What’s next for: Steward CEO now in criminal contempt of Congress; Walgreens’ Pessina’s fortune vanishes by 97%; Masimo’s Kiani now a man without a company

Senate unanimously votes to hold Steward Health CEO in contempt. The resolution passed on Wednesday 25 September refers the contempt charges against Dr. Ralph de la Torre, the CEO of Steward Health, to the Department of Justice (DOJ). The Senate Committee on Health, Education, Labor and Pensions (HELP) voted on 19 September to recommend two contempt charges–criminal and civil–to the full Senate. It is the first time since 1971 that a criminal contempt charge has been passed. The DOJ’s actions can include prosecution by the District of Columbia’s US Attorney which can mean arrest and possible incarceration, with a fine that doesn’t exceed $100,000, or civil contempt which usually involves a fine and another subpoena to appear. FierceHealthcare, Becker’s

The threatening language of the HELP committee members such as Bernie Sanders and Ed Markey surely did not encourage de la Torre or his legal counsel to appear on 12 September, with the anger across the board among all members regardless of party. All that it promised to be was, in street language, the worst kind of beatdown. Formally, the appearance was rejected because of Steward’s bankruptcy in adjudication in the US Bankruptcy Court for the Southern District of Texas supervising the sale of Steward assets. There is also a court order that prevents de la Torre from commenting during the sale process. To the press, his legal counsel depicted the HELP committee hearing as “a pseudo-criminal proceeding in which they use the time, not to gather facts, but to convict Dr. de la Torre in the eyes of public opinion.” TTA 14 Sept

Steward Health’s spectacular collapse opens even more Pandora’s Boxes for de la Torre. He possibly faces additional lawsuits attempting to ‘pierce the corporate veil’ to claw back his bank and personal, sizeable maritime and aviation assets–or hold him criminally liable, far more complicated, long-term, and damaging. A cynical view would be that de la Torre would be well advised to get on his $40 million yacht or one of his private aircraft–and depart for a destination that is reluctant to extradite to the US. 

Walgreens Boots Alliance’s troubles drastically shrink executive chairman Stefano Pessina’s personal fortune. Chairman Pessina, who holds 17% of WBA stock and is the single largest shareholder, has seen his holdings shrink in value by 97%, from $12 billion in 2015 to a current $1.3 billion, according to Bloomberg data. The 83-year-old WBA head has seen hard times before. He pulled a rabbit out of the proverbial hat in 2007 by going private with Boots and then merging it with Walgreens in 2015, but time and Mr. Market are not on his side with taking on the debt load necessary.

Is WBA or Walgreens attractive to an acquirer? With stock trading at a record low of around $8 and a market capitalization of about $7.5 billion, it may be a bargain if an investor ignores or doesn’t blanch at the debt load. But those who understand the business cannot buy due to US antitrust regulations, which rules out any retail competitor or PBM. Or the company could be parted out to healthcare providers or a health insurer, but that ignores their miseries, such as reduced Medicare Advantage reimbursements. Their mistakes such as VillageMD and unprofitable locations are in the middle of being worked out and the company is shrinking. Meanwhile, their 15 October full-year earnings report will be dripping with red ink, as their Q1-3 lost $314 million versus prior year earnings of $1.2 billion. Crain’s Chicago Business

Vanishing for Joe Kiani is his day job at Masimo after a dramatic proxy fight. The founder of the audio and health monitor company was voted out of his board seat by shareholders. He followed by resigning as CEO after founding the company 35 years ago. Michelle Brennan, a board member (from Politan) has been appointed as interim CEO. Previously, she was a senior executive at Johnson & Johnson’s companies, including international experience in business development, for over 30 years. She also is on the board of Cardinal Health. Korn Ferry is coordinating the search for a permanent CEO.

The proxy battle wasn’t even close, according a CNBC report reported by Strata-gee. Quoting an inside source, the Politan slate of two directors, Darlene Solomon and William Jellison, received twice as many votes as Joe Kiani and Christopher Chavez on the Masimo slate. 

The company is continuing ‘strategic alternatives’ (read: sale) of its consumer health and audio businesses, the latter mostly acquired in the utterly snakebit 2022 acquisition of Sound United’s consumer audio brands. Masimo is using Centerview Partners and Morgan Stanley as financial advisors and Sullivan & Cromwell as a legal advisor. Presumably, the Kiani-arranged sales to or joint ventures of these units with unnamed investors is off. Masimo will be retaining their professional healthcare and pulse oximetry products. For Q3 2024, Masimo reiterated its financials from early August, with earlier guidance here.

Whether others will depart with Kiani is too soon to tell. During the proxy fight in July, Masimo’s chief operating officer, Bilal Muhsin, promised to resign if Kiani was forced out, specifically citing that he would refuse to work with Quentin Koffey, a Masimo director and chief investment officer of Politan Capital. Other managers signed similar letters around the same time.  However, in the Masimo release on the Kiani resignation, financials, and management changes, CFO Micah Young and Muhsin stated that would provide more details on an earnings call in October.

The Strate-gee view was that shareholders got tired of hearing promises about Sound United and that Kiani was high-handed with them–treating it as his personal company and not theirs. Healthcare Dive

Facing Future: Walgreens CEO moves company into strategic review–will he get WBA board alignment?

Walgreens’ CEO Wentworth positions for turnaround. “This is not a 12-month turnaround story” said Mr. Wentworth at the TD Cowen healthcare investor conference. To this Editor, the public honesty and lack of cant (a/k/a “PR Speak”) was refreshing. His unobvious caveat though was aligning the board around what he and the new executive team–very few if any carryovers from the prior regime–see as the direction of the company and asset management.

The WBA board is led by executive chairman Stefano Pessina, who has a vested interest in a turnaround. He is the lead individual shareholder of WBA with apparently 10% of shares with other insiders (including the COO of WBA International, Ornella Barra, spouse of Mr. Pessina) having about 17%. Large institutional investors (Vanguard, State Street, etc.) have over 60% of the company. The share price has fallen about 40% in the past year (from early March 2023) and 55% from this time in 2022. (Derived from WBA and Yahoo Finance)

Example: This Editor has estimated from public information that Walgreens sank north of $10 billion into VillageMD, from initial and then controlling interest, then funding the buy of Summit Health/CityMD. This is a huge and recent investment that is going sideways in a span of less than three years. It does take some nerve to walk it back. TTA 22 Feb

Other key points Mr. Wentworth made, according to the most complete report in Crain’s Chicago Business, was that this was not a prelude to some massive unveiling of a New Walgreens, that it would be a ‘starting gun’ for the work to be done, and that investors would be updated through the process. The review will include:

  • Evaluating its 8,000+ location footprint based on current and projected population and type of usage
  • US Healthcare assets including the already shrinking VillageMD [TTA 29 Feb], home care benefit management services primarily for payers CareCentrix, and specialty pharmacy Shields Health Solutions.
  • Shields is apparently no longer up for sale per earlier reports but Boots now may be
  • Smaller assets around clinical trials and pharmacy fulfillment centers

The next earnings call is 28 March, when undoubtedly more will be revealed.

FierceHealthcare caught up to this as well.

Editor’s POV on ‘musts to avoid’: Walgreens’ chief medical officer, Dr. Sashi Moodley, was interviewed during ViVE24 by Mobihealthnews, It is only remarkable in how he sidestepped direct questions beyond the first two lengthy ones on a virtual care initiative, generating a fog of non-answers around VillageMD closures and corporate strategy that became peasoup thick by the last question. (Kudos to Jessica Haden for not going wobbly.) The dubious wisdom of placing a C-level in front of the press at a ‘hard and tough news’ time, one whose expertise is clinical in nature, most comfortable in speaking to that and not corporate strategy, plus evidently has a hard time editing/limiting responses, should be rethought. 

Walgreens’ transformation continues: new CEO enters, CIO exits, launches Virtual Healthcare in 9 states

This week of HLTH has not been short of Big News from WBA, perhaps cleverly to ace out CVS, Amazon (facing retail monopoly charges from the FTC and 17 states), and Walmart. Regaining the lost momentum at Walgreens Boots Alliance will be a heavy lift.

Enter Tim Wentworth as CEO from retirement. Mr. Wentworth formerly helmed Express Scripts, coming on after that company’s acquisition of pharmacy benefits manager Medco. When Express Scripts was acquired by Cigna in 2018, he headed their health services area, now Evernorth, retiring from there at the end of 2021. He is exactly what executive chair Stefano Pessina (and the board) ordered–a younger executive (63) with CEO experience, energy, through-the-ranks background, and deep, deep experience in pharmacy management, payers, and healthcare. To CNBC on Tuesday, Mr. Wentworth said, “What made me decide to come back was a chance to lead this iconic brand and company at a time when it’s not in a steady state. It’s a massive platform…they touch almost 10 million people a day.” Plus undoubtedly an offer hard to refuse! He starts on 23 October. Walgreens replaced Roz Brewer, who departed 31 August [TTA 19 Sep], in record time. Her interim replacement, former pharma exec Ginger Graham, returns to her lead independent director spot on the WBA board. WBA release

Walgreens recently missed earnings estimates for its Q3 ending in May [TTA 28 June] with underperformance problems in retail consumer sales and urgent care CityMD. They have been selling peripheral businesses and investments, with plans to lay off 10% (500) of its workforce. It doesn’t help the bottom line that Walgreens last month settled a class action lawsuit about its long-ago Theranos clinics in Arizona for a tidy $44 million.

There’s trouble from the streets to the suites right now. Pharmacy workers walked out on 300 Walgreens locations this past Monday through Wednesday. Their big issues are short-staffing and overwork. Demands are, according to an organizer talking to the AP: to improve transparency about shifting hours and schedules; to set aside training hours for new team members; and to adjust tasks and expectations at each location based on staffing levels. They are also organizing for union representation. Walgreens isn’t alone in this–CVS has also faced pharmacy worker walkouts. Fortune  At the executive level, chief information officer Hsiao Wang left suddenly on 2 October after one year after a recent leave of absence. His departure was confirmed by Walgreens to industry publication PYMNTS. Neal Sample, a consultant and former CIO at Northwestern Mutual with experience at Express Scripts, will be stepping in on an interim basis. Retail Dive. This follows on Walgreens’ chief financial officer James Kehoe July departure after five years to join financial services firm FIS in August. Mr. Wentworth’s HR experience will come in handy on these issues.

On a positive note, WBA announced Monday at HLTH that its Walgreens Virtual Healthcare will start up in nine states later this month. Via their website, Virtual Healthcare will provide on-demand consults with providers on common medical conditions and for prescriptions. It will be available in California, Florida, Georgia, Illinois, Michigan, Nevada, North Carolina, Ohio, and Texas, which represent almost half of the US population as well as Walgreens’ pharmacy customer base. It will be primarily clinician chat-based, with synchronous video visits for select conditions. Conditions treated include seasonal allergies, COVID-19 or flu, erectile dysfunction, hair loss, birth control, and other common health needs. Cash only–$33 for chat with video visits $36 to $75, which puts it in line with Amazon Clinic’s cash charge of $35 and $75 respectively. Insurance may come in the future. WBA has had telehealth through VillageMD locations and has actually had tele-dermatology service since 2016. Walgreens’ move, though, is a little tardy given Amazon Clinic’s national rollout after privacy issues delayed it on 1 August [TTA 1 Aug] and CVS’ Virtual Primary Care nationally with Amwell a year ago [TTA 12 Aug 22]. Healthcare Dive

Walgreens trying to reboot “healthcare transformation” momentum, looking for new CEO, settling with Theranos litigants

A $4.7 billion makeup for chairman Stefano Pessina. In the race among CVS Health, Walmart, and Amazon, something is not clicking with Walgreens Boots Alliance (WBA). WBA was a late entrant in the diversification race but they certainly went big when they did, acquiring VillageMD, Summit Health, and CityMD plus at-home care provider CareCentrix and specialty pharmacy Shields Health Solutions. But the results have been disappointing. Their Q3 reported in June was negative [TTA 28 June]. Roz Brewer, appointed as CEO 2 1/2 years ago for her expertise in retail operations at Starbucks and Sam’s Club, was also tasked with making Mr. Pessina’s healthcare diversification strategy, started in 2020 with VillageMD, a reality. Billions were spent, including a full $5 billion purchase of VillageMD along with their purchase of Summit Health and CityMD, plus CareCentrix. With no healthcare experience, she had to learn and execute from scratch–an adventure that ended on 31 August with her resignation. CNBC

How now, Stefano? Ms. Brewer’s temporary replacement is Ginger Graham, the lead independent director and a pharmaceutical veteran as former president and CEO of Amylin Pharmaceuticals plus group chairman in the office of the president for cardiology medical technology company Guidant. She will serve only until another CEO, now with healthcare background, is chosen. Mr. Pessina has an outsize vote in the choice as a 17% shareholder, engineer of the company, and himself CEO for five years after merging Alliance Boots with Walgreens in 2014.

Two other options for WBA are to go private, which Mr. Pessina has done before in 2007, but one that involves taking on heavy debt loads in addition to a high level of existing debt. Unlike 16 years ago, at 82 he has limited time to recoup the value of his personal 17% share. The other is to find an acquirer willing to pay a premium for the company higher than the current share price. That acquirer due to antitrust could not be a competitor like Walmart, but possibly a healthcare provider or a health insurer. But given the current attitudes at FTC and DOJ, even that approach may fall into the very wide Antitrust Net [TTA 11 Aug and previous].

WBA’s troubles are coming at a bad time, with CVS Health and Amazon also struggling with perhaps too-aggressive approaches in a down market, especially for healthcare.

The analysis in Crain’s Chicago Business (PDF) is worth your time–see pages 1 and 39.

Update  The class action lawsuit by customers who purchased Theranos blood tests at Arizona-located Walgreens, originally filed in 2016, was settled two weeks ago. Walgreens will pay $44 million into a fund for affected customers. There are two levels of individual payments. One group of customers will receive double the cost of their Theranos tests, plus an additional $10 base payment. Then there are members of a Walgreens Edison subclass, presumably more damaged, who will receive an additional $700 to $1,000 for medical battery claims. The plaintiffs’ memorandum has additional detail to be approved by the US District Court in the District of Arizona. There was also a settlement with Sunny Balwani that involves the successor company, Theranos ABC, but none with Elizabeth Holmes. MedTech Dive   Hopefully the new CEO will avoid the Fear of Missing Out (FOMO) that powered Walgreens’ involvement with Theranos.

Unnerving mergers (US-UK); DoD’s EHR picked; EHRs & AMA

Blues feeling Blue about…The Anthem-Cigna merger, finalized last week (but yet to be approved by the US and likely the UK Governments as Cigna issues policies there), gives them bragging rights over the Aetna-Humana merger and Optum/United Healthcare in their covering of 53 million US lives as the largest US health insurer. Unnerved is the Blue Cross and Blue Shield Association, of which Anthem is a part of with the Anthem and Empire Blue Cross plans plus others in a total of 14 states. But Anthem also competes with ‘the Blues’ in 19 additional states where it markets under a non-Blue brand, Amerigroup, primarily for Medicare and Medicaid (state low-income coverage). Many of the Blues are non-profit or mutual insurers; many are partial or single-state, like Independence, Capital and Highmark (PA/DE/WV) in Pennsylvania and Horizon Blue Cross of New Jersey. Their stand-alone future, not bright since the ACA, now seem ever dimmer in this Editor’s long-time consideration and that of Bruce Japsen writing in Forbes. Also Morningstar considers Anthem’s overpaying and the LA Times overviews.

Walgreens Boots Alliance, another recent merger of quintessentially American and British drug store institutions, named as its interim CEO Stefano Pessina. He previously ran Alliance Boots prior to the merger and is the largest individual shareholder of WBA stock with approximately 140 million shares, so one cannot call it a surprise. At a youthful 73 (see video), one assumes he also takes plenty of Walgreens vitamins and uses Boots No 7 skin care. Forbes.

Updated: The big EHR news is the US Department of Defense announcing the award of its Defense Healthcare Management System Modernization contract this week. At 10 years and $11 billion, even giant EHRs went phalanxed with other giant government contractors to face DOD: Epic with IBM; Cerner with Leidos, Accenture and Intermountain Healthcare; Allscripts with Computer Sciences Corp. and Hewlett Packard. Certainly there will be ‘gravitational pull’ that affects healthcare organizations, but the open and unanswered question is if that pull will include the far nearer and immediately critical lack of interoperability with the Veterans Health Administration’s (VA) VistA EHR. The Magic 8 Ball reads: Hazy, try again later.  Leidos/Cerner announced as winners close of business Wednesday 29 July. 

In other EHR news, US doctors vented last week on how much they hate the @#$%^&* things to the American Medical Association‘s ‘town hall’ in Atlanta. Bloat, diminished effectiveness, error, getting in the way of care due to design by those without medical background presently prevail. The AMA’s Break the Red Tape campaign asks CMS to “postpone” finalizing Stage 3 Meaningful Use (MU) rules so that it can align with new payment/delivery models. Better yet, they should buy thousands of copies of Dr Robert Wachter’s book [TTA 16 Apr] and drop them on every policymaker’s desk there, with a thud. Health Data Management