Wrapping up many changes at Walgreens, VillageMD, CVS Health, Oracle Health

Walgreens’ multitudinous c-c-c-changes from the suites to the streets. Financially, Walgreens’ US Healthcare segment in Q1 2024 (Oct-Dec 2023) grew sales to $1.9 billion versus prior year’s $989 million. This included VillageMD’s revenue from Summit Health and some growth at CareCentrix (home care) and Shields Health Solutions (specialty pharmacy). But losses continued, with an operating loss of $456 million and adjusted operating loss of $96 million, reduced from the prior year’s $152 million loss. This is also after their November layoff of several senior staff and 5% of corporate workers following a May layoff [TTA 10 Nov 2023]

  • On the earnings call, new CEO Tim Wentworth confirmed that VillageMD has closed 27 under-performing clinic locations. This is a little less halfway through the 60-location previously announced closure. This is a key part of the $1 billion in 2024 cuts announced at the end of last quarter by then-acting CEO Ginger Graham [TTA 18 Oct 2023]. Healthcare Dive
  • VillageMD’s weakness has been filling physician ‘patient panels’. A patient panel is one doctor’s patient count treated over typically 12 to 18 months. This can be as high in primary care as 2,500 patients, though no numbers were cited for VillageMD. According to Wentworth, VillageMD is now “on a diet”; fewer locations, more patient concentration at available clinics, patient panels and profitability goes up. Or so the math goes. Forbes
  • Walgreens also has trouble in the IT department. Key indicators: Neal Sample is their third CIO in a year, layoffs in staff among employees and contractors, departures of key managers, and the need for new technology including AI to support operations. Graham has cited the new pharmacy inventory system to more accurately forecast demand using AI as an example of the direction she sees IT taking. (Let’s hope it will quiet the rebellious pharmacists.) The former CIO, who departed in September, stocked up on AI and engineering talent at the expense of other needed roles. The Wall Street Journal’s deep dive from December.

Year’s end brought a stop to some of the musical chairs in the CVS Health C-suite. CFO and appointed president of Health Services Shawn Guertin turned his leave of absence due to family health reasons into a formal departure at the end of May. Interims Tom Cowhey moves from SVP corporate finance to CFO and Mike Pykosz, the CEO of Oak Street Health, becomes president of Health Care Delivery. Release, FierceHealthcare

Oracle Health also has the music up and the chairs out.

  • General Manager Travis Dalton is departing on 1 March to join MultiPlan as president and CEO. He succeeds Dale White, who moves to executive chairman replacing the retiring chairman Mark Tabak after 23 years with the company. MultiPlan is a payer cost management company that serves about 700 payers in payment and revenue integrity, network-based and analytics-based services. Dalton is the fifth of 10 senior executives from Cerner to depart after the late 2021 sale to Oracle.MultiPlan releaseHIStalk 1/5
  • Oracle Health’s chairman, Dr. David Feinberg, has also been making some transitional moves of his own, joining Aegis Ventures as a senior advisor while remaining at Oracle. His role is to help Aegis work with a consortium of health systems on developing and launching digital health products. Interestingly, there has been no disclosure of the percentage of time he will spend at Oracle versus Aegis. Dr. Feinberg also is a Humana board member. He joined Cerner from Google Health and within a few months, Cerner was sold.  Modern Healthcare

Cigna-Humana deal fizzles after two weeks after term discussion fails, shareholders nix

That was mercifully fast. After all the speculation and rumors [TTA 2 Dec], Cigna and Humana called off their talks on 10 December after not coming anywhere near terms on the financials. According to the Wall Street Journal, it was also evident that shareholders disliked it nearly immediately by driving down the share prices of both companies by 10%.

Their sources indicated that it would be a share and cash deal by Cigna for Humana, which added to shareholder displeasure. Cigna will be instead buying back up to $10 billion in stock to drive up their valuation. Reportedly, the repurchasing of least $5 billion of stock will take place between now and H1 2024. Cigna will also concentrate on smaller ‘bolt-on’ acquisitions and the sale of its Medicare Advantage business as previously announced. In the past five days, Cigna shares plumped by nearly $50 and Humana’s by about $10.

The WSJ‘s sources stated that Cigna continues to believe in a combination with Humana, something that the two companies have danced around for years, dating back even before the proposed payer megamergers of 2015 which saw Humana’s acquisition by Aetna (and Cigna’s by Anthem, now Elevance) disapproved both by states and at the Federal antitrust level. The two would, at least on paper, be a good fit, with Cigna’s strength in commercial plans plus Evernorth’s services added to Humana’s in Medicare Advantage, Medicaid, and home health services under CenterWell. It would have created a strong rival to UnitedHealth Group and CVS Health at $300 billion in revenue. What may have proved to be the antitrust stumbling block were their respective strengths in pharmacy benefit management (PBM) though with different focuses.

Even more than the increasingly hostile Federal antitrust environment between DOJ and FTC, it also points to the paucity of funding for mergers and acquisitions–M&A down 14% so far this year to about $1.2 trillion according to Dealogic.

In about three years, healthcare funding has gone from money thrown by VC and PE investors at what we recognize now as shaky propositions (Cerebral, Babylon Health, Olive AI, Pear) to no interest (or funds available) in what would be quality matchups. The pendulum swings–and swings back. We hope. Healthcare Dive

Turmoil smacks retail healthcare (updated): Walgreens to shut 60 VillageMDs, as Village names 3 new presidents; CVS shakeup continues; Rite Aid bankrupt; Amazon’s One Medical rebrands Iora

Walgreens shuttering 60 VillageMD locations adjacent to stores in five markets. This follows a second disappointing quarter for Walgreens Boots Alliance [Q3 TTA 28 June] and a fiscal Q4 net loss of $180 million, or 21 cents per share. Their CFO attributed the loss to charges for certain legal and regulatory approvals and settlements (in September, $44 million for their Theranos fling), and one-time charges related to Walgreens’ cost-cutting program. Cuts announced by acting CEO Ginger Graham are $1 billion in 2024. Shares perked up slightly; since the start of 2023, share value has been down 39% for the year before the earnings call on 12 October. 

Cutting 27% of co-located VillageMD clinics in ‘non-strategic locations’ is a start. Currently, about 220 are co-located with Walgreens which followed an original plan of about 200 in 2023. However, since WBA bought a 63% share in VillageMD for $5.3 billion in 2021, VillageMD has aggressively expanded. They bought Summit Health last November for $8.9 billion ($3.5 billion from WBA) which included CityMD, acquired Starling Physicians in Connecticut, Family and Internal Medicine Associates in central Kentucky, and Dallas (Texas) Internal Medicine and Geriatric Specialists for a whopping 700 locations [TTA 9 Mar]. Last quarter’s revenue grew by 17%. But expansion can be problematic. Together with the underperformance of CityMD, which came with the acquisition of Summit, and weak retail sales, for WBA this led to an adjusted operating loss of $172 million for the US Healthcare segment. But…there may be more. HISTalk cites an analysis by AI company founder Sergei Polevikov that attributes half of WBA’s projected 2023 $3 billion net loss, its first ever, to…VillageMD. Yet it appears, at least in the press, that Walgreens is staking a great deal on VillageMD, even though it may be a ‘gamble’. FierceHealthcare

As noted last week, WBA has experienced problems from the streets to the suites. Pharmacy workers have walked out, the CEO was given the heave-ho before Labor Day and replaced in record time, the CFO exited in July, and the CIO mysteriously departed at the top of this month. Bad earnings and a depressed retail/pharmacy outlook, without Covid’s ‘black swan’ stimulus, will do that. Even the US Healthcare head on the earnings call resorted to the anodyne “We will continue to grow in 2024 but with a renewed focus on more profitable growth.”  TTA 11 Oct, Chain Store Age, CNBC

Updated & Breaking  VillageMD’s three new divisional presidents. Village Medical’s new president is Rishi Sikka, MD, who is joining from president of system enterprises at Sutter Health. CityMD is promoting Dan Frogel, MD to the dual role of president and chief clinical officer. He joined in 2013 as a founder of Premier Care which was merged into CityMD and has had other positions within CityMD and Summit Health. At Summit Health, Becky Levy, JD moves to the new position of president of Summit Health and Starling Physicians. She has been with Summit Health since 2011, previously as chief legal officer, chief administrative officer, and chief strategy officer. Business Wire 18 October

CVS Health continues to Shake & Bake. Chief financial officer and recently announced president of Health Services Shawn Guertin is taking a leave of absence due to “unforeseen family health reasons”. The CFO role will be covered by Tom Cowhey, SVP of corporate finance with Mike Pykosz, CEO of Oak Street Health, stepping in as the interim president of health services. Interestingly, the CVS release included Kyle Armbrester, the CEO of Signify Health, as being “highly involved in the Health Services strategy”. Both Oak Street and Signify were part of a CVS buying binge this year and last that topped $18.6 billion. Neither is reportedly profitable. As usually happens when the numbers don’t look good, CVS will be laying off 5,000 in the next few months, with the first tranche of 1,200 this month [TTA 23 Aug].  FierceHealthcare, Healthcare Dive

Retail pharmacy chain Rite Aid declared Chapter 11 last Sunday. One of the US’ largest chains with 2,000 locations in 17 states, it will close 150 locations and sell its pharmacy benefit manager Elixir. Rite Aid has been beleaguered with over 1,600 lawsuits over opioid prescriptions from Federal to state and local governments, hospitals, and individuals, as well as high debt and heavy competition from other retailers like Walgreens, CVS, and Walmart, as well as Amazon. The greatest numbers are in Michigan, California, New York, New Jersey, and Pennsylvania.  Reuters, The Hill

And for Amazon, Iora Health is now One Medical Senior. Iora was acquired by One Medical in 2021 but never rebranded. It was quite different than One Medical’s membership concierge-style practices in serving primarily Medicare patients in full-risk value-based care models such as Medicare Advantage (MA) and Medicare shared savings programs at 46 locations in seven states. One Medical intends to be able to serve patients of any age at all sites, according to One Medical VP Natasha Bhuyan’s comments to Healthcare Dive at HLTH last week.

Mid-week roundup: Babylon Rwanda update, CVS Health laying off 1,700+, Optum laying off too, Veradigm’s third non-compliance Nasdaq notice, AireHealth auctioning assets, Viome’s $86M raise + CVS retail kit deal

It’s another jump into the unknown between bankruptcies, layoffs, and funding raises for the Lucky Few. Emblematic of this year as we prepare to wind up this Crazy Summer in the next few weeks.

Rwandan government scrambling to keep Babyl services going. According to a local website, The EastAfrican, on 7 August “Health Minister Sabin Nsanzimana convened a meeting with the head of Babyl’s operations in Rwanda, Shivon Byamukama, to formulate a contingency plan to mitigate the impact of the company’s bankruptcy.” The Rwanda Ministry of Health is trying to secure the Babyl Rwanda operation that serves 2.4 million Rwandans (not Babylon’s 2.8 million, but still close to 20% of population) and employs over 600 people–doctors, nurses, call center agents, and software developers, Babyl is maintaining normal daily operations for now while Babyl Rwanda’s managing director, Dr. Shivon Byamukama, told the publication that the Rwanda operation is in active discussions with potential investors and partners either as a standalone entity or in partnership with another body. One wonders where the $2.2 million in funding from the Bill & Melinda Gates Foundation went.

CVS Health is starting to wield the knife on its promised (to investors) 5,000-person layoff, starting with at least 1,200 in October. The bulk of the layoffs will be in Connecticut and Rhode Island, both home to much of the Aetna operations. State labor departments in Rhode Island and Connecticut have already received WARN notices from CVS that over 1,200 employees in those states will be terminated effective 21 October. In other states, WARN notices have been filed for another 580 also effective 21 October.

  • The Woonsocket, RI headquarters and a neighboring office in Cumberland will lose 770 workers. 198 live in RI, the others are remote workers reporting to RI-based supervisors.
  • 306 employees are based at the insurer’s headquarters in Hartford, Connecticut. An additional 215 work remotely but are supervised out of the Connecticut offices, for a total of 521.
  • Other employees will be terminated in New York (167), Plantation, Florida (288), and Arizona (134), according to notices filed in each state.
  • Updated 24 Aug: another 825 across four additional states. In NJ, 207 employees at multiple locations starting 15 November. In Texas, 167 employees in Richardson and Irving; in Pennsylvania, 157 employees at an Aetna office in Blue Bell; in Illinois, 294 employees in Chicago, Buffalo Grove, and Northbrook starting 21 October.  Becker’s
  • CVS refused to disclose other layoffs to Healthcare Dive in other states where the number fell below WARN notice requirements

These positions include assistants, data engineers, customer care pharmacists, actuary executives, corporate vice presidents, project managers, program managers, and managers/directors of network development. While these constitute only 2% of CVS’ overall workforce of 300,000, it is cold comfort to those affected, many of whom have worked years for Aetna or CVS.   Becker’s  

The timing is revealed in the Becker’s Payer Issues article: When CVS acquired Aetna, “its agreement with state insurance regulators included a promise to keep employment levels at Aetna and its subsidiaries at 5,300 for at least four years after the closure of the deal. The employment levels reflected staffing as of Oct. 1, 2018, and the agreement expired in 2022.” Notice the similarities in the numbers.

In the interim, CVS went on an acquisition binge of $18.6 billion, buying Signify Health and Oak Street Health only months apart in strategic moves to buy up practices and network extenders such as ACOs in value-based care and home health.

  • Oak Street Health and its 169 practices do not project profitability until 2025–maybe–and clocked an over $500 million loss last year [TTA 4 May]. In the views of many on the Street, Oak Street was a $10 billion waste.
  • No one knows if Signify Health is profitable or not with practices and home health, but that company took a bath on Remedy Partners in Episodes of Care models and wound down that business right before the auction. CVS Health got caught up in a four-way bidding war only a year ago (in a universe that feels quite far away) that topped out at over $8 billion in cash. Ill-considered in retrospect?

CVS Health is already dealing with 2023 and 2024 projections that are downtrend: increased Medicare Advantage costs, higher drug utilization, and lower consumer spending expectations affecting retail operations. Mr. Market does not ignore Where The Money Comes From, and the piper that is paid comes from where it usually does–the people working for the company.

Optum not immune from layoffs either. Optum Health’s MedExpress Urgent Care clinics are eliminating registered nursing positions at nearly 150 facilities as part of a larger group of layoffs at Optum. MedExpress’ RNs are circulating an online petition protesting the change as ‘negligent’. Social media has also posted about gradual current layoffs at UnitedHealth Group and Optum building to major layoffs affecting worldwide operations. There are no WARN filings so these are suspected to be below the 50-100 WARN threshold (number and time period e.g. 6 months may vary by state) but cumulatively across UHG substantial. Becker’s    Becker’s updated coverage today 23 August

Veradigm’s ‘problem’ with Nasdaq continues. The former Allscripts still has not filed an annual report for 2022, nor Q1 or Q2 financial reports, with the Securities and Exchange Commission (SEC) which are required for Nasdaq stock listing under Nasdaq Listing Rule 5250(c)(1). TTA previously reported in June that Veradigm is not reporting because they had a software flaw that affected its revenue reporting going back to 2021. This has been going on since March. Veradigm has requested multiple extensions from the exchange and are set to ask for another. Veradigm stock closed today at $12.89, which is well out of the usual trouble, but an accounting software problem this long unresolved from a software company specializing in practice EHRs and practice management software…does not compute. Healthcare Dive, Business Wire

AireHealth auctioning off assets. This respiratory health company based in Winter Park, FL founded in 2018 developed a FDA-cleared nebulizer with Bluetooth functionality plus AI and machine learning software to generate predictive data on patients’ clinical conditions. The online auction of patents, software, hardware, and intellectual property for the company’s remote patient respiratory care platform will be held by Florida-based Fisher Auction Company. Apparently, there was no bankruptcy filed but the early-stage company decided to shutter anyway and sell assets. Mobihealthnews

On the other hand, gut health is hot and Viome scored a Series C of $86.5 million for a total $175 million raise plus gut testing in 200 CVS locations. Lead investors are Khosla Ventures, Bold Capital, and WRG Ventures. With the raise, Viome announced the launch of its Gut Intelligence Test in 200 CVS locations. Online, the Gut Test retails for $149 on current sale. Viome also markets oral and throat tests plus a ‘full body’ test in the $200+ range. The gut test is not currently FDA-cleared, though its saliva-based oral and throat cancer test received FDA breakthrough device designation in 2021. They claim that its RNA sequencing technology that utilizes AI and advanced algorithms to analyze the world’s largest gene expression data from over 600,000 samples, was originally developed out of research from the Los Alamos National Laboratory, “is clinically validated, fully automated, exclusively licensed by Viome [to analyze] biological samples at least 1,000 times greater than other technologies.” Release, Mobihealthnews, TechCrunch

Short takes: CVS’ $1.12M Q2 net income loss, forecast spurs 5,000 layoffs; Signify’s in-home kidney exams; Indonesia’s Halodoc $100M D; FeelBetter raises $5.9M; Medicare breach hits 612,000 beneficiaries

A mixed picture for CVS Health. Their Q2 reporting was almost schizophrenic, depending on whose reporting you read. Healthcare Finance highlighted their $1.12M net income loss–tiny when compared to the size of the company– but apparently one of the factors driving a layoff of 5,000 corporate, non-customer facing staff. From FierceHealthcare, CVS is still quite profitable at $1.9 billion, but that is down 36%. Revenue of $88.9 billion was up 10% from prior year. The results beat Wall Street analyst estimates of $2.12/share with adjusted earnings of $2.21/share. 

Despite the overall good picture of Q2, financial projections trended down for the full year. CVS in Q2 started a restructuring plan which cost $496 million in pre-tax income, expected to be completed by year’s end. 2023 is projected to have increased Medicare Advantage costs, higher drug utilization, and lower consumer spending expectations affecting retail operations. Added to their acquisition binge of Signify Health and Oak Street Health, which together totaled $18.6 billion, their 2024 earnings per share projections for 2024 fell from $9 to a range of $8.50 to $8.70. Timing was not disclosed for the 5,000-person reduction among corporate staff. It is not known whether this will affect Aetna and CVS Caremark (pharmacy benefit). CVS has 300,000 employees (75% full time) including part and full-time retail workers. They are also reducing corporate travel, plus the use of consultants and vendors. (CVS is known to have extremely low contractor rates already.) The restructuring is projected to save $700 to $800 million next year, but cold comfort to the 5,000 who won’t be there.  FierceHealthcare. We’ll see.

One of those CVS purchases, Signify Health, is moving forward with an in-home option for evaluating kidney function as part of in-home exams of Medicare Advantage members. This evaluation will include urinalysis and estimated glomerular filtration rate testing which are relatively simple and cost-effective to administer in-home. It fits within their in-home exam protocols and will support early detection and diagnosis of kidney disease plus management of those with chronic kidney disease for earlier and better treatment. End-stage renal disease (ESRD) costs $37.3 billion to Medicare. FierceHealthcare

Going far, far East to Indonesia, virtual health provider Halodoc scored $100 million in a Series D funding round. Lead investor was Astra International with Openspace and Novo Holdings. This brings their total funding to $245 million. Halodoc provides online and app-based health services for 20 million active platform users claimed. Services include telehealth, medicine ordering, lab test, and doctor appointment booking. They also manage third-party health insurance purchase and at-home health testing. Their network includes more than 20,000 medical practitioners, 3,300 hospitals, and 4,900 pharmacies. On the website, there are a wide variety of services, including wellness. Unfortunately, to read it, you’ll have to know Indonesian (Malay)–and there are some pictures of intriguing recipes there! Mobihealthnews

Contrasting this to an exceedingly modest raise by a new Boston/Tel Aviv medication management company, FeelBetter. Their $5.9 million unlettered raise was led by Firstime Ventures and Shoni Health Ventures, with participation from Random Forest VC, The Group Ventures, and previous investor Triventures for a total of $8 million. FeelBetter uses AI tools to create what they call Pharmaco-Clinical Intelligence to identify patients at risk and deliver insights on gaps in care to personalize medication management to change the risks of polypharmacy. Release, Mobihealthnews  They also issued a study on how FeelBetter could be used to effectively risk stratify emergency department use and hospitalizations among patients 65+ with multiple chronic conditions and complex medication regimens to avoid the 10-30% of hospitalizations that include medication issues. Release

No week seems to pass by without a data breach of some sort, but it’s unusual when Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) are attached to it. A contractor to the Medicare program, Maximus Federal Services, Inc. (Maximus), used a vendor, Progress Software, and their MOVEit Transfer software, which is a popular file transfer software for transmitting sensitive data. There was a vulnerability in this software that has previously been exploited by Russian ransomwareistes CLOP with Johns Hopkins currently being sued for their breach [TTA 19 July]. Maximus detected the unusual activity, an outside entity copying files, from 27 to 31 May. CMS is reporting that about 612,000 Medicare beneficiaries may have been affected by the breach which may have exposed personally identifiable information (PII) and/or protected health information (PHI). CMS and Maximus are notifying the beneficiaries this week and offering 24 months of free credit monitoring service. CMS release, Federal News Network, Progress page,  Deep Instinct backgrounder on MOVEit’s zero-day vulnerability

Monday roundup: Envision files Ch. 11, who’s to blame for Meta Pixel abuse?, CVS Health to shut clinical trials unit, Amino Health scoops $80M, DocGo flat but optimistic, Owlet way down in revenue

What was envisioned last week came to pass for Envision Healthcare on Sunday. The hospital and physician staffing company filed for Chapter 11 reorganization five years after it was taken private by investment company KKR. At the time of that massive buyout, the value of the company was pegged at $10 billion. Things started to go south for Envision after 2020 with the pandemic drying up patient volumes for two years, with the added factors of regulations kicking in on ‘no surprise’ billing, inflation, staffing shortages, and major fights with health plans around out-of-network inflated charges plus a huge claims dispute with UnitedHealthcare [TTA 12 May]. Ironically, Envision won the main dispute with UHG; that $91 million won in arbitration in an insider’s view would have staved off the bankruptcy this year.

KKR will apparently lose its $3.5 billion equity in the company as $8 billion in debt restructuring takes place. What’s before the court is that the Envision staffing operation will be separated from the AmSurg surgical clinics. Senior lenders will have their debt rearranged into equity into one or the other company. Junior lenders, bondholders, and KKR will receive zero, or as we say locally, bupkis. It’s envisioned (sic) that the restructuring will take about three to four months.  Financial Times, Envision release

The hospitals, that’s who! If you believe Meta, it’s the hospitals that abused those poor Pixels, making them do things against their wishes to tattle all sorts of PHI and PII to Big Bad Meta which sends patients all those Nasty Intrusive Ads. Meta is being sued by parties from the ACLU to patients in class action lawsuits on how the Pixel was used on hospital patient portals and scheduling websites. Meta’s argument is that the health systems’ developers could but did not control how the ad trackers were used and that “Meta did not implement or configure” the Pixels used on the health systems’ websites. In fact, Meta claims that they have filtering tools that screen out sensitive data and that would alert the developer. “It’s ultimately the developer, not Meta, that controls the code on its own website and chooses what information to send,” according to the May 5 filing in that busy US District Court of Northern California.

This could influence outcomes in the multitude of lawsuits being filed against health systems like Kaiser Permanente, UCSF Health, and LCMC Health in New Orleans plus Willis-Knighton Health in northwest Louisiana (Healthcare Dive). If the District Court finds that Meta, and possibly other ad trackers such as those from Google, Twitter, or Bing were not inherently liable for personal health data violations that monetized PHI, then the health systems are 100% on the hook for the data breaches (or ‘wiretapping’ in a creative use of terminology). It also makes the potential paydays possibly less lucrative–in the eyes of this Editor, as Meta and Google have far deeper pockets than any ol’ health system. SC Media, Paubox   The Meta Pixel backstory here

CVS Health to shut its clinical trials unit by December 2024. CVS, like Walgreens and Walmart, jumped into the clinical trials business during the Covid-19 pandemic, seeing a need in the market with pharmaceutical companies and a ready-made, 100 million deep diverse base of patients among their pharmacy users. CVS cited to Healthcare Dive that the shutdown was to better concentrate on core business. Current active trials on the website include narcolepsy, rheumatoid arthritis, and kidney health. No disclosure as to profitability but CVS has a lot to digest with new buys Signify Health and Oak Street Health.

Amino Health’s $80 million funding is a bright spot in this sideways spring. With a digital guidance model that works with employers and health plans to help 1.6 million members navigate their care, their new funding will be used for technology scaling. Equity and debt financing were led by Transformation Capital, which will be joining the Amino board, and Oxford Finance LLC. Amino is being boosted by the Federal Transparency in Coverage (TIC) Rule which makes pricing disclosure a key part of plan navigation. Amino originally started with a direct-to-consumer model but shifted to enterprise, including brokers and third-party administrators. Amino’s total raise is now $125 million (Crunchbase). Mobihealthnews, Amino release

DocGo’s two services, mobile health and medical transport, essentially swapped revenue this quarter in a better-than-average picture. Their mobile health services area in Q1 fell 19% to $72.9 million from $90.1 million in Q1 2022, while transportation services grew 44% to $40.1 million from $27.8 million in Q1 2022. This added to total revenue of $113 million with a net loss of $3.9 million. Their 2023 revenue guidance remains at $500-$510 million with adjusted EBITDA guidance of $45-$50 million. 

What’s promising here is that it’s a SPAC that didn’t crack like practically every other. DocGo pointed out in their release that they have a backlog of $205 million in total contract value over approximately three years and they have doubled their RFPs. Their patient target for 2023 is 50,000. Share price today on Nasdaq ticked up to $8.77. Considering their high last year of $11.08, they are not doing badly in this time at all. Mobihealthnews .We last saw DocGo providing mobile clinics in a Tennessee pilot with Dollar General [TTA 24 Jan] which now is tied in with the state of Tennessee, plus a pilot in NY and NJ with Redirect Health. They provide services in 26 states and the UK.  

This Editor is trying to be as cheerful as the baby at left about baby sock/monitor Owlet, which has had a rough ride in the past two years. Their revenue dropped to $10.7 million in Q1 2023 versus $12 million in Q4 2022 and $21.5 million in Q1 2022. Owlet ended 2021 with a nastygram from the FDA that pulled their original Smart Sock off the market [TTA 4 Dec 2021] but rebounded early in 2022 with the Dream Sock and Dream Duo [TTA 16 Feb 2022] that avoided the claims that sent them into 510(k) Marketing Neverland.  Still, they were delisted by the NYSE in December 2022. On the positive side, Owlet wound up 2022 with $69.2 million in revenue and a good-sized private placement of $30 million in February [TTA 18 Mar]. It has submitted to FDA for two products, including the steep de novo climb on an enhancement to the Dream Sock. Now a much smaller company than it was last year, they have reduced operational expenses to $15.1 million from $24.1 million in Q4 2022 to get to breakeven by end of this year and to be relisted on the NYSE in the future. Having followed them since the early ‘telehealth for the bassinet set’ days of 2012-2013, this Editor wishes them bonne chance. Owlet release, Mobihealthnews

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

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

Mid-week news roundup: CVS Health Virtual Primary Care launches, VA’s two-day Oracle Cerner EHR slowdown, and microsampling blood + wearables for multiple tests

CVS Health finally has Virtual Primary Care up and running. First announced by CVS last May, Virtual Primary Care provides primary care, 24/7 on-demand care, and scheduled mental health services to Aetna members nationwide enrolled in eligible fully-insured and self-insured commercial health plans. Members in VPC can schedule urgent care, 24/7 on-demand care (that may vary by plan), an in-office primary care visit, Minute Clinic visits, and expanded virtual mental health services. Amwell announced that it would be the provider in August on their Q2 2022 earnings call. The release mentions that board-certified physicians and nurse practitioners will be delivering primary care services through physician-led care teams and coordinating with CVS pharmacists. This applies to virtual mental health services as well. (One trusts that this in-network approach will avoid the problems they experienced with Cerebral and Done Health on their prescribed ADHD drugs.) Health records, lab results, and medications are shareable via the patient CVS Health Dashboard. At this point, there is no mention of further rollouts to other plans. Becker’s.

Somebody threw sand in the Oracle Cerner EHR gears at the VA–and it started at MHS. A report from the Spokane Spokesman-Review seems to be the only report out there (other than HISTalk picking it up) on the two-day slowdown in the Oracle Cerner Millenium EHR rolled out at the VA and the Department of Defense’s Military Health System (MHS Genesis) that covers active duty. On Monday and Tuesday, there was a “major slowdown” that did not abate until Tuesday afternoon.  It affected more than half of all MHS providers, as well as VA clinics and hospitals in Washington, Idaho, Oregon, and Ohio. Mann-Grandstaff clinicians reported problems to the Spokesman, which contacted the VA. Their press secretary Terrence Hayes confirmed that changes made to the system by the DOD, which shares a database with the VA, “had the unintended consequence of interrupting services that provide connectivity to the network.” The system slowed down from screen to screen, requiring clinicians to work extra time to make all entries, and was not resolved until configuration changes were made. This is another incident adding to a Very Large Dogpile, including interoperability between VA and MHS versions, 498 outages between September 2020 and June 2022, plus two veteran deaths.

And maybe Stanford, forever associated with Theranos, is trying to get its reputation back–in running multiple blood tests on microsamples. A new paper published in Nature Biomedical Engineering by a group of 17 researchers led by Stanford Medicine determined that valid tests could be run on a microsample (10 μl) of blood that could be drawn from a finger prick at home to test for thousands of metabolites, lipids, cytokines, and proteins. This testing would be paired with data captured from wearables. They tested reactions to food (Ensure shake) and the effects of physical activity on blood with wearables monitoring heart rate and step count, plus a continuous glucose monitor (CGM) to profile individual physiological status, including cortisol. Unlike Theranos, it’s not done in a ‘lab in a box’ in a supermarket trying to duplicate (fake?) existing diagnostic tests, and it employs mass spectrometry molecule-sorting technology in a lab. Becker’s.

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.

Mid-week roundup: Teladoc gets BetterHelp to boost Q4 ’22 revenue; fundings for Array, Paytient, Telesair, three others; layoffs hit at Alphabet’s Verily, Cue Health

Teladoc may finish 2022 better than expected, at least in revenue. At the JPMorgan (JPM) annual healthcare conference, CEO Jason Gorevic shared a revised but still preliminary projection that Q4 would finish up a tick higher than expected–between $633 million and $640 million in revenue, versus their projection during Q3 that the low side would be $625 million. FY2022 revenue was updated to be the $2.403 billion to $2.41 billion range. The big contributor? Their mental health app BetterHelp. Their growth, according to Mr. Gorevic, is “staggering’. Silicon Valley Bank (SVP) analyst Stephanie Davis calculated a growth rate of 43% for the business, up from previous management targets. Teladoc’s optimism is tempered by the no/slow growth economy projected for this year, both direct to consumer and corporate. To help boost the latter, it is launching a new app for health plan members and company employees access to all of Teladoc’s clinical programs. Healthcare Dive, Becker’s

Despite the uncertain economy, funding continues in various rounds, especially in still-hot areas such as remote/virtual behavioral therapy and payments, but nowhere near the bubbly level of 2021:

CVS Health’s open piggybank helped to fund NJ-based Array Behavioral Care’s $25 million Series C. Other investors included HLM Venture Partners, OSF Healthcare System, Wells Fargo, and three others. Array will use the funds to scale its virtual behavioral therapy platform.  Mobihealthnews, Crunchbase

In that interesting area called healthcare fintech, the cleverly-named Paytient now has an additional $40.5 million in Series B funding, bringing their total to $63 million. Paytient provides corporate employees, health plan members, and health system patients with a card-based Health Payment Account (HPA) that includes a line of credit. Release, Mobihealthnews 

In hospital-to-home respiratory care, still in stealth Telesair raised $22 million in Series A funding, led by Pasaca Capital with participation from existing and new investors such as Honeywell Investors, ZhenCheng Capital, Shangbay Capital plus three others. According to the release, funding will be used for the commercialization of the Bonhawa Respiratory Humidifier for use in the ICU and the development of a second-generation, revolutionary product for hospital-to-home. Mobihealthnews   

Also highlighted in Mobihealthnews‘ article is a $10 million Series B for ModifyHealth, which delivers prepared, medically tailored meals and provides advice from dieticians. ModifyHealth provides certified low FODMAP meals for those with irritable bowel syndrome or small intestinal bacterial overgrowth (SIBO), as well as Mediterranean, low-sodium, and gluten-free (celiac disease) diet meals. Censinet, a developer of healthcare cybersecurity software, also landed $9 million in a funding round led by MemorialCare Innovation Fund, Rex Health Ventures, and Ballad Ventures plus five others for a total of over $22 million.  Release  CARI Health, a San Diego startup developing a wearable sensor for medication management, gained $2.3 million in seed funding from the San Diego Angel Conference plus four other funds. Release

The pace of layoffs may have slowed, but the numbers have not.

Alphabet’s Verily health tech development unit is discharging 15% of current staff, estimated at 240 people.  This is part of a reorganization designed to move to financial independence from Alphabet/Google. It’s categorized among Google units as ‘Other Bets’ which is appropriate given that so far, their bets haven’t hit any jackpots. An example we covered back in 2015-16 was a glucose monitoring contact lens developed with Alcon, an on-the-face of it Preposterous Idea that died about that time. Current discontinued areas include remote patient monitoring for heart failure and micro needles for drug delivery. Employees were told to leave the office for the remainder of the week; further information including separation would be sent to them via email. Since 2017, it has raised over $2 billion. You wonder where it went. CNBC

Cue Health, a home diagnostics company, is cutting 388 employees, about 26% of its workforce, effective March. This is in addition to an 170-person manufacturing worker layoff during the summer. Cue bet heavily on growth of its at-home molecular Covid testing packs sold direct on a membership plan [TTA 12 Nov 2021], plus to pharmacies and to businesses. It expanded from about 100 workers in 2020 to more than 1,500. That growth has cratered along with the entire testing market for a pandemic that is no longer there. According to Mobihealthnews, they have submitted to the FDA for new test such as an EUA for a combination flu and COVID-19 diagnostic as well as de novo clearances for its flu and COVID-19 standalone tests. 

 

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]

VillageMD considering $5-$10B merger with Summit Health provider group: reports

Two large provider groups, VillageMD and Summit Health, reportedly are considering a merger. VillageMD, which now is majority owned (62%) by Walgreens Boots Alliance, has 342 total primary care clinics in 22 southern and northeastern markets covering 15 states, with 152 co-located with Walgreens eventually increasing to 200. Summit Health has 370 locations in five states, including specialty practices and CityMD urgent care locations. Summit Health is majority owned by Walburg Pincus.

This reinforces a trend of cross-healthcare sector buys, consolidations, and control. VillageMD’s move from a co-location deal with Walgreens to majority ownership (but controlled by an independent board) was one step starting during the pandemic in July 2020 [TTA article series here].

  • Amazon agreed to acquire OneMedical (1Life) for $3.9 billion at the end of July, and abandon Amazon Care, though now running into FTC/DOJ review headwinds with a second request for information [TTA 15 Sep].
  • CVS Health has made no secret of its desire to acquire primary care, provider enablement, and home health companies (Signify Health, also under DOJ scrutiny), but apparently has abandoned or put on hold a deal with Cano Health [TTA 21 Oct].
  • Walmart continues to go direct by opening full-service clinics, announcing the expansion of 16 based in the Tampa, Jacksonville, and Orlando areas in 2023 (Healthcare Dive, Healthcare Finance News).

Valued at $12.9 billion and with Walgreens’ backing, VillageMD has the ‘go big or go home’ resources to execute Walgreens’ version of this strategy.

Why this very well may happen. The two do not overlap (except in NJ) on markets. VillageMD is primarily owned and affiliated primary care practices; Summit Health specialty practices (neurology, chiropractic, cardiology, orthopedics, dermatology) and CityMD urgent care. VillageMD has successfully mastered value-based care models in Medicare and entered advanced Medicare ACO models early and vigorously (Editor’s information); Summit Health primarily is fee-for-service with some participation in value-based programs. More to come. Bloomberg, Becker’s, and a very big hat tip to research from Jailendra Singh of Truist Securities  (paper here)

Breaking: CVS’ Signify Health buy under DOJ scrutiny in ‘second request’

Not unexpectedly, the US Department of Justice (DOJ) is taking a hard look at the Signify Health acquisition by CVS Health. The two companies were notified Wednesday on DOJ’s Second Request for information. This was disclosed on an SEC Form 8-K. The DOJ now has 30 additional days to investigate antitrust aspects of the merger, once that additional information is received. 

The timetable goes like this:

  • 19 Sept: CVS filed its premerger notification and report with the DOJ and the Federal Trade Commission (FTC) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). This initiates a 30-day waiting period.
  • 19 Oct: At deadline, the request for additional information initiated by the DOJ was received by both CVS and Signify (Second Request)
  • The Second Request extends the waiting period under the HSR Act by 30 days after both CVS and Signify have substantially complied with the Second Request. The DOJ can terminate the waiting period earlier, or move it to an agreed-upon later date. 

CVS continues to affirm closing the deal by first half 2023 as planned, which is a fairly wide window.

The current government’s DOJ and FTC have made no secret of their policy-driven yen for using antitrust in the name of lowering healthcare costs (even favored pharma). The crashing failure of DOJ’s antitrust motions against UnitedHealthGroup and Change Healthcare [TTA 20 Sept] must have smarted. What this usually initiates is the search for a quick and easy win to put said embarrassment behind them. CVS Health is certainly a high-profile target, though Signify even at $8 billion, like Change, is not except in the industry. 

Signify’s competitive overlap with CVS/Aetna isn’t as large or obvious as UHG’s Optum with Change, but there is some: home health management and (in this Editor’s view), ACO management services with Signify’s Caravan, which participates in multiple Federal shared savings models where Aetna also is. One wonders if some divestment will be demanded by DOJ. Even before the auction, Signify started the complicated and long exit from the failing Bundled Payments for Care Improvement (BPCI) programs inherited from the Remedy Partners buy.

Could the DOJ action have played a role in CVS’ sudden cold feet in acquiring Medicare/Medicaid primary care provider Cano Health? [TTA 20 Oct] The timing is certainly close. 

DOJ is not working alone. The FTC also has a yen for Amazon in their 2 September second request for information on their acquisition of OneMedical, which also added 30 days to the Hart-Scott-Rodino (HSR) clock after compliance. Amazon is already going through this with their iRobot acquisition [TTA 15 Sept]. Reuters, FierceHealthcare, Home Health Care News

News roundup: CVS abandons (?) Cano Health buy; Signify adds home RPM; BioIntelliSense RPM acquires AlertWatch; GE Healthcare, AMC Health partner; Viome raises $67M, other fundings

CVS Health apparently backs away from a strategic primary care buy. Earlier this week, both Barron’s and DealReporter (via FactSet) reported that CVS Health is no longer pursuing an acquisition of Cano Health, a primary care provider group in Florida, Texas, Nevada, California, Illinois, New Mexico, and Puerto Rico that concentrates on senior health, Medicare Advantage patients, and value-based care. Cano has 4,000 employees and 280,000 members. Reasons why were not disclosed by either CVS or Cano. Cano shares listed on the NYSE fell on the news from Monday’s open of $8.22 to $4.50 today (20 Oct). An alternative buyer may be Humana, which has a right of first refusal on a sale dating back to 2019, but Humana has been quiet on the acquisition front of late.

Walking away seems contrary to CVS’ stated strategy of pursuing deals in primary care, provider enablement, and home health, but CVS can afford to be choosy. There’s speculation that CVS has a different provider/VBC enablement target in mind.  Jailendra Singh of Truist Securities identified ACO management services organization Privia Health as a potential buy that would fit well with CVS’ pending buy of Signify Health, which includes competitor Caravan Health (more on this here). But who knows if this ‘walk away’ is final? Healthcare Finance, FierceHealthcare

CVS’ pending deal, Signify Health, announced the addition of spirometry testing to evaluate patients for COPD. This will be added to their existing suite of in-home diagnostic testing and tracking, In-Home Health Evaluation, targeted to Medicaid and Medicare Advantage members. Mobihealthnews

If there’s a Cinderella this inflationary, recessionary year, it’s remote patient monitoring (RPM). BioIntelliSense has been in RPM since 2020 with on-body/stick-on sensors such as the BioButton and the BioSense 30-day monitor. Their latest addition through acquisition is the AlertWatch clinical intelligence and triage system. AlertWatch will join BioIntelliSense’s product group within Medtronic’s HealthCast portfolio in US hospital patient monitoring as part of their existing partnership. In the past ten years, AlertWatch achieved four FDA 510(k) clearances for its specialized product offerings for the operating room, intensive care unit, and labor and delivery unit.  BioIntelliSense release

Veteran RPM company AMC Health will be partnering with GE Healthcare (GEHC) for post-discharge in-home care monitoring. This will extend GEHC’s hospital-based monitoring into post-acute patient needs and anticipate future care needs, potentially reducing unnecessary readmissions. It’s also planned that eventually both hospital and home data will be integrated into GE’s Edison Health database. GEHC also announced additional details about its spinoff, due to happen in early 2023. [Also TTA 12 Nov 21 and 20 July] Mobihealthnews

Healthcare/health tech raises haven’t entirely disappeared. Viome, which uses AI to test the oral and gut microbiome to prevent, diagnose, and treat chronic diseases and cancer, just raised a $67 million Series C led by Bold Capital Group with participation from Khosla Ventures, West River Group, Glico, Ocgrow Ventures, and Physician Partners, for a total raise since 2017 of over $169 million (Crunchbase). Viome recently launched the CancerDetect test for oral and throat cancers under the FDA Breakthrough Device Designation. Last year, they expanded their partnership with GlaxoSmithKline to research and potentially develop interventions for some cancers and autoimmune diseases. Viome release  

Mobihealthnews rounds up several other financings from genomic tester Variantyx’s $20 million in debt financing to mental health app Mindful Care’s modest $7 million Series B and dataset research collaboration platform Rhino Health‘s $6.7 million seed round extension for an $11 million total.

News roundup: CVS sells bswift; Babylon puts Meritage IPA up for sale, financially realigning to prevent delisting; Redesign Health sheds 20%, Noom 10%

Companies shedding ancillary businesses, and more than a few of their people that make them go. 

CVS Health is selling bswift to Francisco Partners. Bswift, a benefits technology and HR services company, was acquired by Aetna in 2014 for $400 million. It became part of CVS Health in 2018 after CVS acquired Aetna. Based on the website, it was operated independently. Francisco Partners, an investment group specializing in tech, recently acquired IBM Watson (now Merative) [TTA 7 July] and added it to 400-odd portfolio companies. Acquisition cost and management transitions were not disclosed, but expected to close by Q4 this year. The company will continue to partner with CVS Health and Aetna. Francisco Partners/bswift release, Mobihealthnews, FierceHealthcare, HealthcareFinanceNews

Babylon Health exiting the provider business, transitioning to US financial reporting requirements, and reversing stock to boost price. Babylon has put on the block 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. The sale was announced 12 October and is expected to complete in early 2023. Babylon’s rationale is “to focus on its core business model through further investment in its digital-first contracts”. It was a short-lived foray, as Meritage was bought only last year along with First Choice Medical Group [TTA 7 Oct 21], which is not mentioned, and completed prior to their SPAC.

Babylon is also financially realigning.

  • On 12 October they also announced conversion to US financial reporting and GAAP accounting from reporting as a foreign private issuer. This will be effective in January 2023.
  • In September, shareholders approved a reverse share split to take place in Q4 to consolidate shares within the approved range of 15:1 to 25:1. All shares will be converted to Class A ordinary shares from a previous A/B structure.

These address a major problem that threatened Babylon’s listing on the New York Stock Exchange (NYSE). In September, Babylon received notice that it violated NYSE rules in not maintaining an average closing share price of at least $1 over 30 consecutive days. Today’s close (12 October) was $0.42. A reverse split will boost the stock price and prevent Babylon from being delisted. Babylon release, Mobihealthnews

After a brief break, healthcare layoffs continue even at richly valued companies with recent raises.

  • Redesign Health is releasing 20% of its workforce, or 67 people from its NYC-based workforce. This is one month after a $65 million Series C raise in late September from General Catalyst, CVS Health Ventures, and other investors, and a valuation in the $1.7 billion range. According to a company spokesperson, these had nothing to do with the Series C or financially driven, but according to the CEO, part of a “ongoing evolution, and given the need to prioritize in a challenging market”. Departments affected in the ‘restructuring’ are engineering, product, marketing, and recruiting. Redesign is unusual in that it creates startups from its own research, assembles management teams, brands, and funds them. To date, it has created about 40, including a few that have had layoffs of their own (Calibrate). Redesign had planned to create more than 25 new companies by the end of 2022, which apparently will not happen. Fast Company, Mobihealthnews
  • The heavily advertised weight loss app Noom reportedly will be laying off 10% of their staff, or 500 people primarily in coaching. Noom currently has a valuation around $3.7 billion and a cumulative funding of $650 million. Apparently there is also a change in direction from the original (and successful) concept of nutrition, behavioral, and exercise coaching via live chat to scheduled video consults as part of a mind and body platform with a higher degree of personalization, including mental health. The company CFO is also departing for TripAdvisor, according to the Wall Street Journal. TechCrunch

News briefs, catchup edition: UnitedHealth/Change decision October?, CVS wins $8B Signify Health auction, Walgreens majority buy of CareCentrix, FTC requests more info on Amazon-One Medical

Your Editor is semi-returned from Almost Two Weeks in Another Town, with a few more days to close out September (and summer into autumn) coming up. A lot of big news broke despite the usually slow Labor Day holiday week.

UnitedHealthcare Group/Change Healthcare Federal lawsuit to be decided in October–reports. The bench trial in the US District Court in Washington DC pitted the Department of Justice and state plaintiffs against UHG’s massive $13 billion acquisition of claims and EDI/data processing giant Change. It concluded 16 August with closing arguments presented 8 September. Dealreporter via Seeking Alpha reported that UHG and Change effectively countered DOJ’s antitrust objections to the acquisition. Change Healthcare had previously sold their claims editing business to TPG Capital to ease antitrust concerns.  Whether that will be enough in the current environment with greater sensitivities around healthcare consolidation remains to be seen. If approved, Change will be folded into OptumInsight. For a deeper dive into the issues, see TTA’s earlier reporting 3 August and 23 March.

CVS Health beat out other contenders with an $8 billion cash bid for Signify Health. It was a busy Labor Day for CVS as Signify’s board met and decided that day on CVS’ cash offer of $30.50 per share in their unusual auction. Amazon, UnitedHealth Group, and little-known Option Care Health were the other bidders. Signify is a strategic boost for CVS in becoming a major player in primary care, provider enablement, and home health as we’ve summarized here from CVS’ Q2 earnings call. Signify’s capabilities in in-home health delivery and provider services were cheaper to buy than to develop. Based on the weight given to it in the CVS release, Signify’s Caravan Health and their Medicare ACOs furnishing value-based care management services to 170 providers was a significant factor in the top price paid.

New Mountain Capital and their investors own 60% of Signify and will be exiting. Signify had in July announced their own exit from the costly and problematic Episodes of Care/BPCI business acquired with Remedy Partners back in 2019. This led to most of the over 480 staff layoffs announced last month. The sale is, as usual, pending regulatory approvals and isn’t expected to close until first half 2023. Kyle Armbrester, Signify’s CEO Kyle Armbrester will continue to lead the company as part of CVS Health. Healthcare Finance, FierceHealthcare

Rival Walgreens Boots Alliance completed their acquisition of a majority share of home care coordination platform CareCentrix. Walgreens’ final payment was $330 million for 55% of the company at an $800 million valuation. As noted previously, Walgreens ‘go big or go home’ strategy in primary care kicked off in 2020 with growing investments in VillageMD, culminating in last year’s $5.2 billion for 63% of the company. The plan is to co-locate Village Medical offices with 600 Walgreens locations by 2025 [TTA 14 Oct 2021]. CVS’ recent actions can be seen as a reaction to Walgreens’ aggressive moves. Healthcare Finance

Amazon now under FTC scrutiny for One Medical acquisition. If shutting down the much-publicized Amazon Care wasn’t quite enough last month, the Federal Trade Commission (FTC) will be reviewing Amazon’s $3.9 billion buy of One Medical. This was announced in a 1Life Healthcare (parent of One Medical) 8-K filing with the Securities and Exchange Commission (SEC). Both 1Life and Amazon received requests for additional information on 2 September, above and beyond the usual required Hart-Scott-Rodino Act (HSR) reports that will be reviewed by the FTC and DOJ. Effectively it extends the HSR waiting period by 30 days after One Medical and Amazon have substantially complied with the additional information ‘second request’.

The FTC isn’t winning popularity contests with Amazon’s legal department, as the agency is reviewing their acquisition of iRobot, maker of robot vacuum cleaners. Mobihealthnews