Masimo update: SEC announces investigation of RTW Investments and role in proxy war voting

December 6, 2024 | by

The Securities and Exchange Commission comes knocking on RTW Investments’ door…and they have no sense of humor. Though the proxy war is over now for two months and Politan Capital Management is firmly in control, with losing founder Joe Kiani departing in a classic ‘you’re fired/I quit’ scenario that’s dissolved in a flurry of lawsuits from New York to California [TTA 15 Nov], the next shoe dropping can land Kiani and his ally Roderick Wong of RTW into some extremely hot soup, to strain two metaphors.

The SEC is now investigating the “empty voting” scheme apparently used by Kiani’s side in the proxy war. Masimo had already sued Kiani and RTW in the US District Court for the Southern District of New York charging that they used empty voting to manipulate the shareholder vote in favor of Kiani. Masimo is claiming that this action rigged 19% of the vote under Kiani’s and allies’ control. As noted in our November article, empty voting is done through put options or by selling the shares after the record date but before the shareholder meeting. It’s a way for an investor to build up share control and sway the outcome of a shareholder vote at little cost.

Strata-gee yesterday (5 Dec) reported that Bloomberg News (paywalled), during last week’s pre-Thanksgiving ‘news black hole’, broke that the SEC is probing RTW, a $6.5 billion hedge fund. Its head Roderick Wong is cooperating with the probe. He characterized it to his investors as a ‘fact-finding investigation’ and accurately characterized it as “the existence of a probe doesn’t mean laws were broken” in a message on Monday 25 November. A SEC probe is not necessarily safe as milk–see the last part of this article.

However, as Strata-gee reports, empty voting is not necessarily illegal. It is Masimo’s stating that it has evidence that Kiani and RTW conspired to form an insider group–and insider groups always ring bells for the SEC especially during a proxy fight. And where there’s the SEC, there is the Department of Justice. Witness the interest in insider trading in the form of stock sales by executives at UnitedHealth Group while a DOJ probe was happening but not public–and the resurgence of interest in UHG’s legal difficulties as part of the shocking recent events–which have caused industry executives to scrub their profiles from corporate websites. Healthcare Dive.

Why this matters to us in healthcare tech. Masimo makes consumer and professional medical devices, including smartwatches, that measure vital signs including pulse oximetry where they have a brace of patents. Their global revenue in 2023 was over $2 billion. Medical Design and Outsourcing  Last year at this time, Masimo was the David wrestling Goliath Apple to the mats with  ITC (International Trade Commission) bans on the new Apple Watch 9 and Ultra 2 last Christmas season, forcing Apple to pull them from sale and disable the feature violating the Masimo patents. Masimo continues to challenge Apple patents in court with mixed results, most recently reported in mid-October. Since the new Masimo is actively selling or spinning off its audio brands, what remains is their healthcare technology business.

A cautionary tale. This Editor, as a subscriber to Strata-gee (an audio business specialist website) after finding Editor Ted Green’s talented writing there in following the Masimo Mess, wanted to share from today’s subscriber email his description of a SEC probe at a former employer. Basically, the SEC doesn’t launch investigations unless they have good reason to do so, and they turn your company’s life upside down doing it. Mr. Wong will be holding court for a group of guests for awhile. Editor Ted has a reminiscence of when it happened at the well-known audio brand Onkyo, which was treated as a suspect in the legendary Crazy Eddie (“his prices are insaaaaane!”) retail electronics chain fraud.

Have I ever told you the story about the day, many years ago, when about 20 agents of the Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation (FBI) came storming through the main entrance of Onkyo USA, marched into the President’s office (who was in a meeting that was hastily dismissed) and delivered a Search Warrant? (This is not a joke!) I learned a few things that day about the men and women of the SEC: 1) Most of them were armed with weapons that could deliver deadly force; 2) They were as serious as a heart attack; and 3) They would take office space in our facility and stay for weeks, as they forensically examined everything about our business. It turned out that this was part of an investigation into Crazy Eddie, a New York dealer that they suspected had engaged in illegal activities. As one of their top suppliers, Onkyo was considered a potential co-conspirator until we proved we weren’t…which, thankfully, we did – and they came to see us as one of the victims of Eddie Antar’s scheme and NOT a partner.

No apologies rendered, I’d guess. Or payback for the sandwiches and coffee.

Breaking: Federal agents seize Steward Health’s CEO, international head’s mobile phones in widening US fraud investigations

November 26, 2024 | by

This fowl is coming home to roost, and it’s not going to be much of a Thanksgiving at Steward’s former CEO Ralph de la Torre and international CEO Armin Ernst’s tables as a result. Last week, reports emerged that Federal agents served search warrants and seized mobile phones belonging to both Steward executives, though neither has been formally charged with crimes in the US. Since July, rumors have prevailed that the US Attorney’s office based in Boston had opened an investigation, citing fraud and violations of the Foreign Corrupt Practices Act about its business dealings in Malta between 2018 and 2023–and perhaps more [TTA 25 July]. These rumors were confirmed when a former US Senator, John Boehner, a Steward board director, testified on 14 November to a Federal grand jury in Boston. Boehner had access to financial information that could have revealed potential fraud and corruption within the operations of Steward Health, which collapsed into bankruptcy in May. Prosecutors were reportedly zeroing in on financial transactions that could have personally benefited de la Torre and their top executives. The former senator was best known of late for his lobbying and advocacy of marijuana legalization, which makes his board appointment even more interesting. Other former Steward executives have also been questioned by Federal investigators, according to the Boston Globe‘s (paywalled) reports.  Becker’s and Becker’s, both 25 November. Also Times of Malta 26 Nov

In the US, federal search warrants are not issued lightly. Credible evidence must be presented by a federal law enforcement officer or a US attorney to a magistrate judge with authority in any district where the crimes may have occurred. There must be probable cause to search for and seize a person or property. That includes electronic storage media such as servers, computers, and phones.

The Boston Federal investigation is separate from the outgoing Congress’ Health, Education, Labor and Pensions (HELP) Committee’s subpoena and criminal/civil contempt charges referred in September to the Department of Justice [TTA 1 Oct and prior], complete with de la Torre’s immediate countersuit, nor the Malta Government’s ongoing actions against Steward (as Vitals Global) in the privatization of three hospitals in that island nation. Times of Malta 26 Nov  Steward’s business in Malta included a loony, gaudy spy operation against their critics there and elsewhere. That reported cost was $7 million, diverting much-needed funds while Steward defaulted on its bills and payrolls.  [TTA 2 July]  The Malta investigations have also been stymied by the non-appearance of both de la Torre and Ernst, on the grounds of facing US charges and an ill wife, respectively. Former Malta prime minister Joseph Muscat, under investigation, previously had his phone seized but refused to give the password, which may take a year to crack. Times of Malta 21 Nov

An extensive critique of Steward’s board of directors by the Globe’s reporters from October is available here courtesy of the Weinberg Center for Corporate Governance. It is a worthwhile dive into how Steward’s “unusual” business practices were facilitated by its tight-knit and inexpert board, drawing parallels with Theranos. Board members also enjoyed de la Torre’s considerable largesse, unlike Theranos.

Investigations by the Boston Globe’s reporters also reported that additional Steward funds were diverted to de la Torre’s personal pursuits, such as a private jet for friends, a donation to his children’s school, and a Madrid apartment. The last is interesting to this Editor as Spanish courts do not extradite easily for crimes not committed or charged in Spain, requiring review and approval of all requests by the National Court. de la Torre also has reported residences in Costa Rica where extradition via a bilateral treaty is easier. 

This Editor’s extra-legal advice to de la Torre remains that he should go on his $40 million oceangoing yacht for a trip into international waters and not even try to brazen this through. (And if anyone believes that the corporate phone hasn’t been tossed overboard or any phones seized hadn’t been thoroughly cleansed, I have a bridge over the Hudson River to sell you!)

Bad News Roundup updates: UHG/Optum defends Amedisys buy fast via a website, digging deeper into Forward’s fast demise, former Masimo CEO Kiani booted–and sued (updated)

November 15, 2024 | by

The other shoe drops, as UnitedHealth Group/Optum take their defense public a day later. This unorthodox approach to defending an acquisition against a Department of Justice lawsuit [TTA 13 Nov] is visible on a specially set up Optum page. ImprovingHomeCare.com predictably highlights the benefits of an Amedisys merger along with the divestitures to VitalCaring Group. The gauntlet thrown is unadorned: “The Amedisys combination with Optum would be pro-competitive and further innovation, leading to improved patient outcomes and greater access to quality care. We will vigorously defend against the Department of Justice’s overreaching interpretation of the antitrust laws.”

  • Setup is around present and future demand–and that providers have to be capable of investing and scaling to meet it. “70% of adults 65 or older will likely need some form of long-term care during their lives.” and 3 million Americans received home health services in 2020 (Editor’s note–in a pandemic year when visits were certainly curtailed).
  • Home health is highly fragmented both nationally and locally, thus the acquisition isn’t anti-competitive. “In metropolitan areas with approximately 500,000 residents, there are an average of 26 agencies serving the metro area. The combination of Optum and Amedisys would be a fraction of both home health and hospice–and there would be strong competition in both metro and rural areas.
  • The divestiture to VitalCaring would further preserve competition, and that VitalCaring is a quality competitor. The DOJ release made much of VitalCaring’s inadequacies, such as their lower quality scores, financial difficulties, and leadership. VitalCaring, headquartered in Austin, Texas, currently operates in six states with 58 locations with plans to expand. Their CEO April Anthony is cited as building multiple home health companies ‘from scratch’ such as Encompass Care.
  • Additional proof points stress streamlining of care across Optum’s areas of expertise, integrating technology, and improving value-based care coordination.

FierceHealthcare

Forward’s shut down continues to reverberate in a classic tale of overreach and misdirection. Their bet on kiosks, plus a ‘forward-tech’ approach to a concierge-on-the-cheap, no- insurance-accepted model of primary care over eight years, apparently led to what pilots call a death spiral–it begins wide and imperceptible until it tightens and accelerates fatally in a final dive. Business Insider, true to its name, spoke with 11 anonymous and now former employees who attributed the failure to putting all their chips on 3,200 CarePods installed in one year. Their CEO, Adrian Aoun, was obsessed with technology to the point where he wanted to replace his offices and doctors with CarePods and started to strip the clinics of services, despite only two CarePods installed. 

Most advanced, yet unacceptable*. Patients didn’t try out or use the CarePods, finding them less than inviting. Logistical challenges delayed placements in large markets like New York and Chicago. Then technical problems mounted: automated blood draws failed, lab tests were withdrawn. The coup de grace–patients kept getting trapped in the CarePods. They were insanely expensive–the first two CarePods cost over $1 million each. Then the huge units were unattractive to landlords who didn’t want to fight local building codes nor saw a profit in them. By the end of the summer, there were only two CarePods in place at a mall in Sacramento and in Chandler, Arizona, both gathering dust. (*Shout out to Raymond Loewy, Never Leave Well Enough Alone)

In the increasingly empty Forward clinic offices, the futuristic tech and breadth of services touted in social media adverts weren’t quite as advertised. The whole-body scanner glitched requiring manual checks. Their lab tests became limited to those that could be done in-house, eliminating genetic testing via 23andMe along with services such as simple dermatology removals.

Christina Farr in Second Opinion has a set of takeaways worth noting, with this Editor’s comments (in parentheses):

  • Subscription-based, out-of-pocket healthcare is possible–but hard. (WAY hard when basics are up 25%+! And insurance is almost a given, even if taken in part.)
  • Brick-and-mortar clinics make only limited sense–and space must be used economically, not easy to do in health tech. (Retail and in-person are perhaps anathema in the concepts of those in health tech.)
  • We’re not focusing on those who really need care (But they’re not sexy, wealthy, or relatable to the creators of said tech. Many of them are also on Medicare and Medicaid–truly not sexy.)
  • Primary care is a tough starting point for subscription care (Except the very highest, most exclusive end as she notes!) Specialties may be more amenable to this model. (But volume?) And different age groups want different relationships within this type of care.
  • Timing is everything. Perhaps if Forward had started its clinics today it would have had a far better chance of success? (Then look at bullets 1-4 and see how truly daunting a tech-first clinic setup can be for the tech mindset untempered by research and UX-minded marketing.)

Forward is yet another sad and expensive example of 1) a founder hyperfocusing on whiz-bang technology, 2) losing touch with the customers using it, 3) not improving delivery based on customer needs, and 4) forgetting where he ostensibly started–the mission of improving healthcare. This Editor is sure that his 30-odd investors, especially Vinod Khosla, will have something to say to him about running through $100 million in one year–and over $300 million over eight years.

Masimo’s now-former CEO booted from his company and sued–to boot! (updated) The new management formally terminated founder Joe Kiani on 24 October, as noted in an October SEC filing. In a classic ‘you’re fired..no, I quit!’ situation, after he lost the proxy fight for control of the company, he resigned on 19 September. Kiani immediately filed a lawsuit against Masimo in California state court to obtain a $400 million payout per his employment contract. It is reported to be a declaratory relief suit that hinges on a ‘resignation for good reason’. This is usually specified in the contract. An example is that the executive ceases to be part of senior management, along with others.

The new board of directors has now turned the tables. Masimo is now suing Kiani and RTW Investments in the US District Court for the Southern District of New York. The complaint alleges collusion to violate Federal securities laws by secretly manipulating the shareholder vote through an ’empty voting’ scheme. Empty voting is done through put options or by selling the shares after the record date but before the shareholder meeting. It’s a way for an investor to build up share control and sway the outcome of a shareholder vote at little cost. The suit proposes that Kiani and RTW did precisely that, rigging the vote by acquiring control of over 19% of shares. Evidently, the BOD has proof. The lawsuit and more details are in Strata-gee.

(Editor’s opinion: this is a bare-knucks attempt to claw back Kiani’s contract payout by the new controlling company, Politan Capital Management. And both lawsuits could be true. Pass the popcorn.)

Insult upon injury for Joe Kiani is that shareholders now have some hope that management can save the company by concentrating on healthcare tech. Shares are up. Masimo’s Q3 results reported on 5 November were strong though net income declined. Sound United, the main anchor dragging down the company, is now termed ‘a discontinued operation’. Exhaustive detail on their results is in Strata-gee here.

Bad News roundup: DOJ drops the hammer on UHG-Amedisys, 23andMe lays off 40% and closes therapeutics, Lyra Health lays off 2% in restructuring, Forward primary care + kiosks shuts down abruptly

November 14, 2024 | by

Shoe drop! The long-anticipated Department of Justice (DOJ) lawsuit against UnitedHealth Group and Optum to prevent the acquisition of  home health and hospice operator Amedisys was filed yesterday (12 November) in the District of Maryland. UHG’s offer to acquire Amedisys was made in June 2023 for $3.3 billion in an all-cash deal, but approval was held up in DOJ review ever since. Even with location divestitures proposed in July to VitalCaring Group to reduce anti-trust concerns with Optum’s home health operations (acquired with LHC Group), UHG remained a DOJ target. The civil lawsuit was filed by DOJ together with the Attorneys General of Maryland, Illinois, New Jersey, and New York. No timeline is provided in the release.

The rationale cited is of course anti-trust and elimination of competition between Amedisys and UHG’s Optum. “We are challenging this merger because home health and hospice patients and their families experiencing some of the most difficult moments of their lives deserve affordable, high quality care options,” said Attorney General Merrick B. Garland. The fact that the US Attorney General was quoted first in their release indicates the importance of the case to the DOJ. It’s also a race to the finish as come 20 January 2025, there will be a new president appointing a new AG immediately.

The DOJ states that both companies are “fierce competitors” and that the divestiture is insufficient. “The proposed divestiture does not alleviate harm in over 100 home health, hospice, and labor markets, which generate at least a billion dollars in revenue annually, serve at least 200,000 patients, and employ at least 4,000 nurses.”  Their case is well-built in this Editor’s view. From the release:

 UnitedHealth’s market share after the transaction would make the merger presumptively illegal in:

    • Hundreds of local home health care markets, with an annual volume of commerce exceeding $1.6 billion annually, in 23 states and the District of Columbia;
    • Dozens of local hospice markets, with an annual volume of commerce exceeding $300 million annually, in 8 states; and
    • Hundreds of local markets for home health and hospice nurse labor, employing at least 8,000 nurses, in 24 states.

The lawsuit also seeks civil penalties against Amedisys for falsely certifying compliance with its obligations under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) by failing to produce millions of documents or disclosing the deletion of other documents. For each day that Amedisys was in violation of the HSR, DOJ is seeking a fine of up to $51,744 daily. Amedisys was originally set to be acquired by OptionCare, which does not directly compete in home health, but UHG won a bidding war.

As this Editor said at the time of the Change Healthcare acquisition win against DOJ in Federal court (and we know how that turned out long term), “DOJ has a long memory, a Paul Bunyan-sized ax to grind, and doesn’t like losing.” FierceHealthcare

23andMe continues their long jump down to…who knows where? CEO Anne Wojcicki is minusing out 200+ employees or 40% of its remaining workforce, and fully shuttering its therapeutics development unit. The latter is running two clinical trials which will be wound down ‘as quickly as practical.’ These cuts will save $35 million annually but incur $12 million in one-time severance and termination-related costs. The much-touted therapeutics discovery unit was shut in late summer [TTA 14 August].

What’s left? Not much–the Lemonaid remote prescribing unit, with an entree into GLP-1 prescribing, some published studies, a new AI chatbot called “DaNA”, and a longevity service dubbed Total Health. During their Q2 FY2025 earnings call and release, revenue sank to $44 million versus prior year’s $50 million (-12%)–slightly from Q1’s $40 million–operating expenses reduced 17% to $84 million versus prior year’s $101 million, but the company remained firmly in the red with a GAAP loss of $59 million, 21% less than last year’s $75 million and reduced versus Q1’s $69 million loss. The board, as previously noted, now consists of three financial non-healthcare people, replacing the seven who resigned. Meanwhile, customers wonder about the security and use of their genetic and personal information [TTA 8 Nov]. Release, AP, Healthcare Dive

Another telemental health unicorn, Lyra Health, laid off 2% of staff in a restructuring. 77 people on non-clinical operational teams were released. Some may receive severance for 12 weeks with health benefits, according to one of the anonymous released. Noted in the FierceHealthcare article are reported changes at Lyra, including larger provider caseloads demanded and deletion of seven core values that put clients and clinicians first. Lyra’s last raise was a $235 million Series F in January 2022 for a total of over $910 million (Crunchbase). That high valuation of $5.6 billion has been tough to maintain in the current funding environment–and to not take a down round that affects valuation. 

Health kiosk/primary care practice Forward goes backward, shuts immediately. Nearly on the first anniversary of a $100 million Series E raise from Khosla Ventures and four other investors to deploy self-serve kiosks (left) in major cities [TTA 17 Nov 23], tech-driven primary care practice Forward announced its sudden closure today, effective immediately. What remains on their website is a goodbye-and-good-luck note to patients canceling appointments and zeroing out its app. Patients can email clinicians for care support until 19 December. There is no information available on accessing records nor transferring to new providers, leaving patients in the lurch. 200 employees will lose their jobs immediately as well.

Forward had primary care practices in 14 markets such as New York, San Francisco, and others. Last year it claimed 100+ primary clinicians at 19 locations, with patients paying $150/monthly (no insurance accepted) for un­lim­it­ed vis­its to For­ward’s pri­ma­ry clin­ics. (Refunds, anyone?) The CarePods self-serve kiosks were designed to be self-contained units placed in malls, offices, and gyms. Inside, subscribing patients could access AI-powered health apps for disease detection, biometric body scans, blood testing in disease areas, including diabetes, hypertension, weight management, and mental health (depression and anxiety). They were scheduled last year to be deployed in the San Francisco Bay Area, New York, Chicago, and Philadelphia. Nice idea, but like the earlier HealthSpot Station of 2012-2016, they are equally defunct.

In its eight-year life, Forward had raised $325 million (Crunchbase), which also reported last year’s Series E as only $75 million. At the time of their Series D, Forward was valued at over $1 billion and had a roster of flashy investors such as music’s The Weeknd, Salesforce’s founder Marc Benioff, actor Matthew McConaughey, Eric Schmidt, and Softbank. What’s stunning? Reports indicated that it only gen­er­at­ed un­der $100 mil­lion in to­tal rev­enue since its founding. There has to be more to this, like lawsuits….    FierceHealthcare, Endpoints News

FTC drops the hammer on premerger notification requirements–what will be M&A and investment effects?

October 15, 2024 | by

Premerger Notification just got a lot tougher. As the Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division promised us back in June 2023, FTC has now finalized their changes on the Premerger Notification rules. Changes were pared back after public review and comments, notably by the American Hospital Association (AHA) but thousands of others. The Final Rule will take effect 90 days after publishing in the Federal Register. 

Premerger Notification applies to mergers and acquisitions that fall under the 48-year-old Hart-Scott-Rodino Act (HSR). Companies larger than the threshold (previously $111.4 million) must submit information based on standard forms in advance of filing the merger or acquisition. Both agencies then have 30 days to determine whether or not the M&A is legal or not especially around antitrust and restricting competition. Either agency can request additional information from the companies, extending the process through a Second Request. The purpose is to deny M&A in advance that may violate primarily antitrust law–an approach that has had mixed results in the past decade or so.

This is the first time in just under 50 years that there have been other than minor changes to the Premerger Notification Form. The new rules considerably tighten requirements–and increase paperwork. The Final Rule changes from the FTC press release were clearly highlights and not a full list:

  • Additional transaction documents from the supervisor of each merging party’s deal team as well as a small set of high-level business plans related to competition. 
  • A description of the business lines of each filer to reveal existing areas of competition between the merging firms (including for products or services that are in development) and supply relationships
  • Disclosure of investors in the buyer, including those with management rights. According to Healthcare Dive’s analysis, this will also include minority stakeholders and investors. FTC has recently focused on the rise of private equity investments across all M&A, which have increased to over 40% of transactions (2022), but less in healthcare varying by sector (e.g. 8% hospital, up to 11% of nursing homes).

The Healthcare Dive analysis, unlike the FTC release, confirmed that both acquirer and acquiree have to detail their prior acquisitions within a five-year window. FTC is going after “roll-ups,” the small, under-the-HSR-wire serial acquisitions that private equity groups and some companies utilize. Previously, only the acquirer had to disclose this information. Roll-ups have become popular in healthcare and health tech as startup companies with similar or complementary technologies attempt to grow and in some cases survive market evolutions.

The FTC’s Premerger Notification Office (PNO) will provide future compliance guidance in advance of the final rule’s effective date on the PNO’s website. The FTC estimates that the additional information required will increase the time required to complete the form to 105 hours from the current 37 hour average. In June, the proposed rule changes were estimated to require 144 hours.

The AHA’s objections centered around the extensive Federal disclosures hospitals already make in the course of business and transactions and the additional time taken administratively away from care.

Another online wrinkle to M&A: FTC’s new online portal for M&A commenters. FTC will collect comments on any and all proposed transactions submitted for premarket notification review. This will enable a long list of parties–consumers, workers, suppliers, rivals, business partners, advocacy organizations, professional and trade associations, local, state, and federal elected officials, academics, and others–itemized in the release to say their piece to the FTC about how the proposed M&A will affect competition. FTC can then point to the ‘public uproar’.

What will be the effect on M&A?

  • Possible end of year rush to complete any deals before the Final Rule takes effect
  • Rollups or complementary transactions will take place at earlier stages, under the HSR limits, but companies will limit them until they determine what is permissible and not if down the road they are acquired.
  • Longer term, it may overall further depress healthcare M&A from small to large, and investor exits–already barely recovering.
  • It may also affect large-scale funding for growth beyond Series A and B. Beyond that point, investors get larger, get on the FTC radar, and ultimately look to Other People’s Money to exit–if not an IPO, then to be acquired. 

One wonders what creative solutions VCs, PEs, and Mr. Market will concoct.

US telehealth controlled substances prescribing waiver may expire at year’s end; DEA may further restrict

September 13, 2024 | by

Current waivers end 31 December without DEA, Congressional action. The Drug Enforcement Administration (DEA) apparently through inaction, will allow the current virtual prescribing flexibilities impacting Schedule II and higher drugs to expire at the end of year. These waivers which removed the in-person examination requirement under the Ryan-Haight Act were instituted during the Covid pandemic and extended twice [TTA 11 Oct 23, 11 May 23] with a final expiration of 31 December 2024.

Reportedly, the DEA is not only wishing to reinstate the status quo ante, but also reportedly wants to institute additional restrictions. However, any draft rule that would reimpose or changes restrictions has not been put out for the public comment period, review, and final rule implementation which typically takes anywhere from 60 to 120 days, well past year’s end. Last year, when a draft rule was released for comment, nearly 40,000 comments were received.

At the time of the 2023 extension that kicked this particular can down the road into the end of a presidential election year, DEA had stated that they would use 2024 to finalize telemedicine prescribing rules, but no action has been taken. Since then, the Department of Justice has filed multiple charges of Medicare and Medicaid fraud and illegal distribution of controlled substances against seven Done Global employees [TTA 3 July and prior], with investigations pending on practices by provider Cerebral and pharmacy Truepill. 

Under the aegis of the American Telemedicine Association (ATA), a coalition of 330+ organizations have again written as of Tuesday 10 September to the current administration and both houses of Congress to 1) extend the waivers for two years, as part of the end of the Federal fiscal year (starting 1 Oct) package, and 2) use the time for DEA to “to fulfill its congressional mandate to establish a special registration pathway that balances access to medically necessary care with appropriate enforcement.” The rationale centers on the lack of time, but strongly around the availability of psychiatrists throughout most of the US–there are none in half of US counties especially in rural areas. (The average MD psychiatrist is well over 50, nearing retirement, and not well reimbursed for his or her time–which is why med school grads in heavy debt don’t gravitate to the specialty.) What is not stated is that many if not most telepsychiatry providers do not have models that will support in-person evaluations as required without waivers.

There are no public actions or responses either by Congress or by the DEA as of today (13 September).

ATA press release, Biden Administration letter, House letter, Senate Leadership letter, Healthcare Dive

ATA Action, ATA’s trade organization and advocacy arm, has also formed a political action committee (PAC), ATA Action PAC. Its stated purpose is to support incumbent Federal candidates including Congressmembers who support their goals in virtual care policy. Candidates on the Federal or state levels will not receive support.  Release

First half digital health investment — a true rebound or a ‘dead cat bounce’? A Gimlety look at Rock Health’s H1 report.

July 30, 2024 | by

Gimlet EyeFirst, your Editor assures our Readers that no felines were harmed or poorly thought of. It’s just words expressing concepts!

In ever-dapper Mr. Market’s picturesque and blunt language of finance, a ‘dead cat bounce’ is a temporary improvement, a short-term recovery that does not reverse the reality of the long-term downward trend, which resumes shortly thereafter the pick-me-up. It’s applied to assets, stock prices, market sectors, and even political polling. 

So…let’s debate the point. Is digital health investment in the US recovering, or taking a few lungfuls of air at the surface before sinking again?

Rock Health’s first half (H1) report. It is, like most of theirs, heavy on the optimistic ‘glass half full’ view. Its headline ‘Resilience Leads to Brilliance’ is certainly a catchy rhyme or meme, but in this Editor’s Gimlety View, an overstatement. It does look like the logjam in funding and M&A has broken, but where’s the brilliance?

Let’s take a cold look at the Rock Health findings for the first half (H1) of 2024. Rock Health only looks at US digital health fundings above $2 million and includes some companies those of us in the professional field do not consider ‘digital health’. FTR:

  • US digital health startups raised $5.7B across 266 deals. Average deal size: $21.4 million.
  • The action was in Series A and B raises, which were roughly comparable to prior years. Series C and D were anemic, with Series C especially lagging even anemic 2023.
  • 40% of H1 2024’s fundraises (107 deals) were unlabeled; by quarter, Q1 47% and Q2 33%. This is only slightly down from the 44% for full year (FY) 2023.
  • The top ‘value propositions’ for fundraising companies were disease treatment (including food as medicine), non-clinical workflow, R&D, clinical workflow, on demand healthcare and precision medicine. The first two are no change from FY 2023. The biggest shifts up from FY2023? Clinical workflow, on-demand healthcare, and precision medicine. These categories are not defined by Rock Health.
  • The top ‘clinical indications’ are mental health, cardiovascular, oncology, weight management, reproductive/maternal health, and neurology. Again, the first three are basically little changed from FY 2023. The big upward shift was funding for reproductive health.
  • “AI momentum underpinned deals in categories next on the list, including nonclinical workflow ($896M), R&D for pharma and medical devices ($737M), and clinical workflow ($639M).”
  • Until Q2 2024, there had not been any into the public markets for 21 months. Starting in May and June, there were three: fetal monitoring Nuvo (public exit via SPAC (!!) in May) and two in June: revenue cycle management company Waystar and precision diagnostics Tempus AI.
  • There were only 66 acquisition deals made in H1, about half between digital health companies. Private equity acquired 10 companies and 12 in “other”. 

In nearly every metric above, H1’s trends are comparable to 2023 extrapolated to a full year, as well as in line in numbers to pre-inflationary 2019–the investments in absolute terms are worth less. 

But overall, it is as if the boom of 2020-2022 never happened except in the wreckage of overfunded/foolish funded companies. And 2023 was marked by four tech bank lender bankruptcies and many high profile bankruptcies such as Babylon Health, Quil Health, and Pear Therapeutics. 2024 should look better than 2023, by that logic.

But let’s factor in the following for 2024 H2:

  • The raises are there and they’re fairly steady–but with only a few exceptions, usually AI related, they are far less than in the past, again using 2019-2020 as a baseline.
  • At the same time, layoffs are also prevalent and substantial at all levels, indicative of retrenching. And there is little real hiring versus resume collection.
  • This is an election year like no other in the US, UK, and France, as well as political and terror turmoil worldwide. 
  • Two active wars in Ukraine and Israel, possibly a third on the horizon with major impact (Taiwan)
  • Drying up of now unwanted Chinese capital that fed into Sand Road VCs
  • The very underdiscussed FTC/DOJ pre-merger notification and Merger Guidelines–and a hostile FTC

Socially and physically, there’s little respite, from the fool’s spectacle of the opening Olympic ceremony to increased volcanic activity worldwide seen from Yellowstone to Italy. Natural disasters add to nervousness. 

As usual, there are two metrics missing from Rock Health’s analysis: companies in deep trouble or bankrupt. Capital destruction matters. Granted, Rock’s report is about digital health investment, but considering what and why it fails is part of the investment picture. What comes after all those rounds and exits? 

  • Bankruptcies: Cue Health, Cano Health, Invitae, SmileDirectClub (late Dec 2023)
  • On the way: 23andme, NeueHealth (probably 2025), Amwell (which avoided delisting by a reverse stock split)

There is also the shutdown of Walmart Health’s telehealth / remote health unit, formerly MeMD, acquired by Fabric. There is also the Veradigm mystery–delisted and as of May, up for sale, despite having positive revenue. Added context: the failure of melding retail health with clinic operations–Walgreens’ VillageMD, CVS scaling back Oak Street, Amazon folding Clinic into One Medical.

AI is also proving to be ‘not all that’. Health systems are using them to automate procedures and some interfaces with patients. But the investment/payout equation is still tilted heavily to the former.

Conclusion: this Editor is leaning towards ‘dead cat bounce’ through this year unless something drastically changes, as in improves.

Agree? Disagree? Comment below!

Referenced: Rock Health FY 2023 report, Rock Health Q1 2024 ‘flat spin’ report, Mobihealthnews

What the DOJ and FTC Merger Guidelines mean for healthcare M&A–review of the Epstein Becker Green podcast

April 23, 2024 | by

Are you in the (mostly) lucky group of companies seeking to buy or be bought? This podcast is a ‘must hear’ as likely you’ll be affected. Healthcare law firm Epstein Becker Green’s roundtable podcast in the ‘Diagnosing Health Care’ series is their half-hour condensed view on the new Federal Merger Guidelines that the Department of Justice (DOJ) and the Federal Trade Commission (FTC) finalized last 18 December. Their view on how it will affect healthcare organizations is not too different from your Editor’s lengthy review of the DOJ/FTC document published on 20 December. The DOJ/FTC end-of-year drop perhaps (ahem) was timed to bury the bad news, drowning it in a punch bowl of good cheer or in holiday busy-ness.

This Editor (note: not a lawyer nor do I play one on TV or YouTube) took the view that it was that it was a whole scuttle of coal for healthcare holiday stockings (right) and that it would discourage much of 2024’s healthcare M&A until companies figured what mergers would likely past muster, among other predictions. The EBG folks mostly agree. They also point out that the final Guidelines’ language is “more aggressive” than the draft that many healthcare organizations took issue with–what the article referred to as “substantially more restrictive language and interpretation”. There are some wins from the draft, but much of the language, especially on vertical mergers, simply moved into one or another of the 11 Guidelines. 

The EBG team on the podcast (available for play on the web page and download) are Trish Wagner, John Steren, and Jeremy Morris, moderated by Dan Fahey. Below are some key points made by the team on the podcast. Your Editor recommends that you pull up our 20 December article as a reference to the specific Guideline references they make.

  • Background: Horizontal merger Guidelines were last updated in 2010. Vertical merger Guidelines were issued in 2020 but later rescinded. These new Guidelines apply to both horizontal and vertical mergers and acquisitions. US antitrust is based on three acts passed by Congress: The Sherman Antitrust Act (1890), the Clayton Act (1914), and the Federal Trade Commission Act of 1914, now in US Code Title 15. The Guidelines since then are based on them as well as case law.  (From the wrapup) Courts tend to be very deferential to the Guidelines.
  • The wording of Guideline #8, When a Merger is Part of a Series of Multiple Acquisitions, the Agencies May Examine the Whole Series, is both interesting and aggressive in that it will be considered and opens up a pattern of acquisitions. This can be by private equity (PE) or other owners.
  • Guidelines #1, Mergers Raise a Presumption of Illegality When They Significantly Increase Concentration in a Highly Concentrated Market, and 2, Mergers Can Violate the Law When They Eliminate Substantial Competition Between Firms, impact hospital mergers. Prior merger guidelines focused on highly concentrated markets using a point system (HHI, the Herfindahl-Hirschman Index, is a common measure of market concentration). This measure sets a lower bar.
    • To trigger #1, a market share above 30% and an HHI over 100 can trigger it even in unconcentrated markets.
    • On #2, elimination of direct competition is maybe in and of itself harmful
  • Guideline #6, Mergers Can Violate the Law When They Entrench or Extend a Dominant Position: for horizontal mergers, ‘entrench’ is in practice the operative term, whereas ‘extend’ applies mainly to vertical mergers. Companies will have to demonstrate that the beneficial competitive effects outweigh the anticompetitive, especially when involving consumers. And they will have to demonstrate why the merger is necessary. 
  • Wrapping up:
    • Ms. Wagner: the Guidelines don’t have the force of law, but they do have impact because they are about the process on how mergers are evaluated. Courts have been very deferential to the Guidelines.
    • Mr. Morris: hospital leaders will have to contemplate this “huge change in a moment” which he questioned. He emphasized that organizations involve their antitrust counsel now even earlier than previously.
    • Mr. Steren: “healthcare has a bullseye on its back”. It is immediately more restrictive. It fits right in with what current enforcers do in trying to bring “persuasive authority” to bring new, novel, cases into court. He seconded Mr. Morris’ last remark.

This Editor, as the Canary in the Coal Mine, will assume that UnitedHealth Group and others have already anticipated that they will have difficulty now making new acquisitions, obtaining approvals for ones that haven’t been finalized, or making quick sales of units they no longer want (Walgreens). Hospitals will find that divestiture and regional mergers will be discouraged. Acquirers who’ve been concentrating on filling out their platforms with vertical acquisitions may find that these Guidelines are also written to trip them up–and once tripped, each Guideline knocks on another. (For other predicted consequences, see the 20 December article.)

News roundup: VillageMD sued on Meta Pixel trackers; Cerebral pays $7.1M FTC fine on data sharing, cancellation policy; VA may resume Oracle Cerner implementation during FY2025; Epic-Particle Health dispute on PHI sharing

April 16, 2024 | by

It’s all about personal health data–sharing, bad sharing, and bad transfers in this roundup.

VillageMD takes another hit, this time on Meta Pixel ad tracker issues. A class-action lawsuit filed on 10 April charges VillageMD (formally Village Practice Management Company), via its Village Medical website, of using the Meta Pixel ad tracker for disclosing user-protected health information (PHI) and other identifiable information generally classified as PII. This included visitors to their website villagemedical.com seeking information and patient users of Village Medical’s web-based tools for scheduling and the patient portal. The lawsuit by a “John Doe”, a patient since January 2023 resident in Quincy, Massachusetts but brought by three Midwest law firms in the US District Court for the Northern District of Illinois, states that VillageMD used trackers that transferred this personal information to Meta Networks’ Facebook and Instagram, as well as other third parties like Google, for use in targeted advertising, in violation of HIPAA and other regulations. The lawsuit seeks 1) an injunction stopping Village Medical from using ad trackers and 2) monetary redress via damages–actual, compensatory, statutory, and punitive for the entire affected class. The suit also alleges that VillageMD violated its own internal procedures. Crain’s Health Pulse, Healthcare Dive

Readers will recall that in June 2022, STAT and The Markup published a study and follow-ups on Meta Pixel and ad tracker use by healthcare organizations. Ostensibly, the ad trackers were there to better track website performance and to tailor information for the patient [TTA 17 June, 21 June 2022], but they sent information to third parties that violated HIPAA and privacy guidelines. Ad trackers were also monetized. Meta blamed the health systems [TTA 16 May 2023] for misuse though they used the data for ad serving.  Congressional hearings, FTC, and DOJ followed later in 2022 and 2023. Multiple class action lawsuits against providers large and small have ensued. Providers have pushed back on FTC and HHS rules on ad trackers, stating the restrictions hamper their ability to build better websites based on customer usage and to serve individuals with useful information. 

Another ‘oversharing’ company, troubled telemental Cerebral, whacked with $7.1 million FTC fine on disclosing consumer information via ad trackers plus ‘negative option’ cancellation policy. The proposed order for a permanent injunction filed by the Department of Justice (DOJ) and docketed on 15 April has to be approved by the Federal District Court for the Southern District of Florida. The fine for the company only penalized the following:

  • Cerebral released 3.2 million consumers’ information to third parties such as practices, LinkedIn, and TikTok. This included PHI and PII such as names, medical histories, addresses, IP addresses, payment methods including insurance, sexual orientation, and more. Even more outrageously, they also used the mail for postcards that had sensitive information such as diagnosis printed on them. The insult on injury was that Cerebral failed to disclose or buried information on data sharing to consumers signing up for their ‘safe, secure, and discreet’ services. Cerebral now has to restrict nearly all information to third parties.
  • Cerebral also set up their service cancellation as a ‘negative option’ cancellation policy, which in reality meant that it was renewed indefinitely unless the customer took action to cancel. It was not adequately disclosed in violation of the federal Restore Online Shoppers’ Confidence Act (ROSCA). Then Cerebral made it extremely difficult to cancel by instituting a complex procedure that required multiple steps and often took several days to execute. They even eliminated a one-step cancel button at their then-CEO Kyle Robertson’s direction. The order requires this to be corrected including deleting the negative option.
  • Former employees were not blocked from accessing patient medical records from May to December 2021. It also failed to ensure that providers were only able to access their patients’ records.

Cerebral’s settlement with the FTC and DOJ breaks down to $5.1 million to provide partial refunds to consumers impacted by their deceptive cancellation practices. They also levied a civil penalty of $10 million, reduced to $2 million as Cerebral was unable to pay the full amount. The decision and fine do not cover charges to be decided by the court against the former Cerebral CEO Robertson due to his extensive personal involvement in these practices. Those have not been settled and apparently were severed from the company as a separate action (FTC case information). Since 2022, Mr. Robertson has consistently blamed company management and investors for pushing for bad practices such as prescribing restricted stimulant drugs. Cerebral countersued him for defaulting on a $49.8 million loan taken in January 2022 to buy 1.06 million shares of Cerebral common stock. More to come, as the order also does not address other Federal violations under investigation, such as those under the Controlled Substances Act.  FTC release, FierceHealthcare  

VA to possibly resume Oracle Cerner EHR implementation at VA sites before the end of FY 2025, even if not in budget. During House Veterans’ Affairs Committee hearings on FY 2025 and 2026 budgets, VA Secretary Denis McDonough last Thursday (11 April) said that the VA intends to resume deploying the Oracle Cerner EHR as part of VA’s Electronic Health Records Modernization (EHRM) before the end of FY 2025. As Federal years go from October to September, FY 2025 starts October 2024 and ends September 2025. When asked if VA plans to maintain the “program reset” as they termed it in April 2023 for all of FY25, Secy. McDonough said that “we do not.”However, there is no budget allocated for additional implementations in either FY. The plan is to use carryover funding.

Oracle Cerner’s Millenium EHR was implemented at five VA locations before suspending in April 2023 for a massive re-evaluation which involved reworking systems such as the Health Data Repository which created critical scheduling and pharmacy problems detailed by the Office of Inspector General (OIG)  [TTA 28 Mar]. The joint VA and MHS/Genesis Lovell FHCC implementation, which went live in March, is not included.  NextGov/FCW, Healthcare Dive

And in another dispute about data sharing, leading EHR Epic cut off requests made by some Particle Health customers, expressing concern about privacy risks. Particle Health is a health data exchange API platform for developers. Both Epic and Particle are part of Carequality, a large scale data exchange group that connects 600,000 care providers, 50,000 clinics, and 4,200 hospitals to facilitate the exchange of patient medical records On 21 March, Epic filed a dispute with Carequality that some of Particle’s users “might be inaccurately representing the purpose associated with their record retrievals.” and stopped responding to some Particle Health customer queries. This has now degenerated into a ‘who said what‘ dispute, with Particle and their CEO alleging that Epic implied that it completely disconnected Particle Health and its customers from Epic’s data, while Epic has said that after a review by its 15-member Care Everywhere Governing Council, they flagged three companies who were using Particle’s Carequality connection to access data not related to patient care or treatment. There’s also a larger concern being brought up by providers on the use of these mass data exchanges for fraudulent extraction of data or use that would violate HIPAA guidelines. FierceHealthcare, CNBC, Becker’s, Morningstar

Davids (AliveCor, Masimo) v. Goliath (Apple): the patent infringement game *not* over; Masimo’s messy proxy fight with Politan (updated)

April 4, 2024 | by

Apple’s legal department certainly hasn’t been maxing their relaxing this year, what with DOJ and pesky upstarts taking them to court. The big one keeping them busy is the US Department of Justice (DOJ) giving Apple a dose of its own medicine in filing an antitrust lawsuit against Apple for monopolizing smartphone markets [TTA 22 Mar]. Apple also continues to fight antitrust and intellectual property (patent) infringement in Federal district courts, the US Patent and Trademark Office (USPTO)’s Patent Trial and Appeal Board (PTAB), and the International Trade Commission (ITC), brought by ECG reader AliveCor and Masimo‘s pulse oximetry reader and software. Masimo succeeded in disrupting Apple’s sales of the Watch Series 9 and Ultra 2 right at the Christmas holiday sales season [TTA 28 Dec 23], forcing Apple to disable the pulse ox feature [TTA 18 Jan] in future imports in one of Apple’s few losses.

The DOJ lawsuit does not address Apple’s copycat activities against either AliveCor or Masimo. Both companies worked with Apple.  AliveCor integrated its early KardiaBand (2016) with early Apple Watches, only to have cardiac readings integrated into the Apple Watch two years later (2018). Masimo and Apple were in mid-stages of a 2021 partnership that Apple broke off, but Masimo then accused Apple of hiring its employees working on the project [TTA 27 Oct 23].

AliveCor hasn’t been quite so successful as Masimo in challenging Apple, but it has been fighting Apple as a David v Goliath on multiple fronts for years. In February, AliveCor lost a round in the US District Court for the Northern District of California on the heart rate algorithm changes Apple made in 2018 that made their SmartRhythm app provided to Apple non-functional. That decision reportedly is still under seal. However, AliveCor has multiple Federal patent infringement lawsuits going against Apple. The differing rulings of the PTAB against and an ITC ruling finding for AliveCor went to the Federal circuit court level. According to CEO Priya Abani in an excellent MedCityNews article, AliveCor expects to see action on this by summer. Abani also scored Apple’s annoying (understatement) habit of IP infringement and broken partnerships. “Apple’s vast resources allow them to squash small innovators,” she said. “They have more lobbyists and lawyers on their payroll than we have employees.”

AliveCor and Masimo aren’t the only ones battling Apple. In the MedCityNews article, NYU Langone cardiologist Joseph Wiesel has sued Apple on patent infringement on his atrial fibrillation app (2021), also involving the USPTO, an action that is wending its way through courts now. While this Editor has long been mystified by Apple’s continued combativeness against small innovative companies when certainly it would be cheaper (and more respectful) to pay a license or settlement, FTA in MedCityNews citing Dr. Wiesel’s attorney Andrew Bochner, “Apple is known among the legal community to have a certain modus operandi: they do “not entertain any sort of real settlement discussions” and instead battle “tooth and nail” in order to wear out their rivals with fewer resources.” The shocker here is that Apple, in this case, stated to Bochner that it filed “roughly 10%” of the USPTO’s total post-grant proceedings, which take place after a patent has been granted and generally challenge a patent’s validity. One wonders whether DOJ will even take note of this anticompetitive activity involving Apple Watches in its blunderbuss action on iPhones and the US smartphone market.

Masimo itself is being roiled by a shareholder proxy fight over who controls the company. Masimo is a publicly-traded (Nasdaq) electronics company that is primarily focused on health devices, including smartwatches, and data software monitoring for the clinical and consumer markets, notably pulse oximetry.

  • Last week, activist investor group Politan Capital Management accused CEO Joe Kiani and others of mismanagement, announcing the nomination of two more independent candidates from Politan for the board of directors. Politan already has two seats on the BOD and a win here would give Politan majority control.
  • The bone being picked is Masimo’s February 2022 $1 billion acquisition of consumer audio brand Sound United (Polk, Marantz, Denon, and others) which didn’t mesh well with their health tech business. This drove down the share price from that time, with Politan subsequently swooping in and picking up shares, successfully winning two BOD seats in 2023.
  • Masimo announced on 22 March that their consumer ‘hearables’ division would be spun off.
  • Politan’s response on 26 March was to object to the spinoff on governance grounds, nominate the additional directors, and heavily criticize CEO Kiani’s ‘control and influence’. Strata-gee 26 March

Yesterday’s follow-up is that Kiani and Masimo are rebutting all of Politan’s claims and more. Strata-gee 2 April, Masimo release 1 April, MedTechDive

This Editor notes that products in their personal monitoring line combine both audio and vital signs monitoring–the (out of stock) Stork, that appears with its baby sock to be directly competitive with Owlet’s Dream Sock.

This will all play out at the yet-to-be-announced 2024 Shareholders Meeting. This Editor notes that Politan picks its battles and is rarely defeated. Our Readers may recall that Politan swooped in on Centene Corporation in late 2021, and in short order ousted long-time directors, added new friendly ones, shook up management and forcibly retired 25+ year CEO Michael Neidorff (since deceased). Masimo’s victory over Apple may go down as either not mattering much–or that Apple will be fighting a much deeper-pocketed backer that knows how to win.

Update: It gets stranger. Masimo’s Consumer (audio) division’s brand president and general manager Joel Sietsema announced on Tuesday that he is no longer with the company. He came to Masimo through the Sound United acquisition being with them for a decade. He announced his departure on LinkedIn. It was apparently a mutual decision that preceded the current turmoil. Strata-gee 4 April

Why is the US DOJ filing an antitrust lawsuit against Apple–on monopolizing the smartphone market?

March 22, 2024 | by

The Department of Justice’s antitrust filing against Apple on the iPhone is a many-splendored thing–and will take many years to work through the courts. It was filed Thursday 21 March in the US District Court for the District of New Jersey, alleging monopolization or attempted monopolization of smartphone markets in violation of Section 2 of the Sherman Act. New Jersey’s US District Courts are in beautiful Newark, Camden, and Trenton. The DOJ was joined by 16 states in the lawsuit including NJ. Apple has promised to fight it tooth and nail, correctly realizing this goes to the core of its business. “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets” and “We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”

On the face of this, the DOJ antitrust lawsuit seems almost ludicrous. While iPhones have a 60% market share in the US (Backlinko), there’s plenty of Android phones from Samsung and others (sadly, no longer LG) at competitive prices from every carrier. This Editor never looked twice at an iPhone for personal use and wasn’t impressed by a short-lived company phone, a totally locked-down iPhone 6. (On the other hand, my second computer at work where I really self-learned computing was an easy-to-use Mac 2si, a long time ago.) There are about 140 million iPhone owners in the US. Obviously, Apple makes a product and ecosystem, including the Apple Watch, that people, especially US upper-income users, prefer. There are features that Androids have and iPhones have, and sometimes the twains don’t meet, but for most of us it doesn’t matter.

But does Apple act in an anticompetitive, monopolistic way?

The DOJ says yes. The complaint states that Apple uses its control over the iPhone to engage in a broad, sustained, and illegal course of conduct, using its monopoly power to extract as much revenue as possible. The specifics include some centering on the Apple Watch:

  • Apple has exclusive software features–apps–that Android manufacturers don’t have or don’t work as well, for instance Apple Pay, iMessage, Find My Phone, FaceTime, and AirTags.
  • Apple Pay blocks other financial institutions from instituting their own cross-platform payment systems.
  • Apple’s control over app developers in their ‘walled garden’, locking them in especially in the cloud gaming area, but generally imposing contractual restrictions on and withholding critical access from developers in the name of security and privacy. Reportedly there are 30% commissions on app sales. Blocking ‘super apps’ restricts not only developers but also users from switching to Android since they will lose use of the app.
  • Apple’s messaging systems are only partly interoperable with Android and have unique features not available on Android
  • App Store commissions and rules are prohibitive for many developers
  • Locking in consumers with features not available on Android
  • Lack of interoperability of the Apple Watch with Android phones, and other manufacturers’ watches with iPhones 

What is interesting is that in the Apple Watch charges, there’s nothing about how Apple has essentially stolen features from other developers such as AliveCor and Masimo as found in other Federal courts. That IP theft is outside of antitrust and being litigated in other courts.

Much of the heated commentary has to do with the Apple Brand Promise and how they deliver apps. Apple is an integrator and people like the ‘walled garden’. The phone ‘just works’. Quoting Alex Tabarrok in Marginal Revolution, Apple is a gatekeeper that promises its users greater security, privacy, usability, and reliability. Users trade off control for a seamless experience and it delivers. It’s desirable. However, many of us don’t need or want to give over all that much control and desire flexibility in a more open platform. Not all of us need or want ‘seamless’ features like Apple Pay and live very well without that or games. 

What will keep DOJ and Apple entertaining each other in court for the next few years are court decisions over the years that have favored Apple:

  • Monopoly has been defined in repeated decisions as market share in the 70-80% range, not 60%
  • The concept of ‘procompetitive’ means that if you can choose between open access and the Apple ‘walled garden’, Apple has a legitimate competitive feature.
  • Companies don’t have a ‘duty to deal’ with other companies
  • Apple as a monopoly has already been dismissed in other cases

The push towards the DOJ action has apparently been stimulated by the EU Digital Markets Act, which Apple will comply with, as well as Apple competitors in the US who have tried and failed to restrict Apple in integrating its services. Will DOJ succeed in forcing Apple to be more like Android? The debate will rage on. DOJ release, 88 page filing, The Verge, 9to5 Mac, Medium.com, AP, Epoch Times

Reality Bites Again: UHG being probed by DOJ on antitrust, One Medical layoffs “not related” to Amazon, the psychological effects of cyberattacks

March 6, 2024 | by

When It Rains, It Really Pours for UnitedHealth Group. On the heels of their Optum/Change Healthcare ransomware disaster are recent reports that the US Department of Justice is investigating UHG over multiple antitrust concerns. According to the Wall Street Journal, DOJ is examining certain relationships between the company’s UnitedHealthcare insurance unit and its Optum services unit, specifically around Optum’s ownership of physician groups. UHG has been aggressively buying and buying interests in practice groups for several years, announcing quite publicly that their goal was to own or control 5% of US physicians. In 2022 and 2023, they bought CareMount, Kelsey-Seybold, Atrius Health, Healthcare Associates of Texas, and Crystal Run Healthcare (Becker’s). Local reporting by the Examiner News in Westchester, NY, brought much of this history to light. In that area, it started with local practice group CareMount and their 25% layoff after being folded into Optum Tri-State with ProHealth in Long Island and NYC and Riverside Health–a layoff pattern that accelerated in the practice groups in 2023.

DOJ lost out on their challenge to the Change Healthcare acquisition in November 2022, deciding not to appeal the Federal District Court decision in 2023 [TTA 23 Mar 2023]. But DOJ never sleeps; they are examining with a microscope UHG’s $3.3 billion bid for home health provider Amedisys that started in August 2023 and has not moved forward. DOJ has a long memory, a Paul Bunyan-sized ax to grind, and doesn’t like losing. One wonders if now UHG has buyer’s remorse after fighting for two years to buy Change.

In the Alternate Reality Department, One Medical CEO Trent Green insisted that their reorganization and layoffs were unrelated to their acquisition by Amazon. Those of us who are a little less credulous know that with 98% of acquisitions, staff are laid off. Overlapping areas wind up being pinkslipped, no matter their individuals’ quality or even difference in business: finance, HR, legal, marketing, IT, operations, compliance, sales, account managers…the list is almost endless. According to the Washington Post article (also Becker’s), One Medical cuts, estimated at up to 400, also included front desk staff, office managers, health coaches, behavioral health specialists and a pediatrician–people who aren’t employed by other Amazon units. One Medical’s corporate offices in New York, Minneapolis, and St. Petersburg, Florida are closing, and its San Francisco office space is reduced to one floor. TTA 14 Feb

One Medical has never been profitable, as this Editor noted when the acquisition was announced as part of the “race to transform healthcare models”. This wasn’t going to last long with Amazon, which has been aggressively been cutting and dumping in other units such as Audible, Prime, and Halo. Marketing Amazon-style with deeply discounted memberships to Prime members also has its limitations. One Medical has a scant 200 mostly urban offices, which means that members outside those areas only have access to virtual visits. It had previously cultivated a patient population of young, mostly healthy and lower-cost urbanites, who as they grow older and have families might stick with the practice–or find it not compatible with or targeted to their needs in middle age. Management has changed: Green replaced Amir Dan Rubin, MD, as CEO last September. CFO Bjorn Thaler will move to a new position focused on growth initiatives. A layer of regional general managers will report to an Amazon head of operations, and legal, finance, and technology teams will report to Amazon’s healthcare business structure. Inbound calls now go to Mission Control, a central call center, and even those humans will be in future supplemented by an AI-enabled chatbot.

Iora Health, One Medical’s specialized (acquired) unit in Medicare Advantage and Medicare Shared Savings Programs including the advanced ACO REACH model, in October was rebranded as One Medical Senior, with an intention for all One Medical offices to serve age 65+–but with current patients, many with multiple chronic conditions, now reporting cutbacks in callbacks, appointment length, physician load, and services provided such as transportation. One clinic had 20 staff cut back to five with patients pushed out to virtual visits–hardly appropriate for a high needs, older, less technologically savvy patient population in value-based care, quality-measured models. Editor’s note: having had some experience in ACO and VBC World, Amazon may as well get out of ACOs because practices in these primary care models require specialized and dedicated management, reporting, and population nurturing. They don’t mainstream well.  I have also read that ironically, Iora was profitable for OneMedical, which is 1) why they bought it and 2) ran it separately.

In this Editor’s view, human costs are a factor shown to be absent from Amazon’s business calculations for success–which doesn’t quite square with the mission of healthcare for healthier patients and better outcomes.

Speaking of the reality of human cost, let’s spare a thought for those dealing with the effects of a cyberattack or data breach. They are the IT staff, pharmacists, software specialists, front line clinicians, billing specialists, doctors, therapists, business managers, coders…the list goes on. They share their feelings of frustration, helplessness, distress, aloneness, and financial fear on Reddit, Twitter/X and other forums. Few think of them taking the brunt of patient frustration and their state of mind day after day as Change/Optum’s disaster goes on and on. Writer Molly Gamble of Becker’s has the final and most sympathetically descriptive say in her brief but important article about When ransomware strikes, who to call?  A full read is recommended.

Helplessness or loss of control, especially at a collective level, can be psychologically and emotionally taxing. Recognizing a threat but not knowing what to do about it can increase one’s stress, anxiety and fear. The lack of a known end point of a cyberattack like Change is experiencing can intensify psychological distress. Some independent therapists, for instance, have noted they have halted their insurance billing for a week due to the downtime and expressed fear about going longer without income. 

These mental effects, while lesser-discussed, are exactly what cyberthreats intend to bring on. Cyberterrorists want to create mental and physical harm, and research has found that the psychological effects of cyber threats can rival those of traditional terrorism.

Peering through the cloudy crystal ball into 2024 healthcare investment and company health

January 25, 2024 | by

crystal-ballWill 2024 be the mirror image of 2023? This time last year, signs pointed to slow, steady growth after the bubble bath of 2020-early 2022 was followed by failures of tech-leveraged banks (SVB and Signature in March 2023) leading to a mid-year bust [TTA 11 Aug 23]. Some big deals kicked off the year (CVS’ Carbon Health investment, Oak Street mega-buy TTA 16 Feb 23). Then as the year went on, they were followed by sheer turmoil–huge losses and business divestitures (Cano Health, Bright Health, insurtechs like Clover and Oscar), bankruptcies and shutdowns (Babylon, Pear, Quil, OliveAI, Smile Direct, Cureatr, Rite Aid), IP lawsuits (Apple-Masimo, Apple-AliveCor, FruitStreet-Sharecare), C-levels walking the plank (Walgreens, Noom), and big layoffs nearly every week. Cigna and Humana called off merging again, perhaps because Cigna didn’t like what it saw. M&A fell to its lowest level in years and IPOs fell to zero.

To cap the year, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued new Merger Guidelines that made the M&A mountain even steeper, and will follow up this year with Pre-Merger Notification guidelines that will make that part even more costly. Both signal hard times for M&A. Add to that the overt hostility the chair of the FTC has to any kind of M&A and the weaponization of the tools government has at hand…..Even early-stage, independent companies which allegedly these agencies are trying to foster don’t catch a break. A change in the tax law hitting hardest in 2023 forces annual expenses in research and experimentation (R&E) to be amortized over five years versus one year which severely affects their financials. (Section 174 explained here)

The crystal ball promises to be more like a Magic 8 Ball this year. Other than a flurry of smaller-scale investments, a rumor of a $5 billion EHR company sale (Netsmart), and predictable layoffs in health systems, the start of the year in healthcare has been fairly (ominously?) quiet.

HealthcareFinance talked to two partners in law firm Akerman’s healthcare practice group to get their take, weaving in some findings from a PWC report: 

  • Buyer interest in acquiring practices and surgery centers
  • Partnerships on rise, for example Amazon’s One Medical with health systems 
  • Smaller hospitals in mid-America will merge as there is “safety in numbers’
  • More investment in life sciences and drug development, especially diabetes/weight loss drugs in the GLP-1 category
  • Anything around AI attracts interest

The two big factors: interest rates (the Federal Reserve has signaled no further increases, and maybe cuts in 2024) and (of course) a presidential election as well as all of the House, much of the Senate, and state gubernatorial offices.

Bubbling under this are reports of two big pending IPOs:

  • Home health, pharmacy, and eldercare services provider BrightSpring Health filed with the SEC on 3 January for a near-billion dollar IPO (publicly released on 17th). This is estimated to raise $960 million, valuing the company at about $3 billion. Common stock will debut between $15 and $18 on Nasdaq under the symbol BTSG. They are also selling 8 million tangible equity units at $50. Proceeds will go from the offerings to repay outstanding debt under various credit facilities and pay penalties associated with terminating its monitoring agreement with Kohlberg Kravis Roberts & Co. L.P. (KKR, the current owner) and Walgreens Boots Alliance. BrightSpring serves 400,000 daily patients and dispensed 34 million prescriptions in 2022. IPO timing is still to be announced. This is the second time the company has filed, abandoning its first attempt in late 2021 as the market softened in 2022. KKR is signalling an exit…will it happen this time? Release, FierceHealthcare
  • Waystar’s IPO is still pending after being announced late last year [TTA 26 Oct 23]. The RCM and payments software company delayed it to 2024 due to an uncertain market at year’s end. Reportedly the roadshows were postponed to December but there has been no confirmation that they took place. Will it happen?

Fasten your seatbelts…it may be a bumpy ride.

DOJ and FTC finalize Merger Guidelines, deliver coal for holiday stockings and the New Year (updated)

December 20, 2023 | by

DOJ and FTC deliver a scuttle of coal for healthcare holiday stockings. The Department of Justice (DOJ) and the Federal Trade Commission (FTC) finalized the Merger Guidelines that were drafted back in July [TTA 20 July]. They update prior guidelines first issued in 1968 that have been revised six times since then. They are not legally binding but demonstrate how each agency will examine any merger or acquisition going forward–and are advance notice on how they can and will stop either. US antitrust law is based on three acts passed by Congress: The Sherman Antitrust Act (1890), the Clayton Act (1914), and the Federal Trade Commission Act of 1914, now in US Code Title 15.

After 30,000 public comments in the 60-day period, the published Guidelines are now down to 11, but in context based on this Editor’s read (caveat, not a lawyer nor play one on TV) are not materially different than the July draft of 13, perhaps considered unlucky. The language in each Guideline restates the draft language in substantially more restrictive language and interpretation. The agencies’ stated purpose is that when two companies propose a merger that “raises concerns” on one or more of these Guidelines, the agencies “closely examine” whether the effect of the merger may be to substantially lessen competition or to tend to create a monopoly (sometimes referred to as a “prima facie case”). Two “C” words are repeated throughout–concentration and consolidation. 

The guidelines are verbatim from the 51-page DOJ/FTC document (PDF link) issued 18 December and are grouped on how the agencies use these guidelines. They are effective immediately.

Distinct frameworks the agencies use to identify that a merger raises prima facie concerns (1-6)

Guideline 1: Mergers Raise a Presumption of Illegality When They Significantly Increase Concentration in a Highly Concentrated Market.
Guideline 2: Mergers Can Violate the Law When They Eliminate Substantial Competition Between Firms.
Guideline 3: Mergers Can Violate the Law When They Increase the Risk of Coordination
Guideline 4: Mergers Can Violate the Law When They Eliminate a Potential Entrant in a Concentrated Market
Guideline 5: Mergers Can Violate the Law When They Create a Firm That May Limit Access to Products or Services That Its Rivals Use to Compete
Guideline 6: Mergers Can Violate the Law When They Entrench or Extend a Dominant Position

How to apply those frameworks in several specific settings (7-11)

Guideline 7: When an Industry Undergoes a Trend Toward Consolidation, the Agencies Consider Whether It Increases the Risk a Merger May Substantially Lessen Competition or Tend to Create a Monopoly
Guideline 8: When a Merger is Part of a Series of Multiple Acquisitions, the Agencies May Examine the Whole Series
Guideline 9: When a Merger Involves a Multi-Sided Platform, the Agencies Examine Competition Between Platforms, on a Platform, or to Displace a Platform
Guideline 10: When a Merger Involves Competing Buyers, the Agencies Examine Whether It May Substantially Lessen Competition for Workers, Creators, Suppliers, or Other Providers
Guideline 11: When an Acquisition Involves Partial Ownership or Minority Interests, the Agencies Examine Its Impact on Competition

The Guidelines are summarized in the Overview. Section 2 explains them more completely with how the agencies apply the Guidelines. Section 3 identifies rebuttal evidence that companies could typically present, and Section 4 presents a non-exhaustive discussion of analytical, economic, and evidentiary tools the Agencies use for evaluation. 

More coal, Ebenezer Scrooge. As this Editor described the draft guidelines in July, it it is hard to see that any merger or acquisition of like companies or even complimentary organizations building out capabilities or platforms could pass. Each one of these Guidelines is a tripwire and once tripped, can trip others. Each one of these can be used by FTC and DOJ to present to a Federal district court, where decisions are now more influential than the body of US Supreme Court decisions. Healthcare Dive notes the Illumina decision in the Fifth Circuit appeals court, liberally cited in the Guidelines document. This is forcing Illumina’s divestiture of cancer test developer Grail, earlier purchased for $7.1 billion. 

So now the coal’s been delivered…what will 2024 and out look like?

  • This will freeze M&A for months as companies try to figure this out. It’s not hard to guess that the imminent publication of the Guidelines nudged the termination of the Cigna-Humana deal. Hospital and health system mergers will continue to find nothing but discouragement.
  • Watch for an acceleration of existing company failures in 2024 and disruption in the current funding structure. Smaller healthcare companies, fattened on the investment binge of 2020-21, but now betting on a buyout from a near competitor, are either going to stick it out on their own or run out of runway. VC and PE companies investing not strategically, but for the purpose of a 18-24 month exit or quick payday, will largely be out of luck. Public companies may languish unless they move quickly to profitability. This may stimulate a new look at investing–strategic investors that look at the very long term–or not. (JP Morgan in January will be verrrrry interesting.)
  • Companies that have grown organically or benefited from previous acquisitions but need to acquire capabilities for a platform to continue to be competitive will also be affected. These could trip Guideline 9 and if found to be anti-competitive, may trip Guideline 8: “If an individual transaction is part of a firm’s pattern or strategy of multiple acquisitions, the Agencies consider the cumulative effect of the pattern or strategy.”
  • The behemoths like UnitedHealth Group, Walgreens Boots Alliance, and CVS Health will have no rivals for many years. The flip side: they will have trouble making additional acquisitions without forcing divestitures, or find buyers when they wish to divest money-losing units.
  • Partnerships may accelerate–with all their risks of purloined IP and monetary disputes. But smaller companies may use it to band together without antitrust risk.
  • The SPAC (special purpose acquisition company) may make a comeback. They will not have any antitrust conflicts but risk a chancy public market, at least in the US. 
  • The conglomerate–unrelated businesses under a holding or investment company–may rise again, as it did in a tight antitrust environment in the 1960s. Remember Gulf + Western and LTV (Ling Temco Vought)–both gone? Berkshire Hathaway is a prime example of a current conglomerate. Foreign investment groups may also find US healthcare an attractive proposition.
  • Offshore reincorporation. Much as Medtronic moved its corporate headquarters from Minneapolis to Dublin, Ireland, companies may move offshore to friendlier climes like Ireland, Estonia, Hungary or the Visegrad nations, and the Channel Islands, effecting their M&A there and making their US branches operational only. 

But…there’s more. Both DOJ and FTC will be reviewing the 2010 Horizontal Merger Guidelines and the 2020 Vertical Merger Guidelines. Fasten your seatbelts, it’s going to be a bumpy year. 

FTC press release (which makes clear what agency is leading!), Crowell (law firm) short analysis, PrivateFundsCFO

Additional sources added 2 January: National Law Review (article by Foley & Lardner), Healthcare Finance News

Short takes: a rumor of merger/buy with Cigna and Humana–what are the odds? (updated) And what’s up with the low number of HIMSS 24 exhibitors?

December 2, 2023 | by

crystal-ballCigna and Humana, perfect together? Only if they can get the deal through the Feds and the states. Late this week, the Wall Street Journal revealed that Cigna and Humana were exploring either a merger or, as some theorize, a buy of Humana ($93 billion in revenue, $60 billion valuation) by much-larger Cigna ($181 billion in revenue, $78 billion valuation). Between them, it is estimated that they would have 35 million members. No transaction cost has been estimated, but the WSJ sources indicate it will be a stock-and-cash deal that could be finalized by the end of the year if all goes well.

On paper, industry observers like it but point out the overlap in one significant area.

  • Cigna earlier announced that it wants to sell its relatively small Medicare Advantage business, concentrating on its leadership in the commercial business and with its service businesses under the Evernorth umbrella.
  • Humana is exiting its commercial health plans to focus on MA and Medicaid, as well as its large footprint in the home health business with CenterWell.
  • Humana’s CEO Bruce Broussard is retiring next year, with newcomer to Humana Jim Rechtin joining as COO in January 2024 as his replacement. Cigna’s CEO David Cordani is a sprightly 57 and likely not to go anywhere.
  • The overlap area that could be problematic is pharmacy benefit management (PBM) with each having about 17-18 million in Express Scripts (Cigna), the second largest in the US, and Humana Pharmacy Solutions. 

Liking it on paper is one thing–FTC, DOJ, and 50 states may not feel so enthusiastic. It’s established through their actions that both Federal agencies are reining in M&A with new and restrictive merger guidelines scheduled to go into effect next year [TTA 20 July]. Healthcare is a major political hot button for this administration for cost–especially drug costs. That is where the reportedly equally sized in revenue PBM operations present the most major conflict to a merger or a buy, both in service and valuation. Both serve their own plan members as well as others, notably Express Scripts with 24% of claims, whereas Humana’s serves primarily its own plan members with 8% of claims. Neither are easy to divest without creating antitrust questions for acquirers and a major dent in Humana’s services. The final factor: Lina Khan, chair of the FTC, has never seen a merger that she’s liked based on her own statements [TTA 24 Aug].

Doomed to repeat history? In 2015, two payer mega-mergers involving these same companies were concocted: Cigna with Anthem and Humana with Aetna. They hit the buzzsaws of DOJ and before that, state approvals. The DOJ pursued them on antitrust in the Federal courts which derailed both by January 2017. Running up to that, every state got an approval vote through review by each state’s Department of Banking and Insurance or equivalent. Many did not approve or with conditions. The other factor is corporate. In the runup to the merger, Anthem-Cigna was marked by escalating animosity from the management suites to the worker cubes. After the deals were scuppered in the Federal District Court, Anthem and Cigna bitterly fought over damages and cancellation fees in Delaware Chancery Court. Aetna and Humana took their lumps and breakup fees, and went on. Aetna went on to merge with CVS, a deal that avoided most of the antitrust flak. Humana went on to acquisitions in other areas.

Our betting line. Both insurers will look at the financials in this hard-to-get-arrested year. Both will feel out the Feds before going forward. Both will calculate whether it’s best to start now or wait till next year and a possible change in administration. Neither company wants to be a political target in an election year. Defensively, Cigna may make noises about other combinations–Centene and Molina have been mentioned–which present their own difficulties and troubles, to strategically try to force the issue. Stay tuned! MedCityNews, Axios

Update: Other analysts suddenly are on board with this Editor’s gimlety view of the matchup, citing antitrust and how Federal regulators are primed to challenge major deals. The FTC is specifically probing the PBM business. The fact that the deal, according to JP Morgan, could take 12 to 24 months is no surprise as par for the course, but Mr. Market didn’t like it, dragging down both companies’ share prices every day since the rumor broke. (Hmmmm….do they read TTA?)  But a small lamp was lit by one analyst: a Cigna-Humana combo could present real competition to the 9,000 lb. elephant of healthcare, UnitedHealth Group, and that might help to put it over. FierceHealthcare

Another concern that occurred to your Editor: Cigna’s international footprint could mean additional approvals by UK and EU regulators.

According to Healthcare Dive’s analysis, the combined entity would have a PBM market share of 32%, right up against CVS Health-Caremark at 33% and UHG’s OptumRx way behind at 22%. It’s a small group with big barriers to entry which makes it a slam-dunk to antitrust regulators.  A whistle in the dark might be UHG’s long-drawn-out buy of Change Healthcare, but there were divestitures of business before closing and both parties managed to prove to the satisfaction of a US District Court that the separation to Optum Insight would not affect business relationships with other health plans. But here, both are health plans, and both have PBMs.

HIMSS 24 exhibitors, where are you? An item in today’s HIStalk on the ‘interesting’ choice as closing keynoter of football coach Nick Saban (U of Alabama Crimson Tide) at a healthcare IT conference went on to compare the number of booked HIMSS exhibitors to date with HIMSS 23’s floor total. This Editor, who for a few years booked the least expensive HIMSS space for the company she worked for back then well in advance, could not believe the low number of exhibitors three months from show time in March. Checking the HIMSS show website, there are 501 exhibitors listed. In 2023, according to HIStalk, there were 1,216. Many of these exhibitors have multiple booths in the Orange County (Orlando) Convention Center, but it still indicates the uncertain state of healthcare, pullbacks in marketing budgets, the rise of real competition in HLTH and ViVE, and perhaps some concerns about the show management transition from HIMSS itself to Informa. Are industry and IT influentials skipping HIMSS next year? Stay tuned or comment below!

News roundup: Walgreens & CVS pharmacy staff 3 day walkout, DOJ ramping up healthcare acquisition scrutiny, Cantata Health sold to TT Capital, Lancashire County Council chooses Progress Lifeline for TECS (UK)

October 31, 2023 | by

Kicking off the week, a walkout. Pharmacy staff at both Walgreens and CVS locations are participating in a three-day walkout that started today (30 October) and will go through Wednesday (1 November). The scope is limited–organizers are urging pharmacists to call in sick on those days and the actions appear to be somewhat scattered by state. This follows an earlier mid-October three-day walkout [TTA 11 Oct]. The Walgreens action, according to organizers, will end on Wednesday with  Wednesday with a planned demonstration outside Walgreens’ headquarters in the Chicago suburb of Deerfield, Illinois.

The organizer quoted by MedCityNews and CNN, Shane Jerominski, a former Walgreens pharmacist and now with an independent pharmacy, stated that the issues are over short-staffing and overwork. In addition to their main tasks of accurately filling prescriptions, he said that they also deal with requests for administering vaccinations, testing, setting up auto-refills and other tasks. Mr. Jerominski claims that 2,500 Walgreens pharmacists and technicians will participate, which is coming as a surprise to Walgreens management. He also claimed to CNN 25 store closures.

Pharmacy workers are not currently unionized, but both the United Food and Commercial Workers International Union (UFCW) and the Service Employees International Union-United Healthcare Workers West (SEIU) are interested and support the walkouts. The American Pharmacists Association (APhA) also issued a statement of support from their CEO including issues such as patient harassment, burnout, quotas, and additional fees imposed by pharmacy benefit managers (PBMs) such as Express Scripts and Optum. Becker’s

Meanwhile, the Department of Justice (DOJ) continues its warning shots over the bow to Big Healthcare. POLITICO, the daily broadsheet of the political class, reported that Andrew Forman, a deputy assistant attorney general in the DOJ’s antitrust division, warned that DOJ would be 1) closely scrutinizing all deals for antitrust and 2) stepping up post-merger investigations. This is all about “monopoly’ of healthcare markets as deemed by DOJ–and the Federal Trade Commission (FTC), currently ax-tossing at Amazon. Mr. Forman cited national economic data, blame-gaming among health care providers, insurers and drug makers, and economic analysts–as well as the public comments registered as part of DOJ’s draft merger guidelines. Hiding behind value-based care isn’t going to help as DOJ is questioning whether payer/provider consolidation actually delivers on VBC, but instead “delivers on increased power and conduct that increases barriers and otherwise harms competition”. A far more complete summary of his remarks at the Health Care Competition Conference of The Capitol Forum is at Medical Economics. 

Our backgrounders on both DOJ and FTC actions around antitrust and mergers are summarized on 24 August (lead item) including our 20 July analysis of the Draft Merger Guidelines and this Editor’s educated guesses on the cloudy future of M&A. Also Becker’s

Slipping in under the DOJ radar is Cantata Health’s majority sale to a private equity group, TT Capital Partners (TTCP). Cantata developed and markets the Arize EHR and revenue cycle management platform for behavioral health, human services, acute and post-acute care. Arize is in 280 healthcare facilities across 45 states, as well as Canada, the Bahamas, Puerto Rico, and Guam. Investment amount nor percentage are disclosed, nor who exited or management changes. However, a look back at a 2017 release about Cantata’s formation states that another PE, GPB Capital, acquired NTT DATA’s healthcare software assets for acute and long-term care. TTCP release

In Lancashire, the County Council has chosen a new preferred provider for technology enabled care services (TECS), Progress Lifeline, in a competitive bid. The Council currently provides personal alarm button pendants, wristbands, and wireless home sensors and detectors to local residents for a monthly fee. A significant factor in these new bids is enabling a smooth analogue-to-digital changeover, a critical issue for UK telecare providers. Progress release   Hat tip to Diane Gannon of Progress