News roundup: ONC recommends ‘nutrition labeling’ for healthcare AI apps but Google moves forward; CVS’ health services rebranding as Healthspire (updated); Clover Health repots out of ACO REACH

Straining toward a model for AI app information? The latest grope by Federal regulators towards the “trustworthy use of artificial intelligence”, as the American Telemedicine Association terms it, is a labeling system that has been likened to ‘nutrition labeling’. This near-incomprehensible analogy to food labeling was proposed back in April by the Department of Health and Human Services (HHS) Office of the National Coordinator for Health Information Technology (ONC), now headed by Micky Tripathi, Ph.D. This disclosure would consist of how the app was trained, how it performs, how it should be used, and how it shouldn’t, which does not sound onerous at all. The disclosures are designed to forestall issues around performance and bias that have previously appeared, such as Epic’s AI system designed to predict sepsis risk and an algorithm designed to flag patients needing assistance with complex treatment regimens. 

An optional proposed disclosure around how the app was trained and tested would be important to healthcare organizations but potentially problematic to developers. There are quite a few caveats expressed by Silicon Valley investors around hurting startups and even giants like Epic through over-disclosure of proprietary information, enabling reverse engineering and poaching of intellectual property. Everyone likes transparency, trust, safety, and efficacy, but the conundrum is to disclose what is needed for proper and cautious use without providing an entreé to IP. Wall Street Journal, Becker’s, ATA release and AI principles 

Google, predictably, damns the torpedoes, full speed ahead with healthcare AI. And intends to write the rules. They’ve deployed AI tools already with Mayo Clinic and HCA Healthcare–Mayo for medical records and research papers, HCA for clinical notes. EHR Meditech is using Google’s AI for clinical documentation and to summarize patient histories. Bayer is also working with Google. Their products include a licensed algorithm for breast and lung cancer detection, a tool for diagnosing diabetic retinopathy, and a question-answering bot. Google makes no secret that they plan to influence Federal efforts at setting standards by hiring lobbyists, most of whom are out of the Food and Drug Administration (FDA), and playing a large role in industry groups such as the Coalition for Health AI (CHAI).  If you believe that Google, Microsoft, Amazon (playing catchup), or other healthcare service companies like UnitedHealth Group’s Optum will twiddle their thumbs and wait for the Feds to set standards and (good grief) enforce disclosure on AI tools, this Editor has several lovely bridges for sale. POLITICO, Becker’s

CVS Health grouping health services and multi-payer assets under CVS Healthspire. Monday’s announcement at the Forbes Healthcare Summit will roll up new $20 billion acquisitions Oak Street Health and Signify Health along with 1,100 MinuteClinics, the CVS Caremark pharmacy benefit manager (PBM), CVS Specialty, and its new Cordavis operation that works with pharmaceutical companies to bring to market  biosimilars. The rebranding, a clever melding of ‘health’ and ‘inspire’, will start this month into 2024. It’s not revealed whether the current names will be sunsetted for CVS Healthspire, or whether they will keep their established brand names. The parallels are with Evernorth (Cigna), Optum (UnitedHealth Group), and Carelon (Elevance, the former Anthem) in creating a vertically integrated healthcare company. At Investor Day, CVS Pharmacy announced a cost-plus arrangement for retail prescriptions built on the cost of the drug, a set markup, and a fee that reflects the care and value of pharmacy services–clearly in competition with Mark Cuban CostPlus.  Forbes, FierceHealthcare, CVS release, Investor Day release  

Clover Health exits the advanced value-based primary care program, ACO REACH. Clover’s exit at the end of the 2023 performance year after two years disbands their practice arrangements for CMS’ advanced original Medicare shared savings program, formerly Direct Contracting, and provision of beneficiary services after completing their required wrapups and reporting. It is part of their recent moves to become profitable, focusing on their Medicare Advantage business and Clover Assistant management. They outsourced their Medicare Advantage plan administration to UST HealthProof for a savings of $30 million and laid off 10% of staff as part of restructuring. A 2021 SPAC on Nasdaq debuting above $16 that survived investigations by the SEC and DOJ now has shares trading currently under the $1.00 minimum for listing. Clover also finally settled seven shareholder lawsuits over its non-disclosure of the DOJ investigation at the time of the SPAC. Cleaning house is all part of living to fight another day, like other ‘insurtechs’ such as Oscar Health. Clover release, FierceHealthcare  Also: Looking back at insurtechs and their ‘disruption’,  Insurtechs in the widening gyre

Living to fight another day: insurtechs Bright Health, Clover Health, and Oscar Health report improved Q2s, H1s (updated)

Have the upstart payers turned a corner–even if that means exiting the business? ‘Insurtech’ is the term given to the tech-enabled, health tech-friendly US payers which were supposed to deliver health insurance plans more efficiently (buy online!), more conveniently using apps and telehealth, lead in value-based care through strong networks, provider software, internal automation tools, and wrap it up with a ribbon of lower delivery cost to consumers, from those who needed individual exchange plans to Medicare Advantage. This utopian model cracked like the SPACs of Bright Health and Clover Health, and the IPO of Oscar Health, as this Editor noted last month, perhaps to the glee of traditional payers. But when survival is at stake, some surprising things can happen. All three are Not Dead Yet.

Bright Health Group succeeded last month in selling its remaining plans to ‘pure payer’ Molina Healthcare–their California Medicare Advantage plans Brand New Day and Central Health Plan. The deal: purchase 100% of the issued and outstanding capital stock of the two plans in a deal structured to be about $600 million. The Catch-22: stay solvent and absorb plan operational costs and losses (which are many) until Q1 2024 when the Molina deal will close. [TTA 6 July]

Last Friday (4 August), Bright secured a life preserver and line just as the waves started to crash–$60 million through a credit facility with an investment partnership of New Enterprise Associates (NEA). They also entered into a permanent waiver of default on its existing credit facility, which expires in February 2024. This has to refer to their prior $500 million credit facility with JP Morgan which was long overdue and now waived until the Molina close, apparently. Bright also is issuing penny warrants to NEA to purchase up to 1,656,789 shares of the Company’s common stock to the lenders under the new credit facility, approved by the board without the usual shareholder approval. This leaves an open question about who is really controlling the company. Release, Healthcare Finance, FierceHealthcare

There seems to be an even brighter (sic) picture in that their adjusted EBITDA for Q2 and H1 were actually in the black: $6.4 million for Q2 and $670,000 for H1. Even more bullishly, they project a full-year profitable adjusted EBITDA.

  • Reduced Q2 and H1 net losses: Q2 was $125 million versus $284 million in prior year. For H1 2023, the losses were $312 million and $488 million respectively.
  • Their other businesses in consumer care delivery, value-based care with providers in shared risk including ACO REACH (NeueHealth), and enterprise seemingly perform well. Their 2023 totals: consumer care $250-275 million, care solutions $900-925 million, and enterprise $1.15 -$1.2 billion.
  • Lives covered in value-based care are up to 371,000, an increase of 214% over last year’s 118,000–excluding any covered under their now exited commercial plans. ReleaseHealthcare Finance

Looking at Clover Health, it was revealed this week that they survived a delisting off Nasdaq, which happens when the minimum closing share price requirement falls below $1 for at least 10 consecutive days. Now with closings for 10 days over $1, they are in Nasdaq’s good graces for now. They are exploring a reverse stock split or authorized share reduction, to be discussed at the 30 August shareholder meeting.

Clover then followed this up with a cheerful lead in their Q2 results that they had adjusted profitable EBITDA of $10 million versus last year’s $83.9 million loss. This is also remarkable as their revenue fell by over $333 million to $513.6 million due to a drop in non-insurance revenue of $384 million. Insurance plan revenue made up some of it by growing 17% to $314.4 million. In total, Clover recorded a net loss of $28.8 million. But for the year, adjusted EBITDA is projected to remain in the red between $70 and $120 million. Mobihealthnews, FierceHealthcare, release

Clover provides both Medicare Advantage (MA) plans in eight states plus a tool for practices, Clover Assistant, which assists in patient chronic care management through machine learning and aggregated data. They also entered value-based care in 2021 in the Medicare Direct Contracting (now ACO REACH) model which was a major loss generator in 2022 (Healthcare Dive) and has been cut back. Clover also survived an epically cracked SPAC out of the gate in January 2021 with the news that the Department of Justice (DOJ) had been investigating the company on investor relationships and business practices starting in fall 2020. A little over a month ago, the company finally settled seven shareholder lawsuits over its non-disclosure of the DOJ investigation at the time of the SPAC [TTA 28 June]. 

Now to NYC-based Oscar Health reporting its Q2, the first under its new CEO Mark Bertolini [TTA 30 March]. Their adjusted EBITDA went from red to in the black with a Q2 of $35.6 million, an improvement of $111.4 million versus prior year, and the second profitable quarter in a row with H1 adjusted EBITDA of $86.6 million, improving by $198 million from 2022. Revenue for Q2 was $1.5 billion with H1 at $3 billion. Net loss narrowed substantially to $15.4 million, an improvement of $96.7 million versus prior year, with H1 loss at $55.3 million, reduced by 70% from last year’s $187.3 million. The year will still be in the red with projected EBITDA loss of $75 to $175 million. The reasons for this gap–two profitable quarters, but an overall disappointing year–are not clear.

Bertolini touted factors such as improved medical loss ratios and rate increases. Oscar also pulled out of unprofitable Affordable Care Act marketplaces in Arkansas, Colorado, and California, as well as trimming MA plans in New York and Texas. On the earnings call, they announced that they were given state approval to resume MA enrollments in Florida and that they were relaunching +Oscar with help from ChatGPT to build automation tools in its Campaign Builder platform. In other news, their CFO is stepping down on 13 August, but remains on the board. He will be replaced internally by the chief transformation officer. Other staff are reportedly changing. Release, Healthcare Dive, FierceHealthcare

Update: you may also want to read Ari Gottlieb’s comments on these three companies on LinkedIn from the view of an expert financial analyst. Further comments on Bright’s perilous situation and Clover’s ‘legitimately good quarter’ here.

Why the ‘insurtechs’ didn’t revolutionize health insurance–and the damage they may have done

crystal-ballIce water on hopes that many placed in ‘insurtechs’. This is the umbrella term that healthcare dubbed the upstart tech-enabled, health tech-friendly US payers which were supposed to deliver health insurance plans more efficiently (buy online!), more conveniently using apps and telehealth, with strong networks and at a lower delivery cost to consumers, from those who needed individual plans to Medicare Advantage. Around 2019-2020, these insurers gained billions in funding before going public through IPO or SPAC: Bright Health’s $500 million Series E in 2020 was only a chunk of their total $2.4 billion; Oscar Health raised $1.6 billion, Clover Health $1.3 billion. All three have struggled to stay clear of the insolvency precipice, with Friday Health Plans going over [TTA 23 June]. Bright Health Group will be exiting the insurance business after this year with the stock sale of their plans to Molina Healthcare–provided they survive to Q1 2024 [TTA 6 July]. Oscar and Clover have exited states and cut back offerings. In April, in a real retrenching, Oscar hired on Mark Bertolini, late of Aetna, pushing back a founder to an operational role. 

This Editor, in a marketing assessment for a client two years ago, believed as many did that Insurtechs Were The Future. At the very least, their practices would be adopted by the legacy insurers: easy online enrollment, lower premiums, predictive analytics, machine learning, digital documentation, online health education via apps, outsourcing areas such as customer service 24/7 and even marketing. Even those like Cigna through their Ventures arm bet some millions on insurtechs redefining payer-member relationships and payer structure, gaining better margins at profitable lines of business like Medicare Advantage (MA) and special needs plans (SNPs). After all, these plans did have people with decades of experience at insurers in their management, didn’t they, and they’d know what NOT to do. (And that’s the problem with gazing into crystal balls…eyestrain.)

Marissa Plescia’s article in MedCityNews is an excellent review on why the insurtechs’ centre did not hold. Key points made from her dive among the experts:

  • They underpriced and took heavy losses to grow their member base
  • They didn’t understand that some ‘inefficiencies’ in the health insurance market exist for reasons–perhaps not good ones, like state mandates through their departments of banking and insurance, but they exist and cannot be ignored. [Ed.–health education for MA has to be provided or at least available in written form in most if not all states]. Compliance can’t be skirted or ignored. Were they paying attention to the compliance of their plans?
  • They didn’t pay provider claims efficiently or at all [the SSM lawsuit of Bright]–a nifty way to lose networks and be sued by states, very damaging if the network wasn’t all that competitive to begin with.
  • Contracted rates with providers weren’t competitive. Were they managing risk adjusting coding well? 
  • Did they leverage sales channels beyond online such as brokers and their provider network? What about customer service?
  • The plans were not sticky enough to create some loyalty to an infamously non-loyal product

The insurtechs perhaps expected the technology to do too much–and for legacy payers to not catch up to them if they weren’t already moving there. Another problem–they (largely) were.

Disruption–but not the Clayton Christensen definition. Their disruption so far has been financial and legal (insolvency, cracked SPACs, lawsuits, share prices below $1.00, and delistings pending), loss of coverage for members; unpaid providers. With this track record, investors will avoid this category beyond the legacies. States won’t approve new plans from new companies. (This Editor believes that there are some overlooked positives such as inclusion in marketing of specialized and underserved groups, as well as some forced streamlining of processes.) There will be survivors–Alignment Health, kind of a below-the-radar operation and an afterthought in funding at $375 million, is in a few states and is mentioned. It’s also hard to bet against Bertolini leading Oscar–except that this is maybe Act V for him and he’s had his share of bunts and misses (bunt–ActiveHealth Management, misses–Healthagen, CarePass, iTriage) before his contentious departure from CVS. But in this particular widening gyre, while more revelations will be at hand, innovative newcomers in health plans won’t be seen for a long time, if ever. If the saga of airline deregulation (1980-1995) is a model, payer disruption just took a fraction of that time.

Week-end roundup: Cano Health’s $60M loss and divesting, Oscar Health exits CA, UCSF Meta Pixel lawsuit narrows, Syneos goes private for $7.1B, Envision nears Ch. 11, Australia’s A$429M EHR modernization funded

Cano Health’s Q1 was not a cheerful one, what with a board fight, the Cano 3 resigning and nailing a long list of grievances to the door, and a new chairman of the board, Sol Trujillo, who specializes in turnarounds. The results bore out the Cano 3’s concerns, with a $60.6 million net loss versus 2022’s barely-there $100,000. Revenue increased 23% to $866.9 million but per member per month (PMPM) revenue fell 13%, driven by a higher proportion of non-Medicare members but partially offset by membership growth: 388,667 including 207,420 Medicare capitated members, an increase of 44% and 29% year-over-year. Adjusted EBITDA was only $5 million, compared to $29.2 million in Q1 2022. What’s being divested to improve cash flow are the proverbial ‘non-core assets’ which are outside of Medicare Advantage–a complaint of the Cano 3 who noted things like family self-dealing and a murky relationship with a Miami claims recovery outfit. Cano also raised 2023 forecasts for membership and total revenue, but no mention of growth in medical centers. Cano earnings release, Healthcare Dive, Digital Health Business

In other slimming-down news, Oscar Health will exit its exchange plans within Covered California at the end of the year. While they have 35,000 members, their medical loss ratios (MLR) are over 100% versus the desired 80%. (MLR, a key metric in exchange plans, is defined as the proportion of total paid medical service claims and all quality improvement activities together, then dividing that number by the total premium revenue minus all allowable deductions. New CEO Mark Bertolini says they will return when Oscar reshapes their product offerings and strategy. This Editor hears a heavy boot drop. Healthcare Dive

Lawsuits of health systems on Meta Pixel being used to send private patient information to Facebook and other third-party advertisers are now rolling through the courts. The class action against University of California San Francisco (UCSF) Health just got a little narrower. Judge William Horrick of the US District Court for the Northern District of California granted defendant UCSF Health’s motion to dismiss several plaintiff claims. As a public entity, UCSF argued that the “unjust enrichment” claims were invalid. ‘Jane Doe’s’ lawyers representing the class of patients have a deadline of 30 May to amend the breach-of-contract claim. Health systems caught up in the ad pixel mess should follow this closely, though Becker’s seems to be the only news coverage. Our coverage of Meta Pixel

And in other healthcare news from two ends of the spectrum:

  • Biopharma contract research organization (CRO) Syneos Health will be going private in a $7.1 billion deal.  Elliott Investment Management, Patient Square Capital, and Veritas Capital are leading the cash buyout for $43.00 per share, a tidy 24% premium to the 13 February closing price, which is a somewhat unusual delay but apparently due to heavy media speculation around it. Syneos was formed in the merger of two large CROs, InVentiv Health and INC Research, and as a public company has been on the share price roller coaster, though the category is considered to be highly attractive for investment to improve the odds of biopharma success.  The deal is expected to close in the second half of the year. Syneos release, Healthcare Dive
  • Healthcare staffing company Envision Healthcare envisions filing a Chapter 11 bankruptcy soon, according to a Wall Street Journal report. They are carrying about $7 billion in outstanding debt, ongoing and costly legal spats with UnitedHealthcare, and has had difficulty finding physicians and nurses that are contracted to augment hospital staff. Conflicts with payers center around out-of-network billing charges which are far above the customary and the ‘no surprises’ patient protection billing law that took effect this year. Investor KKR owns the company and reportedly has already written it down. Their EBITDA cracked from $1 billion in 2020 to about $250 million in 2022. FierceHealthcare, Healthcare Dive

And Down Under, the modernization of Australia’s health system EHR, estimated to cost A$429 million over two years, is now funded in the 2023-4 budget. The My Health Record (MHR) modernization will improve data sharing across service settings, sharing of pathology and diagnostic imaging information, and increase usage of MHR by allied health professionals. The budget also includes substantial fresh funding to the Australian Digital Health Agency (ADHA)–over A$325 million over four years and an ongoing A$80 million–and A$5.7 billion to Australia’s national Medicare program including strengthening primary care and urgent care. IT News (Australia)

Mid-week corral: CVS closes Signify Health; Bertolini to lead Oscar Health; ViVE highlights from Wellvana, AWS, Everly Health; Better Therapeutics lays off 35%, CoverMyMeds 815

CVS closed its acquisition of Signify Health today. This $8 billion transaction ($30.50/share) adds a network of more than 10,000 clinicians nationally, including the 170-provider Medicare ACO group originally organized by Caravan Health. It was beneficial to the major shareholder group, New Mountain Capital and their investors, which owned 60% of Signify and have a tidily profitable exit. The CVS press release stated that Signify would continue to operate as a ‘payer-agnostic’ business within CVS Health. As earlier stated, Kyle Armbrester, Signify’s CEO, will continue to lead the business. Also Healthcare Dive (updated)

The bulldog engineer of the CVS-Aetna merger, Mark Bertolini, now tapped to head Oscar Health. Bertolini, the former chairman/CEO of Aetna (center), in the past three years since his unwilling (according to him) departure from the CVS board of directors [TTA 6 Feb 2020], has not been idle. From 2022, he was co-CEO of asset management firm Bridgewater Associates, and in the last 18 months, he has been a ‘strategic advisor’ to insurtech Oscar. Now he moves to the CEO office effective next Monday (3 April) and joins their board. Co-founder Mario Schlosser (left) steps back from CEO to president of technology, reporting to Bertolini, and joins the board. Joshua Kushner, a co-founder and major investor (Thrive Capital), as well as executive chairman of the board, is on the right in the leadership picture supplied with the Business Wire release.

Once a skeptic of insurtechs like Oscar, Bertolini by his statements is now a true believer. In a call with investors on Tuesday, he cited their technology that included digitization, individualization, and personal care. A major factor is that consumers are more comfortable since the pandemic with telehealth. Oscar was a pioneer in offering free telehealth with their plans.

Investors have pressed Oscar to get over to a profitable state by next year. Oscar has not been profitable since its 2012 founding by Schlosser, Kushner, and the long-departed Kevin Nazemi. In the time since Bertolini joined as an advisor, they have largely shed their Medicare Advantage business and concentrated on their individual market and ACA plans, which have seen huge growth along with overall record enrollment on the exchanges. But Oscar paused on new ACA signups in Florida and hauled back its glitchy and over-featured +Oscar tech platform [TTA 24 April 2021], which is now available unbundled. 2022 financials were substantially in the red with a loss of $610 million on revenue of $4 billion (Oscar release). However, the news of Bertolini moving to Oscar’s helm was met with a round of investor confidence. Share price moved from Monday’s close of $3.41 to $6.70 midday Tuesday and has largely stayed in the $6.00 range. Oscar release on Business Wire, FierceHealthcare, Healthcare Dive, YahooFinance

ViVE, the digital health spinoff of HLTH, concluded its annual meeting in Nashville this year with an announced attendance of 7,500, including 650 startups, 425 investors, and 330 hosted buyers. The energetic start on Sunday was sadly marked on Monday with the shooting at the local Covenant School where six were killed. Impressions from an anonymous attendee to HISTalk today were that most of the sessions were panels (which gets more people up front, but can be sunk by a dull moderator) versus individual speakers (who can either be fabulous or duds). Content could have been more inspiring and, as usual, many speakers are throwing out headlines for those in media to write about. This Editor has read relatively little so far but more will come this week. Highlights so far:

  • Nashville-based Wellvana Health, which provides technology for healthcare providers and health systems to implement value-based care, raised a stunning Series B of $84 million for a total raise of $140 million. Heritage Group and Valtruis co-led the investment with participation from Memorial Hermann Health System. The funding will be used to expand from its present 22 states and over 100,000 lives. Their current agreements are with multiple payers, Medicare Advantage, and three national contracts for the 2023 ACO REACH model. FierceHealthcare, Mobihealthnews
  • Everly Health is moving beyond its current home testing kits to integrate lab testing with telehealth. This will cover certain conditions, such as COVID-19, flu, sexually transmitted infections (STIs), urinary tract infections (UTIs), thyroid, weight management, and men’s and women’s health. Cost is out of pocket $59 and if insurance covers, $10-50. In its weight management program, Everly will offer GLP-1 drugs, a class of drugs that includes Ozempic and Wegovy, to qualified patients. FierceHealthcare
  • Amazon Web Services (AWS) announced 23 startups for their 2023 Healthcare Accelerator: Global Cohort for Workforce. This year’s accelerator cohort is finding solutions for the healthcare industry in three core areas for healthcare employees: retention, deployment, and training. More on the accelerator here and the list here, including 10 from the UK. FierceHealthcare
  • Health systems are demanding a quick ROI on their digital expenditures, according to a panel of CIOs and digital officers from Providence, Allegheny Health Network, Sutter Health, and Adventist Health. It should not be a surprise to anyone that they are looking for returns in the next year or so–yet are pushing forward with investments because of inflation and increased workforce pressures. FierceHealthcare

Another digital cognitive behavioral therapy trims. Better Therapeutics is reportedly releasing 35% of staff, or 15 people, in yet another cutback of another company in the formerly high, wide, and flying sector. Better specializes in prescription digital therapeutics to address cardiometabolic diseases such as diabetes. Better SPAC’d in 2021 [TTA 8 April 2021] hitting the market at $10.25 and currently trading on Nasdaq at about $0.60. According to their SEC filing, they are trying to stretch remaining cash to reach potential FDA marketing authorization and subsequent commercial launch of BT-001 in Type 2 diabetes. Better is in the same jam as competitors Pear Therapeutics and Akili Interactive, both paring back to the bone and looking for buyers, according to Mobihealthnews. Also LayoffsTracker

CoverMyMeds, a division of healthcare giant McKesson, is also laying off 815 by mid-April and closing its Scottsdale, Arizona office. The Arizona office has the company’s patient support center; workers there will be given the option to move to Columbus, Ohio. Other offices including Columbus (Franklinton) and Atlanta will be condensed and space leased out. CoverMyMeds automates the prior authorization process for medications for payers. What is unusual is that the company, bought for about $1 billion in 2017, accounted for $1.1 billion of McKesson’s $70.5 billion in 2022 revenue, and $136 million in McKesson profit–the most profitable of their four divisions. Columbus Dispatch, Layoffs.fyi

Week-end news roundup: +Oscar data tech platform pauses, BD buys MedKeeper pharmatech for $93M, Novant’s Meta misconfiguration reveals PHI, Mt Sinai’s Sema4 genomics spinoff releases 250 + founder

+Oscar, Oscar Health’s foray into selling value-based health plan management services within a full-stack platform, has taken a minus. They are no longer pursuing relationships until they straighten out the ones they have, which are proving problematic. Their last implementation at Florida-based insurer Health First Health Plans (not to be confused with NY’s HealthFirst) proved to have some problems that prevented them from going live early this year, which were not itemized but were serious enough for Oscar Health to stop acquiring accounts until said difficulties are sorted out.  +Oscar’s platform is designed to deliver medical cost management to payers and value-based care by closing care gaps, improving quality scores, enhancing value, and communicating effectively with patients through its Campaign Builder and Next Best Actions engines (release). How many contracts +Oscar has implemented was not disclosed, although since startup in April 2021, they were claiming a pace of 1-2 annually. Oscar Health has experienced a few bumps since its March 2021 IPO that raised $1.4 billion, what with share prices cruising in the mid-single digits and shareholder class action lawsuits [TTA 19 May]. Healthcare Dive, Q2 results

Medical device giant BD gets into pharmatech with MedKeeper buy for an eye-popping $93 million. The purchase was made from pharmaceutical manufacturer Grifols, SA, a Spanish multinational pharmaceutical and chemical manufacturer, as part of their plan to exit non-core businesses. MedKeeper is a photo-based automation system for in-hospital workflows and systems for pharmacy communications, compliance, and productivity.  BD also owns two pharmacy-related companies in their Medication Management Solutions portfolio, Parata for automating vial filling, packaging, and central fill, and Pyxis automated medication dispensers. Count BD as another company that acquires technology from, as this Editor put it earlier, “healthy health tech companies at the right (discounted) price that fill in their tech gaps.” MedTechDive, BD release

North Carolina provider Novant Health has notified patients of a code misconfiguration of their Meta Pixel tracker that may lead to unauthorized disclosure of their personal health information (PHI). The number of patients is not disclosed. In June, The Markup and STAT jointly published a several-part exposé of the Meta Pixel tracker being loaded into patient portals and the online appointment scheduler, capturing sensitive patient information and sending it to Facebook [TTA 17 June]. The letter explains the event as a campaign to connect more patients to their MyChart portal. The pixel was removed in June (after the article published). Novant determined that PHI could have been disclosed, although they have not uncovered any improper use to date. HealthITSecurity, Novant release

Layoffs and restructurings continue this summer with the latest being Sema4, a population health/analytics/ML/AI-assisted disease model spinoff of Mount Sinai. In what the company (Nasdaq: SMFR) has termed “a series of corporate realignments”, the company is discharging 250 staff, about 13%, plus shedding its founder from both the president and director slots effective immediately. Leading the company will be a transformation management office that includes the CEO and the new chief technology & product officer. On their Q2 earnings call, coupled with the first half, Sema4 disclosed layoffs from first half to total 30% of “legacy” staff to reduce to 1,600 employees. With shuttering some of their lab business and moving of operations, they expect to achieve cost savings of $50 million in 2022 and $250 million by end of 2023, to refocus on what they term their ‘health insights business’. Net loss in the second quarter of 2022 was $85.7 million, up over $40 million in Q2 2021. Yahoo Finance, Becker’s.

Thursday legal news roundup: Oscar Health accused of IPO securities fraud; Venezuelan cardiologist moonlights as cybercriminal, faces slammer; Change Healthcare sues former employee now at Olive AI

To use a cliché, what a difference a year makes. In March 2021, insurtech Oscar Health successfully raised $1,4 billion in its IPO with shares at $39. Heady times didn’t last long, with shares tumbling to $5.67 as of this writing. Now the shareholder lawsuits have begun, with the complaint stating that negative effects of COVID-19 on Oscar’s business were not disclosed, specifically the growing cost of the pandemic on testing and treatment costs they would cover, and “Oscar would be negatively impacted by an unfavorable prior year Risk Adjustment Data Validation (RADV) result relating to 2019 and 2020 [and] that Oscar was on track to be negatively impacted by significant SEP membership growth”. The lack of forward-looking disclosure at an IPO is a violation of the Securities Act. The initial lawsuit has been filed in the US District Court for the Southern District Court of New York by shareholder Lorin Carpenter. Multiple law firms have invited shareholders to join in the suit — example from PR Newswire. Also named in the suit are Oscar Health co-founders CEO Mario Schlosser and Vice Chairman Joshua Kushner, plus several investment banks.

Oscar started the year with a Q1 loss of $0.36 per share versus an estimate of a loss of $0.40, but this is less than half of last year’s loss of $0.98 per share. They are also exiting the Arkansas and Colorado markets in 2023. Healthcare Dive

Cardiologist, master cybercriminal, a new Dr. Mabuse? Accused of the creation, use, and sale of ransomware is one Venezuelan doctor and practicing cardiologist, Moises Luis Zagala Gonzalez, a dual citizen of Venezuela and France. The charges by the Department of Justice (DOJ) in the Eastern District of New York also detail his “extensive support of, and profit sharing arrangements with, the cybercriminals who used his ransomware programs.” SaaS can’t hold a candle to the RaaS–ransomware-as-a-service–operation he created to sell what he dubbed ‘Thanos,’ allegedly named after a fictional cartoon villain responsible for destroying half of all life in the universe. Turns out that Iranian state-sponsored hackers and fellow ransomware designers really liked it too. If convicted, he faces 10 years in Club Fed–five years for attempted computer intrusion, and five years for conspiracy to commit computer intrusions. Designing criminal software really does test the limits of moonlighting. DOJ release, TechCrunch

Change Healthcare sues former employee at competitor Olive AI. While their merger with UnitedHealthcare is tied up in the US District Court in DC [TTA 23 Mar], Change Healthcare is not letting any courtroom grass grow under their feet. They are suing a former employee, Michael Feeney, with violating the non-compete clauses of his employment contract. The suit was filed in Tennessee Chancery Court, its HQ state. Mr. Feeney has countersued in his state of residence, stating that the non-compete violates Massachusetts law. He was VP, strategy and operations at Change handling physician revenue cycle management. At Olive AI, he is currently SVP, provider market operations. Information is a bit scarce on this and the free article this Editor has found reads machine-translated. If you have access to the Nashville Post or Modern Healthcare it’s probably more decipherable.

As to the lawsuit affecting non-competes due to the tight labor market–don’t count on it. It’s a conflict between the state the company is in enforcing non-competes, versus a state which restricts (or negates) them that is the former employee’s state of residence and work. What wins out will be the interesting part and affect many of us in the US.

‘Insurtech’ Bright Health’s IPO second largest to date, but falls slightly short of estimates (updated)

Bright Health Group’s IPO last Friday (23 June) fell a little short of the $1 billion+ raise and valuation projection two weeks ago, but not by much on a bad market day. Their $924 million raise was based on a float of 51.3 million shares at an opening price of $18 per share, with a targeted price range of $20 to $23. (Thursday 1 July’s BHG close: $16.85, a typical pattern.)

The raise compares favorably to Oscar Health’s blockbuster $1.44 billion IPO, Clover Health’s controversial but lucrative SPAC [TTA 9 Feb]. and Alignment Health’s $490 million.  Bright Health also acquired Zipnosis, a telehealth/telemedicine ‘white label’ triage system for large health systems, in April [TTA 6 Apr].

The IPO now creates a company value of $11.23 billion, down from the expected $14 billion. Bright Health is unique in its category in not only offering exchange and Medicare Advantage plans but also NeueHealth, 61 advanced risk-bearing primary care clinics delivering in-person and virtual care to 75,000 unique patients. FierceHealthcare, Reuters, Bright Health Group release. Also see TTA 18 June and 28 May.

‘Insurtech’ Oscar Health adds +Oscar tech platform to market health plan and member engagement services

Oscar Health putting $1.4 bn in IPO cash to work. Oscar Health announced the formation of a stand-alone platform, +Oscar, to provide healthcare partners with a range of services to benefit providers, payers, and patients/members. The new unit will be headed by Meghan Joyce as COO and EVP. There is no website yet for +Oscar nor mention of a start of business date but an email contact for the unit.

+Oscar will offer a range of services to enable partners to:

  • Lower costs through an efficient, full-stack platform and health plan infrastructure–integrated, end-to-end health plan services. Oscar is claiming they can achieve the administrative efficiency of far larger health plans, targeting provider-sponsored and regional health plans.
  • Create member experiences that are marketable and can drive growth and retention; that catch the attention of brokers and members plus enables flexible plan designs that can save money for members. Oscar is also hiring out Care Teams.
  • Power effective medical cost management and deliver on value-based care by closing care gaps, improving quality scores, enhancing value capture, and more.
  • Empower providers to manage care at scale: bi-directional integrations with existing electronic medical records and workflow tools.  

Why it’s important. It’s an interesting and fast redeployment of assets developed to run Oscar’s plans and services, repackaged to sell to smaller health plans. Large insurers took years to realize that they could package and sell their systems to other health plans and employers; independent companies do the same (for instance, network management and provider credentialing). Oscar is also partnering with Cigna on co-branded California health plans. Selling the technology can create real revenue (ask UHG’s Optum), even more so than health plans. It also might help their profitability problem [TTA 9 Feb]. Release, FierceHealthcare, Becker’s.

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.

Deal and news roundup: Cigna acquires MDLive, Oscar Health $1bn IPO preview, Teladoc’s smash revenue–and losses, Medisafe’s $30M Series C

The big news this week in Telehealth World is Cigna’s agreement to acquire MDLive. MDLive will be part of Evernorth, Cigna’s health services portfolio. From the release and news reports,  Cigna has been a long-time partner of and investor (through Cigna Ventures) in MDLive, which has grown to 60 million members. No purchase price nor management changes have been disclosed. Headquartered in Florida, since 2009 MDLive raised close to $200 million in investment in five rounds, the last $50 million in private equity in September, and was rumored to be prepping an IPO. 

Evernorth was rebranded within Cigna last September for management services which can be sold outside of Cigna, a move that follows both CVS Aetna and UnitedHealthGroup. It contains pharmacy benefit management company Express Scripts, specialty pharmacy Accredo, and medical benefit manager eviCore along with several other smaller related businesses. Last year, it brought in $116.1 billion in revenues for Cigna last year, a 20 percent jump from 2019, according to Cigna’s annual report. MDLive release, Healthcare Dive, FierceHealthcare

‘Neoinsurer’ Oscar Health’s IPO raise, scheduled for next week, is now estimated to be in the eye-blinking $1 bn to $1.2 bn range, with over 30 million shares valued at $32-34 per share. At the beginning of the month, it was estimated to be a modest $100 million [TTA 9 Feb]. Daffodils in February? More in TechCrunch, Reuters

Meanwhile, the Big Kahuna of Telehealth, Teladoc, ended 2020 with a smashing $1.1 bn in revenue and equally smashing losses. Their Q4 revenue was $383 million, up 145 percent from $156 million in Q4 2019. Visits skyrocketed due to the pandemic of course–10.6 million, up 156% from 2019. Paid membership hit 51.8 million, up 41 percent from 2019’s 36.7 million. Both membership and visits are expected to increase in 2021. Livongo, acquired in October, added substantially to 2020’s losses of $485 million, up 389 percent from 2019’s $99 million. Q4 losses were $394 million in the fourth quarter, up from $19 million in 2019. FierceHealthcare, Teladoc release

And happily, but more modestly, Medisafe’s smartphone-based medication management app has raised a $30 million Series C, led by Sanofi Ventures and ALIVE Israel HealthTech Fund. From a basic app when this Editor first profiled the company and met Omri ‘Bob’ Shor over a coffee in 2013, the app now is more a digital drug companion and a platform for patient adherence programs. Kudos! Release

‘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

New Year’s Deal and Event Roundup: Optum-Change Healthcare, Walgreens-Amerisource Bergen, December’s deal potpourri, CES and JPM

Mutated COVID virii may be spreading, the UK locked down tight, but the deals with big numbers just keep on coming….

Change Healthcare not sold for pocket change. $13bn from the coffers of UnitedHealth Group’s Optum took it, though word was that it wasn’t for sale. Change will be part of OptumInsight to reinforce data analytics, technology-enabled services, and revenue cycle management. The deal pays common stock shareholders $25.75 per share in cash plus assumption of Change’s debt. Closing is slated for second half 2021. Neil de Crescenzo, Change’s CEO, will be CEO of OptumInsight which will integrate Change into its structure.

Change houses a dizzying group of diverse businesses including radiology, imaging, revenue cycle and payment management, consumer experience, clinical decision support, workflow integration, communication and payment solutions, network optimization, value-based care enablement….and that is about half of the list. The release emphasized RCM, provider payment, claims transaction analysis, and clinical decision support. It will be interesting what Optum chooses to retain and discard.  Press release, Fierce Healthcare, Forbes. Credit Suisse has also published a lengthy financial analysis (PDF) of the deal which opines that it’s likely to not run afoul of Federal anti-trust interest or significant conflicts of interest (Optum currently serves many payers other than UHC). There may be Federal concern about a concentration of data and transaction information as Change alone serves 19 of 20 major US payers and is a leader in network services and payments.

Walgreens Boots Alliance sells the majority of their Alliance Healthcare pharmaceutical wholesale businesses to AmerisourceBergen, a leading US drug wholesale company, for about $6.5 billion in cash and stock ($6.275 billion in cash and 2 million shares of AmerisourceBergen common stock). Interestingly, Walgreens is the single largest shareholder of Amerisource Bergen at 30 percent of common shares. Both Walgreens and Amerisource Bergen will continue their US distribution agreement until 2029 and Alliance UK with Boots until 2031. One way of interpreting this is fattening their ‘war chest’ for expansion, including their major bet with Village Medical. Perhaps a payer or a health tech company? Press release

December’s potpourri of Big Deals was rounded up by FierceHealthcare:

  • Alphabet’s Verily closed out 2020 with a massive $700 million funding round primarily from Alphabet to fund its commercial work
  • 23andMe got a lifeline of $82.5 million in Series F funding from an offering of $85 million in total equity shares. TTA analyzed why the bloom had faded from the genetic testing rose, so hot only a few years ago, last August and February. Bloomberg
  • New Agey Calm is meditating on $75 million in Series C funding and visualizing a valuation of $2 bn.
  • Pear Therapeutics, developer of prescription apps to treat addiction and insomnia, counted $80 million in Series D sheep. 
  • Provider CityBlock Health raised $160 million to support care for marginalized populations with complex needs and now has an estimated value of $2 bn.
  • On the payer side, Oscar Health raised $140 million in a venture round as we reported before Christmas.
  • And we reported on Everlywell’s digital home testing/telehealth consult Series D of $179 million in early December.

And the Big January Events Roll On, Virtually.  CES 2021 and the JP Morgan Healthcare conference for their clients will be held next week as usual, along with the usual constellation of independent conferences. These are usually a major venue for deals and deal announcements, and even in the virtual space, will likely be no different. One wonders if Haven’s closure [TTA 5 Jan] will be even whispered.

News roundup, lockdown edition: Oscar Health’s $140M raise, IPO filing; Centene’s Diameter Health investment; Abbott’s telehealth-guided COVID antigen test

Before we break for the Christmas and New Year’s festive season, though most of us are partially or fully locked down for travel and get-togethers, binge-watching the telly for comfort, a few items of interest–we’ll keep it short:

An Oscar Health Double Header. Not only did this relatively new payer in the individual, small group, and Medicare Advantage markets gain a $140 million funding round last week, adding to a $225 million raise in June (Fierce Healthcare), but they quietly filed their S-1 registration with the US Securities and Exchange Commission (SEC) to go public on Monday (Healthcare Dive, Oscar release). Since their founding in 2012, the company has raised $1.6 bn in 10 rounds. The fresh funding will go towards 19 new markets and four new states in 2021, adding to their current 18 states and 211 counties. 

Speaking of payers getting into other lines of business, Centene Corporation, which has Medicare plans with different brands in all 50 states, seems to be moving in a different direction with some recent acquisitions and investments. Centene was the lead investor in an $18 million Series B round for Diameter Health, an enterprise data interoperability developer. Optum Ventures, LRVHealth, Connecticut Innovations, and Activate Venture Partners also participated. Fierce Healthcare Centene recently finalized their acquisition of Apixio (AI-assisted clinical data mining of unstructured data) [TTA 14 Nov] and is acquiring Pantherx, a specialty pharmacy focused on orphan medications and rare diseases, to blend into their Envolve Pharmacy Solutions unit. It does appear that Centene is moving into the UnitedHealthcare/Optum model of dividing services and innovations which can be sold to third parties (Optum) from their health plan and pharmacy businesses (UHC), which may be less profitable in the next few years.

An antigen test for COVID-19 with a telehealth spin is Abbott Pharmaceuticals’ BinaxNOW 15-minute antigen test. It is the first at home, telehealth guided test to get an FDA emergency use authorization (EUA). The Ag Card Home Test requires a prescription and used telehealth to guide users through the sample self-collection process, then to help them read and understand their results. MedTech Dive  It was followed up this week by Quidel’s EUA for a dipstick-style collection with a reading in minutes, similar to that of a pregnancy test, but is only cleared for healthcare settings for now. MedTech Dive

Above: Rockefeller Center, 2011. This year’s tree was mangy and the decorations leading to the plaza scarce.

Where’s the evidence? Healthcare unicorns lack the proof and credibility of peer-reviewed studies.

Another sign that too many healthcare unicorns are decoupled from the rock-solid fundamental reality–that they work. Healthcare unicorns–those startups valued over $1 bn–are unicorns because they have patents, processes, or a line of business that has immense potential to be profitable. The standard in healthcare, unlike other tech, is the peer-reviewed study. Is this process or device effective based upon the study? Does this drug looks like it will work? Is this study validating, encouraging? Peer-reviewed research takes place before a drug or device goes into clinical trials — a precursor. It ensures a certain level of disclosure, validation, and transparency at an early stage.

Instead, these unicorns largely rely on ‘stealth research’–a term coined by Dr. John P.A. Ioannidis, the co-director of the Meta-Research Innovation Center at Stanford University (METRICS). He summed it up in his latest peer-reviewed paper, “Stealth research: lack of peer-reviewed evidence from healthcare unicorns” (co-authored with Ioana A. Cristea and Eli M. Cahan), published in the European Journal of Clinical Investigation 28 Jan: 

In 2014, one of us (JPAI) wrote a viewpoint article coining the term “stealth research” for touted biomedical innovation happening outside the peer-reviewed literature in a confusing mix of “possibly brilliant ideas, aggressive corporate announcements, and mass media hype.”

The term ‘stealth research’ was prompted to the author by the practices of Theranos–ironically, a company that started and was funded in the Stanford nexus. By the time Dr. Ioannidis’ viewpoint paper was published in JAMA in Feb 2015, Theranos had ballooned to a $9 bn valuation. His paper was the first to question Theranos’ science–and Theranos aggressively pushed back against Dr. Ioannidis, including their general counsel attempting to convince the author to recant his own writing. Three years later, we know the outcome.

This latest study concludes that there is a real dearth of peer-reviewed research among healthcare unicorns–and that it’s detrimental. It measured whether these unicorns published peer-reviewed articles and whether they publish highly-cited (in other publications) articles; compared them against companies with lower valuations; and whether founders or board members themselves impacted the scientific literature through their own citations.

The meta-study looked at 18 current and 29 exited healthcare unicorns. Highlights:

  • Two companies–23andMe and Adaptive Biotechnologies published almost half of all unicorn papers–196 combined
  • Three unicorns (Outcome Health, GuaHao and Oscar Health) had no published papers, and two more (Clover Health, Zocdoc) had published just one
  • Seven of the exited unicorns had zero to one papers
  • In fact, ‘there was a negative, non-statistically significant association between company valuation and number of published or highly-cited papers’

As our Readers know, Outcome Health had a little problem around artificially inflated advertising placement wrapped in health ed and placed in doctors’ offices [TTA 29 Jan 18]. Oscar and Clover Health are insurers. Zocdoc…well, we know their business model is to get as many doctors to sign up in their scheduling app and pay as much as possible. But it’s the drug and device companies that are especially worrisome in a stealth research model. The paper points out among other examples StemCentrx, bought for $10.2 bn in 2016 by AbbVie for its Rova T targeted antibody drug for cancer treatment, was halted at Phase III because it was not effective. Acerta Pharma, also focused on cancer treatments, was bought by AstraZeneca for $7.3 bn; two years ago, AstraZeneca had to withdraw the Acerta data and admit that Acerta falsified preclinical data for its drug.

The conclusions are that healthcare unicorns contribute minimally to relevant, high-impact published research, and that greater scrutiny by the scientific community through peer-reviewed research is needed to ensure credibility for the underlying work by these startups. “There is no need for numerous papers. Discrete pivotal, high-impact articles would suffice.”

This Editor returns to #5 on Rock Health’s Bubble Meter: high valuations decoupled from fundamentals. Based on this, the lack of publishing represents risk–to investors and to patients who would benefit from better vetted treatments. To these companies, however, the risk is in having their technology or researched poached–as well as the investment in time and money research represents.

The study authors point out several ways to minimize the risk, including collaborating with academic centers in research, validation without disclosing all technical details, secure patents, and contributing their technology to other research. A higher-risk way is to “withhold significant publications until successful validation from agencies such as the Food and Drug Administration (FDA) or the European Medicines Agency (EMA)” but usually investors won’t wait that long. ‘Stealth Research’ paper, TechCrunch review Hat tip to David Albert, MD, of AliveCor via Twitter

CVS’ bid for Aetna–will it happen, and kick off a trend? (updated)

We have scant facts about the reported bid of US drugstore giant CVS to purchase insurance giant Aetna for a tidy sum of $200 per share, or $66 billion plus. This may have been in development for weeks or months, but wisely the sides are keeping mum. According to FOX Business, “an Aetna spokesperson declined to chime in on the reports, saying the company doesn’t “comment on rumors or speculation” and to Drug Store News, a CVS Health spokesperson did the same. Aetna’s current market cap is $53 billion, so it’s a great deal for shareholders if it does happen.

Both parties have sound reasons to consider a merger:

  • CVS, like all retailers, is suffering from the Amazon Effect at its retail stores
  • Retail mergers are done with the Walgreens Boots AllianceRite Aid merger going through considerable difficulties until approved last month
  • The US DOJ and Congress has signaled its disapproval of any major payer merger (see the dragged-out drama of Aetna-Humana)
  • It has reportedly had problems with its pharmacy benefit management (PBM) arm from insurers like Optum (United HealthCare), and only last week announced that it was forming a PBM with another giant, Anthem, called IngenioRx (which to Forbes is a reason why this merger won’t happen–this Editor calls it ‘hedging one’s bets’ or ‘leverage’)
  • Aetna was hard hit by the (un)Affordable Care Act (ACA), and in May announced its complete exit from individual care plans by next year. Losses were $700 million between 2014 and 2016, with over $200 million in 2017 estimated (and this is prior to the Trump Administration’s ending of subsidies).
  • It’s a neat redesign of the payer/provider system. This would create an end-to-end system: insurance coverage from Aetna, CVS’ Minute Clinics delivering care onsite, integrated PBM, retail delivery of care, pharmaceuticals, and medical supplies–plus relationships with many hospital providers (see list here)–this Editor is the first to note this CVS relationship with providers.

We will be in for more regulatory drama, of course–and plenty of competitor reaction. Can we look forward to others such as:

  • Walgreens Boots with Anthem or Cigna (currently at each others’ throats in Delaware court
  • Other specialized, Medicare Advantage/Medicare/Medicaid networks such as Humana or WellCare?
  • Will supermarkets, also big retail pharmacy providers, get into the act? Publix, Wegmans, Shop Rite or Ahold (Stop & Shop, Giant) buying regionals or specialty insurers like the above, a Blue or two, Oscar, Clover, Bright Health….or seeking alliances?
  • And then, there’s Amazon and Whole Foods….no pharmacy in-house at Whole Foods, but talk about a delivery system?

Also Chicago Tribune, MedCityNews.

UPDATED. In seeking an update for the Anthem-Cigna ‘Who Shot John’ court action about breakup fees (there isn’t yet), this Editor came across a must-read analysis in Health Affairs 

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