US Department of Justice decides additional scrutiny needed of $13bn Optum acquisition of Change Healthcare

March 30, 2021 | by

Change, so to speak, will not be fast for Optum. On Friday, Change Healthcare filed with the Securities and Exchange Commission (SEC) a Form 8-K (PDF link) that confirms that the Department of Justice (DOJ) has asked for additional information pertinent to their proposed acquisition by UnitedHealthcare Group and integration into their Optum unit. On 24 March, both received a request from the DOJ for additional information and documentary materials (called a “Second Request”) as part of DOJ’s review of the merger under the Hart-Scott-Rodino Antitrust Act (HSR). The Second Request extends the waiting period for 30 days after UHG and Change comply with the review, unless either the DOJ shortens it or it is extended by the two companies (para. 3).

The integration of Change Healthcare into Optum already had significant competitive concerns for DOJ to consider. OptumInsight, Optum’s data analytics unit, and Change provide a similar range of services in health IT and revenue cycle management (RCM). However, Change is one of the largest independent companies providing these services to major providers, with access to the data of 1 out of 3 patients. Optum’s parent, UnitedHealthcare, is the largest US payer. These were the factors that made those represented by the American Hospital Association (AHA) very nervous indeed [TTA 25 Mar] regarding pricing of these services–and they expressed their misgivings cogently in a seven-page letter (PDF link) to DOJ on 17 March. In their view, Change integrated into OptumInsight would reduce competition and increase pricing in RCM, claims clearinghouse and payment accuracy services, and clinical decision support services.

Why it’s important. The closing of the $13 bn deal, originally forecast as second half 2021, now has a decent likelihood of being postponed. As CVS and Aetna found between 2017 and 2019, once the objections start in the flashpoint called US Healthcare, they tend to snowball into delays, even if it can be managed to a successful conclusion. (Extreme examples: the doomed to fail Aetna-Humana and Anthem-Cigna mergers) While RCM and data analytics are not as high profile as health plans and retail health, industry groups have a lot of clout in the DC Swamp when the cause is higher cost and DOJ, in this administration, is likely to be more activist. Another reason: if UHG or Change have to divest themselves of too much (UHG set a boundary of $650 million), they may Call The Whole Thing Off. Also Healthcare Dive and FierceHealthcare. 

Funding, acquisition news roundup, round 2: Lyra Health’s $187M Series E, DarioHealth-Upright, GetWellNetwork-Docent Health, Hillrom-BardyDx (updated)

January 29, 2021 | by

Our cowgirl has been keeping busy rounding up more news on funding and acquisitions. Significance? Nearly all are major rounds only dreamed of a year ago for these relatively small companies boosting valuations into the stratosphere. The acquisitions also extend these companies into multiple lines of business.

Lyra Health, a mental health therapy benefit company for employers, closed an additional $187 million in a Series E round led by Addition Capital. This adds to a torrid 2020 $185 million Series C and D bringing their total funding to $475 million. The company claims a valuation of $2.3 billion and doubling its customer base in 2020 to 2 million members, with marquee clients such as Genentech, Morgan Stanley, and Zoom. Lyra Health uses cognitive-based therapy (CBT) models using virtual self-care, coaching, and therapists. Also announced was a partnership with ICAS World, an employee-assistance provider. Lyra is one of many companies in an increasingly crowded category using the CBT model to save employers and payers money on employee and member mental health with and without chronic conditions such as diabetes. Earlier this month, the Talkspace app, which focuses on direct to consumer therapy, announced they were going public through a ‘blank check’ SPAC with Hudson Executive Investment Corp, in a deal valued at $1.4 billion, including debt. Release, Mobihealthnews

DarioHealth, an Israeli-US company concentrating on digital diabetes and hypertension management, extended into musculoskeletal (MSK) therapeutics with the $31 million acquisition of Upright Technologies Ltd., another Israeli-US company. Upright uses a $100 sensor that provides biofeedback and vibration reminders to correct posture plus digital coaching. Last year, Upright was heavily advertised on US television. The buy will transfer to Upright $1.5 million in cash and $29.5 million in stock, and is expected to close in about 10 days. Dario also completed a $70 million private placement for 3,278,688 shares of its common stock at a purchase price of $21.35 per share. Dario has about 150,000 users and Upright 90,000 users. Dario is projecting a 2020 revenue of $7.6 million. Release, Mobihealthnews

GetWellNetwork, a relatively small player in patient engagement and communications in the inpatient care journey, announced it has acquired patient-messaging company Docent Health for an undisclosed sum, beefing up capabilities in data analytics and directing patients to additional services. According to Crunchbase, GetWellNetwork has funding to date of $19 million.  Release, Mobihealthnews

Wrapping it up is cardiac monitoring giant Hillrom’s acquisition of Bardy Diagnostics for $375 million plus future potential payments based on the achievement of certain commercial milestones. Hillrom is also acquiring net operating losses valued at more than $20 million and 230 employees. The BardyDx Carnation Ambulatory Monitor (CAM) is a lightweight cardiac patch monitor for heart rhythm diagnostics using P-wave-centric ECG detection. The irony here is that BardyDx positioned itself squarely against Hillrom’s Holter monitors. Nothing like buying out the competition! Release, MedCityNews

$6.8 bn in digital health funding through Q3 blows the doors off 2017: Rock Health

October 11, 2018 | by

And the money rolls in. All Rock Health had to do was wait a quarter to get breathless [TTA 4 July], because digital health funding through Q3 is now exceeding the full year 2017 by $1.1 bn. The average deal size has accelerated substantially–$23.6 million versus last year’s $16.4 million. The deals are bigger but fewer–290 so far versus 357 last year–and the length of time between funding rounds has consistently grown shorter. 

Another proportional shift is the growth of Series B and C startups, at long last, and a more than doubling of D+ deals.

A big shift in this quarter were that the stars lined up, perhaps for the first time, with at-home and on demand health. American Well of course at $291 M loaded these dice, but also benefiting from the throw were the similar Doctor on Demand, Honor (home care), and NowRx med delivery service. Faster meds at lower cost have become a major area of action (Amazon with PillPack, TelePharm, others). Digital therapeutics that help to monitor health at home followed from Pear Therapeutics, Click Therapeutics, Akili Interactive, Virta Health, Propeller Health, and Hinge Health. 

And where the money comes from? Independent venture funds still account for 63 percent, and corporate VCs for 15 percent.  Some of those CVCs are major names such as GSK, Abbott, and Cigna. Big tech is also moving into healthcare, with Amazon’s $1bn acquisition of PillPack, the Apple Watch 4, Google’s Nest.

Rock Health’s trend prediction is continued consolidation in digital health, with companies continuing to acquire each other. “With available capital and a desire to build out product lines, talent, and client bases, it’s not surprising to see a great deal of M&A activity within digital health.” One example given is Welltok, which plays in the consumer health ‘activation’ area, and their acquisitions from corporate health management programs to Wellpass, which has created such as Text4Baby, Text2Quit and Care4Life and whose largest customer is state Medicaid plans.

Keep in mind that Rock Health tracks deals over $2 million in value from venture capital, excluding government and grant funding. They omit non-US deals, even if heavily US funded.

Rock Health’s report. Healthcare Dive.  Mobilhealthnews‘ own top 17 M&As, which include Best Buy-GreatCall and Logisticare-Circulation in the burgeoning area of non-emergency medical transport (NEMT).

2015 digital health VC funding flat, consolidations nearly double: Rock Health

December 16, 2015 | by

Rock Health published yesterday their 2015 annual Digital Health Funding report, and perhaps it is good news that 2015 activity maintained the blazing 2014 total at $4.3 bn. Still, it represents a compound annual growth (CAGR) from 2011-2015 of 30 percent.

Consumer digital health is thriving, with healthcare consumer engagement, personal health tools and tracking accounting for 23 percent of overall funding. Two of the six largest deals were won by consumer-driven genetic companies, 23andMe and Helix.

The one new record was that there were 278 deals across 248 companies, with an record-breaking average deal size of $15.6m. What continued is that the vast majority of funding deals (70 percent) were Series B and below, but C and C+ deals increased slightly.  It was also a big year for exits. M&A activity nearly doubled in volume with 180 deals and $6B in disclosed activity. Their index comprising shares of publicly traded digital health companies was off over 5 percent with two of this year’s IPOs trading lower than their opening prices.

According to the Rock Health newsletter, early-funded companies had a few zombies among them. Rock Health looked at companies up to five years ago, and found that 11 percent they classified as either dead or “zombies” (which have not raised a round in 3+ years). “Most likely to die? A disproportionate number of these zombie companies are in the care coordination, EHR, or clinical workflow space.”

The web page with a link to the full study is here. Unfortunately, the download is not free, but $99.

First M&A roundup for 3rd quarter: more action, less value, whither digital health?

October 14, 2013 | by

VC/research firm TripleTree is first out of the gate with its roundup of merger and acquisition activity in healthcare, July through September. The news and directions are mixed. Deals are up 28 percent from the two previous quarters but down 12 percent in total deal value. Most are in the healthcare facilities area with home care giant Gentiva acquiring Harden Healthcare and insurance giant Humana adding to its LTC, Medicaid/Medicare portfolio with American Eldercare. 19 healthcare companies had successful IPOs totaling ~$3 billion of transaction value. Two highlighted here are Envision Healthcare Holdings (ambulance and outsourced physician services) and Benefitfocus (benefit administration software and tracking). Given that they are the creator of the iAwards at the annual Wireless-Life Sciences Alliance in May which focuses on digital health, the decidedly non-buzzy companies getting the action here are perhaps another indicator of the funding cooling preceding M&A as projected by Rock Health back in July [TTA 9 July], with their 3rd Quarter report due out shortly.