TTA’s May Flowers 2: ‘Not for sale’ Transcarent’s $2.2B valuation, good earnings from NeueHealth and Oscar (!!), Amwell’s hopes, cyberattacks at Ascension and DocGo, telehealth extensions in House, more!

 

 

Earnings and endings dominated this week, along with Transcarent’s Series D, $2.2 billion valuation, and ‘not for sale’ sign. Even NeueHealth and Oscar had a good Q1, but Amwell and Steward didn’t. Telehealth flexibilities got an important ‘go’ in the House. Cigna + Oscar called it a day as did many at 98point6. And cyberattacks continued, this time at Ascension and DocGo.

Short takes: Medicare telehealth flexibilities may extend; ‘no interest’ in Transcarent sale; NeueHealth ekes out positive net income; Cigna and Oscar break up; DocGo, Ascension cyberattacked
News roundup: Transcarent raises $126M; 98point6 lays off; Oscar notches first profit; Steward Health’s Ch. 11; Amazon Clinic GM leaves; Amwell’s down but hopeful Q1; Hims founder gets political

Surprises and shockers abounded this week. If Walmart can’t make it in providing basic health services, what hope does a retail model really have? Optum and Walmart exit telehealth, while Teladoc grows–firmly in the red. Change Healthcare’s troubles led to UHG’s CEO grilling on both sides of Congress and humiliation on MFA. MobileHelp PERS up for sale, Owlet’s new partner, fundings, partnerships. And a shrinking Oracle goes to Music City!

News roundup: UHG CEO’s Bad Day at Capitol Hill; Kaiser’s 13.4M data breach; Walgreens’ stock beatup; Cigna writes off VillageMD; Oracle Cerner shrinks 50%; Owlet BabySat gets Wheel; fundings for Midi, Trovo, Alaffia, Klineo (A rough week for some)
Teladoc’s Q1: increased revenue, increased net loss, dealing with slowing growth–as is CVS Health (Teladoc in existential crisis?)
Midweek news roundup: Optum exiting telehealth, laying off; Advocate Health selling MobileHelp; VA notifying 15M veterans re Change PHI breach, Oracle moving to Nashville–maybe? (updated) (A lot of jettisoning)
Walmart Health shutters health centers, Walmart Virtual Care, in sudden move (updated–why?) (If Walmart can’t make it…)

Returning to the Cyberattack That Changed Everything, wondering how much and to whom UnitedHealth paid ransom–now that they’ve finally admitted it. Also returning to those Merger Guidelines and how they may change the face of healthcare M&A. VA and DOD hard at work on their EHRs and systems, Lumeris gains a luminous funding, but Optum staff are seeing pink slips.

Two studies: Telehealth underutilized, underbilled, even during pandemic–and accounted for only modest increases in costs, and quality (Perhaps undercaptured?)
Short takes: VA seeks vendor to support EHR testing; Defense Health seeks ‘digital front door’ vendor; GAO recommendations to Oracle; Nonin partners with Finland’s Medixine; Lumeris gains $100M equity funding 
What the DOJ and FTC Merger Guidelines mean for healthcare M&A–a Epstein Becker Green podcast (Legal department torture)
Breaking: UnitedHealth admits to paying ransomwareistes on Change stolen patient data (updated) (For what and how much?)
Who really has the 4TB of Change Healthcare data 4 sale? And in great timing, Optum lays off a rumored 20K–say wot? (UHG has some ‘splainin’)

Another packed week, with a few baffling events. Leading in bafflement is NeueHealth’s additional $30M from NEA, which now owns 60%. UHG battling on multiple fronts between the Change hacking and the House, Walgreens lays off more to cut costs, VillageMD sued on ad trackers, and Cerebral’s comeuppance costs $7.1M. VA may restart Oracle Cerner implementation, Epic and Particle Health feud. But restoring faith in health tech benefiting a neglected group is TandemStride. 

TandemStride launches platform to assist survivors of traumatic injury; a personal look (A real care gap)
News roundup: Congress hammers absent UHG on Change cyberattack–and more; 10% unhinged at Hinge Health; Steward Health nears insolvency; Two Chairs $72M Series C (UHG’s troubles cover the waterfront)
ISfTeH student contest and award 2024–deadline 26 April! (Move fast!)
Mid-week short takes: UnitedHealth’s $1.2B Q1 loss from Change attack, another Walgreens layoff, Dexcom-MD Revolution partner, Kontakt.io $47.5 raise, GeBBS Healthcare may sell for $1B (Walgreens still downsizing–what’s next)
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 (Cerebral still in trouble)
The New Reality, Bizarro World version: NeueHealth gets $30M loan increase from NEA, now majority owner (Baffling)

This packed week was about righting listing ships. Teladoc’s CEO suddenly departs, Amwell at risk of a NYSE delisting–we look at What Happened and what needs to be done. VillageMD gets new COO to manage the shrinkage. And Change Healthcare data on sale from disgruntled ALPHV affiliate. Digital health funding continues to limp along. Clover looks at another delisting, Walmart Health applies the brakes. And we highlight innovations from Novosound, Biolinq, Eko, Universal Brain. 

Digital health’s Q1 according to Rock Health: the New Reality is a flat spin back to 2019 (Limping, but alive)
VillageMD names new president and COO as it shrinks to 620 locations (Ex Centene, Humana exec comes out of short retirement to clean up)
News roundup: Now Clover Health faces delisting; BlackCat/ALPHV affiliate with 4TB of data puts it up for sale; $58M for Biolinq’s ‘smallest blood glucose biosensor’ (Will UHG pay more ransom?)
Opinion: Further thoughts on Teladoc, Amwell, and the future of telehealth–what happens next? (A hard look at the follies, mistakes, and saving ships)
News roundup: Amwell faces NYSE delisting; Walmart Health slows Health Centers, except Texas; Novosound’s ultrasound patent; Eko’s Low EF AI; Universal Brain; Elizabeth Holmes in ‘Dropout’ + update
Teladoc CEO Jason Gorevic steps down immediately in shock announcement (Now what?)

A damp start to April leads with puzzling news. NeueHealth loses plans and big money in ’23–but gives a big bonus to its CEO. Cano Health reorganizing or selling by June. ATA kicks DOJ about expediting controlled substance telehealth regs. Apple keeps kicking around the ‘Davids’, but Davids won’t stop slinging either. And if you work with a PR or marketing agency, our Perspectives has some advice for you.

More New Reality: NeueHealth (Bright Health) CEO’s $1.9M bonus, 2023 financials–and does Cano Health have a future? (Two stories gone way sideways)
ATA requests expediting of revised proposed rule on controlled substance telehealth prescribing; announces Nexus 2024 meeting 5-7 May (DEA needs to get moving now, not later)
Davids (AliveCor, Masimo) v. Goliath (Apple): the patent infringement game *not* over; Masimo’s messy proxy fight with Politan (updated) (Seeing value in Masimo?)
Perspectives: Working with a PR Agency–How to Make the Most of the Partnership (Expert advice if you manage communications)

It was a pre-Easter week that started as quiet and got VERY LOUD at the end. Walgreens took the hard road, writing down VillageMD even before the closures were final and lowering forecasts. An important metastudy+ casts doubt on the efficacy of present digital health diabetes solutions but provides solid direction forward. And it’s definitely an early sunny spring for funding, but there’s continued bad weather forecast for UnitedHealth Group and Oracle Cerner’s VA implementation.

Facing Future 2: Walgreens writes down $5.8B for VillageMD in Q2, lowers 2024 earnings on ‘challenging’ retail outlook (Biting bullet early and hard)
Short takes: PocketHealth, Brightside fundings; VA OIG reports hit Oracle Cerner; Change cyberattack/legal updates; UHG-Amedisys reviewed in Oregon; Optum to buy Steward Health practices (UHG carries on as does company funding)
Can digital health RPM achieve meaningful change with type 2 diabetics? New metastudy expresses doubt. (Major digital health findings from PHTI)


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Telehealth & Telecare Aware: covering the news on latest developments in telecare, telehealth, telemedicine, and health tech, worldwide–thoughtfully and from the view of fellow professionals

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Donna Cusano, Editor In Chief
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News roundup: Transcarent raises $126M; 98point6 lays off; Oscar notches first profit; Steward Health’s Ch. 11; Amazon Clinic GM leaves; Amwell’s down but hopeful Q1; Hims founder gets political

A study in contrasts

Already well-funded Transcarent gains another $126 million in a Series D round. Total outside funding is $424 million that boosts its valuation to $2.2 billion. This round will fund expansion and development efforts plus enhancing the platform’s AI capabilities. The Series D round was led by General Catalyst and Glen Tullman’s 7wireVentures, with participation from new investors Memorial Hermann Health System and Geodesic Capital, along with existing investors. As noted in our Rock Health analysis (but not in the company’s release), this raise had a ‘sweetener’ of a 2.5x return should the company IPO or M&A.  Transcarent is an enterprise health navigator that enables employees to use a single platform to navigate their needs for medical, surgery, pharmacy, and mental health care. Transcarent’s differentiator in this space for large self-insured employers is that Transcarent steers employees to higher quality, lower cost care settings. Their pricing is also based on actual users only in risk-based agreements, versus the more common per member per month (PMPM) care management model. Transcarent also pays health systems up front for surgical procedures.

Tullman, who is also Transcarent’s CEO, is well known for creating high profile companies that eventually are sold or IPO’d for high valuations. These deals make his followers money, but often not the buyers (ask Teladoc) or the employees left in the lurch. This Editor does wonder, given the state of US business right now, how this competitive enterprise care management niche earns this kind of investment and valuation. Release, Mobihealthnews 

One of Transcarent’s buys last year was 98point6’s virtual care and related assets that included 98point6’s physician group, self-insured employer business, and an irrevocable software license in a deal worth potentially $100 million according to publicity. 98point6 then had a well publicized and $32 million-financed pivot to being a software company and licensor, acquiring remaining assets from asynchronous telehealth provider Bright.md this past January for 55% in equity and 45% in cash. Despite all this, little noted was that at the end of April was that 98point6 laid off an undisclosed number of its estimated 100 US-based staff. One wonders if this affects service to Bright.md’s provider customers. GeekWire

On the health plan side, rebooted insurtech Oscar Health finally got into the black with $177.4 million in net income for Q1 and beat earnings per share estimates. It’s no surprise to those of us who’ve followed the modus operandi of Mark Bertolini, who took the reins a year ago March [TTA 30 Mar 2023] and stated at the time that his focus was moving Oscar to profitability. Total revenue was $2.1 billion, a 46% increase versus Q1 2023, driven primarily by higher membership, rate increases, and lower risk adjustment as a percentage of premiums. Release. Becker’s, FierceHealthcare Their full 2024 is projected at $8.3 to $8.4 billion in revenue, $125 to $175 million in adjusted EBIDTA. Oscar solely offers ACA exchange plans for individuals and small groups, having exited Medicare Advantage after 2022. Release

Steward Health Care filed Chapter 11 bankruptcy on 6 May. As forecast when the company moved to sell its provider group Stewardship Health to Optum [TTA 18 Apr], Steward’s debt load in its 31 hospitals and operations forced the restructuring on Monday. What’s owed: $1.2 billion in total loan debts, about $6.6 billion in long-term lease payments, north of $600 million to 30 of its largest lenders (Change Healthcare, Philips North America LLC, Medline Industries, AYA Healthcare and Cerner). There’s $289.8 million in unpaid compensation obligations: $68 million to its own workers in unpaid employee salaries, $105.6 million in payments for physician services and $47.7 million owed to staffing agencies. Topping it off–$979.4 million outstanding in trade obligations, of which approximately 70% are over 120 days past due.

Debtor-in-possession is now Medical Properties Trust (MPT) which will finance $75 million up front extending to $225 million more if Steward’s asset selloff milestones are completed on time. MPT will need to be far more forthcoming about Steward’s finances than Steward has been. The Stewardship Health sale to Optum now has to pass through the US Bankruptcy Court for the Southern District of Texas as well as Massachusetts regulators. Becker’s, Healthcare Dive 6 May, 7 May

Amazon Clinic loses its general manager, Nworah Ayogu, MD. He departed for Thrive Capital, a secretive VC (based on its website) that invests in technology, internet, and software companies. Dr. Ayogu, who doubled as chief medical officer of Amazon Pharmacy, stated the move will enable him to focus “exclusively on healthcare” after nearly four years with Amazon. He launched Clinic in November 2022 to a full 50-state rollout of the asynchronous and synchronous telehealth service last August, after a privacy challenge that escalated to the Senatorial level and forced a rollout delay [TTA 1 Aug 2023]. It sounds more like the doctor needs to go on a break. Amazon has not announced a replacement nor has Thrive issued any information. Becker’s, Modern Healthcare

Amwell’s soft Q1 reflective of telehealth as a whole. Its Q1 revenue of $59.5 million was 7% below Q1 2023’s $64 million, and missed Mr. Market’s forecasts. Where there was improvement was that net loss narrowed considerably to $73.4 million from prior year’s $398.5 million, when it took a hefty non-cash goodwill impairment charge. The bright spot Amwell is forecasting is that their Federal contract with Defense Health Agency, jointly with Leidos, will impact by Q4. Their part of the Digital First initiative for the Military Health System (MHS) will replace the current system, MHS Video Connect, with Amwell Converge [TTA 15 May]. Their pending NYSE stock delisting they plan to remedy with a reverse stock split to be announced.  Healthcare Dive, Amwell’s SEC Form 10-Q

Hims CEO and founder Andrew Dudum Does a Dumb. Mr. Dudum made a statement that on X that was interpreted by most to be encouraging the disruptive anti-Israel university and elsewhere protests which have roiled cities like New York and Los Angeles for weeks and are canceling graduations at Columbia University and University of Southern California. A statement like “If you’re currently protesting against the genocide of the Palestinian people & for your university’s divestment from Israel, keep going. It’s working.” and went on to say that companies would be eager to hire them is plain and clear. It immediately garnered criticism from investment group, industry, and software heads, as well as conservative and moderate media. This Editor will put on her marketing cap and remind Mr. Dudum of Marketing 101–be memorable, but do not offend the customer or investors who give you money. You have, after all, a company that depends upon appealing to a wide spectrum of people with easy and recurring telehealth prescriptions for hair loss, weight loss, skin problems, women’s health concerns, and erectile dysfunction. Your statement was not only completely unnecessary but also inflammatory at a bad time–it offended many customers no matter what religion or beliefs. Stock dropped. Customers canceled. Note to Mr. Dudum: if you want a thriving business, don’t live up to your name. FoxBusiness

Health tech bubble watch: Rock Health’s mid-2019 funding assessment amid Big IPOs (updated: Health Catalyst, Livongo, more)

Updated for IPOs and analysis. The big time IPOs add extra bubbles to the digital health bath. Rock Health’s mid-year digital health market update continues its frothy way with a topline of $4.2 bn across 180 deals invested in digital health during the first half of 2019. 2019 is tracking to last year’s spending rate across fewer deals and is projected to end the year at $8.4 bn and 360 deals versus 2018’s $8.2 bn and 376 deals.

This year has been notable for Big IPOs, which have been absent from the digital health scene for three years. Exits come in three flavors: mergers and acquisitions (43 in their count so far), IPOs, and shutdowns (like Call9). IPOs are a reasonable outcome of last year’s trend of mega deals over $100 million and a more direct way for VCs to return their money to investors. So far in 2019, 30 percent of venture dollars went to these mega deals. (Rock Health tracks only US digital health deals over $2 million, so not a global picture.)

Reviewing the IPOs and pending IPOs to date:

  • Practice intake and patient management system Phreesia closed its NYSE IPO of 10.7 million shares at $18 per share on 22 July. The company earned approximately $140.6 million and the total gross proceeds to the selling stockholders were approximately $51.6 million for a value over $600 million. The market cap as of 26 July exceeded $949 million with shares rising past $26. Not bad for a company that raised a frugal $92.6 million over seven rounds since 2005.  Yahoo Finance, Crunchbase
  • Chronic condition management company Livongo’s picture is frothier. Their 22 July SEC filing has their IPO at 10.7 million shares at $24 to $26 per share offered on NASDAQ. This would total a $267.5 million raise and a $2.2 bn valuation. This is a stunning amount for a company with reportedly $55 million at the end of its most recent reporting period, increasing losses, and rising cash burn. Livongo raised $235 million since 2014 from private investors. Crunchbase 
  • Analytics company Health Catalyst’s IPO, which will probably take place this week on NASDAQ with Livongo’s, expects to float 7 million shares. Shares will be in a range of $24 to $25 with a raise in excess of $171 million. Their quarterly revenue is above $35 million with an operating loss of $9.8 million. Since 2008, they’ve raised $377 million. IPO analysts call both Livongo’s and Health Catalyst’s IPOs ‘essentially oversubscribed’. Investors Business Daily, Crunchbase
    • UPDATE: Both Livongo and Health Catalyst IPOs debuted on Thursday 25 July, with Livongo raising $356 million on an upsized 12.7 million shares at $28/share, while Health Catalyst’s 7 million shares brought in $182 million at $26/share.  Friday’s shares closed way up from the IPOs Livongo at $38.12 and $38.30 for Health Catalyst. Bubbly indeed! Investors Business Daily, Yahoo Finance
  • Change Healthcare is also planning a NASDAQ IPO at a recently repriced $13 per share, raising $557.7 million from 42.8 million shares. With the IPO, Change is also offering an equity raise and senior amortizing note to pay off its over $5 bn in debt. The excruciating details are here. Investors here are taking a much bigger chance than with the above IPOs, but the market action above will be a definite boost for Change.
  • Connected fitness device company Peloton, after raising $900 million, is scheduled to IPO soon after a confidential SEC filing. (UPDATED–Ed. Note: Included as in the Rock Health report; however this Editor believes that their continued inclusion of Peleton in digital health is specious and should be disregarded by those looking at actual funding trends in health tech.) Forbes

Rock Health itself raised the ‘bubble’ question in considering 2018 results. Their six points of a bubble are:

  1. Hype supersedes business fundamentals
  2. High cash burn rates
  3. High valuations decoupled from fundamentals
  4. Surge of cash from new investors
  5. Fraud or misuse of funds
  6. Unclear exit pathways

This Editor’s further analysis of these six points [TTA 21 Jan] wasn’t quite as reassuring as Rock Health’s. As in 2018, #2, #3, and #6 are rated ‘moderately bubbly’ with even Rock Health admitting that #2 had some added froth. #3–high valuations decoupled from fundamentals–is, in this Editor’s experience, the most daunting, as as it represents the widest divergence from reality and is the least fixable. The three new ‘digital health unicorns’ they cite are companies you’ve likely never heard of and in ‘interesting’ but not exactly mainstream niches in health tech except, perhaps, for the last: Zipline (medicine via drone to clinics in Rwanda and Ghana), Gympass (corporate employee gym passes), and Hims (prescription service and delivery).

Editor’s opinion: When there are too many companies with high valuations paired with a high ‘huh?’ quotient (#3)–that one is slightly incredulous at the valuation granted ‘for that??’–it’s time to take a step back from the screen and do something constructive like rebuild an engine or take a swim. Having observed or worked for companies in bubbles since 1980 in three industries– post-deregulation airlines in the 1980s, internet (dot.com) from the mid-1990s to 2001, first stage telecare/telehealth (2006-8), and healthcare today (Theranos/Outcome Health), a moderate bubble never, ever deflates–it expands, then bursts. The textbook #3 was the dot.com boom/bust; it not only fried internet companies but many vendors all over the US and kicked off a recession.

Rock Health also downplayed #5, fraud and misuse of funds. It’s hard to tell why with troubles around uBiome, Nurx, and Cleo in the news, Teladoc isn’t mentioned, but their lack of disclosure for a public company around critical NCQA accreditation only two months ago and their 2018 accounting problems make for an interesting omission [TTA 16 May]. (And absurdly, they excluded Theranos from 2018’s digital health category, yet include drones, gym passes, connected fitness devices…shall we go on?)

Rock Health’s analysis goes deeper on the private investment picture, particularly their interesting concept of ‘net liquidity overhang’, the amount of money where investors have yet to realize any return, as an indicator of the pressure investors have to exit. Pressure, both in healthcare and in early-stage companies, is a double-edged sword. There’s also a nifty annual IPO Watch List which includes the five above and why buying innovation works for both early-stage and mature healthcare companies. 

(Editor’s final note: The above is not to be excessively critical of Rock Health’s needed analysis, made available to us for free, but in line with our traditionally ‘gimlety’ industry view.)