News and deal roundup, 5 March: Oscar Health’s $1.4 billion IPO, telehealth expansion in Congress, what people *really* do during a telehealth visit

What a difference a month makes in a blazing healthcare market. ‘Neoinsurer’ Oscar Health went public on Tuesday, selling over 37 million shares at $39 each, reaping an eyeblinking $1.44 bn. While shares took a tumble on Wednesday and Thursday, closing at just above $32, the valuation of the company could be anywhere between $7.92 and $9.5 bn (calculating in options and the like). Quite a difference from the estimate in early February, which was a modest–and as now we know, totally sandbagged–$100 million [TTA 9 Feb]. A lovely payday for their backers and all at Oscar who had stock grants, indeed.

As we’ve seen from recent IPOs, they have all been underestimated (e.g. Signify Health’s $100 million filing transubstantiated into $561 million). The downward glide slope in share price is typical. Whether it will rise will depend very much on strong results for this quarter, half year, and full year as Oscar presses harder into the competitive Medicare Advantage, exchange, and small group markets. How they, and all the other payers do, will be dependent on health policy permutations and emanations from the DC Swamp. CNBC, TechCrunch, FierceHealthcare

Speaking of the DC Swamp, telehealth expansion is enjoying real traction in Congress and with Health and Human Services (HHS). The chair of the House Health Subcommittee, Rep. Anna Eshoo (D-Calif.) has called for many of the flexibilities on payments and locations granted temporarily during the pandemic’s liberalization of coverage to be made permanent. These affect Medicare and other types of Federal payments. [Review of the 2021 Medicare Physician Fee Schedule re telehealth here]  They expire after the public health emergency (PHE), extended in January to end of April, so a clock is ticking, quickly.

The basics are that Congress must pass legislation that removes restrictions on geography (currently rural only) and permits the patient home to be used as a ‘distant site’. Advocates also want to add to Medicare telehealth coverage hospice and home dialysis care, more types of eligible care providers such as physical therapists and other allied health professionals, and audio-only (telephonic) consults. Others are pushing for reinstating HIPAA compliance for telehealth platforms.

The Telehealth Modernization Bill that covers most of the above was introduced on 23 February in both the Senate and House, in a rare show of both bipartisanship and bicamerality. (Excluded: telephonic consults, HIPAA compliance) Rep. Eshoo’s remarks were made during last Tuesday’s Committee on Energy and Commerce Health Subcommittee hearing.

HHS is also backing this, based on HHS’ Office of the Inspector General’s recent statement praising the expansion of telehealth. Recognizing that concerns have been raised about ‘telefraud’, IG Christi Grimm noted that they have been vigorously prosecuting fraudulent claims [TTA 2 Oct 20] with telehealth being used in a broad sense for billing other goods and services such as medications and durable medical equipment. FierceHealthcare, Healthcare Dive, ATA News 26 Feb

Speaking of telehealth visits, what do the patients do during them? This Editor had filed away, waiting for an opportune moment to share it, a surprising study by DrFirst, a mobile telehealth and communications platform. It was conducted online during the Pits of the Pandemic (June 2020). It may not surprise you that most patients weren’t fully engaged in the process. Bored, isolated, mostly male patients–73 percent men, 39 percent women–multitasked and distracted themselves during the virtual visit by: 

Surfing web, checking email, texting – 24.5%
Watching the news, TV, or movie – 24%
Scrolling through social media – 21%
Eating a snack or a meal – 21%
Playing a video game – 19%
Exercising – 18%
Smoking a cigarette – 11%
Driving a car – 10% (!!!!)

And the best….Having a “quarantini” cocktail or other alcoholic beverage – 9.4%

Reasons for consults were unsurprising: annual checkup – 38%, mental health therapy – 25%, and specialist visits (e.g., dermatologist, hematologist, or oncologist) – 21%.  N=1,002 US consumers. 44% of Americans Have Used Telehealth Services During Coronavirus Pandemic but Some Admit Not Paying Attention. Also Advisory Board blog.

‘Neoinsurer’ Oscar Health goes for $100 million IPO; Clover Health’s big SPAC under SEC microscope

Oscar Health, one of a number of US ‘insurtech’ or ‘neoinsurance’ private health insurance companies that have nipped at the heels of the Big 9, announced late Friday an IPO on the NYSE. The number of shares and their value is not on the SEC S-1 filing but the estimate of the raise is $100 million. Timing is not disclosed but rumored to be by March or early Q2. The offering is underwritten by Goldman Sachs, Morgan Stanley, and Allen and Company.

Oscar was one of the first to offer members apps, telehealth, and fitness trackers–revolutionary back in 2012 but routine now. Expanding beyond its original base of individual health insurance coverage, it now offers Medicare Advantage and small group coverage in 18 states to over 500,000 members. Oscar remains a virtual-first platform with the majority of its members in Florida, Texas, and California. Oscar makes much of member engagement and its partnerships; 47 percent of its overall subscribing membership and 44 percent of its 55-and-up subscribers are monthly active users. Oscar has also partnered with Cleveland Clinic and other larger insurers like Cigna. 

Financing for Oscar to date is over $1.5 bn. It has tidily grown in geographic coverage, members, and revenue–$1.67 billion in 2020 and $1.04 billion in 2019–no simple feat against the Big 9. Oscar’s problem is profitability–operating losses grew proportionately, $402.3 million (+56% from $259.4 million). Operating expenses also grew by 16 percent. TechCrunch gives additional crunch in the financial analysis (article in part, full paid access). Mobihealthnews

Oscar is one of a few health-tech heavy survivors of insurance companies that bloomed like flowers–and wilted–during and post-Obamacare. Clover Health, which thrived in a slice of the Medicare Advantage market, went the SPAC (blank check) route 8 January with Social Capital Hedosophia Holdings. Now with an enterprise value of approximately $3.7 billion, the SPAC indeed put Clover in the clover [TTA 14 Jan].

But perhaps short-lived. Clover’s SPAC is now being scrutinized by the SEC based on last week’s explosive charges by short-seller maven Hindenburg Research (!). Hindenburg’s research report alleges that Clover “lured retail investors into a broken business” by not disclosing a Department of Justice (DOJ) investigation that started (at least) last fall. Clover countered that the investigation is “routine” since Clover is in the Medicare business. Thus, it was not disclosed by Clover to investors as ‘non-material’. DOJ investigations are far more serious than CMS fines for compliance violations, which are not uncommon. Back in 2016, Clover was fined just over $106,000 by CMS on misleading marketing practices.

In short, DOJ investigations are never routine. They usually are the start point for enhanced claims scrutiny and a concatenation of charges, as WellCare, then a scrappy upstart insurer, found out over six agonizing years, 2006-2012, that were serious enough to send much of top management to Club Fed.  The Hindenburg paper (linked above) details other business practices that if true, are dodgy at best and fuel for further investigations.

The SEC notice of investigation was disclosed by Clover last Friday evening, usually a good time to disclose Bad News. This SPAC may have feet of clay.  PYMNTS.com, CNBC

News roundup: Phreesia’s IPO, Chiptech enters UK telecare market, PatientsLikeMe goes to UHG, Medopad-Tencent UK Parkinson’s pilot, Oxford VR goes to HK, Cigna Singapore’s telehealth intro, HIMSS exiting Cleveland

Patient check-in tablet Phreesia is preparing for an IPO, filing of its S-1 form this week. The number of shares and pricing is not yet announced. Phreesia, which specializes in patient intake in the office via a rugged PhreesiaPad tablet and software that integrates with major EHRs such as Epic, Cerner, and Allscripts, has survived not only 14 years, but also in New York City. Phreesia has enjoyed a relatively low profile on the health tech scene, yet it has raised close to $100 million through a Series D (Crunchbase) and maintained much the same founding leadership (Chaim Indig, Evan Roberts, Michael Weintraub). Their business includes 1,600 health firms and 70 million patient intakes annually, for $100 million in revenue in its last fiscal year, up 25 percent from previous. Timing of the IPO is not yet forecast. Mobihealthnews, Business Insider.

Coming to the UK and Europe markets are New Zealand’s Chiptech telecare systems. Chiptech has both traditional in-home and mobile monitored PERS, pill dispensers, and a smartphone-based lone worker alert device. According to their website, they are the leading provider of monitored personal alarms in Australasia. Chiptech also announced a new CEO, veteran David Hammond, whose background includes leadership roles at UTC and Chubb. 

In M&A news, UnitedHealth Group bought the contested PatientsLikeMe, which runs an online service that helps patients find people with similar health conditions. PatientsLikeMe had raised $100 million in 2017, selling a majority stake to Shenzhen-based iCarbonX, backed by Chinese giant Tencent. That investment put the company under scrutiny by CFIUS–Committee on Foreign Investment in the United States. CFIUS is especially looking at Chinese investment in companies that deal with sensitive data, trade secrets, and national security–and coming down hard. Companies like Tencent are working with the Chinese government to amass millions of patient records and data points, with no regard for consent, and to build massive medical databases [TTA 17 Apr].

Tencent has multiple strategic investments in data-driven health companies, including an interesting Parkinson’s clinical trial in the UK with London startup Medopad, which developed an app that tests cognitive abilities across a series of tasks and captures it into what’s dubbed the Markerless Motion Capture and Analysis System (MMCAS). It is being tested on about 40 patients at a private mental health clinic in London called (appropriately) Dementech NeurosciencesForbes

Mental health is hot, and Oxford VR, a spinout of Oxford University, is pairing with AXA HK and the Chinese University of Hong Kong (CUHK) to develop treatments for common mental health conditions such as social avoidance, anxiety and depressive symptoms. ‘Yes I Can’ uses virtual reality (VR) sessions over three to six weeks. In the true Chinese model (it’s free, but you don’t control where your data goes), it will also be offered to AXA’s corporate customers as part of their employee benefits services to drive better mental health outcomes in Asia. Mobihealthnews

Elsewhere in Asia-Pacific, Cigna Singapore launched a telemedicine service, Cigna Virtual Clinic, where users can access real-time doctor consults via a mobile app. Cigna is using Doctor Anywhere for the service. Telemedicine in Singapore is supervised by the Singapore Ministry of Health’s Licencing and Adaptation Programme (LEAP), “a regulatory sandbox initiative that allows the safe development of new and innovative healthcare models to be piloted in a controlled environment”. Insurance Business Asia

Back in the US, HIMSS is exiting its 30,000 square foot bricks-and-mortar office in downtown Cleveland’s Global Center for Health Innovation (a/k/a the Medical Mart). The exit will be over the next year. This is after a three-year extension of its lease inked in 2018. According to Crain’s Cleveland Business, their sources “described the move as a shift in strategy by the nonprofit that has gone through a leadership change.”

Fitbit and Teladoc: big IPOs, big questions

This week’s big news (so far) of Fitbit’s $732 million initial public offering–the largest consumer electronics IPO ever–comes despite the Jawbone IP lawsuits [TTA 11 June]. Count us among those who question this ‘vote of confidence’ as raising unrealistic expectations for health tech by a fitness tracker not truly part of real digital health. Telemedicine provider Teladoc appears headed on the same track with an IPO estimated to come in at $137 million, probably by next week. This generous pricing (~$20/share) comes despite never being profitable in 13 years. Like Fitbit, Teladoc is facing lawsuits from its major competitor American Well on IP [TTA 9 June], with Teladoc asking the US Patent and Trademark Office to review the validity of several American Well patents. Both IPOs are on the New York Stock Exchange (NYSE). MedCityNews examines Fitbit and Teladoc.