News roundup: Babylon Health Q3 revenue up 3.9x; surprise–DOJ to appeal UHG-Change buy approval; Walmart loses senior health exec Pegus to JPM

Earlier this month, Babylon Health announced its Q3 financials. Both revenue and value-based care membership grew. Losses also grew but the margins narrowed considerably. Highlights of their release:

Comparing Q3 2022 to Q3 2021

  • Revenue increased by $288.9 million versus $74.5 million, an increase of $214.4 million or 3.9x. This was largely driven by a 285% increase in Medicare membership.
  • Losses were there but margins improved due to aggressive cost reductions. Q3 loss was $89.9 million, or a 31.1% loss for the Period Margin (percent of revenue). Last year’s loss was $66 million, or 88.6% Period Margin. This represented an improvement of 57 points. When looking at EBITDA, Adjusted EBITDA totaled $(54.3) million, an (18.8)% Adjusted EBITDA Margin. This compared to last year’s $(47.5) million Adjusted EBITDA, or (63.7)% Adjusted EBITDA Margin, an improvement of 45 points.
  • Value-based care membership grew 2.7x to approximately 271,000
  • They acquired Medicare Advantage members in New Mexico, and commercial members via a digital-first product for Centene’s Ambetter plans in six states
  • In the UK, their Bupa partnership was extended for three years. Bupa has 2.3 million health insurance customers.

For year 2022, Babylon is updating its revenue guidance from $1.0 billion or greater to $1.05 billion to $1.1 billion.

Babylon is selling Meritage Medical Network, an independent physician association (IPA) based in Northern and Central California with 1,800 providers in six counties serving 90,000 patients, advised by  a major investment bank. They will also comply with SEC reporting requirements for a domestic issuer versus previously as a foreign private issue. Babylon will report its Q4 and 2022 yearend results under U.S. GAAP. They are also proceeding with a 25-to-1 reverse stock split to boost share price and prevent a NYSE delisting [TTA 13 Oct]. Mobihealthnews

The Department of Justice (DOJ) wiped egg off its face Friday, appealing the District Court of the District of Columbia approval in late September of UnitedHealth Group’s acquisition of Change Healthcare. The two companies closed on the buy in early October. DOJ was joined in the appeal by New York and Minnesota. The surprising appeal, after six weeks and the closing, is unusual but not unprecedented. At the time, the DOJ statement was written so that industry observers expected an appeal.

While the merger is closed, an appealed decision, if favorable to the DOJ, would force a separation of the businesses. Of course, UHG believes that “the appeal is without merit.” Stay tuned to see if this goes anywhere. Becker’s, Healthcare Dive

Walmart loses another healthcare exec. Cheryl Pegus, MD, will be departing Walmart as EVP of health and wellness and joining Morgan Health as a managing director. At Morgan, she will be focusing on population-based health initiatives and bringing clinical expertise to mental health, diabetes, and other chronic diseases. She is also joining Atria, a physician-owned organization of heart specialists.

During two years at Walmart, Dr. Pegus helmed development of a low-cost private brand analog insulin, expanded Walmart’s retail health center network across major markets, and the company’s pandemic response. Morgan Health was set up in 2021 to improve the quality, affordability, and equity of employer-sponsored healthcare. It has opened advanced primary care centers in Ohio. JPM a few weeks ago opened a Life Sciences Private Capital group [TTA 2 Nov]. Becker’s, Healthcare Dive

Walmart, despite their size, has had a certain wobbliness in their strategy. Aggressively starting out of the gate in 2018 with high-profile exec Sean Slovenski leading and plans to open up 1,000 clinics, he departed in 2020 and that put the brakes on the clinic strategy for awhile. In 2021, they bought privately held telehealth provider MeMD. Earlier this year, they announced the opening of more health ‘superstores’ in Florida, having established 20 in Arkansas, Illinois, and Georgia starting in 2019. Meanwhile, Walgreens is going big with VillageMD and its acquisition of Summit Health, and CVS Health is snapping up Signify Health to expand into value-based care and home health.

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