Mid-week roundup: Kaiser Permanente to buy Geisinger, setup separate system; GoodRx co-CEOs step down; strong earnings for Centene, Humana; Clover Health stock woes, settles $22M lawsuit

Today’s big news was that Kaiser Permanente will be acquiring Geisinger Health. Technically, the acquisition is being made by Risant Health, a separate non-profit organization founded by the Kaiser Foundation Hospitals that will acquire other non-profit community health systems. Acquisition costs and a timetable for the transaction were not disclosed and will be subject to the usual state and Federal regulatory review and requirements.

Geisinger will be the founding system of Risant Health, a non-profit that will be headquartered in the Washington, D.C. area. Its current president, Jaewon Ryu, MD, JD, will become CEO when the acquisition closes. Risant’s purpose will be to advance value-based care by acquiring and connecting other multi-payer, multi-provider, community-based health systems in areas such as care model design, pharmacy, consumer digital engagement, health plan product development, and purchasing. 

Kaiser Permanente is a giant integrated care system with 12.6 million members based in California. It operates in eight states (California, Colorado, Georgia, Hawaii, Maryland, Oregon, Virginia, and Washington) and the District of Columbia. Geisinger Health is Pennsylvania-based, has 10 hospital campuses, its own health plan that covers more than 500,000 members, and the Geisinger College of Health Sciences with schools of medicine, nursing, and graduate education. Geisinger was also a pioneer in incorporating telehealth and remote patient monitoring into its healthcare system. The benefit to Geisinger joining Risant is that as the lead system, it will help to shape their operational model. Reportedly, Kaiser will spend $5 billion and acquire five to six health systems over the next five years. The health systems will retain their names and operational areas.

On the face of it, this seems to be a novel solution to both health systems’ challenges. Both have had operating losses and net losses in recent years and difficulty expanding out of their geographic areas. Kaiser has a tightly integrated health plan and service model that is location-dependent. Geisinger has been squeezed in Pennsylvania by UPMC and Penn Medicine along with other community systems. In 2020, it ended its effort to expand into southern New Jersey via a merger with AtlantiCare. However, this current administration and state regulators have not favored health system mergers, which has seemingly been anticipated by Kaiser in forming the Risant Health organization. Healthcare Dive, FierceHealthcare, Kaiser/Geisinger/Risant release

GoodRx names Scott Wagner as interim chief executive officer. Current co-CEOs and founders Doug Hirsch and Trevor Bezdek will be stepping down but staying with the company as chief mission officer and chairman respectively. Wagner was formerly CEO of GoDaddy and is a board member of other digital and advertising businesses. In February, GoodRx was the first ‘victim’ of the newly aggressive Federal Trade Commission policies on Meta Pixel and other ad trackers collecting user health-related data and sharing for revenue with Facebook, Google, Criteo, and other advertising sites. The FTC used the Health Breach Notification Rule, created in 2009, to GoodRx in a Federal court with misuse of consumer health information. Even though GoodRx is not a HIPAA-covered entity and they ended the practice in 2019, they settled with the FTC for $1.5 million. But the likely reason for the CEO change is that the company is still unprofitable. It ended 2022 with a net loss of $32.81 million and laid off 16% of staff last September. Mobihealthnews, FierceHealthcare

It’s earnings report season for payers. The news has been good for some, not for others. 

  • Centene reported year-over-year gains, with Q1 revenue of $38.9 billion versus prior year $37.2 billion. Q1 profitability also gained at $1.1 billion versus prior year $849 million, which missed Wall Street projections. Their outlook was scaled back due to Medicaid redeterminations, 2024 Medicare bids and investments. They also attributed the increased profitability through the strategic sale of Magellan Rx and internal reorganizations. Fierce Healthcare
  • Humana’s Q1 was also profitable and met Wall Street analyst expectations with earnings of $1.24 billion, or $9.87 a share (adjusted to $9.38/share), up from prior year $930 million, or $7.29 a share. This reflects investments in their Medicare Advantage business. Humana is projecting an aggressive target of a 17% membership increase, reversing from last year’s losses.  Fierce Healthcare
  • Clover Health’s Nasdaq notice, settles $22 million in SPAC class action lawsuit. Nasdaq notified Clover on 20 April that since their stock traded below $1.00 for 30 days, they have 180 days to 17 October to regain compliance with the Minimum Bid Price Requirement. This was disclosed in Clover’s SEC 8-K filing last week. There are other ways to maintain a listing (e.g. transferring to Nasdaq Capital Markets) but the anemic share price (closing today at $0.73, a drop of over 90% from the SPAC high) shows no signs of reviving. On Monday, Clover announced a $22 million settlement in a class action lawsuit filed in Tennessee around the company’s January 2021 SPAC. The following month, Hindenburg Research published that Clover did not disclose a Department of Justice (DOJ) investigation in 2020, claiming it was ‘non-material’ [TTA 9 Feb 2021]. The share price fell off the roof and kicked off multiple similar class action suits which are proceeding in New York and Delaware. Release
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