News roundup: Congress hammers absent UHG on Change cyberattack–and more; 10% unhinged at Hinge Health; Steward Health nears insolvency; Two Chairs $72M Series C

UnitedHealth Group facing direct Congressional criticism–and didn’t show up to answer it. The House Energy and Commerce Committee held a hearing yesterday on the BlackCat/ALPHV cyberattack on UHG/Optum’s Change Healthcare systems. Representatives of the American Hospital Association, which we noted led the earliest efforts to assess the situation, help health systems, and then lobby Health and Human Services to assist providers, the College of Healthcare Information Management Executives, and the Healthcare Sector Coordinating Council testified to a restive group of House representatives. Though reports have said that UHG had previously briefed the committee and CEO Andrew Witty will appear before the Senate Finance Committee on 30 April, both Republicans and Democrats didn’t spare the criticism. Other issues, such as healthcare provider consolidation, cybersecurity coordination, and vertical integration through acquisitions as represented by UHG and Change, entered into the hearing. And it went pretty far. Rep. Buddy Carter (R-GA): “The FTC has failed the American people by allowing vertical integration to happen, and it needs to be busted up.” Rep. Anna Eshoo (D-CA): “The attack shows how UnitedHealth’s anti-competitive practices present a national security risk because its operations now extend through every point of our healthcare system,” and called it “outrageous”. 

The current administration’s proposed $800 million investment in hospital cybersecurity protections was typed as “woefully insufficient.” 

Returning to the main issues, Larry Bucshon, MD (R-IN) stated that both the government and private companies were slow in assisting providers. John Riggi, AHA’s national adviser for cybersecurity and risk testified that “The federal government did not step in for weeks. Needed flexibilities under Medicare were not immediately available. It took 18 days for CMS to begin allowing providers to apply for advancing accelerated payments.” On how it affected providers, 94% of respondents in an AHA provider survey felt a financial impact from the attack, over half reported a “significant or serious” impact, and 74% of hospitals reported a direct effect on patient care. Payers are resisting advanced payments. UHG was even accused of exploiting the cyberattack to purchase additional practices by Rep. John Joyce, MD (R-PA). Becker’s, Chief Healthcare Executive, STAT

This Editor has previously noted that UHG is taking a $1.6 billion charge for the cyberattack and is separately facing a DOJ investigation on multiple antitrust issues between the payer group and Optum, including their Amedisys buy [TTA 6 Mar]. UHG is also facing multiple class-action lawsuits from practices currently and expected from patients affected by the theft of PHI and PII [TTA 28 Mar]. It’ll be a busy spring and summer for UHG’s legal department.

Hinge Health cuts 10% of staff. Reasons given were the standard tropes of ‘long-term sustainable business’, ‘accelerate our path to profitability, speed up decision making, and better focus our investments’ plus ‘realign our organization’. Their employee group is estimated at 1,700 on LinkedIn, making this about 170 staff released in various functions including engineers. The company is preparing for an IPO, which may not be this year, since they claim to have $400 million in cash on the books. Hinge’s last raise was an October 2021 $400 million Series E led by Tiger Global and Coatue Management for a total funding of $826.1 million over 10 raises (Crunchbase). At that time, their valuation was a bubbly $6.2 billion. Their virtual musculoskeletal rehabilitative therapy for back and joint pain care has since then expanded to rehab for pelvic pain, bowel, and bladder control. TechCrunch  As predicted in our Rock Health Q1 review, Hinge is a perfect example of companies “pursuing IPO and M&A exit pathways concurrently to keep options open” by presenting their financials as if they were already public companies. 

Steward Health Care nears bankruptcy court. And the Optum buy of Stewardship Health practices won’t save it in time. Steward’s lenders are giving the health network until the end of April–two weeks away–to prove it can repay its considerable debts. Its recovery plan which included the Stewardship sale has been criticized as unworkable given the volume of debt and the regulatory implications of selling their hospital assets. The Optum acquisition is required to undergo a 30-day review by Massachusetts’ Health Policy Commission (HPC)–and while it was announced at the end of March, it had not started by mid-April. Given UHG’s other problems and scrutiny of practice purchases by the DOJ and FTC, Optum may walk away or wait. No purchase price had been announced but it would be a drop in a bottomless well anyway. The mounting problems of Steward Health Care are detailed in Healthcare Dive’s analysis.

And to end on a more optimistic note, Two Chairs, a telemental health provider out of San Francisco, scored a $72 million Series C. Lead investors are Amplo and Fifth Down Capital with debt financing from Bridge Bank. The new raise, majority equity, brings Two Chairs’ total funding to $103 million. Their hybrid virtual and in-person therapy model is available at present in California, Florida, and Washington and markets to consumers, payers (Aetna nationally, Kaiser Permanente in Washington and Northern California), providers, and employers. The company states it will use the fresh funding to expand its markets and improve its technology platform. Currently, they have more than 500 clinicians on staff, most of whom are full-time. Their differentiator in the crowded telemental health category is their emphasis on measurement-based care, aided by a “matching consult,” facilitated by a proprietary 300-variable algorithm that creates the right therapist-client match (the ‘two chairs’ of the company’s name), which studies indicate is the most important factor in determining a good outcome.  Release, FierceHealthcare, MedCityNews

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