Roundup: Virgin Pulse, NextGen close fast; Elucid, Eleos, Vida, Neteera funding; One Medical-CommonSpirit; Indian Health $2.5B EHR to General Dynamics+Oracle; losses, layoffs at Cano Health, 15% digital cuts at Mass General Brigham

No surprise that some big deals in digital health closed at year’s end before we roll out the turkey and the holiday decorations.

  • The Virgin Pulse-HealthComp merger that adds benefits analytics to Virgin’s employee wellness platform closed last Thursday (9 November). It was announced only in late September [TTA 29 Sep]. This creates what they estimate is a $3 billion company. Ownership is also changing to New Mountain Capital, the owner of HealthComp, now as the majority owner of the new company with Marlin Equity Partners in minority ownership with others including Blackstone and Morgan Health. Other than Chris Michalak becoming CEO of Virgin Pulse and HealthComp, there is no confirmation of financing nor management/employee transitions or headquarters (Virgin is in Providence Rhode Island, HealthComp in Fresno California). Virgin release
  • EHR NextGen closed its $1.8 billion taking-private by private equity firm Thoma Bravo after shareholders approved it the previous Tuesday for $23.95/share in cash. This was announced around US Labor Day and closed in record time on Friday 10 November. As previously noted, this ended 41 years of public trading for a company that was one of the pioneers of EHRs and practice management. In its release, Thoma Bravo will “leverage its operational and software expertise” and “adding new products and capabilities, both organically and inorganically, to continue enabling NextGen Healthcare’s customers to deliver exceptional patient outcomes.” Healthcare Dive, FierceHealthcare (also Virgin Pulse)

Are these lights at the end of the dark M&A tunnel for health tech and related? Or avoiding the oncoming train of FTC and DOJ regulations that collide head-on with M&A with the pending imposition of the Draft Merger Guidelines and the Premerger Notification rules under Hart-Scott-Rodino (HSR)?

It seems like top digital health law firm Epstein Becker Green has caught up with Editor Cassandra [TTA 20 July, 20 June]  in this Diagnosing Health Care Podcast of 10 November. Fun estimate: the time in filing a premerger notification may be increased by 289%. The cloudy crystal ball was clear indeed….

Last week was also a busy time for smaller companies’ fundings–even letter rounds! 

  • Elucid scored $80 million in Series C funding led by led by Elevage Medical Technologies, bringing total funding for this AI-assisted cardiovascular imaging company. They have the “only FDA-cleared non-invasive tool able to accurately characterize arterial plaque, simulating what pathologists would see under a microscope and establishing a histologic ground truth. The company is also pursuing an indication for non-invasive measurement of fractional flow reserve (FFRCT), uniquely derived from its PlaqueIQ technology, to measure coronary blockages and the extent of ischemia.” Release
  • In behavioral health, Eleos Health now has $40 million in Series B funding to add to previous funding of $28 million. The Series B was led by Menlo Ventures, with participation from F-Prime Capital, Eight Roads, Arkin Digital Health, SamsungNEXT, and ION. Eleos has developed AI-assisted solutions for group therapy sessions, compliance automation, case management, concurrent documentation, and value-based care support. They will use the additional funding for further development as well as network expansion and EHR partnerships. Release
  • Vida Health, which offers health coaching for chronic conditions, primarily obesity and diabetes management, gained $28.5 million in an unlettered round led by existing investors Ally Bridge, Canvas Ventures, General Atlantic, Hercules Capital, and others. Vida also announced a change of CEOs. Joe Murad succeeds Stephanie Tilenius, who is stepping down after nine years as founder/CEO, transitioning to an advisory capacity. Mr. Murad joins the company’s board. He was previously with WithMe Health, where he was president/CEO for nearly five years and previously headed PokitDoc before its acquisition by Change Healthcare in 2018. Release  Also Mobihealthnews on Elucid, Eleos, and Vida.
  • Israeli RPM company Neteera now has an additional $6.7 million as part of a Series B extension. Their unique RPM uses sub-THZ radar to monitor vital signs through bedding and clothing, then analyzes the data and produces reports on its platform. Neteera partners with Foxconn on their RPM and currently sells to long-term care facilities in the US.  Pulse 2.0

Amazon’s One Medical announced a partnership with CommonSpirit Health’s Virginia Mason Franciscan Health (VMFH) in the Seattle Puget Sound metro. This will add integrated specialty care in that area to One Medical’s primary care focus. VMFH has 2,000 providers in an integrated network of providers, outpatient facilities, and hospitals. Financials weren’t disclosed, but according to Becker’s, in another One Medical partnership, a health system disclosed that it “reimburses One Medical for providing care on its behalf and collects the fee-for-service revenue from the patient visits. One Medical previously collaborated with Seattle-based Swedish (part of Renton, Wash.-based Providence) in the region.” VMFH release, FierceHealthcare

The federal Indian Health System (IHS) is modernizing its EHR and moving to a General Dynamics IT-managed Oracle Cerner system. Its current system is the 40+-year-old Resource and Patient Management System–based on (surprise!) VistA. What is most interesting in the release is that General Dynamics Information Technology (IT) is listed as the primary contractor that will “build, configure, and maintain a new IHS enterprise Electronic Health Record system utilizing Oracle Cerner technology.” One very interesting bit of verbiage! The IHS used an “Indefinite Delivery, Indefinite Quantity” contract structure for this requirement which is explained as “the IHS will issue specific task orders for technical support and services. This gives the IHS the ability to adjust what it purchases, incorporate lessons learned, user input, and availability of new technology.” Reports indicate its ultimate value to General Dynamics IT in the 10-year contract to be close to $2.5 billion. IHS provides healthcare services for 2.8 million American Indians and Native Alaskans belonging to over 570 tribes. IHS release, Healthcare IT News

Cano Health continues its hemorrhage. Q3 loss was $497.1 million in Q3, with a cut of 21% of its workforce, or approximately 842 staff. Their loss was 4x times the year-prior Q3 on revenue of $788.1 million. Adding to operating losses, they were hit with a $354 million impairment charge and poor operating results from higher third-party medical costs. 52% of the staff cuts reflect the sales of operating units such as in Texas and Nevada to Humana CenterWell and exits in California, New Mexico, and Illinois. The remaining 48% is from restructuring. Now a Florida-only operation except for Puerto Rico (ending early 2024), they are concentrating on ACO REACH and Medicare Advantage there. Their clinics are now 126, down from 169 at the end of June. Cano is still looking for a buyer, which indicates that they anticipate further rough going. Healthcare Dive, Cano Health Q3 Financial Powerpoint

And winding up the bad news, Mass General Brigham, which is partnering with Best Buy for their Healthcare at Home programs, will be doing it with at least 15% fewer digital staff. They are offering voluntary separation packages to those employees in the hope of finding enough takers. The offer is a not especially generous two weeks of severance for every year of service. If the magic number of 15% is not reached, layoffs will start after Thanksgiving. Reportedly a state agency, the Massachusetts Health Policy Commission, has deemed that MGB’s cost growth is too much. MGB is the largest private employer in Massachusetts with 80,000 workers. The offers were floated starting from 1 November and will close on 15 November, with layoffs if needed to be announced on 4 December. The targeting of digital is claimed to be for modernization. The area is responsible for multiple areas of IT and maintaining patients’ electronic health records. Boston Herald, Healthcare Dive

Thursday roundup: UHG/Optum, Change extend merger deadline to 31 Dec, buys Kelsey-Seybold; $2B Tivity Health sale; General Dynamics enters derm AI diagnostics; MobileHelp PERS sold to Advocate Aurora

UnitedHealth Group’s Optum unit and Change Healthcare, to no one’s surprise, have cast the die and extended their merger deadline to 31 December. Originally, the acquisition was to be completed at end of 2021 and later pushed to 5 April.

In a joint release, they touted their shared vision for a “simpler, more intelligent and adaptive health system for patients, payers and providers”. Backing this up is a break fee of $650 million from Optum to Change Healthcare in the event the court scuppers the deal.

On 25 February, the US Department of Justice filed a lawsuit in US District Court in Washington, DC to stop the acquisition on anti-competitive grounds [TTA 25 Feb]. UHG/Optum and Change, despite divestitures, could not evade DOJ’s reasoning that Optum was buying its only major competitor in areas such as hospital claims data, claims processing, claims editing, and EDI clearinghouse, which facilitates the transfer of electronic transactions between payers and physicians, health care professionals, or facilities. Less than a month later, Optum and Change responded, contesting the charges in that same District Court, and contending that it would be ‘economic suicide’ for Optum to be anti-competitive, since Optum’s business model is dependent on payers other than UnitedHealth. Fighting rather than switching off the deal, it’ll be heard on 1 August [TTA 23 March]. FierceHealthPayer

As noted last week, Optum is writing big checks for LHC Group home care/management services and Refresh Mental Health. This week’s jumbo buy is the Kelsey-Seybold Clinic of Houston. This is a multi-faceted operation with multiple multi-specialty care centers, a cancer center, a women’s health center, two ambulatory surgery center locations, and a 30-location specialized sleep center. It also has a highly regarded ACO and KelseyCare Advantage, a 5 Star Medicare Advantage plan, in addition to partnering with insurers on commercial value-based health plans. If it closes, Optum will be more than likely well over its goal of owning or controlling over 5% of US providers. Terms were not disclosed, but TPG’s private equity arm made a minority investment in Kelsey-Seybold two years ago. At the time, the valuation was rumored to be $1.3 billion.

Tivity Health is being acquired by funds managed by Stone Point Capital for $2 billion. The $32.50 per share is a 20% premium to the 90-day price average, which reflects its 40% financial share growth in the past year. Having sold its original name of Healthways and a sizable chunk of its original business to the digital health conglomerate Sharecare, it rebranded in 2017 as Tivity and concentrated on fitness businesses: senior-targeted SilverSneakers, gym chain Prime Fitness, and alternative/complementary medicine WholeHealth Living. Closing is anticipated to be Q3. CEO Richard Ashworth will remain with the company, and headquarters stay in Franklin, TN. Release, Becker’s

A palate cleanser: a division of defense/aerospace giant General Dynamics, General Dynamics Information Technology (GDIT) has developed an AI diagnostic for remote dermatologic use for the active service/veteran market. It classifies images of skin lesions, determines if they are indicative of skin disease, and will recommend follow-up care. According to the GDIT release, “the GDIT skin lesion classifier tool won third place in the VA National AI Tech Sprint 2020-2021, a competition organized by the Department of Veterans Affairs (VA) National Artificial Intelligence Institute (NAII) to match private sector talent with veterans, VA clinicians and other experts to brainstorm AI-based solutions that can improve veteran health and well-being.” Also Healthcare IT News

MobileHelp, one of the earliest mobile PERS, and sister company Clear Arch Health, a remote patient monitoring provider, have been purchased by Advocate Aurora Enterprises. Terms were not disclosed, but management will remain in place in Boca Raton. MobileHelp was private, so estimates of valuation are difficult, but their private equity backing included ABRY Partners and Topmark Partners (Crunchbase). Their PERS market claimed 300,000 households. Clear Arch had a separate clinical base with provider care management of chronic condition patients connected to EHRs. For AAE, a division of Advocate Aurora Health systems in Illinois and Wisconsin, MobileHelp’s acquisition will complement their recently acquired home health provider Senior Helpers and Xhealth clinical digital solution ordering. The traditional PERS and call center business continues to be of interest, but blending into other businesses. Release, Healthcare IT News