News roundup: DOJ investigating UHG on Medicare Advantage billing upcoding; Teladoc’s BetterHelp therapists using AI?–a short seller alleges; Hims whacked by FDA ending compounded GLP-1s (updated); some fired FDA staffers in CDRH reinstated

February 25, 2025 | by

UHG’s annus horribilis gets more horribilis. News broke on Friday 21 February via the Wall Street Journal (paywalled) that UnitedHealth Group is reportedly under investigation by the US Department of Justice–again.  The DOJ is looking at UHG’s billing practices for members covered by UnitedHealthcare Medicare Advantage (MA) plans on diagnoses that were made to generate extra payments, a practice known in the industry as upcoding. This also involves the many practices that UHG owns or has relationships through Optum, about 10% of primary care practices. These practices are receiving visits from DOJ investigators, certainly something that would strike some fear into any doctor’s or practice manager’s heart. 

The WSJ reported that two providers cited in their article provided documentation, while another person said that the Department of Health and Human Services’ Office of Inspector General (HHS-OIG) is involved in the probe.

It’s a real Mound of Misery for UHG.

  • MA plans and their set rates for additional benefits not covered under original Medicare have been under HHS/CMS scrutiny in the past year, and health plans have been running higher costs than anticipated as covered patients have returned back to care.
  • UHG’s OptumRx unit last year was reported as under investigation on antitrust grounds.
  • Optum’s Change Healthcare (contested by DOJ but approved) is still recovering from an unprecedented hacking and ransomwaring, with the huge expense of restoring systems plus notification and providing a reported 100 million with free credit monitoring services.
  • The proposed $3.3 billion deal with Amedisys for home care continues to be delayed by the DOJ antitrust suit.
  • Their UnitedHealthcare president was assassinated in New York, and his (alleged) killer is starting his trial here, a spectacle which will go into the summer. But the issue that supposedly tipped off the murder–claim denials and denials of care due to policies and the use of AI, isn’t going away–jumping in the fray is megainvestor Bill Ackman.

While Federal involvement with health plans comes with the territory, the adversarial relationship with DOJ far exceeds the norm. The share price reflects it, having cracked 26% in the past six months. Those accepting the 30,000 buyouts on offer may be grateful if they take them. CNBC, FierceHealthcare

Another backwash from the use of AI? Teladoc is receiving some bad publicity it can ill afford. There are allegations of their therapists using AI-drafted responses with patients–and this apparently is becoming more frequent. It’s been percolating on social media boards such as Reddit (see example here) for some time. The latest is a report from a short seller* of Teladoc, Blue Orca Capital, that alleges that BetterHelp therapists not only use ChatGPT for text responses outside of live sessions (messaging), but also during live chat sessions. This goes against Teladoc’s own stated policy against AI therapy as ‘dehumanizing’  in a lengthy blog post ranging from social media to job loss as a result as AI. Blue Orca includes first hand information from two BetterHelp patients, an allegation from a competitor that BetterHelp doesn’t care, and that therapists are actually incentivized on the word length of responses they give to a patient, overloading their schedule, and being available 24/7 to patients paying a reported $400/month. Given BetterHelp’s prominence in Teladoc’s earnings–according to them “accounting for 40% of the Company’s revenues and adjusted EBITDA since FY21”, adding in their other financial factors, their dim view is jarring if you like or own TDOC.  Developing. Hat tip to HIStalk 2/24/25

*Editor’s note: Blue Orca Capital, as a short seller, profits when a stock goes down. Blue Orca has a short position in TDOC. So our Readers should take their position into account. Short sellers are also prohibited by securities law from spreading false information about a stock for the purposes of profiting from its decline (Rule 10b-5 under the Securities Exchange Act of 1934.)

The Feds giveth and taketh away Hims’ weight loss business. Updated information. Friday’s good news was that FDA has reclassified the shortage of semaglutide, the active ingredient in GLP-1 drugs, as ‘resolved’, meaning It’s Over and it’s easier to get your Wegovy, Ozempic, Zepbound, etc. prescription. The bad news is that online prescribers that were authorized by FDA to use less expensive compounding to approximate or customize the branded versions of these drugs for weight loss, are now prohibited from doing so. They have till April or May to transition to branded injectable versions. This affects the bottom line of all these telemedicine prescribers such as Ro, Weight Watchers, Future Health (a heavy local radio advertiser), 23andMe, and Hims & Hers. Hims, the showiest in class, took a breathtaking 25% hit on their stock between Friday and Monday.

It is not only cost of branded drugs but also that so many competitors have jumped into the field, creating another shortage of the branded drugs, that looms. Suppliers of compounded drugs, the high volume compounding pharmacies (not your corner pharmacy that does compounding based on Rx), may be reluctant to continue supplying telemedicine prescribers in reasonable fear of FDA action or pharma lawsuits that could put them out of business.

Hims also publicly took the hardest line against the pharma companies, implying in their now infamous Super Bowl commercial that their obesity drugs are priced “for profits, not patients”, unlike Hims’, of course. Novo Nordisk, the Ozempic and Wegovy manufacturer, in turn has taken a hard stance against the compounders pointing out that a compounded version isn’t standardized nor FDA-approved for safety and efficacy.

A custom, compounded version of a drug can only be sold when there is a shortage or if the branded drug is in some way inappropriate for the patient requiring a customized version, e.g. with adjusted dosage, method of dosing, or added/deleted ingredients. Look for Hims and other telemedicine prescribers to start pushing this POV. FierceHealthcare, MedCity News

Some FDA reviewers reinstated after DOGE cuts. The ~230 probationary and other employees who were let go with severance then partially reinstated are reported to be reviewers in the CDRH (Center for Devices and Radiological Health). The 183 reinstated reviewers are actually funded by the industry through the Medical Device User Fee Amendment (MDUFA) agreements to help speed the review and approval process. There is considerable confusion about this because phone calls went out over the weekend but as of today (Monday) there is no written confirmation from HR or the Office of Personnel Management (OPM). It remains murky as do layoffs in the rest of HHS. FierceHealthcare, Endpoints

News roundup 21 Feb: UHG offers buyouts to 30K before layoffs (updated); more inside the Transcarent-Accolade deal; Hims acquires NJ testing company; layoffs bite inside HHS; in fundings, Vitalchat gains $6M, Frontera seeds at $32M, Harrison.ai $112M (AU), Abridge’s $250M

February 21, 2025 | by

UnitedHealth Group ends an annus horribilis with more horribilis. UHG offered early this week 30,000 employees their “Voluntary Resignation Severance Program” or VSRP. If the employee accepts between 24 February and 3 March, the program offers anywhere from 7 to 30 weeks severance, based upon tenure and salary grade; they’ll receive their termination date on 17 March with all released by 1 May, as of now. A wrinkle: their managers must approve of their taking the package, which could set up a situation of being released later involuntarily. UHG has 420,000 employees and oddly, is still posting available positions but they may be ‘ghost’.

Reports have been compiled by employees posting largely anonymously across social media and websites such as Reddit, Facebook, LinkedIn, TikTok, and TheLayoff.com. The buyout offer, according to reports, is concentrated in the benefits operations area. According to CNBC’s sources, benefits oversees multiple subdivisions that help manage customer service, claims, enrollment, customers’ insurance benefits, and more. As is typical with voluntary severance offers, the whip is that if employees do not take the VSRP, those laid off later will receive a reduced package.  There is no information about additional benefits, such as 401(k) and incentive vesting, or healthcare benefits–the last ironic for a healthcare company.

On social media, the betting is that UHG is only the first payer to institute layoffs, with the decline in Medicare Advantage payouts and reductions in ACA subsidies. Other factors: AI (per the last earnings call, they are replacing many customer service functions with AI programs) and offshoring. This is not going to be a great year for any payer, if you work for one, and their suppliers/partners. HealthPayerSpecialist (hat tip to Mansur Shaheen via LinkedIn), FierceHealthcare, PYMNTS.com, Minneapolis Star-Tribune   A followup article by Mr. Shaheen with UHG interviewing employees and accessing company information is here. Another reason why is that UHG’s attrition rate, for various reasons including company response to the Brian Thompson murder and their higher pay rates, was much lower than forecast.

Updates on the Transcarent deal for Accolade. Contained in the latter’s SEC Schedule 14A, an announcement of a stockholder meeting (virtual) and preliminary proxy statement, are more tidbits in the runup to the deal with Transcarent:

  • Transcarent’s merger sub was formed on 3 January, indicating this deal has been on the table for some time
  • In April 2024, Accolade was considering acquiring a strategic company (unnamed). That company rejected the offer and instead offered to buy Accolade by May. Later that month into August, a special committee and outside advisors considered competing purchase offers, well over 16.
  • Transcarent’s original offer was made at end of July, was unsolicited, and an August proposal was rejected. A second proposal was rejected in September based on financing.
  • In October, after business reverses, Transcarent submitted another bid for shares at $7.25 and was delayed by the special committee 
  • Between that date and year’s end, the other proposals faded away for a variety of reasons.
  • Transcarent’s final offer was $7.03 per share and accepted in January.

Regarding transitioning incentives in the deal, expected to close in Q2:

  • It can be terminated by 7 October. If Accolade terminates it, the payment to Transcarent is $19.8 million. If Transcarent terminates, the fee to Accolade is $29,950,000
  • Top management (Rajeev Singh, Stephen Barnes, Robert Cavanaugh, and Richard Eskew) shares will accelerate in vesting. Some top management such as CEO Singh will enjoy retention bonuses.
  • It describes treatment of employee benefits such as restricted and performance stock units (RSU, PSU) being converted to cash and that other benefits for continuing employees will be cut over for a year.

Also Endpoints News

Hims & Hers buys a testing lab in NJ.  The acquisition of Sigmund NJ LLC, also known as Trybe Labs, in Kearny NJ will support at-home blood draws and more complete and affordable whole-body testing. The acquisition was self-financed and not disclosed. Hims, a telehealth prescriber for GLP-1, ED, hair loss, migraines, and anti-depressants, in the release pointed out that the Trybe Labs buy will enable them to serve high-impact clinical categories including low testosterone, perimenopausal, and menopausal support for patients and providers. Through using a blood lancet, they will test for hormone levels, cardiac risk, stress markers, cholesterol, liver function, thyroid function, and prostate health. Mobihealthnews, Endpoints News

Layoffs within HHS are extensive–and as of a court action today, going through. Most of those eliminated by DOGE (Department of Government Efficiency) are probationary hires–in their first year–and some in year two. Those released at HHS include 1,300 at the Centers for Disease Control and the National Institute of Health (unknown but expected to be upwards of 600). Those released will have a month’s severance but will end work on Friday 14 February. Some probationary NIH employees will be retained. Cuts include CDC and other HHS contract workers and include dozens at the Vaccine Research Center housed at NIH. The current acting principal deputy director, Nirav Shah, will be departing on 28 February as will Renee Wegrzyn, the appointed head of Advanced Research Projects Agency for Health (ARPA-H), which performs biomedical research in conjunction with the private sector established in 2022 by the last administration. Ironically, reviewers of Elon Musk’s Neuralink project and other brain-computer interface companies were among the 20 fired at FDA’s Office of Neurological and Physical Medicine Devices.

HHS employs more than 80,000 people across multiple agencies and has a budget of $1.8 trillion. NIH alone has 20,000 people and has a $47 billion annual budget. STAT, Mobihealthnews

Funding highlights include a stunning seed round:

  • Vitalchat, a provider of in-patient virtual nursing and procedural telehealth, closed a $6 million Series A round. Investors were led by Green Harvest Capital Industries (GHC Industries). Two of their principals will join the Vitalchat board: Ankit Patel, GHC’s CEO, and Saagar Parikh, co-founder/principal. The new funds will be used for product innovation, market expansion, and deeper AI integration into clinical workflows for its AI-assisted virtual sitters. Release
  • Frontera Health’s seed round of $32 million was a return to 2020’s Big Raises. It was co-led by Lux Capital and Lightspeed Venture Partners, with Bison Ventures, Menlo Ventures, and Inspired Capital participating. Frontera specializes in autism services, including virtual autism diagnosis and assessments, as well as in-home and center-based ABA therapy. It uses what they call ‘digital phenotyping’ to analyze interactions and behaviors, providing real-time cognitive reasoning and objective data points for clinical assessments. Behavioral Health Business noted substantial raises by other companies such as Anna Health and Prosper Health, along with private equity (PE) investments.  Release, Mobihealthnews
  • Down Under, Harrison.ai’s Series C totaled $112 million in a Series C funding. It was led by Aware Super, ECP, and Horizons Ventures. It provides medical imaging diagnostic support in radiology and pathology, including workflow solutions. Harrison is opening a US headquarters in Boston to expand their US business. It already has clients in APAC, EMEA, UK, and US, where it has 12 FDA clearances. One of their CT brain algorithms has FDA Breakthrough Device Designation and Medicare reimbursement through the New Technology Add-on Payment (NTAP).   Release, Mobihealthnews
  • Abridge raised an old-school level $250 million Series D investment. This was co-led by Elad Gil and IVP, with a long list of participants including Bessemer Venture Partners, California Health Care Foundation, CapitalG, CVS Health Ventures, K. Ventures, Lightspeed Venture Partners, NVentures (NVIDIA’s venture capital arm), Redpoint Ventures, Spark Capital, and SV Angel. Abridge’s platform converts patient/clinician conversations into structured clinical notes in real time using (guess) generative AI. Funding will be used to further develop AI capabilities and commercial growth to support broader applications. It claims 100 of the largest and most complex healthcare systems in the US, from rural systems to children’s hospitals, leading academic systems, and nationally recognized cancer centers, Release