Crime Does Not Pay–especially when defrauding Medicare of nearly $1 billion

May 20, 2022 | by

Ocean’s 11 (or 13) It Ain’t. Back in October, the Department of Justice (DOJ) and other Federal agencies had what was dubbed the  National Health Care Fraud and Opioid Takedown. Many of the takedownees were ‘telemedicine’ fraudsters. Of the over $6 bn of fraud identified, $4.5 bn was specified as relating to ‘telemedicine’ with more than 86 criminal defendants located in 19 judicial districts [TTA 2 Oct 20].

The sentences are now rolling in for this and earlier actions. Becker’s seems to be the only outlet tallying those who will be fined and having a stay in Club Fed. The three ‘telemedicine’ convictions noted by this Editor to date, totaling $958 million, are:

  • Genetic testing fraud: The owner of Scott Global, an Orlando telemarketing call center, was convicted of eight counts and a $2.8 million fraud. Telemarketers would call Medicare beneficiaries soliciting their information for expensive cancer screening genetic testing, or CGx, telling them that it would be covered by Medicare. Mr. Scott then paid bribes and kickbacks to ‘telemedicine’ companies to get physician’s orders authorizing the tests. Becker’s Healthcare 12 Jan   DOJ release
  • Pharmacy fraud: Larry Smith, a Florida resident owner of two pharmacies and a related company, defrauded pharmacy benefit managers of $931.4 million by submitting bills for fraudulent prescriptions purchased from a telemarketing company. The telemarketers improperly solicited patient information, then got approvals from ‘telemedicine’ prescribers, and finally sold the prescriptions to pharmacies like Mr. Smith’s for a kickback. Mr. Smith faces up to 10 years in prison. DOJ Release 21 Jan 21 

(Updated April 2024) In a 2018 related action, HealthRight, a ‘telemedicine’ company, and its CEO Scott Roix pleaded guilty to conspiracy to commit healthcare fraud for their roles in the scheme and agreed to pay $5 million in restitution. Subsequently, other defendants and related companies were sentenced for their parts in the conspiracy. The DOJ release of 20 May 2022 details involvement and sentencing.  DOJ release May 2022

  • The absence of telemedicine–prescribing medication without a patient consult–was what landed New Jersey physician Bernard Ogon, MD, to 33 months in prison, pay restitution of $24.3 million, and forfeit an additional $75,000. He signed preprinted prescriptions and then sent them to specific compounding pharmacies involved in the conspiracy. Becker’s Healthcare 28 Jan  DOJ release

Certainly more to come. This Editor has also checked for any further actions in Humana’s suit against telehealth/telemarketing company QuivvyTech as reported last August, and there are none. Our original report here.

DOJ investigates telemental Cerebral on over-prescribing of controlled medications

May 10, 2022 | by

DOJ dropped an anvil on Cerebral’s head Friday night. Last week’s reports on the Drug Enforcement Agency (DEA) investigation of telemental health provider Cerebral were confirmed on Friday with the official notification that the US Attorney’s Office for the Eastern District of New York had subpoenaed the company as part of their investigation into possible violations of the Controlled Substances Act. According to the Wall Street Journal, the subpoena was issued to Cerebral Medical Group, the corporation it uses to contract with clinicians and provide healthcare services. The company is fully cooperating with the investigation by the Department of Justice, which includes turning over records pertaining to their prescribing of controlled substances such as Adderall and Xanax. This has been reported by FierceHealthcare which is citing (paywalled) Insider.

Last week, Cerebral announced that it would stop prescribing controlled substance prescriptions for new ADHD patients as of 9 May. However, they would continue prescribing controlled substances for other mental health conditions, according to a memo from their chief medical officer to their clinician network.

Cerebral’s Saturday statement in response to the subpoena maintains (from FierceHealthcare):

“To be clear, at this time, no regulatory or law enforcement authority has accused Cerebral of violating any law”

and

“Cerebral has dedicated significant time, energy, and resources to ensuring that its policies and procedures regarding the prescription of controlled substances and other medications both are medically appropriate and comply with all applicable state and federal law,” the statement also said. “As a responsible company, Cerebral is continuously improving its systems and practices. The foundation of this company is built on evidence-based, ethical, and compliant practices so that our patients can receive the highest quality of care and achieve the best clinical outcomes.”

The company has done well with the increased demand for mental health services provided via telehealth including remote evaluating and prescribing. In December, their $300 million Series C raise boosted their valuation past $4.8 billion.

Darkening this rosy picture is, as TTA noted last week, that a former VP of product and engineering, Matthew Truebe, has sued Cerebral for wrongful dismissal. According to him, the company put growth before patient safety, including overprescribing medications for ADHD. Other reports indicate that the DEA interviewed other former Cerebral nurse practitioners who felt pressured to prescribe ADHD medication after a short video call. The Verge

Cerebral has also gained notoriety for dodgy advertising claims pertaining to ADHD and other conditions. In January, advertising on TikTok and Instagram was pulled for claims that obesity is “five times more prevalent” among adults with ADHD, and stated that getting treatment for the mental health disorder could help patients “stop overeating.” These followed inquiries by Forbes and NBC News. Also pulled was their Facebook advertising around prescribing Type 2 diabetes medications, GLP-1 agonists, as a “wonder drug” for weight loss. 

Will this put a damper on the burgeoning area of telemental health and remote prescribing? Stay tuned. Also Becker’s. 

The shoe dropped: DOJ sues to block UnitedHealth Group-Change Healthcare merger. What’s next?

February 25, 2022 | by

To nearly no one’s surprise, the US Department of Justice did what was reported back on 17 Jan: block UnitedHealth Group’s (UHG) bid to acquire Change Healthcare on anticompetitive grounds. Earlier today, the DOJ issued their statement in a release on the joint civil lawsuit with the attorneys general of New York and Minnesota. (This Editor finds the New York AG participation interesting, as Change is HQ’d in Nashville, Tennessee with UnitedHealth in Minnesota. The usual grounds are state interest and commerce.)

The reasons cited will also not come as any surprise to our Readers, as these objections were raised from the start in that the acquisition would give UHG an unfair advantage against their payer competition and squelch innovation. These are from the DOJ release and the complaint filed today (24 February) in the US District Court for the District of Columbia.

  • UHG is the US’ largest insurer and also a major controller of health data. Change is a major competitor to UHG/OptumInsight in health care claims technology systems, which was the basis of the American Hospital Association’s (AHA) objections.
  • The acquisition would eliminate a major competitor to UHG in claims processing. Moreover, Change is “United’s only major rival for first-pass claims editing technology — a critical product used to efficiently process health insurance claims and save health insurers billions of dollars each year — and give United a monopoly share in the market.” It would also give UHG the ability to raise competitors’ costs for that technology.
  • Hospital data accounts for about half of all insurance claims. UHG with Change would have effective control of that ‘highway’.
  • Change is also a major EDI clearinghouse, which facilitates the transfer of electronic transactions between payers and physicians, health care professionals, or facilities. UHG would have control of the EDI clearinghouse market.
  • UHG would be able to view competitors’ claims data and other competitively sensitive information through Change. “United would be able to use its rivals’ information to gain an unfair advantage and harm competition in health insurance markets.”

The plaintiffs–DOJ, New York, and Minnesota–conclude with a request of the court to 1) enjoin (stop) the acquisition and 2) award restitution by UHG and Change for costs incurred in bringing this action.

Consider this acquisition one for the books–the one embossed ‘Nice Try, But No Dice’. 

So what’s next? Here’s your Editor’s speculation.

Change is one of the ‘shaggiest’ independent companies in healthcare, in so many businesses (many acquired) that it’s hard to understand exactly what they stand for. It has extensive businesses not only in the areas above that will nix the UHG buy, but also in imaging, data analytics, clinical decision making, revenue cycle management, provider network optimization and related solutions, pharmacy benefits, patient experience in billing and call centers, funding healthcare….and that’s just the surface of a giant list. From the outside, it’s hard to see how all these parts coalesce.

In the industry, Change was long rumored to be for sale. Recently, it’s become unprofitable. It closed its FY 2021 (ending 31 Mar 2021) with a $13.1 million loss and through Q3 FY 2022 with a $24.5 million loss.

At the end of this, Change may be better advised to sell off some of its businesses, retrench, and refocus on its most cohesive and profitable areas. 

Outcome Health’s Desai reaches settlement with DOJ, SEC

February 7, 2020 | by

Ashik Desai, the former chief growth officer of point-of-care advertising firm Outcome Health, settled the charges against him brought in Federal court by the Securities and Exchange Commission. The filing was on 4 February. Monetary relief and/or penalties against him will be disclosed at a later date.

Last month, Mr. Desai pleaded guilty to the charges and announced cooperation with the authorities on the criminal charges of securities fraud related to Outcome Health’s capital raises of about $1 bn during 2011 into 2017. Similarly, his former analysts Kathryn Choi and Oliver Han did the same at the end of January.

Remaining are the senior executives who have all entered pleas of  ‘not guilty’: founders Rishi Shah and Shradha Agarwal, both of Chicago, and Brad Purdy, their former COO and CFO, all in their 30s. All of them blame Mr. Desai, who is presently 26 and started at Outcome Health as an intern.  Pass the popcorn for a dramatic tale of complex and multi-layered fraud, likely in the spring. Becker’s Health IT and CIO Report, Chicago Tribune  Also TTA 17 Dec and 3 Dec

A Practice Fusion coda: an insider’s perspective on the pressure to ethically breach an ‘objective’ service for revenue

January 31, 2020 | by

From both sides: an insider at Practice Fusion, then a regulator at ONC. Mentioned briefly in POLITICO Morning eHealth is a blog posting from a former ONC (Office of the National Coordinator, HHS) official, Jacob Reider, MD, about Practice Fusion. Before he was Deputy National Coordinator of Health IT, he was CMIO of Practice Fusion circa 2009-11. His blog has some interesting insights on even ten years ago, how aggressive pharmaceutical companies were in wanting to ‘bend’ (Editor’s term) clinical decision support (CDS) in the EHR to promote a drug category, and in a young, growing, and revenue-hungry company, the temptation for ‘growth’ teams to do so. Fast forward a few years, and Dr. Reider is working to write the certification requirements for EHRs and the evidence (via citations) for CDS. His conversations with the then-CEO, Ryan Howard, about the ethics of their advertising model and their rationale illustrate the conflict between ethics and revenue–as in right up to the line and looking over. While this is familiar to any media observer–after all, why buy advertising if not to change behavior?–when decisions are being guided by an EHR, the CDS shouldn’t be rigged, visibly or invisibly. Dr. Reider places the crossing of the line after Mr. Howard’s departure with a new pharma-minded team. The evidence in the CDS lies in the citations funded by–pharma and biomed companies. The inevitable result: Allscripts, now the owner, settling for $145 million with the DOJ and having ‘kickbacks’ attached to their business. Dr. Reider is now CEO of the Alliance for Better Health in Albany, NY. Docnotes: When sponsored CDS is a crime

This is hardly the first instance of the blurring of boundaries between ethics and revenue. All those paying to get their genetic history from 23andme or Ancestry.com ought to consider that they may also be signing on to have their information used by a medtech company for research. It may be stripped of PII and ‘de-identified’, but there are ways of cross-referencing some of that information. Why else would GSK own 50 percent of the company? [29 Aug 19, 31 Oct 15] 

Allscripts’ $145 million settlement with DOJ on Practice Fusion’s ‘kickbacks’ on opioid prescribing, other charges

January 29, 2020 | by

The US Department of Justice announced on 27 February that it reached a $145 million settlement with Practice Fusion on what DOJ termed “kickbacks from a major opioid company in exchange for utilizing its EHR software to influence physician prescribing of opioid pain medications”. Allscripts, which now owns Practice Fusion, will be paying out penalties of $25.4 million in criminal fines, $113.4 million to the Federal Government, and up to $5.2 million to individual states, as well as forfeiting criminal proceeds of nearly $1 million from the ‘kickback’. The specific charges relate to two felony charges related to the Anti-Kickback Statute (AKS) and for conspiring with its opioid company client to violate the AKS.

The opioid company is widely believed to be Purdue Pharmaceutical, manufacturers of Oxycontin, according to HISTalk. The high dudgeon generated in the DOJ press release is related to opioid prescriptions and physician usage which are and remain highly controversial. Apparently, Purdue wasn’t the only pharma company that benefited from this type of influence.

In this Editor’s analysis, ‘kickbacks’ is a legalism to prosecute under the AKC what marketers would term a sponsorship deal. Practice Fusion was from inception advertiser supported. What is different here from pop-up screen adverts is that Practice Fusion created sponsorship packages in which not only advertising was featured, but also clinical support decision (CDS) alerts were created, aimed at increasing prescription sales of companies’ products. In addition, Practice Fusion allowed companies to participate in the design of the CDS software. These sponsorships took place between 2014 and 2019. None of this is unusual in AdLand in general, but in pharma and healthcare which play by far stricter rules about marketing programs, this goes against the expectation (and regulation) that an EHR is unbiased.

Allscripts had ‘leaked’ this back in August on their Q2 investor call. Buried in the DOJ release after the opioid ire is the settlement of Practice Fusion’s violations of Office of the National Coordinator for Health Information Technology (ONC) regulations concerning the voluntary health IT certification program, and the Centers for Medicare & Medicaid Services (CMS) regulations around EHR incentive programs, presumably Meaningful Use certifications and payments. This was the origin of the earlier announcement of a $145 million settlement on Allscripts’ Q2 2019 investor call, which in retrospect strikes this Editor as a nice try at minimizing far more serious charges. [TTA 14 August] CDS favoring opioid prescription is far more disturbing.  

It does seem that Allscripts bought itself a bargain basement of trouble with Practice Fusion. Mobihealthnews, TechCrunch. 

Outcome Health analysts plead guilty, cooperate with Federal prosecutors

January 29, 2020 | by

Two financial analysts who worked at Outcome Health and reported to former EVP of business operations/chief growth officer Ashik Desai, changed their ‘not guilty’ pleas to ‘guilty’ earlier this month. Kathryn Choi and Oliver Han were charged with wire fraud by Federal prosecutors. As part of their guilty plea, they will cooperate with prosecutors, as did their former boss Mr. Desai.

As reported in our earlier articles, Ms. Choi and Mr. Han are alleged to have created statements to deceive company auditors and providing advertisers with false patient engagement metrics on Outcome Health’s tablets. Both were hired in 2014 and placed on leave in late 2017. While the charges they face carry a maximum penalty of five years, their cooperation may lead to far lighter sentences.

Their change of plea was rather predictable, given that two fairly young and junior staffers faced Federal charges in a classic squeeze play to obtain further information on the big fish, former Chief Executive Rishi Shah, former President Shradha Agarwal, and former executive Brad Purdy (COO/CFO), who face real prison time and large financial penalties. All three have pleaded not guilty.

Outcome Health’s principals are charged with 26 criminal charges of fraud in their funding raises of over $1 bn from 2011 to 2017. Advertisers were defrauded for ads which never ran in medical audiences and third-party studies were manipulated to enhance their results. The indictment details deception of their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery of actual advertising in doctors’ offices. 

Chicago Tribune, Crain’s Chicago Business. Earlier TTA articles: 3 Dec, 12 Dec, 17 Dec

“There were practices going on there that were wrong”: Outcome Health’s Desai pleads guilty, cooperates with DOJ.

December 12, 2019 | by

Perhaps the smartest move, under really, truly bad circumstances. Ashik Desai, the former executive vice president of business operations/chief growth officer of point-of-care health information/advertising company Outcome Health, ‘copped a plea’ this past Monday to felony wire fraud charges. According to the Chicago Tribune, Assistant US Attorney Matthew Madden told Judge Thomas M. Durkin of the Northern District of Illinois Federal Court in Chicago that Mr. Desai is cooperating with the investigation. “When I was at Outcome Health, there were practices going on there that were wrong,” Mr. Desai said, understatedly, during his court appearance Monday. “I participated in those practices that ended up defrauding Outcome’s customers.”

According to the article and other sources (WTTW), Mr. Desai is only 26; he started at Outcome as an intern when it was still Context Media and departed in 2017. With continued cooperation, the prosecution is recommending only 10 years in prison, half of what a conviction might bring at the statutory maximum of 20 years. He was released on bond and surrendered his passport.

The multiple and most serious charges in the indictment are for the two founders, Rishi Shah and Shradha Agarwal, both of Chicago, and Brad Purdy, their former COO and CFO, all in their early 30s. These are criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017, deceiving their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery performance.

On Monday 9 December, Mr. Purdy pleaded not guilty to six counts each of mail fraud and wire fraud, two counts of bank fraud and one count of making false statements to a financial institution. His counsel, not unexpectedly but amusingly for those of us who are experienced in the corporate pecking order and what exactly a CFO is responsible for, stated: “Ashik Desai and several of his underlings committed a massive fraud. The evidence will show Brad Purdy was not part of that fraud,” he said. “Evidence is going to show Ashik Desai repeatedly lied to Brad and others to conceal his fraud from people like Brad.” Mr. Purdy also was released on bond and surrendered his passport.

Two of those underlings, Kathryn Choi and Oliver Han, pleaded not guilty on Thursday 5 December to their respective charges of wire fraud. They face five years maximum if convicted. In this Editor’s opinion, they were indicted to bring forth additional information to buttress the major charges on Mr. Desai and the three top executives. As ‘small fry’ with at most a little profit sharing, they are sideshows–easy to pressure. They may truly spill the beans if they and their counsel sense that things are going badly–if they have any more beans to spill. 

Mr. Shah and Ms. Agarwal are scheduled to appear in court next Monday, 16 December. They have previously stated that they will plead not guilty (FiercePharma). Flight risk is undoubtedly a concern for the prosecution regarding Ms. Agarwal. According to this Refinery29  interview from 2017, Ms. Agarwal is an Indian citizen and, while a long-time legal resident, not a naturalized American. Mr. Shah was born in the US. This cautionary Tale of the Unicorn, told in the Chicago Way, warns us all to be careful of what we see, are asked to do, sign on to–and sign off on.

SEC, DOJ charges Outcome Health founders Shah and Agarwal, others, with $487 million fraud, 26 counts of indictment (updated)

December 3, 2019 | by

All the points of information here. While we here in the US were enjoying our Thanksgiving feasts of turkey, steak, lobster, and lasagna, Outcome Health founders former Chief Executive Rishi Shah, former President Shradha Agarwal, and former executives Brad Purdy (COO/CFO), and Executive VP Ashik Desai, were being served a vastly different dish on 25 November. Underreported in the run-up to the holiday were two major legal actions against these individuals:

  • SEC charges of $487 million in investor fraud by “misrepresent(ing) the company’s business successes while raising hundreds of millions of dollars from unsuspecting investors”, billing clients (primarily pharmaceutical companies) for ads that never ran in medical offices, and manipulating third-party studies to make the company’s ad delivery look more effective than it actually was to create the impression of meteoric growth. The falsification trail was such that even they had trouble matching up their claims versus actual in their ‘selling of futures’.
  • 26 counts from a Department of Justice grand jury indictment on criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017 and their business practices. The indictment alleges deception of their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery of actual advertising in doctors’ offices which they may or may not have had, in extreme and additional detail to the SEC complaint. Arraignments for the defendants started on Tuesday 3 Dec.

Two young analysts, Kathryn Choi and Oliver Han, reported to Mr. Desai and are being charged with wire fraud. They are alleged to have created statements to deceive company auditors and providing advertisers with false patient engagement metrics on Outcome Health’s tablets. Both were hired in 2014 and placed on leave in late 2017. This action is highly unusual in reaching down to this level and naming two young subordinates.

One-time unicorn Outcome Health is, of course, still in business, selling advertising and educational materials at point-of-care, having settled with the SEC in October for $70 million in advertiser make-goods [TTA 31 Oct]. It also restructured/recapitalized in May by selling a majority stake to private equity firm Littlejohn & Co. In coming down to earth, the posturing of the executives should be less than two years ago, when Outcome was going to build its own Chicago office building–but this early October article from FiercePharma hardly moderates the healthcare change-agent hype for what is really POC advertising to inform and mostly distract patients who wait…and wait.

Additional information:

In this Editor’s view, once both SEC and DOJ are double-teamed on an indictment, avoiding Club Fed will be extremely difficult for the four main executives. (One assumes their US passports have been confiscated.) There is a huge amount of financial fraud leading to losses by some powerful companies. Even when losses are small, the Feds get their man most of the time. This Editor had a view of this at a distance, as the CEO of a company where she formerly worked was convicted of financial fraud in an enterprise formed after that company. He and his accomplice are serving five years in a Federal prison. Not even Elizabeth Holmes is facing the full fury of both Federal agencies, and she’s facing only nine counts in her indictment. 

The Theranos Story, ch. 61: Elizabeth Holmes as legal deadbeat

October 9, 2019 | by

Did her lawyers expect otherwise? This weekend’s news of Elizabeth Holmes’ legal team at Cooley LLP withdrawing their representation services due to non-payment should not have caused much surprise. Cooley’s attorney team petitioned the court to withdraw from the case, stating that “Ms. Holmes has not paid Cooley for any of its work as her counsel of record in this action for more than a year.”

Cooley was representing Ms. Holmes in a class-action civil suit in Phoenix brought against her, former Theranos president Sunny Balwani, and Walgreens, charging fraud and medical battery. (When they withdraw, will she seek public representation based on poverty?)

Perhaps Ms. Holmes is the one who’s setting priorities, as the civil suit would be for monetary damages, and no money means there will be none for the plaintiffs to collect. The DOJ charges are a different story. She is on the hook for nine counts of wire fraud and two counts of conspiracy related to her actions at Theranos. Conviction on these could send her to Club Fed for 20 years plus a fine of $250,000 plus restitution for each charge. [TTA 16 June]. 

Last Wednesday, both Ms. Holmes and lawyers for her and Mr. Balwani were in Federal court in San Jose on the wire fraud and conspiracy charges, demanding that the government release documents from the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) that allegedly would clear them. After an hour, Judge Davila set 4 November as the next hearing date. 

Defending oneself does not come cheap, but after your company’s value crashes to $0 from $9bn, one might be looking for change in your Roche-Bobois couch and wondering if your little black Silicon Valley-entrepreneur formal pantsuit/white shirt ensembles will last through the trial. CNBC 2 Oct, CNBC 4 Oct, Fox Business, Business Insider

Allscripts reaches deal with DOJ on Practice Fusion in compliance settlement for $145 million

August 14, 2019 | by

EHR giant Allscripts settled with the US Department of Justice on compliance charges made against Practice Fusion. Allscripts acquired Practice Fusion, a free/low-cost EHR targeted to primary care practices, in January 2018. A year earlier, Practice Fusion had received an inquiry from the US Attorney’s Office for the District of Vermont examining the company’s compliance with the EHR certification program. According to Fierce Healthcare, after Allscripts acquired Practice Fusion, the inquiry expanded…and expanded…to include additional certification and Anti-Kickback statute charges. Since then, Allscripts has rebranded the EHR as Veradigm.

The announcement was made during their 2019 Q2 results investor call. Their president claimed the $145 million settlement, at this point an agreement in principle with DOJ, is in line with other EHR-DOJ settlements. 

Consider it a final payment on the knockdown price ($100 million) Allscripts paid for Practice Fusion.

Their Q2 bookings were $276 million, up 31% from the prior-year period, but revenue at $445 million was lower than expectations. 

The Theranos Story, ch. 58: with HBO and ABC, let the mythmaking and psychiatric profiling begin! (updated)

February 20, 2019 | by

This Editor thought that her next articles about Theranos would be trial coverage. There are court dates pending for Elizabeth Holmes and Not-So-Sunny Balwani–with the DOJ for 11 counts of wire fraud [TTA 16 June] and, for Mr. Balwani, with the SEC on (civil) securities fraud [TTA 15 March]. 

Instead, Theranos hits the headlines again. On 18 March, there’s the debut of an HBO documentary on Theranos. Titled The Inventor: Out For Blood In Silicon Valley (YouTube preview), we can treat ourselves once again to the SteveJobs-esque presence of Ms. Holmes, down to the unnaturally deep voice, blondined hair, and wide blue eyes, unpacking the deception and fraud that was part of the company from early days. But that’s not all! There’s a six-part ABC Radio ‘Nightline’ docu-podcast that started on 23 Jan and airs in six parts through February, which includes audio of depositions taken of board members, whistleblower Tyler Shultz, and patients affected by bad test results. (This Editor will give a listen on this alone.) Episode 5 and links to 1-4 are here via Yahoo.

On websites, we’re regaled with rehashes. The articles range from Teasing the Doc to Where The Ex (Balwani) Is Now (they don’t know) to What Is Her Net Worth (not $4.6 bn). There’s even a flurry of sensational podcasts and videos on YouTube–just Google them. 

Fascinating Fraud. There’s fascination in The Long Con perpetrated by the principals, and less examined, our tendency to Want To Believe. Many of us like legal procedurals and the drama inherent in them (the eternal appeal of the long-running Law & Order in several countries.) Let’s face it, there’s a substantial dollop of schadenfreude mixed in.

What we are witnessing is the building of a myth, increasingly divorced from the real world where it happened, and not improbably or with superpowers. 

Where it goes a little off the cliff. There is a curious article in Forbes that is written by a contributor who writes and teaches courses on stocks and entrepreneurship. He interviewed a former neighbor of Ms. Holmes, Richard Fuisz, MD. It turns out this psychiatrist, inventor, and former CIA asset knew her in childhood. The families were friends and Dr. Fuisz helped out her father when he hit a bad patch. There’s some sketchy profiling in this article, but it does make a fair attempt to get to the heart of the forces that put the gap in Elizabeth Holmes’ ethical makeup, including the Big Steal of Ian Gibbons’ IP. His position is somewhat complicated by a patent dispute (settled) between Dr. Fuisz & Son and Theranos. He’s still hammering on at it on Twitter (@rfuisz).

What’s missing? Much credit to the estimable John Carreyrou, who broke the story in the Wall Street Journal and got his livelihood (and perhaps a few other things) threatened a few times by Tough Guy Lawyer David Boies.

(Updated) At least it is here in a Vanity Fair article on the Last Days of Theranos, where they had to move to downscale Newark (California) and Ms. Holmes’ dog pooped where he wanted to poop. Her ‘persecution’ doesn’t seem to faze her from living in SF, frequenting cafes with said dog, and her new romance with a ‘younger hospitality heir’–a far cry from her former employees who wear the months or years of their lives at Theranos like a Scarlet Letter as they look for work and loose cash in the sofa.

We’ve gotten to the point where the hard business analysis ends and the looser parts of psychologizing begins, as we attempt to understand why. Beyond a certain point, does why matter when damage to real patients has been done? Collateral damage persists in funding of startups and for entrepreneurial women in health tech.

For this Editor, she looks forward to the warmer weather, when it’s expected when the Legal Action–and reality–resumes. 

News roundup: Walgreens Boots-Microsoft, TytoCare, CVS-Aetna moves along, Care Innovations exits Louisville

January 17, 2019 | by

Walgreens Boots finally does something. Their teaming with Microsoft to migrate their IT infrastructure to the Azure platform will eventually lead to “more personalized care experiences from preventative self-care to chronic disease management. WBA will leverage the cloud for wellness and lifestyle management programs.” It was important enough to both companies to have a photo op with twin CEOs: Walgreens Boots’ Stefano Pessina and Microsoft’s Satya Nadella. The ‘consumerization of healthcare’ and ‘transforming healthcare delivery’ phrases liberally sprinkled throughout the article and the press release are today’s prevalent clichés, as ‘synergy’ was the buzzword of say, 1999. Healthcare IT News, CNBC  In the long run, this IT overhaul may actually mean more to their customers than, say, the Amazon-JP Morgan-Berkshire Hathaway hydra.

A vote of confidence in diagnostic telehealth pioneered by young Israeli company TytoCare. They added $9 million to their Series C from investors including Sanford Health, Itochu and Shenzhen Capital Group (and its affiliates). This adds to last year’s round led by Ping An Global Voyager Fund for a total Series C of $33.5 million. TechCrunch. TytoCare also was named one of Wired’s Best of CES (CBS TV video, at 1:35) and earlier this month announced the integration of Health Navigator’s symptom checker into their system.

The judge says ‘No Delay For You’! In the CVS-Aetna hearing, Federal Judge Richard Leon refused to give the Department of Justice any more time to submit comments in the CVS Health and Aetna merger case. The deadline remains 15 February despite the government shutdown furloughing much of the antitrust division. Judge Leon is reviewing the decree under the Tunney Act requirement that the merger meet the public interest. Healthcare Finance

Care Innovations ankles Louisville. A modest and mainly paywalled item in Louisville Business First may point to something larger at Care Innovations. After two years of operation and a much-touted expansion to one of Louisville’s better addresses, the telehealth/RPM company has quietly vacated its 7,200 square foot space at Brown & Williamson Tower and pulled its operations from the city. Reporters from the publication were unable to obtain a statement from Care Innovations, which is now in Folsom, California, closer to majority owner Intel. At the time of their Louisville expansion in April 2017 (still on their website), Care Innovations received a $500,000 KBI tax incentive to create 24 high-paying jobs, which now are departed. It is ironic as Louisville is a health hub dominated by insurer Humana but has successfully campaigned for health tech. Last July [TTA 17 July], CI sold its Validation Institute and their VA win disappeared from their website. Of late, there has been no news from the one-time Intel-GE partnership.

News roundup: CES’ early beat, CVS-Aetna pauses, digital health fizzes, Yorkshire & Humber Propels

January 10, 2019 | by

The start of January can be a slow–or busy–time. There are, of course, the avalanche of announcements made at JPM and just starting CES, which has become a part-healthcare show with hundreds of health-related exhibitors. At this point, this Editor confesses that there is not much that has caught her attention or that she–and Readers–haven’t heard about before, but the bulk of the coverage will come out next week. A lot of what is on the floor are still gadgets–and they come and mostly go. In better news, there was a Hospital at Home panel kicking off the 10th year of the Digital Health Summit on till Friday which illustrates their maturing into issues such as AI, workplace wellness, and aging. All this may be moving forward and coming a lot closer to reality than say, in 2017. But Jake, it’s CES–this year, if it folds, rolls, is retro, has a healthcare spin, and 5G, it’s on trend at CES.

CVS-Aetna grinds to halt. The partial government shutdown has affected the DOJ’s filings with DC Federal Court Judge Richard Leon on the consent decree from October. Judge Leon is reviewing the decree under the Tunney Act requirement that the merger meet the public interest. It turns out that the DOJ cannot supply documents as the Antitrust Division was furloughed–non-essential . This means little for the actual merger as it has already happened, but it slows down a fair amount of functional integration. Prediction: DOJ will not move forward with this until at least one month after the shutdown ends–our bet is April, with the cherry blossoms. Seeking Alpha

Fizzy, not bubbly. That’s Rock Health’s verdict on This Year In Digital Health Funding. No Bubble Here! While Rock only takes a piece of the picture (US only deals, over $2 million), it came in at $8.1 billion–a full $2.3 bn or 42 percent–over 2017, as projected in Q3 [TTA 11 Oct]. The deals continue to be bigger and fewer–368 versus 359 for 2017, which is barely a rounding error. More on this next week.

Propel@YH debuts. Returning to the UK, Yorkshire and Humber’s Academic Health Science Network’s (AHSN) first digital health accelerator program will be providing guidance and support services for pioneering developers with innovative digital and patient solutions. Eligible organizations will have either an existing presence in the region or are willing to establish one. Six organizations will be chosen to take part in a six-month program focused on human-related design, clinical safety by design and understanding NHS procurement. Announcement and AHSN website.

The Theranos Story, ch. 54: cue up ‘Tainted Love’ in the courtroom

August 2, 2018 | by
[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2018/07/Rock-1-crop-2.jpg” thumb_width=”150″ /]Tainted Love, Labs, and Lucre Indeed. Drop the needle on the Gloria Jones version from 1964 or the Soft Cell version from 1981.…

Consider that the very fates of Ms. Elizabeth Holmes, the now not-so-Sunny Balwani, and the formerly $9 bn Unicorn Theranos may hinge on the nature of their personal relationship and its influence on the governance of the company.

There are two legal actions against the company and the two principals, one by the DOJ for criminal fraud [TTA 16 June] and by the SEC on (civil) securities fraud [TTA 15 March].  Both are out on $500,000 bail on the DOJ charges. The possibilities on the latter can be up to 20 years in Club Fed, plus $250,000 in fines and clawing back of investor funds, if any can be found.

While Ms. Holmes settled with the SEC, paying a fine and exiting the company, Mr. Balwani did not and is fighting the charges, though this declaration was made before the DOJ charges.

Bloomberg Markets brings up an interesting set of dynamics which can play well with potential jurors and make the prosecution’s case far more convincing for a Northern California jury. To wit, in 2009 when she started running out of money, Ms. Holmes turned to Mr. Balwani, her boyfriend, for a $12 million line of credit. In return, he became president and COO. The nature of their relationship was kept strictly hush-hush to the board and investors. Secrecy was ratcheted up at the company and management started to break down. And the timing: a week after Mr. Balwani left, the news of bad patient test results and problems with their lab started to break big.

Jurors, even in Silicon Valley, love drama and personal intrigue–especially the type that underscores deception and $900 million in fraud perpetrated by a Stanford dropout who clumsily attempted to channel Saint Jobs and a somewhat schlubby dude who Should Have Known Better. Far more than gullible corporate suits at Walgreens and hedge funds….add to it the personal stories of patients harmed by bad Theranos tests and you get an emotional story worthy of Law & Order.

Do expect Ms. Holmes to bring up her Saint Joan if not a female Saint Sebastian analogy. Burning at the stake versus being shot full of arrows are too memorable images which she’ll try out. Add a #MeToo spin of a young woman coerced by an older man–a tale of at least tit-for-tat to get the $12 million. 

The rompin’ soap opera is likely to start next year. Stay tuned…. 

CVS-Aetna: DOJ requests additional information at deadline (updated for CVS earnings)

February 2, 2018 | by
[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2017/12/canary-in-the-coal-mine.jpgw595.jpeg” thumb_width=”150″ /]The Canary Tweets. The sources [TTA 8 Dec] were correct that the Department of Justice (DOJ) would take the lead on reviewing the CVS-Aetna merger. Yesterday (1 Feb) they did, requesting additional information. This extends the waiting period for an additional 30 days or more.  The CVS Form 8-K (SEC), which reports the request for information, is here courtesy of Seeking Alpha.

The US law governing this is the Hart-Scott-Rodino Act Antitrust Improvements Act of 1976 (HSR). A pre-merger notification and report was filed with DOJ and the Federal Trade Commission (FTC) on 2 January. There’s a 30-day period for an additional information request and that was taken by the DOJ yesterday. The length of the compliance process may extend for 30 days but may be less if the request is satisfied or more if requested by the parties involved. 

CVS and Aetna still hope to complete the merger by the second half of 2018. The respective shareholder meetings are already scheduled for 20 March. Our previous coverage here.

Editor’s thoughts: CVS-Aetna, despite its size, is a relatively straightforward merger, but because of its nature and size, expect some political haymaking and delays to come. This will be a preview of the action around the Amazon-Berkshire Hathaway-JPMorgan Chase cooperative partnership, in whatever they decide to create, if they create: “there’s many a slip twixt cup and lip.”

Updated for 4th Quarter Financials: CVS is reasonably healthy and nimble. Their earnings report is positive in earnings, operating profit, and reinvestment versus prior year. Under US securities law, it’s silent on Aetna. Form 8-K and press release via Seeking Alpha.