Week-end roundup of not-good news: Teladoc’s Q2 $3B net loss, shares down 24%; Humana, Centene, Molina reorg and downscale; layoffs at Included Health, Capsule, Noom, Kry/Livi, Babylon Health, more (updated)

Teladoc continues to be buffeted by wake turbulence from the Livongo acquisition. The company took a $3 billion goodwill impairment charge in Q2, adding to the $6.3 billion impairment charge in Q1. The total impairment of $9.3 billion was the bulk of the first half loss of nearly $10 billion. While their revenue of $592.4 million exceeded analyst projections of $588 million, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $46.7 million were barely up from projections and were down from $66.8 million year prior. Losses per share mounted to $19.22, versus $0.86 in Q2 2021.

Another weak spot is their online therapy service, BetterHelp, which in the US is pursuing a substantial TV campaign. CEO Jason Gorevic in the earnings release pointed out competitors buying the business at low margins and consumer spending pullbacks. Teladoc’s forward projections are bolstered by Primary360 and Chronic Care Complete. Projected revenue for Q3 is $600 million to $620 million. Shares on Thursday took a 24% hit, adding to the over 50% YTD drop misery. At best, Teladoc will muddle through the remainder of the year, if they are lucky. MarketWatch, Mobihealthnews, FierceHealthcare

Health plans are also presenting a mixed picture. 

  • Humana announced a healthy earnings picture for the quarter and YTD. It earned $696 million in profit for Q2, up nearly 20% year over year. For first half, Humana earned $1.6 billion, an increase of 14.8% from 2021’s $1.4 billion. Cited were growth in their primary care clinics, Medicaid membership, and investment in Medicare Advantage. Earnings surpassed Wall Street projections and Humana increased its guidance to $24.75 in earnings per share. At the same time, they announced a reorganization of its operating units that separates their insurance services (retail health plans and related) and CenterWell for healthcare services including home health. Some key executives will be departing, including the current head of retail health plans who will stay until early 2023, ending a 30 year Humana career. FierceHealthcare, Healthcare Dive
  • Under new leadership, Centene posted a Q2 loss of $172 million which in reality was a significant improvement over Q2 2021’s $535 million and looked on favorably by analysts.
    • Their ‘value creation plan’ has sold off its two specialty pharmacy operations to multiple investors, using third-party vendors in future, and agreed this week to sell its international holdings in Spain and Central Europe — Ribera Salud, Torrejón Salud, and Pro Diagnostics Group — to Vivalto Santé, France’s third-largest private hospital company.
    • Medicaid, their largest business line, has been growing by 7%.
    • Centene is continuing to divest much of its considerable owned and leased real estate holdings, which marks a radical change from the former and now late CEO’s* ‘edifice complex’ to house his ‘cubie culture’. As a result, it is taking a $1.45 billion impairment charge.  Healthcare Dive. [* Michael Neidorff passed away on 7 April, after 25 years as CEO, a record which undoubtedly will never be matched at a health plan.)
    • A cloud in this picture: Centene’s important Medicare Advantage CMS Star quality ratings for 2023 will be “disappointing” which was attributed to the WellCare acquisition (accounting for most of the MA plans), two different operating models between the companies, and the sudden transition to a remote workforce. For plans, WellCare operated on a centralized model, Centene on a decentralized one, and the new management now seems to prefer the former. (Disclosure: your Editor worked over two years for WellCare in marketing, but not in MA.) Healthcare Dive
  • One of the few ‘pure’ health plans without a services division, Molina Healthcare, is also going the real estate divestment route and going full virtual for its workforce. Their real estate holdings will be scaled down by about two-thirds for both owned and leased buildings. Molina does business in 19 states and owns or leases space across the US. Net income for the second quarter increased 34% to $248 million on higher revenue of $8 billion. Healthcare Dive

Many of last year’s fast-growing health tech companies are scaling back in the past two months as fast as they grew in last year’s hothouse–and sharing the trajectory of other tech companies as well as telehealth as VCs, PEs, and shareholders are saying ‘where’s the money?’. 

  • Included Health, the virtual health company created from the merger of Grand Rounds and Doctor on Demand plus the later acquisition of care concierge Included Health, rebranding under that name, has cut staff by 6%. The two main companies continued to operate separately as their markets and accounts were very different: Grand Rounds for second opinion services for employees, and Doctor on Demand for about 3 million telehealth consults in first half 2020. As Readers know, the entire telehealth area is now settling down to a steady but not inflated level–and competition is incredibly fierce. FierceHealthcare
  • Unicorns backed by big sports figures aren’t immune either. Whoop, a Boston-based wearable fitness tech startup with a valuation of $3.6 billion, is laying off 15% of its staff. (Link above)
  • Digital pharmacy/telemedicine Capsule is releasing 13% of its over 900 member staff, putting a distinct damper on the already depressed NYC Silicon Alley.  FierceHealthcare also notes layoffs at weight loss program Calibrate (24%), the $7 billion valued Ro for telehealth for everything from hair loss to fertility (18%), Cedar in healthcare payments (24%), and constantly advertising Noom weight loss (495 people). Updated: Calibrate’s 150-person layoff was reported as particularly brutally handled with employees. Many were newly hired the previous week, given 30 minutes notice of a two-minute webinar notice, then their laptops were wiped. Given that the company makes much of its empathy in weight loss, facilitating prescription of GLP-1 along with virtual coaching, for a hefty price of course. HISTalk 8/3/22
  • Buried in their list are layoffs at Stockholm-based Kry, better known as Livi in the UK, US, and France, with 100 employees (10%).
  • Layoffs.fyi, a tracker, also lists Babylon Health as this month planning redundancies of 100 people of its current 2,500 in their bid to save $100 million in Q3. Bloomberg

Updated: Aetna’s Bertolini to Humana: Let’s call the whole thing off.

Updated–Humana exits individual exchange policy markets

Breaking News On this Valentine’s Day, a Romance Gone Flat. This morning, both Aetna and Humana formally announced the end of their merger, ruling out any appeal of the Federal District Court decision against it last month [TTA 24 Jan]. While positioned as a mutual agreement, Aetna CEO Mark Bertolini took the key quote in the release: “While we continue to believe that a combined company would create greater value for health care consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction. We are disappointed to take this course of action after 19 months of planning, but both companies need to move forward with their respective strategies in order to continue to meet member expectations. Our mutual respect for our companies’ capabilities has grown throughout this process, and we remain committed to a shared goal of helping drive the shift to a consumer-centric health care system.”

Humana’s release limited the announcement to one line and briskly moved on to what really counts–the financials. They will receive a breakup payment of $1 bn (after taxes, $630 million) from Aetna, with their 2017 financial guidance call/release taking place after 4pm EST today. Molina Healthcare, which was to receive certain Aetna Medicare Advantage assets from Aetna post-merger to relieve an over-dominance in some markets, will also receive an undisclosed termination fee. Ka-ching! CNBC, Hartford Courant (Aetna’s hometown paper)

UPDATED 2/14-16 Humana’s financial release announced an updated strategy, share repurchases, a nicely increased dividend–and, buried in the release, their exit effective 2018 from the ‘individual commercial’ business, which are individual policies offered in 11 states through the ACA-created Federal Marketplaces, citing an ‘unbalanced risk pool’ and losses estimated at $45 million for FY17. (By 2018, it may be a moot point.) It is ironic that Aetna’s exit from exchange policies due to unprofitability (or not, as it turned out to be in a few cases) proved to be one of the many bricks that broke the merger, in Judge Bates’ view. The truth is that Aetna and Humana are hardly alone in fleeing the exchanges, and that they have turned out to be unprofitable, as predicted.

[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2017/02/aetna-tweet.jpg” thumb_width=”250″ /]Consistent with their behavior over the 19 months of the proposed merger, both Aetna and Humana are publicly respectful, unlike….

These other two will never be one, something must be done? The demise of the Anthem-Cigna merger [TTA 9 Feb], now breaking up in Delaware Chancery Court, may mean a period of Payer Merger Quiet. Does this mean a refocusing on benefiting corporate and individual policyholders during the certain changes to come? Aetna may also proceed with a plan to move operations to Boston, which may affect hundreds of jobs, but has pledged to keep a presence in Hartford according to the Hartford Courant. Humana continues to be interested in investment opportunities and, from reports, another merger.

Goodness knows what the end will be! (Hat tip to Ira Gershwin for the title and the interpolated lyrics!)

Breaking: Aetna-Humana merger blocked by Federal court

Breaking News from Washington Judge John B. Bates of the Federal District Court for the District of Columbia ruled today (23 Jan), as expected, against the merger of insurance giants Aetna and Humana. Grounds cited were the reduction in competition for Medicare Advantage plans, where both companies compete. “In this case, the government alleged that the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges.” The decision could be appealed in the US Appeals Court for the DC Circuit, or could be abandoned for different combinations, for example a rumored Cigna-Humana merger, or smaller companies in the Medicare/Medicaid market such as Centene, WellCare, and Molina Healthcare. Certainly there is money about: Humana would gain a $1 bn breakup fee from Aetna, and Cigna $1.85 bn.

No decision to date has been made in the Anthem-Cigna merger, but the general consensus of reports is that it will be denied by Federal Judge Jackson soon. [TTA 19 Jan]

Healthcare DiveBloomberg, Business InsiderBenzinga

Of course, with a new President determined to immediately roll back the more onerous regulatory parts of the ACA, in one of his first Executive Orders directing that Federal agencies ease the “regulatory burdens” of ObamaCare on both patients (the mandatory coverage) and providers, the denial of these two mega-mergers in the 2009-2016 environment may be seen as a capital ‘dodging the bullet’ in a reconfigured–and far less giving to Big Payers–environment. FoxNews