8-10%…. Like that 1949 Studebaker Starlight coupe, are we coming, or going?

Sidebar: This Editor has heard from other sources (not Rock Health) that ‘dry powder’ (funds) are low for VCs and barely existent on the provider (health system) side. Their own investors, now leery, are cutting back on their exposure. Where there is dry powder, fintech and biopharma are seen as better bets. VCs sense the bottom hasn’t yet been found in digital health valuations. Payers like UHG and CVS are making big deals but not in digital health. If they are, they are small ‘pocket lint’ pickups. Private equity? Largely kicking tires. Family offices and high net worth individuals are generally staying out of the healthcare picture unless there are other compelling (usually personal) reasons to invest. (Theranos still hangs heavy over these last two funders.)

Back to Rock Health, total Q1 funding was $3.4 billion across 132 deals. Yet only six mega deals (over $100 million) accounted for 40% of the funding early in the quarter: Monogram Health (in-home care, $375M), ShiftKey (PRN nurse scheduling, $300M), Paradigm (drug trials, $203M), ShiftMed (another healthcare workforce scheduler, $200M), Gravie (broker benefit solution, $179M) and Vytalize Health (MSO for providers, $100M). To call these ‘mega deals’ is an overstatement. In 2021 or even in 2022 these would have been seen as outstanding Series A and decent Series B-D+ raises. In 2021, the top mega deals crested $500 million.

The remaining 126 sliced up the remainder ($2.043 billion) of the pie, with a median value of only $16 million per deal. Throwing in the six ‘mega deals’, the overall median increased to $25.9 million. That tracks closely with 2019/2022, allowing for some inflation. Comparisons with full year medians: 2019–$19.8 million, 2020–$31.9 million,  2021–$39.9 million, 2022–$26.7 million. 

The IPO window remains closed tight. No easy exits for investors in late-stage companies. Those that went public during the bubble, with few exceptions, have cracked. From the report: “Digital health stocks started 2023 trading almost 50% lower than they did at the start of 2021, pushing some recently-exited players like Pear Therapeutics to explore going private.” (Under $1.00 per share, Pear is currently exploring a sale in toto, in parts, or merger.) According to this chart shown by Arundhati Parmar, MedCity News’ editor-in-chief, during his VC panel at ViVE [TTA 31 Mar], only two of 17 publicly traded digital health companies that went public have share prices in excess of their IPO: Progyny (also profitable) and HealthEquity. Many are near or below the critical $1.00 mark. (This chart does not include Babylon Health which is trading around $5 and reorganizing to become a US company.) He also pointed out that only two of the 17 are profitable.

These deals now also come with strings attached: valuation adjustments and operational revamps which usually mean staff layoffs, but can also be operational in closing/selling off lines of business. Growth is not the key metric anymore–profitability or a road to it is. Recent examples are Komodo Health and Carbon Health, where their substantial fundings ($200 and $100 million respectively) were tied to jettisoning LOB and staff. 

Last but certainly not least in putting a damper on digital health funding and growth is the end of the prolonged pandemic PHE. This relaxed rules for telehealth platforms around HIPAA compliance and also in mental health prescribing without in-person visits of DEA-controlled substances in Schedule 2 and 3-V. This puts a definite halt to telemental health’s expansion, fueled by drug prescriptions and none-too-fussy signups (see: Cerebral) but also too many virtual players in one niche (Mindstrong ceasing business with remaining assets bought out by SonderMind). New telehealth platforms largely complied with HIPAA but penalties for non-compliance are returning and platforms have to secure data. FTC is an added factor with its own privacy microscope.

Even the eternally optimistic Rock Health likens 2023 in digital health to a stormy sea with “turbulent waters’ resulting in “patched up ships and resilient mindsets.” Now that is a stunning mix of metaphors. Your Editor chooses a classic phrase penned by Joseph L. Mankiewicz and uttered with flair by Bette Davis in ‘All About Eve‘: “Fasten your seatbelts; it’s going to be a bumpy night.” And it’s only Q1. Also Mobihealthnews

ViVE post-script: VC panel opines in midst of digital health’s new reality (depression?), and extra ViVE from an attendee

March 31, 2023 | by

Not everything at ViVE this week was fun and music. The organizers included a timely panel discussion with four VCs exploring the crash of digital health funding, enterprises, and whither the fall of the VCs’ favorite bank, Silicon Valley Bank (SVB). It was moderated by MedCityNews‘ editor-in-chief Arundhati Parmar, who published an interview with Zane Burke, late of Livongo and now CEO of Quantum Health, pointedly asking whether Livongo’s sale to Teladoc was a smart one given the troubling post-script [TTA 3 Feb]. The participants — Lee Shapiro, managing partner at 7wireVentures, Emily Melton, managing partner at Threshold Ventures, Richard Mulry, president and CEO of Northwell Holdings, and Ambar Bhattacharyya, managing partner of Maverick Ventures–evidently weren’t given a diet of softballs, either. 

Parmar started with a quote from a recent article in another publication: “The run on SVB was a textbook result of the myopia and egoism that has swallowed the venture capital industry whole.” This refers to the advice that many VCs gave their invested companies–get your money out now. That was the same invested money that the VCs insisted be in SVB, in accounts such as payables and receivables. At least these VCs seemed to realize that now, somewhat obliquely. Shapiro called it a ‘tragedy of the commons’, B-school terminology that refers to too many people using a common resource ruining it because no one is responsible for it. More to the point, he pointed to some in the VC ‘community’ advising their companies to move their money out of SVB, creating the self-fulfilling prophecy of a run on the bank killing it. Melton pointed to social media and everyone rushing to take care of themselves without reflecting on the consequences of their actions.

The next quote and chart that Parmar presented had to do with that Old Devil Profitability in companies that IPO’d. Only two of 17 are profitable and they’ll be a surprise–Privia Health (VBC models for providers), and Progyny (riding the fertility and benefits bubble). Rather abashedly, the panel admitted to valuation frothiness leading to over-valuation, and a new sobriety and realism leading to (drum roll) an emphasis on profitability. Bhattacharyya noted that VCs were pushing growth up until last year. Now, it’s value, ruled by the “Rule of 40” –combined growth rate and profit margin that exceeds 40%, even better cash flow positive, which are tough bars to achieve for all but the most well-positioned (and fortunate) companies. “That’s now the playbook. So we’ve all transitioned to that.” A defensive playbook, in Shapiro’s view. (A close to impossible one that may stifle innovation, in this Editor’s view, though bootstrapped companies have always earned her admiration.)

To that point, Melton, noted that now more than ever, banking institutions like SVB and similar institutions need to work with founders and VCs to bring innovations to market. “One of the things I’m very fearful of is that we get into an environment where people are risked off and retreat right when we need people to be actually leaning in more now than ever.” Larger banks will be happy to take the money–according to Kruze Consulting, an accounting firm that focuses on startups, about half of its clients that recently changed banks moved to JPMorgan Chase–but will a JPM take up ongoing startup risk? 

Does this begin to feel like Catch-22? (Apologies to Joseph Heller) Or health tech back around 2006-2010?  

One comment towards the end hit home for this Editor, having seen it way up close. Too many founders 1) have an idealistic view of the business they started and can’t separate from it, and 2) there’s a time to exit stage left and do something else with your life. One company that may pull it off in its changeover of CEOs is Oscar Health. I’d add that no CEO should be in that seat for more than 5 years, even in well-established, doing-well companies–much less coming close to dying in place as CEO after 25 years as happened recently at one large, publicly traded payer. Very important: every company should have a succession/coverage plan operative from Day 1, because Stuff Happens. The full article in MedCityNews here. Another shorter take, same panel, in Mobihealthnews.

The next chapter for SVB is that after a Federal bailout (and the realization that the SF Federal Reserve was wearing blinders when it came to watchdogging the bank’s health and solvency), it was mostly sold this past week to First Citizens Bank & Trust Company, a regional bank from Raleigh, North Carolina. SVB’s UK holdings were bought much earlier by HSBC. Also up for sale: Leerink Partners, an investment banker for health care and life sciences companies, that was rebranded as SVB Securities. Jeff Leerink, the founder who still heads it, is trying to get it back through a management buyout. WBUR

A more ViVEcious view of the meeting is over at HISTalk, The most substantive sessions this attendee heard were the opening Tuesday by Micky Tripathi, the National Coordinator for HIT at the Office of the National Coordinator (ONC) for Health Information Technology, and a presentation by Shiv Rao (Abridge) and Joon Lee (UPMC) on generative AI. The downside was that most of the Tuesday presentations came off like walking ads, the CHIME track was separate with some members-only, and that exhibitors got little value by staying over Wednesday as the crowd vanished to 20%. Money quote: “ViVE shoots for a vibe of youth, energy, innovation, and fun in its branding, themes, opening remarks, and evening entertainment. Sounds great until you remember that your ticket cost nearly $3,000.” Ouch! That stings! Well, nobody’s perfect. A successful 2023 means that ViVE will be landing in Los Angeles 25-28 February 2024. For many, it’s on to HIMSS23 in a couple of weeks.

Is Oracle Cerner’s VA EHRM implementation going to be tied up? Senate Veterans Affairs Committee says yes–with two oncoming trains (bills).

March 31, 2023 | by

Both Republican and Democrat Senators proposed separate bills on Wednesday with the same purpose–fix the implementation of Oracle Cerner’s EHR in the VA and increase oversight. Members of the Senate Committee on Veterans’ Affairs want to put the brakes on the entire implementation process until at minimum certain requirements have been met and the EHR modernization (EHRM) works at a level surpassing the existing VistA system.

The Republican bill drafted (without number yet) is being introduced by Bill Cassidy, MD (R-LA) and Jerry Moran (R-KS), joined by John Boozman (R-AR), Mike Rounds (R-SD), Thom Tillis (R-NC), Marsha Blackburn (R-TN), Kevin Cramer (R-ND), Tommy Tuberville (R-AL), Jim Risch (R-ID), Mike Crapo (R-ID), Mike Braun (R-IN) and Steve Daines (R-MT). In its present form, the six-page bill calls for a complete halt to implementation until the following is achieved:

  • Meeting improvement objectives in uptime and system-wide stability as defined by the VA Secretary and staff
  • Submission of a 30-day report to the Senate VA Committee systems that includes reporting on Department of Defense networks within the Federal electronic health record environment, training, and workflows for facilities of differing complexity
  • Quarterly reports on readiness and deviations
  • Individual readiness certifications for each facility receiving the Oracle Cerner EHR

Overall, the draft reads like an interim reform measure that is at the opposite pole from their colleagues in the House, who’d like to call the whole thing off and terminate the EHRM in H.R. 608 [TTA 1 Feb].  Bill Cassidy’s office release is short and to the point

The Democrat bill, not yet drafted but promised in a release from Patty Murray’s (D-WA) office really brings out the pitchforks and pitch. At length. With lots of quotes from Senators Murray, Chairman Jon Tester (D-MT), and Sherrod Brown (D-OH) designed to make hay with their states. (But will they put the needed fear in Oracle’s Mike Sicilia and Larry Ellison, two men who could buy and sell these senators?) Here’s a sample of the fire: 

  • Develop clear metrics to guide whether and how VA should go forward with the new EHR at additional VA facilities and require additional resources to support those facilities;
  • Require VA and Oracle Cerner to fix the technology features connected to the health safety and delivery issues found in VA’s March 2023 Sprint Report;
  • Not move forward with the new EHR at other VA health facilities until the data at the existing five facilities demonstrates an ability to deliver health care to veterans at standards that surpass metrics using VA’s VistA system or that meet national health operations standards as determined by the Under Secretary for Health;
  • Appoint a lead senior negotiator and leverage other federal agencies and independent outside experts to offer advice and strategies for managing aggressive EHR contract negotiations with Oracle Cerner to protect taxpayers and veterans;
  • Develop an alternative “Plan B” strategy for a new EHR in the event Oracle Cerner will not agree to new contract terms that protect taxpayers and increase accountability and penalties for poor performance or when VA data shows it cannot get the technology to work to serve veterans efficiently and safely

The normal Senate processes may unify these bills and make them bipartisan–a good start. But this ‘great deliberative body’ needs to move quickly as the entire VA health system is at stake. (This Editor notes that the Ellisonesque crowing about the transformation of healthcare has been notably absent these past few months, perhaps absorbed by the troubles, the Cerner layoffs, and reputed difficulties with Cerner health system clients.) Hat tip to HISTalk today.

Also on Wednesday, the House, which holds fiscal purse strings, is considering capping the VA’s budget at fiscal 2022 levels. Secretary Denis McDonough at a House Appropriations Committee meeting stated that there would be a $345 million shortfall within the VA Office of Information Technology (OIT) affecting the EHRM, as well as a $465 million shortfall in infrastructure and technology funding regarding major construction elements. In OIT, the EHRM is the third largest outlay with cybersecurity the largest. The FY2024 proposed budget has $6.4 billion for the OIT’s ongoing modernization and veteran IT services, with $1.9 billion for the EHRM alone. FedScoop

Short takes and updates: FTC may not be done with CVS-Oak Street, VistA moves to cloud–why?, Oracle Cerner lays off 10%. at least

March 24, 2023 | by

The CVS-Oak Street Health buy may be finalized on paper for $10.6 billion, but it’s not a done deal. While the papers are signed and the preparations may be underway for a closing at the end of the year, it’s still subject to Federal and state approvals [TTA 9 Feb]. This week, Senator Elizabeth Warren, a one-time presidential candidate who cherishes her bully pulpit as a member of two finance committees (but chair of none), sent a letter (office release) to the Federal Trade Commission (FTC) to “carefully scrutinize” the deal.  In addition, she urges FTC to “retrospectively review similarly consummated deals and challenge in court any mergers that have reduced competition in violation of antitrust laws”. FTC is a prime candidate for a nudge because their newly activist stance needs little encouragement for the commissioners to pull out the cudgels.

CVS may very well find itself challenged as well by the Department of Justice (DOJ)–a more complicated action since it requires preparing a case, going to Federal Court, filing papers, and convincing a judge that it involves true antitrust issues worthy of further examination. CVS  may well be spending time in Federal and state courts before the closing, and likely expects it. Even so, DOJ appears to be positioned on the sidelines. There is a memorandum of understanding between DOJ and Health and Human Services sharing concerns about antitrust.  DOJ may also be tired of complicated, labor-intensive suits like UnitedHealth Group and Change Healthcare that wound up in favor of the defendants and with egg on DOJ’s face [TTA 23 Mar]. Unlike DOJ, FTC has more latitude and they have been using it. Thus Sen. Warren’s appeal is a strategic one. FierceHealthcare

Yet where does it end? Horizontal integration or consolidation–businesses buying similar businesses–has obvious limits. But vertical integration–owning part or all of the care continuum or means of production–is less obvious. It can make healthcare more available and effective. But it may reduce competitive opportunity and create a ‘one or none’ business model. That is where the Feds tend to step in unless it’s a bank (of late). 

VistA’s new tune is ‘I’m Still Here’–in the cloud. Yes, VistA, facing phase-out at the VA, is moving its system to the cloud, and has major reasons why. Reginald Cummings, the deputy chief information officer for VA’s infrastructure operations,  explained during a panel discussion of the Association for Federal IRM (AFFIRM) that the ‘lift and shift’ (the hip IT term for this) was done for two things: to move it away from being multiple systems running at each facility, and to ‘containerize’ it,  packaging the application together with the resources it needs to operate, such as the operating system itself, the storage and interfaces. This improves security and portability. The real news is that VA is now admitting that it will take years to transition to Oracle Cerner. According to Daniel McCune, a VA software executive, VA may need VistA for another 10 years. (Perhaps 15?) Supposedly, this isn’t modernization…but it does keep a legacy system running indefinitely, like the Energizer Bunny, which would 1) suit many at VA, and 2) perhaps avoid dealing with the Oracle Cerner issues. No mention is made in the article if this makes transitioning to Oracle Cerner easier, which this Editor finds odd. The chair of the panel discussion, Tom Temin, is also the article author on Federal News Network. As some of our international Readers know, VistA is used in countries such as India as open-source software (WorldVista.org).

And speaking of Oracle Cerner, the layoffs are on. Rumors have it as high as 10% of Oracle Cerner’s global workforce of about 28,000. It is surmised that at Cerner’s former HQ sites in Kansas City, the layoffs may be several hundred, though no WARN notices for group layoffs have been filed with Missouri. These notices are required when layoffs are at least 50-499 employees if they represent at least 33% of the total active workforce, excluding any part-time employees; or 500 or more employees (excluding any part-time employees) in which case the 33% does not apply. (DOL WARN Act guide) The Cerner workforce in the KC area was about 12,000 at one point. Severance packages were reported to be four weeks plus one week per year of service.

In addition, Oracle employees who were working from an Oracle office but transitioned to remote work during the pandemic must return to in-office work at their previous campus. They will be notified by managers in the next 30 days whether they will be full time in office, ‘flex’ or hybrid without an assigned space, or continuing as remote. Perhaps this is why WARN notices were not filed. Many workers moved out of area, and refusal to return to office can be called quitting. HISTalk, Becker’s

Week-end update: Breaking–Theranos lab director suing Hulu, Disney for defamation; ‘green shoots’ for SonderMind, Cognito, Vital, MedArrive; 3 in Asia; Telstra Australia’s new CTO

March 24, 2023 | by

Key Theranos prosecution witness suing Disney and Hulu for misrepresentation and defamation. It’s not only the FTC but also Adam Rosendorff, MD, the former lab director for Theranos who quit in late 2014, who is fighting against misrepresentation, in this case a fictionalized portrayal of the lab director character. l’affaire Theranos was lightly fictionalized in the docudrama ‘The Dropout” that ran on Hulu in 2022. Dr. Rosendorff is suing both Hulu, its corporate parent, Disney, plus other listed producers, in a New York State Supreme Court lawsuit (link and PDF) for defamation. The summons was filed in New York County (Manhattan) Thursday.

While his name was not used, the lab director named ‘Mark Roessler’ in “The Dropout” was portrayed, according to the summons, as unethical and unfit. He was “shown as covering up Theranos’ fraudulent scheme, thereby endangering patients’ lives … and as otherwise unfit to practice medicine,” “falsely portrayed as a perjurer, a criminal, and of being completely unfit to practice his profession.” In the docudrama, Roessler orders the destruction of damaging lab results, falsifies records, and engages in dishonest behavior. The reality was that Dr. Rosendorff testified against both Elizabeth Holmes and Sunny Balwani in their trials as an invaluable prosecution witness, detailing the failures of the lab tests in his testimony and affidavits [TTA 1 Oct and 6 Oct 2021]. He quit Theranos on these issues and more after 18 months when Holmes and Balwani refused to correct them. “Both the media and defendants’ reckless disregard is sufficient evidence of the malice which a public figure must show to establish claims for defamation.”

Being a whistleblower ain’t for sissies. Being tagged as part of Theranos’ demise and years in endless legal proceedings broke him professionally and fractured him mentally, as revealed after Holmes’ conviction. It became grist for yet more defense appeals that failed [TTA 20 Oct, 26 Oct 2022]. Reuters, New York Post

A (remainder) sale, partnership, and funding roundup–a few green shoots of spring

SonderMind buys out the remains of Mindstrong. The deal is for the remainder of Mindstrong’s tech assets and about 20 related staff. Price was not disclosed. Mindstrong ceased operations as of 10 March and announced they would lay off 100+ employees including the CEO and CFO no later than 15 April according to their filed WARN notice. It raised over $160 million since 2014 including a $100 million Series C in 2020. SonderMind is also in virtual mental health, assessing potential patients, matching them with a therapist in their state, who will see the patient virtually or in-person. According to SonderMind, Mindstrong’s tech will add to personalized care journeys, clinical notes templates, and improved measurement-based services.  SonderMind has had its own series of layoffs, with a 15% cut late in 2022. The deflation of telemental health continues. Mobihealthnews, Digital Health Business & Technology

Neurotech company Cognito Therapeutics raised $73 million in a Series B. It was led by FoundersX Ventures, adding new investors Starbloom Capital, Alzheimer’s Drug Discovery Foundation, WS Investment Company, and IAG Capital. Total funding is now $93 million. Cognito has developed an external neuromodulation device for neurologically degenerative diseases. It uses sensory stimulation to evoke gamma oscillations, which are believed to play a part in memory operations. It is concentrating on improving cognition and memory in Alzheimer’s Disease early-to-mid-stage patients. Cognito is being investigated as part of the HOPE study for Alzheimer’s Disease.  It received FDA Breakthrough Device Designation in 2021 and has completed a Phase 2 trial. Mobihealthnews, Business Wire release

Vital, a patient experience software developer, raised $24.7 million in a Series B. The funding was led by Transformation Capital, with support from Threshold Ventures, strategic health system investors and Vital CEO/Mint.com creator Aaron Patzer. Total funding is now over $40 million. Vital provides real-time patient updates and messaging services for patients and families admitted to hospitals and EDs, as well as follow-ups such as appointments. Business Wire release

MedArrive, an in-home care provider, is partnering with Ouma Health, for maternal-fetal care of women on Medicaid coverage. MedArrive deploys a field provider network for in-home care including testing, assessments, SDOH, and extension of provider services. The technology includes a fully integrated care management platform. Ouma Health is a maternal-fetal telehealth service including behavioral health. Release

And some Asia-Pacific updates…

In Vietnam, online pharmacy Medigo received $2 million in Series A funding, led by East Ventures, with participation from Pavilion Capital and Touchstone Partners. Intellect, a telemental health startup based out of Singapore, received undisclosed funding from global healthcare provider IHH Healthcare for its regional expansion. In India, EHR startup DocPlix raised Rs 5 crore ($600,000) in a pre-series A funding round led by Eris Lifesciences. Mobihealthnews

In Australia, Telstra Health’s new CTO is Farhoud Salimi. He joins in April from eHealth NSW where he held the position of Executive Director, Service Delivery (CTO) among others in a 15-year tenure. Mr. Salimi replaces Russel Duncan, who retired at the end of last year. Telstra release, Mobihealthnews

DOJ drops appeal to block UHG-Change; more hints that FTC will be hunting big game with Amazon

March 23, 2023 | by

DOJ has walked away from trying to stop the already-closed UHG-Change Healthcare merger. The US Department of Justice, which had appealed in November the District Court of DC approval in late September of UnitedHealth Group’s acquisition of Change Healthcare, on antitrust grounds, decided ‘enough egg on face’ and dropped its appeals court filings on 21 March. DOJ did not respond to Reuters’ report. Change is being integrated into OptumInsight and will be kept separate from the health plans. The DC District Court ruling found that DOJ did not conclusively prove its allegations of antitrust and loss of competition in services to hospitals and other providers. Statements from UHG’s competitors such as Cigna, Aetna, and Elevance (Anthem) that the acquisition would not lead them to ‘stifle innovation’ also weakened the DOJ’s case. Had the appeal been successful, it would have forced separation of Change Healthcare’s businesses, which are being quickly integrated into OptumInsight.  Healthcare Dive, Becker’s. Also TTA 4 Oct and 22 Nov 22.

Elsewhere in DC, it’s hunting season for the FTC, and its sights are fixed on Big Game called Amazon. POLITICO confirmed the speculation (or gave advance notice) [TTA 3 Mar], that FTC was building a multi-layered case beyond the Amazon-One Medical buy and warnings about failing to maintain consumer privacy [TTA 3 Mar] to include multiple practices. The POLITICO report indicates that there are at least six ongoing investigations by the FTC’s competition and consumer protection teams, with three apparently near the boiling point of action:

  • Blocking the acquisition of iRobot, famous for its Roomba robot vacuums. Amazon’s $1.7 billion acquisition has stalled with FTC rumoring action and Amazon apparently shutting down any further information. It does not have UK or EU approvals, which gives the FTC some more time to build a case. iRobot is the largest maker of robot vacuums. An acquisition would be expected to shut out competitive manufacturers marketing on Amazon such as Samsung. Their report indicates that FTC’s staff attorneys are leaning toward suing to stop the deal. Court action is expected in the next few months or sooner. 
  • Privacy investigations involving data security from their Ring camera/security system business and the Alexa voice assistant. The Alexa investigation also involves potential violations of the Children’s Online Privacy Protection Act. iRobot, Ring, and Alexa also tie into another FTC concern that Amazon is cornering the market on connected home devices.
  • Retail operations. These possibly could be around bundling services through the Prime subscription business and how competitor data is used on the Amazon platform to ‘outmuscle’ them. There is also a deceptive advertising probe around the use of the “Amazon Choice” label for certain products, including pay-to-play practices.

There is also scrutiny of how Prime and other Amazon services entice customers in with offers for expensive subscriptions, then make it extremely difficult or opaque to unsubscribe. This deceptive practice is called a “dark pattern”. Stay tuned.

Theranos update: Holmes, Balwani reprieved on surrender–for now–and Theranos’ creditors try to claw back $25M

March 22, 2023 | by

Both Elizabeth Holmes and Sunny Balwani enter the final stages of legal actions before their respective trips to Club Fed and what used to be called the ‘rock pile’. Between late last week and today, one of Theranos’ late leaders got some additional days, weeks, perhaps a month of freedom, while the other is left hanging until April. Surprisingly, Theranos, the late company, is not actually dead as the proverbial doornail, at least as creditors are concerned–it’s as simple as ABC.

  • Sunny Balwani’s surrender date, set for 2 pm PT Thursday 16 March, was delayed hours before his surrender when lawyers filed an appeal of Judge Davila’s 9 March ruling denying his request to remain free while appealing his conviction. It automatically triggered the stay while the Ninth Circuit Court of Appeals considers the appeal. Timing on this is not known.
  • Balwani’s defense also appealed to change the Bureau of Prisons’ ruling sending him to the Atlanta Federal penitentiary. This prison has been dogged by scandals, security lapses, and prisoner abuse allegations. As of now, Balwani’s Federal prison will be Terminal Island near San Pedro, about 30 miles from Los Angeles. Judge Davila’s recommendation was Lompoc in Santa Barbara county, about 250 miles from San Jose. It is not known why the BOP declined the judge’s recommendation, nor why the reassignment to Terminal Island, which once hosted Al Capone. CBS News
  • On Friday, Holmes was in court to delay her 27 April surrender to the Bryan, Texas Federal prison, pending her appeals. Legal observers believe this is unlikely now based on Judge Davila’s decision on Sunny Balwani.
  • Before the court session, a man in the gallery attempted to serve her with a paper demanding repayment of two overdue promissory notes she signed while CEO. The now-disclosed December suit by Theranos ABC, an entity set up by creditors, was filed in Superior Court of California in Santa Clara County. It tagged her with repayment of three notes totaling over $25 million, the first two overdue:

August 2011 in the amount of $9,159,333.65, originally due 2016 and extended by the board for five years, now overdue 
December 2011 in the amount of $7,578,575.52, originally due 2016 and extended by the board for five years, now overdue
December 2013 in the amount of $9,129,991.10, due 2018, extended for five years and due in December

According to the complaint, “Theranos ABC has demanded payment of Promissory Note #1 and Promissory Note #2 from Holmes, but Holmes has failed to pay any amounts on account of Promissory Note.”  CNBC, Guardian

  • This would be in addition to whatever is decided on restitution. As we noted on 9 March, “the prosecution is trying to establish that Holmes’ restitution should be in the vicinity of $878 million, up from an earlier estimate of $804 million. This contrasts with the $381 million that Judge Davila used for sentencing purposes, but under Federal law the guidelines for the latter differ. The prosecution is calculating the full loss of the investors “directly harmed” by Holmes’ criminal conduct.” However, Holmes’ defense is arguing that she actually owes nothing because 1) her crimes didn’t cause the collapse of Theranos and 2) that the prosecution had not shown that the investors “relied on the offense conduct when deciding to invest.” Both this and the appeal will be decided by Judge Davila in early April.   Fox News

Whether Holmes or Balwani will be able to pay even small amounts to the creditors or those who suffered losses due to the Theranos fraud remains doubtful. Holmes is not married to her fiance, Billy Evans, and apparently is being supported by him and her family. Balwani may have some funds, but not $900 million. 

VA EHR update: four deaths traced to Oracle Cerner EHR; four safety issues identified by VA EHRM Sprint Team

March 18, 2023 | by

The Senate Veterans Affairs Committee is unhappy. Very unhappy. With good reason. The ongoing problems with the Department of Veterans Affairs (VA) rollout of the Oracle Cerner EHR multiply. There were six instances of ‘catastrophic harm’ attributed to a feature of the EHR modernization program since the rollout, four of which resulted in the death of a veteran patient. According to information given to the staff of Senator Richard Blumenthal (D-CT), one fatality was at Spokane’s Mann-Grandstaff VA Medical Center and the other three died as patients in the VA Central Ohio Healthcare System, launched in April 2022. The nonfatal cases happened to veteran patients in the Inland Northwest (also Spokane).

While Senator Patty Murray (D-WA), the chair of the powerful Appropriations Committee, threatened to withhold further funding for the EHR migration, Senator Jon Tester (D-MT) is not fed up enough to be in favor of terminating the contract, as the House Veterans Affairs technology subcommittee head, Rep. Matt Rosendale (R-also MT), proposed in January in H.R. 608, [TTA 1 Feb] now in the House Subcommittee on Oversight and Investigations. The VA has paid Oracle Cerner $4.4 billion on the contract so far, with a refund of $325,000 paid as compensation for ‘incomplete technology and poor training’. Obligations through the contract are at least $9.4 billion. It comes up for renegotiation on 17 May and VA’s contracting officer, Michael Parrish, has testified he will push for a more favorable contract

The Government Accountability Office is also unhappy. The GAO, which calculated the above obligations, told the committee that the EHR contract “as currently written, has not sufficiently motivated Oracle-Cerner to perform better,” and that the current terms of the contract are “not necessarily in the best favor of the government in this particular case.” The GAO surveyed VA users of the Oracle Cerner EHR and found that only 6% agreed the system enabled quality care. Some of this may be reluctance to change technologies after 40 years of VistA, as Senator Marsha Blackburn (R-TN) pointed out in what this Editor expects is a ‘devil’s advocate’ statement, but there is also a fatigue factor–it’s the fourth attempt at replacing VistA.  Federal News Network 16 March, Spokane Spokesman-Review, Becker’s HealthIT

The VA’s EHRM Sprint Team identified four main issues in the EHR Modernization Sprint Report (PDF) released on 10 March.

1) Unknown queue and related issues (including medications)
2) No show and cancelled appointment orders failed to route to scheduling queues
3) Add Referral button not creating visible external site referral for worklist action
4) Usability issues with the EHR application, allowing providers to order procedure charge codes for imaging without ordering the actual clinical imaging

There were 30 safety issues examined by the team (pages 6-7) of 450 submitted. The report also identified EHR workarounds for VA medical centers that conduct medical research, an issue that surfaced publicly with Ann Arbor Healthcare System in delaying their go-live until 2024 [TTA 1 Mar]. They also examined the Data Collection Workbooks (DCW) process to better ensure consistency with VA standards through moving to a standardized approach. The VA is developing an Enterprise Site Readiness Dashboard for determining if a site is ready to migrate their EHR. Federal News Network 13 March

Week’s end roundup: Theranica clears, Pixel Watch fall alert, Veradigm delays, Walmart adding 40+ clinics by 2024, Bright Health’s dim future, Ontrak founder charged with insider trading

March 3, 2023 | by

Theranica received FDA 510(k) clearance for its Nerivio device for migraine prevention in patients 12 and older. Theranica’s devices are based on a pain inhibition mechanism known as Conditioned Pain Modulation (CPM) where someone who suffers pain has a dysfunctional response to harmless stimuli. According to their product information, Nerivio wraps around the upper arm and uses non-painful remote electrical modulation (REN) to activate peripheral nerves to modulate pain. In addition to the device, the app allows users to customize their migraine treatments, receive reminders for preventive treatments, track patterns, and share migraine data with their doctor, as well as a guided relaxation routine. Theranica is based in Israel and New Jersey. Release, Mobihealthnews

Google’s Pixel Watch added fall detection to capabilities. It uses the motion sensors already in the watch and machine learning to detect a hard fall. If the wearer hasn’t moved within 30 seconds, it will vibrate, sound an alarm and display an on-screen notification that can be called off by pressing ‘I’m OK’ (left) or ‘I need help’. If the former, the alarms escalate until an automated call to 911 is made. The user has to activate the feature and Google claimes that the ML will help it avoid false positives. A very useful feature for older people, lone workers, and runners/walkers, but at the price point of $350 at Best Buy or $11/month via AT&T or Verizon, perhaps not all that attractive to cost-conscious users.    Engadget, Google blog post, Mobihealthnews

And in the Delays Must Be Catching Department, Veradigm, the former Allscripts, is delaying its Q4 and FY 2022 reporting due to a software flaw that affected its revenue reporting. Originally 1 March, the new date is yet to be determined, but they anticipate a reduction of $20 million dollars against what was previously reported from Q3 2021 into estimates for Q4 2022. Not exactly confidence-making for a company in the data management/software business. Coincidentally, the company which bought then-Allscripts’ large hospital/practice EHRs, now called Altera, Canadian giant Constellation Software, is also delaying its Q4/FY 2022 reporting, in this instance due to the Altera acquisition [TTA 15 Feb]. Veradigm’s release gives you the more complicated explanation.

Walmart Health’s Big Announcement is that it will be doubling the number of its Health Centers from the current 32 to over 75. By Q1 2024, Walmart’s plan is to open 28 new locations in the following metros: Dallas (10), Houston (8), Phoenix (6) and Kansas City MO (4). Missouri and Arizona are new states. All these will include the Epic EHR and the infrastructure improvements previewed earlier this week [TTA 1 Mar]. Release

Insurtech Bright Health may have a dim future. 18 months ago, Bright Health seemed to be the most promising insurtech out there, with a healthy Medicare Advantage plan base, family and individual plans, substantial growth, acquisitions of Zipnosis (‘white label’ telehealth triage for health systems) and development of the NeueHealth value-based care provider management network. Bright Health had a buttoned-up management team from UnitedHealth Group, investment groups, Target, CVS, and the Advisory Board. They raised $2.4 billion from prestige investors, including Cigna Ventures and Bessemer, went public on the NYSE in June 2021, and added $925 million in two post-IPO raises in December 2021 and October 2022 (Crunchbase). Fellow insurtechs Oscar and Clover struggled through their own financial and management challenges after an IPO and SPAC respectively. Oscar was sued last year by shareholders for misleading information; Clover lost $558 million in 2021, but reduced to $338.8 million in 2022 and promising a path to profitability. Healthcare Finance. 

Bright Health now appears to be a broken-bulb-filament away from default and bankruptcy. They ended 2021 with a $1.2 billion loss which is not unusual with companies of this type (see above). Bright exited individual and family plans in six states plus cut back MA expansion plans, also not atypical. Healthcare Finance This didn’t appear to help. By last December, their stock declined to below $1 triggering a notice of delisting from the NYSE if it’s not above $1 by May. The stock continues to trade below $0.50. They reported a 2022 loss of $1.4 billion, $0.2 billion up from 2021, on increased revenue. This week, it’s been reported they have told investors that they are facing credit insolvency, having run through $350 million in revolving credit, violated a liquidity covenant, and need $300 million to cover it by end of April. Further analysis in FierceHealthcare and on an interesting LinkedIn post by Ari Gottlieb, ‘Pay for Failure’.

And if there weren’t enough proof that the High Wide and Handsome Days Are Over, the Department of Justice (DOJ) indicted CEO Terren Peizer of Ontrak, a telemental health provider, with insider trading using Rule 10b5-1 trading plans. This rule was actually set up by the SEC to allow insiders to safely trade their shares by setting up a predetermined plan that specifies in advance the share price, amount, and transaction date, plus certifying that they are not aware of non-public information that can influence the price. The last is the rub. DOJ alleges that during mid-year 2021, Peizer was aware that the largest Ontrak customer, Cigna, was at high risk of departing on the heels of Aetna, and sold his stock. If convicted, Peizer may be facing up to 45 years in Club Fed plus disgorgement of funds. Ontrak trades on Nasdaq, today at about $0.60. FierceHealthcare

FTC takes off the gloves: $7.8M fine for Teladoc’s BetterHelp, warns Amazon (and everyone else) on One Medical patient privacy

March 3, 2023 | by

The Federal Trade Commission (FTC) goes to ‘bare knucks’. BetterHelp, Teladoc’s promising telemental business, settled a complaint brought by the FTC in a 4-0 vote over ad trackers and sharing consumer health data with third parties. The ad trackers shared data with  Facebook, Criteo, Pinterest, and Snapchat for ad retargeting to these customers, knowing their situation. While the $7.8 million fine has to be approved by a Federal judge (as does GoodRx’s), the $7.8 million will be returned to consumers whose data was shared. How this will be done is a question mark to this Editor, but the tracking was done from 2013 (prior to Teladoc’s buy in 2015) to 2021, so quite a few will be eligible. According to the complaint, BetterHelp made false and deceptive statements to users about the disclosure of their information and formally “disseminated, or caused to be disseminated, misleading and deceptive representations regarding its compliance with federal health privacy laws.”

BetterHelp did not disclose to users that it was sharing personal information with third parties and never obtained consent. In fact, they assured users on intake that their information would be private, between them and their therapist. BetterHelp did not offer disclosure of information sharing and an opt-out form until October 2021. The information shared was extensive:

  • Intake questionnaire answers, such as whether the user was experiencing suicidal thoughts, and if they belonged to a group such as LGBTQ, teens, or Christians
  • Prescriptions
  • Prior therapy history if any
  • Email addresses and IP addresses
  • Financial status

The decisions on sharing information were delegated to a junior marketing analyst without training in PHI and protecting privacy from 2017. There was no formal compliance review or employee training in HIPAA practices. BetterHelp also displayed various logos, including HIPAA, to assure users that their information adhered to governmental standards and practices for health, when it clearly did not. (Editor’s note: as a marketer, both are shocking with Teladoc as a parent company well aware of these issues.)

Why this is important: Ad tracking is a form of revenue for companies, which now will be effectively shut off. This presents a decline in revenue hopes for Teladoc, which in January positioned BetterHelp as a bright spot of ‘balanced growth’. Expect that BetterHelp will be only the first of these companies in telemental health counseling to receive a working over from a newly-aggressive FTC–and with a return to in-person visits required for Schedule 2 meds, further depressing the entire category.  Complaint, Healthcare Dive, Mobihealthnews

FTC’s shot across the bow to Amazon and everyone in DTC digital health. With Amazon closing the buy of One Medical, the FTC issued a 1 1/2 page public statement warning both companies that because of privacy representations they have made prior to and after the acquisition, any failure to maintain consumer privacy will be in violation of Section 5 of the FTC Act. FTC will be looking at ‘false net impressions’ and “make clear not only how they will use protected health information as defined by HIPAA but also how the integrated entity will use any One Medical patient data for purposes beyond the provision of health care. ” And in closing, a broader warning:

The Commission has long taken the position that personal health information is sensitive data and has reaffirmed this position through recent enforcement actions. Further, companies that fail to have adequate safeguards or controls in place to protect sensitive data or fail to obtain consumers’ express affirmative consent for marketing based on sensitive data such as health data may be in violation of the law.

The law requires companies to treat sensitive data with great care. Accordingly, the parties and the market more broadly should be on notice that the Commission will continue to monitor this space and bring enforcement actions whenever the facts warrant.

Hat tip to HISTalk 3 March   TTA on FTC issues with Amazon post-closing 23 Feb

More VA-Oracle Cerner fallout? Deputy secretary, EHR executive director depart agency

March 3, 2023 | by

EHR Trouble falls with a thud on two senior VA leaders. The Department of Veterans Affairs announced yesterday (1 March) that Deputy Secretary Donald Remy will be stepping down from his post. He will be replaced on an interim basis by VA Assistant Secretary for Enterprise Integration Guy Kiyokawa. This follows the resignation effective 25 February of Terry Adirim, MD, EHR modernization (EHRM) program executive director. Her duties will be taken over, also on an interim basis, by Senior Advisor to the Assistant Secretary for the Office of Information and Technology (OIT), Dr. Neil Evans. The Deputy Secretary position requires nomination by the President and Senate confirmation. The EHRM position is an internal fill.

Both Deputy Secretary Remy and director Adirim were named to their posts in mid-to-late 2021, Dr. Adirim from Acting Assistant Secretary of Defense for Health Affairs. Remy specifically oversaw the EHRM among other duties while Dr. Adirim led the implementation of the Oracle Cerner Millenium EHR that started with an analysis of the failures of the initial tests and the formation of an EHR Integration Council [TTA 3 Dec 21]. But from this ‘go forth and fail no more’, the rethought rollout was fraught with failures, including the 2022  ‘unknown queue’ that created 149 adverse events, a two-day slowdown in both the VA and MHS EHRs in late January 2023, and delayed rollouts to June this year. Perhaps the topper was the chair of the House Veterans Affairs Committee and the chair of the House Veterans Affairs Subcommittee on Technology Modernization co-sponsoring a bill to cancel the Oracle Cerner EHR and return to VistA [TTA 1 Feb]. At the end of February, Ann Arbor Healthcare Center pointed out that VA’s research centers were having specific problems with the EHR cutover that had not been addressed and were cause for further delay, possibly to end of year. Will this change lead to progress with Oracle–or more delay? FedScoop 1 March, 10 Feb. Hat tip to HISTalk 3 March

More gimlety views on CVS-Oak Street Health, Amazon-One Medical acquisitions

March 2, 2023 | by

Perhaps this Editor is not that much of an Outlier in thinking that these deals don’t beat, say, sliced bread. Oak Street Health (OSH) disclosed its financials in an SEC 10-K filed on Tuesday. One must wonder what CVS is seeing in the company other than bulking up its primary care profile. Their loss grew to $510 million from 2021’s $415 million. While OSH grew impressively in 2022 with a 51% increase in revenue to $2.2 billion, driven by 40 new centers ending with a total of 169 facilities in 21 states, expenses grew exponentially for the new patients: medical claims expenses grew 48%, cost of care went up 49%, and sales and marketing up 38%. Scalable, so they claim; profitable, not till 2025 at earliest.

Other problems were revealed in the 10-K. OSH has substantial business from other payers, which may not be pleased that CVS owns a small payer called Aetna, though has pledged to keep OSH payer-neutral. OSH leases or licenses most of its care centers from Humana. That payer also accounted for 32% of its 2022 capitated revenue. Centene’s plans and HealthSpring made up an additional 23%. Other, more routine concerns are regulatory review, attrition of physicians and clinician staff, and last but not least, breakup fees ($500 million if CVS walks away, $300 million if it’s OSH). When you add these to other factors as outlined in our earlier article, such as the Medicare Advantage and high-need populations, CVS is cutting off a hefty slice of loaf, especially considering that the more complex Signify Health buy is due to close this quarter. Earlier opinions on the buy [TTA 16 Feb], Healthcare Dive

Now to Amazon and One Medical. This Editor received her invitation to buy a One Medical membership earlier this week (left). Countering this Editor’s analysis from last week, which maintains that Amazon is already under a broad antitrust microscope viewed by the Federal Trade Commission (FTC) and the Department of Justice (DOJ), Healthcare Dive counters, quite logically and in the view of their experts, that if either agency was going to object, they would have done so before the closing, and the grounds were likely too novel. The article concedes that the FTC could take action further down the road, for instance if Amazon violates HIPAA or consumer privacy with ad trackers. Instead, the focus is on objections by consumer groups, Amazon leveraging health data, privacy violations, and a general consumer unease around Amazon dealing with their health issues.

  • Consumer protection group Public Citizen urged regulators to block the deal in a letter to regulatory groups after it was announced last summer. For instance, it could bundle One Medical and Prime membership (a no-brainer). By tying the two together, Amazon could gain consent for using patient data from health records. Amazon could also serve ads for products related to medical conditions without that access (that old Pixel/ad tracker business again). These concerns are publicly shared by two FTC commissioners.
  • “Analysts said that data acquisition was likely a big driving factor for the deal. After linking One Medical’s data with that from its other products and services, Amazon can analyze petabytes of healthcare data in the cloud and use the findings to better manage the health of One Medical’s Medicare population, build new products and pinpoint people with rare diseases to solicit participation in clinical trials, according to (market research firm) Forrester’s (Natalie) Schibell.” [Editor] That would, of course, require patient consent. 
  • Forrester noted that the consumer unease around Amazon in healthcare is substantial. 34% of surveyed adults weren’t at all comfortable with Amazon for healthcare needs with an additional 17% only somewhat more comfortable (tier 2). Trust levels are low, and it would take only one or two incidents, such as a security breach or HIPAA violations, to destroy it. This Editor would add that if One Medical practices were not managed impeccably, that would go viral among individual and corporate members, in a way that Amazon Care did not.