This ‘n’ that: HHS settles *2017* ransomware breach, Carbon Health lays off 114 in restructuring, why oh why VC General Catalyst wants a $3B health system, when Larry Met Billy, a lexicon of workplace terms

It only took five years to levy a $100,000 fine. Doctors’ Management Services, a Massachusetts-based medical management company, had a ransomware attack back in 2017 that exposed 206,695 individuals to personal health information violations. The Health and Human Services (HHS) Office for Civil Rights (OCR), which is charged with actually enforcing penalties and remedies for data breaches, decided that Doctors’ management hadn’t done quite enough to protect their patients. The cyberattack was identified in December 2018, but Doctors’ didn’t report the breach to OCR until April 2019. Their network had been infected with GandCrab ransomware. After determining various protection failures, HHS put them on a three-year corrective plan to protect their data and collected the $100,000 fine, their very first. But still, nearly four years later? And with breaches, ransomware, and hacking going on every day?  Healthcare Dive

Another Covid unicorn comes down with a bang. Carbon Health, a 13-state network of primary care clinics along with virtual care in areas such as mental health, says ‘bye’ to 114 or 5% of its staff. It grew and got funded big during Covid as it set up testing and vaccine initiatives, achieving a valuation of $3 billion. In 2021, Covid accounted for 60% of their revenue, but as it waned in 2022, so did their revenue by 23%. To date, their funding has been over $622 million, with $100 million in January in a Series D funded by CVS Health Ventures. This isn’t their first big layoff–200 staffers said goodbye in January as well as 250 in mid-2022 which was about 8%. Becker’s

General Catalyst’s newest venture into Health Transformation Land, HATco, The Health Assurance Transformation Corporation, is in the market for a health system in the “$1 billion to $3 billion” range. Not too small to not have an impact in their communities, and large enough to have capabilities around value-based care plus a track record of excellence. This is to create their ‘blueprint’ for healthcare transformation. Interested parties should contact CEO Marc Harrison, MD. Their other plans to get there were announced at HLTH. As to why…General Catalyst has had a lot of experience with companies, and perhaps they feel they have a Better Way to Get There. Becker’s, TTA 10 Oct.

Of Note…The second wealthiest executive in healthcare, Oracle’s Larry Ellison, wasn’t too busy to hang out with the third wealthiest on Forbes’ list, former senator and HCA honcho Bill Frist, in Nashville at the inaugural Frist Cressey Ventures Forum. Ellison is also investing in a 70-acre, $1.35 billion campus on Nashville’s riverfront. It’s always nice to make nice with the neighbors, especially when they have major holdings in a large health corporation. Becker’s

To wrap up This ‘N’ That, Becker’s has a useful article that will keep you au courant on those workplace terms you see on places like LinkedIn. ‘Quiet quitting’, so popular in 2021-2, has had its day with layoffs leading to real ‘quitting’, leaving behind ‘grumpy stayers’ who try to get away with ‘Bare Minimum Mondays’. ‘Coffee badging’ was a new one on your Editor. The rest are catchy phrases for things as old as time in the workplace.

Is CVS’ Oak Street Health deal genius? Or a waste of time and $10B?

A sample of the split opinion. In the buccaneering between CVS and Walgreens, plus Walmart and Amazon, to add primary care, CVS definitely buckled the swash with three deals: Signify Health (being questioned by DOJ and FTC) [TTA 21 Oct 22 latest], a $100 million investment in Carbon Health [TTA 11 Jan], and Oak Street Health [TTA 9 Feb]. These are in line with their strategy of acquiring companies to expand their capabilities in primary care, provider enablement, and home health. The wisdom of the first–primary care–is being questioned by a few in healthcare. 

The basic argument is that primary care is money-losing, ‘unless you have significant ancillary revenue and downstream referral income’ according to Randy Davis, vice president and CIO of CGH Medical Center, based in Sterling, Illinois. Oak Street’s Medicare Advantage business is also money-losing because of its dependence on increasing severity scores (risk adjustment) and is generally an ‘uphill battle’. This Editor will add that as previously noted–and lauded in CVS’ release–Oak Street is notable for serving underserved patient populations–50 percent of Oak Street Health’s patients have a housing, food, or isolation risk factor. That equates to greater expenses that may or may not be reimbursable. Oak Street certainly has proven the money-losing part, forecasting a loss of $200 million for 2023 and not projecting a profit until 2025. Mr. Davis was blunt, calling it a deal that made no sense and “CVS better have a plan they implement in 18 months or they’ll get slaughtered.”

Another rap on the deal is that it is not big enough. Given the size of Oak Street at about 169 offices and the national figure is quoted as 600,000 ambulatory sites, it’s tiny. However, what isn’t considered is Aetna’s existing relationships with primary care physicians through ACOs formed as joint arrangements, and if Signify Health goes through, the Signify/Caravan ACOs. In fact, this may be a factor in the DOJ/FTC consideration of antitrust.

Others see opportunity in integrating primary care into CVS’ retail locations (Carbon Health) and serving historically underserved communities–much the same tack that Walgreens is taking with VillageMD (acquiring Summit Health) and Walmart with Walmart Health clinics. Becker’s Hospital Review

And as to Amazon, this Editor’s prediction is that Amazon will strike its Jolly Roger and sail away from the One Medical buy.

CVS opens the checkbook, does the Oak Street Health deal for a generous $10.6B

Staying on strategy, CVS buys provider group Oak Street Health. First rumored in mid-January, CVS Health and Oak Street finalized their deal today. The $10.6 billion purchase price of the NYSE traded company rewards shareholders with a $39 per share purchase price. 45% of the shareholders are composed of Newlight Partners LP and General Atlantic LLC plus certain members of the Oak Street Health Board of Directors. They have agreed to vote the shares they own in favor of the transaction (with a whew! at exiting). It is expected to close this year subject to the usual Department of Justice antitrust, Federal Trade Commission (FTC), and state-level review.

The $39 per share price was a tick lower than the January speculation that the price would be over $40 per share. $39 is not bad; at close of last week OSH was trading at $26.80, a far cry from its 2021 share prices in the $50-60 range. Today’s price closed at just above $35.  It has 169 offices and 600 providers across 21 states, making it a manageable size for CVS. OSH is headquartered in Chicago. Their CEO Mike Pykosz will continue to lead OSH, which will become part of CVS’ new Health Care Delivery organization and will be payer agnostic.  Oak Street is notable for serving underserved patient populations–50 percent of Oak Street Health’s patients have a housing, food or isolation risk factor.  

CVS Health’s long term plan, announced at recent earnings calls, is to add services in three categories: primary care, provider enablement, and home health. They are not hurting for profit or financing, closing out 2022 with $4.2 billion profit which certainly is a shining star in the depressed healthcare sky. CVS projects more than $500 million in synergy potential at the 2026 goal which is over 300 centers by 2026. But there will be losses first: 2023 loss about $200 million and not turning the profit corner till 2025 at earliest. An attractive point for CVS is  Canopy, their proprietary technology that determines the appropriate type and level of care for each OSH patient–and care integrates nicely into CVS Health’s community, home and digital offerings, as they say.

Will DOJ allow it without divestment? This administration has already taken a fairly hard tack on antitrust, trying (and failing, though appealing) to block UHG-Change Healthcare. Already the CVS-OSH tie-up has been opposed by an antitrust think tank, the American Economic Liberties Project. Oak Street adds primary care practices to those already under Aetna, many of which are in Federal ACO programs. Signify Health also has Medicare ACO practice groups, including the Caravan ACOs bought late last year. The Signify buy is already under a rolling DOJ and FTC review that has been moving slowly since last October. Signify’s other strength is diversification into home health, CVS’ third target area.

CVS’ investment in Carbon Health ($100 million Series D investment into primary and urgent care clinics in Western states) may be considered as Carbon will be piloting clinics in CVS retail locations. Release, Mobihealthnews, Healthcare Dive, Becker’s (including a breakdown of CVS’ 2022 financials), FierceHealthcare

Interesting pickups from JPM on CVS, Talkspace, Veradigm backs Holmusk, ‘misunderstood’ Babylon Health; six takeaways

Out of a decidedly soggy JPMorgan healthcare conference that concentrated mainly on pharma and biotech, there was some news in the downtrodden health tech and related areas. Selected from FierceHealthcare’s Heather Landi’s take:

CVS Health’s open checkbook for the right companies in primary care, provider enablement, and home health was a throwback to the palmy days of 2020-21. A big announcement at JPM was their investment in in-home kidney care and end-stage renal disease management provider Monogram Health. Their Series C raise of $375 million was lead-funded by CVS Health, Cigna Ventures, Humana, Memorial Hermann Health System, and SCAN.  Release, Mobihealthnews This added up to a busy January for CVS with leading Carbon Health‘s $100 million series D [TTA 11 Jan] and $25 million for Array Behavioral Care [TTA 12 Jan].

Talkspace, the cracked telemental health SPAC most recently rumored to be in buy talks with Amwell, touted their “defined, very significant path to profitability within a short period of time.” New CEO Jon Cohen, MD, a surgeon and veteran healthcare exec, touted the strength of the telemental health model, the effectiveness of their asynchronous messaging therapy for depression and anxiety,  and their market change from consumer to employers and health plans. Talkspace has some distance to go, quickly, with a loss through Q3 2022 of $61 million on revenues of $89 million and a share price today of $0.74, which means eventual delisting from Nasdaq. Is a quick buy in their future?

Veradigm, still settling in on their new corporate name, has its own bet on behavioral health data on the analytics side, with a lead investment in Holmusk‘s $45 million Series B. Holmusk will pull in de-identified patient data from Veradigm to their NeuroBlu Database.  Release

And on to Babylon Health, where Ali Parsa must feel like Eric Burdon of the 1960s blues group The Animals in the depth of being ‘misunderstood’Dr. Parsa promises a path to breakeven by end of 2024.  Babylon’s revenue is on target to hit over $1 billion. They operate in over 15 countries with well over 5 million transactions. But their SPAC cracked too from a high of $272 per share after listing in October 2021 to today’s price just above $11, leaving a lot of investors in the lurch. Even though Q3 revenue increased by $288.9 million versus $74.5 million in 2021, an increase of $214.4 million or 3.9x, and the Q3 loss correspondingly widened to $89.9 million, the loss was significantly lower as a percentage of revenue. They are also converting from a foreign private issuer to a domestic, planning a reverse share split, and selling non-core businesses like the Meritage IPA [TTA 22 Nov 22] It’ll either be more correctly understood by Mr. Market or…be bought?

Arundhati Parmar in MedCityNews had a tart take on the proceedings, leading with the convergence of therapeutics with devices and data, Primary Care-Primary Care-Primary Care, billion-dollar bolt-on acquisitions that may be good for biopharma (but not necessarily so in health tech where integration is leading), and innovative therapies that don’t save but actually cost mo’ money. All of which is no surprise to our Readers. And why is there a JPM every year? Healthcare insanity may be catching.

CVS works their plan in Oak Street Health buy talks, Carbon Health $100M investment + clinic pilot; VillageMD-Summit finalizes (updated)

CVS, Walgreens, Amazon, Walmart all chasing the same type of companies to expand their service continuum. During their Q2 2022 earnings call, CVS Health announced that they were determined to enhance their services in three categories: primary care, provider enablement, and home health. And CVS’ CEO Karen Lynch was pretty blunt about it: “We can’t be in the primary care without M&A” (sic). So CVS’ latest moves should come as no surprise.

Oak Street Health: CVS is in talks with this value-based care primary care provider for primarily older adults in Medicare and Medicare Advantage plans. With 100 offices nationally, it’s not too small, not too large to combine with other operations. As a public company traded on the NYSE but puttering along in the $13-$22 per share range since the fall from a high of $30 in August, the news of CVS’ interest has boosted them above $28 and a market cap of just under $7 billion. Although Oak Street has previously maintained that they have no interest in a sale, it has never been profitable and is on track to lose $200 million this year. That is not a good look for CVS but they are working a strategy. Previously, CVS walked away from primary care group Cano Health [TTA 21 Oct 22]. Bloomberg News (paywalled) reported that CVS could pay $10 billion which would be over $40 a share. Healthcare Dive, Reuters

Carbon Health: CVS leads their Series D with a $100 million investment plus piloting Carbon Health operations in primary and urgent care clinics in their retail stores. However, the deal came at a price. Last week, prior to the investment announcement, Carbon announced that it would wind down lines of business in public health, remote patient monitoring, hardware, and chronic care programs, cutting 200 jobs in addition to a June cut of 250, at the time about 8% of their workforce. Carbon will now concentrate on their clinic core business. 100 are presently located across Arizona, Nevada, Colorado, Kansas, Florida, Massachusetts, and California (San Francisco, Bay Area, and San Jose).

In the last two years, Carbon raised $350 million and grew by acquiring four clinic chains. It diversified by buying Steady Health (chronic care management in diabetes) and Alertive Health (remote patient management)–both businesses they are departing. Reportedly last month they bought Inofab Health, an Istanbul-based digital health platform for patients with asthma, chronic obstructive pulmonary disorder, and cystic fibrosis. Crunchbase, FierceHealthcare, Mobihealthnews, SF BizJournal,

CVS is still working its Signify Health acquisition past the Department of Justice (DOJ) and the Federal Trade Commission (FTC). It went into a Second Request for information in late October under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), which adds 30 days to the review timetable after the Second Request has been complied with. There is some competitive overlap between CVS and Signify in home health management and accountable care organization (ACO) operations, and some divestitures may be necessary. A closing in Q1 as planned seems optimistic. Acquiring Oak Street may complicate matters since their clinics operate as a Direct Contracting Entity (DCE, now ACO REACH). This present administration is not friendly towards healthcare consolidation of any type, especially with entities participating in Federal programs. (See UHG’s acquisition of Change Healthcare, with court approval being appealed by DOJ.) Reaching (so to speak) deep into CMS programs could be a red flag.

Walgreens’ VillageMD finalized their Summit Health acquisition for $8.9 billion yesterday (9 Jan) (updated). Now with 680 provider locations in 26 markets and 20,000 employees, the group adds to VillageMD’s primary care practices specialty practices in neurology, chiropractic, cardiology, orthopedics, and dermatology plus 150 City MD urgent care locations. 200 VillageMD locations are already adjacent to Walgreens locations. Walgreens Boots Alliance (WBA) and Evernorth, the health services business of Cigna, were the two investors. WBA raised full-year sales guidance from $133.5 billion to $137.5 billion. The current chair and former chief executive officer of Summit Health, Jeffrey Le Benger, MD, will be the interim president until VillageMD finds a permanent president reporting to VillageMD CEO Tim Barry. Release, RevCycleIntelligence, Forbes  At this point, Walgreens hasn’t moved forward with the rumored acquisition of ACO management services organization Evolent Health [TTA 1 Oct 22], which would be far more complex. 

Amazon is still awaiting Federal approval for One Medical as well as in multiple states (Oregon only the first; expect scrutiny). It is also closing Amazon Care and opening asynchronous non-face-to-face telehealth service Amazon ClinicWalmart continues on an internal strategy of opening Walmart Health clinics in underserved areas. Earlier in 2022, they announced the opening of more health ‘superstores’ in Florida, having established 20 in Arkansas, Illinois, and Georgia starting in 2019. Walmart’s approach to retailing health services and products, since getting serious about it in 2018, has wavered with multiple changes of strategy and executive departures [TTA 22 Nov 22]

News and deals roundup: Owlet’s $1B SPAC, Carbon Health’s $350M Series D, Series Bs by Woebot Health and b.Well, digital health rakes in $15bn

Baby monitoring system Owlet closed its SPAC late last week with Sandbridge Acquisition Corporation. It is now trading on the NYSE (OWLT) for around $8 per share. With Sandbridge’s investment and the concurrent private placement (PIPE), Owlet now has $135 million and a valuation of over $1 billion, far exceeding the $325 million estimated [TTA 17 Feb]. Owlet started in 2013 with a ‘Smart Sock’ (right) at $299 using pulse oximetry to monitor baby heart rate, oxygen levels, and sleep patterns with readouts via their app, but has expanded to include an Owlet Cam and a Dream Lab to encourage good baby sleep, which parents will be the first to appreciate. Mobihealthnews

Carbon Health, which is certainly an odd name for a primary care provider plus virtual health with a streamlined patient record/EMR system and makes insurers happy because they charge only Medicare rates, received a hefty $350 million Series D raise. Led by Blackstone Horizon Partners with Atreides, Homebrew, Hudson Bay Capital, Fifth Wall, Lux Capital, Silver Lake Waterman, and BlackRock participating, along with returning investors Dragoneer Investment Group and Brookfield Technology Partners along with a slew of private investors, it follows on last November’s Series C of $100 million for a total raise since 2016 of $522 million. Valuation is what used to be an eye-blinking $3.3 billion. Carbon’s locations are a bit strange–concentrated in California and SF area with outposts, many of which are limited service or ‘pop-ups’, in Florida, Arizona, Kansas, and NYC. Unlike the recently covered One Medical, it does not require any kind of annual concierge fee. The model is an interesting one in positing high service and low cost. The founders are also staking out becoming the largest US primary care provider, which Village Medical or UnitedHealth Group would not be delighted about. One wonders if all this staking out will work, or is to attract payer investment when the VCs decide to exit. FierceHealthcare, Mobihealthnews (referring to them as multimodal, which sounds like ocean/rail transport or articulated lorries), Forbes

Also in the Mobihealthnews article: a Series B $90 million raise by Woebot Health, developer of a mental health chatbot (ok, relational agent), and the $32 million Series B raise of b.well Connected Health, a patient-facing health management platform that will get a big boost from interoperability around patient records required under the Cures Act. Woebot’s twee infographic about their therapeutic bond study in the JMIR is woeful, though, as large parts are unreadable.

No surprise that digital health funding hit a $15 billion high in the first half of 2021, up 138%, driven in large part by telehealth investment. This is based on a report from Mercom Capital Group. FierceHealthcare