News roundup 16 Oct: Walgreens shuts 1,200 stores–500 in ’25, CVS exiting core infusion biz, Masimo v. Apple update, DEA recommends 3rd telehealth extension, Change hack costing UHG $705M, Owlet back in NYSE compliance

October 16, 2024 | by

A roundup of chickens coming home to roost? But some chickens are just happy to come home.

Walgreens’ Mound of Misery just grew a little higher. The headlines today were all about Walgreens’ closing 1,200 stores over the next three years. Their current store location roster is about 9,000, according to their website. 500 of these will be closed during their upcoming FY2025.  Their release stated this would be “immediately accretive to adjusted EPS and free cash flow”. (Were they making any money at all?) This helped to give their share price a nice bump from $9 to above $10 at market close today. Last year, Walgreens’ shares were priced above $22.

Q4 (closing 31 August) closed with a 6% boost in retail sales. However, losses were $3.0 billion versus a net loss of $180 million in the prior year’s Q4. The reasons cited in their release were a higher operating loss, a $2.3 billion non-cash charge for valuation allowance on deferred tax assets primarily related to opioid liabilities recognized in prior periods, and a non-cash impairment charge related to equity investment in China. The operating loss related to a non-cash goodwill impairment charge for CareCentrix. 

The full year was not cheery. Sales were $147.7 billion, an increase of 6.2% from a year ago (in constant currency, 5.7%). But losses in their FY2024 were $14.1 billion, a stunning increase of 104.5% compared to prior year.

VillageMD is being monetized along with other assets. “CEO Tim Wentworth said in the earnings call that the company is focused on “monetizing non-core assets to generate cash,” naming VillageMD as an example, to focus on its core retail pharmacy business.” HIStalk 16 Oct Can Walgreens shrink itself to profitability? Fierce Healthcare

Over at CVS, they’re doing their own shrinking. CVS is closing its core infusion services business, with plans to either close or sell 29 related regional pharmacies. Infusion services were bought from Coram LLC in 2013 for $2.1 billion. This Reuters exclusive was based on an 8 October memo and confirmed by a CVS press representative. Patients relying on antibiotics, drugs supporting muscular health, and intravenous nutrition services will be transferred to other providers. CVS will continue to provide certain services: specialty medications and enteral nutrition, or tube feeding, at pharmacies in Minnesota, Pennsylvania and San Diego, with nationwide nursing services. Hat tip to HIStalk 16 Oct.

Masimo wins one big patent challenge, loses one (or four), to Apple. 

The Win: Apple had sued Masimo in the US District Court of Delaware for patent infringement of Apple’s utility patent 10,942,491 B2 (“the ‘491 patent”). Masimo was charged as violating Apple’s patent on 19 features. Masimo appealed to the Patent Trial and Appeal Board (PTAB) of the US Patent and Trademark Office (USPTO) for an inter partes review (IPR) of the patent on the grounds of ‘unpatentability’, a very high proof. Masimo succeeded in this, rendering Apple’s ‘491 patent useless. Apple can appeal but the likelihood of success against the PTAB ruling that required three administrative patent judges to review, at this level of proof, is low. In this Editor’s view, this may spur other developers to come up with innovations now that these 19 features have been deemed unpatentable.

The Loss (I think): In review in the Delaware District Court are four complicated lawsuits between the two combatants, with Apple’s premise that Masimo has infringed upon other patents. Masimo alleged “inequitable conduct” by Apple in their patent filings with the PTO, essentially alleging fraudulent filings on multiple patents. Apple has been granted a summary judgment on Masimo’s claims, throwing them out.

Interestingly, Masimo–never shy to announce wins versus their foe Apple under the prior leadership of Joe Kiani–has remained strangely mum. (Perhaps everyone is waiting for the takeover dust to settle?) Will the ‘new’ Masimo be so combative against Apple? A far more detailed analysis for the patent mavens is in Strata-gee. A very large hat tip and bow to their editor, Ted Green, who writes about marketing primarily in the audio/visual business but has been 100% on top of The Masimo Saga–thank you!

To no one’s surprise, DEA kicks the telehealth waiver can down the road–for the third time. The Drug Enforcement Administration (DEA) sent to the White House’s Office of Management and Budget (OMB) a proposed rule to extend telehealth prescribing of Schedule II and higher controlled substances without changes. These waivers which removed the in-person examination requirement under the Ryan-Haight Act were instituted during the Covid pandemic and extended twice [TTA 11 Oct 23, 11 May 23] with a final expiration of 31 December 2024. In September, reports indicated that DEA not only wanted to restore prior restrictions but also wished to introduce additional ones. However, their timing (September!) given Federal standards of publishing draft rules and lengthy comment periods before a final rule was impossible to be achieved by year’s end. [TTA 13 Sept]

Whether OMB will approve the extension (to a date that cannot be confirmed since the text is unavailable, but reportedly one year) is not certain, as it may be disputed by the Department of Health and Human Services (HHS). Since the waiver is due to expire at the end of the year, this may help to assure the multitude of mental health and other telehealth companies dependent on legal remote diagnosis and prescribing controlled substances that their businesses can continue. FierceHealthcare

UHG didn’t have a happy quarter either due to Change. The total hit to UnitedHealth Group of the Change Healthcare hack is now estimated at $705 million, or 75 cents a share. Their 2025 guidance on profit is a lackluster $30 per share–below Wall Street estimates of $31.18. Government plans’ cuts in payments for Medicare Advantage plus and low state payment rates for Medicaid are affecting UHG as well as nearly every other payer. UHG’s share price on the news reacted negatively, falling 9% and dragging down other payers as well. UHG must rue the day they bought Change Healthcare, as it has been largely bad news ever since. CNBC

And winding up on a happy note–Owlet is back in good graces with the NYSE. Last year, they faced a NYSE notification that they were out of compliance with the $50 million minimum valuation of the company over a consecutive 30-day trading day period. They are now in compliance and their Class A shares can trade without the ‘BC’ black mark and no longer be listed as such on the NYSE website. The NYSE will be following its standard procedure of a 12-month follow-up on compliance. Release, Mobihealthnews

The baby sock and baby monitoring company has had a rough couple of years between a cracked SPAC (2021), FDA notifying them at the end of 2021 that they considered the Smart Sock a medical device, forcing the company to pull it from distribution [TTA 4 Dec 21], mounting losses, layoffs, and rebuilding with an FDA-cleared BabySat and enhanced Dream Sock [TTA 21 June 23]. Usually, this concatenation of events means the company either shuts or sells, but Owlet has done neither and bootstrapped itself. Revenue in their Q2 ending 30 June was up 58% year over year with a narrower operating loss of $2.2 million, compared with $6.7 million in prior year. It recently expanded their European distribution of the Dream Sock after CE Mark certification in May to a total of 11 countries [TTA 18 Sep]. 

Short takes: Medicare telehealth flexibilities may extend; ‘no interest’ in Transcarent sale; NeueHealth ekes out positive net income; Cigna and Oscar break up; DocGo, Ascension cyberattacked (updated)

May 10, 2024 | by

Two-year extension of telehealth flexibilities advances in Congress. A small telehealth victory was notched in the House, where the powerful Ways and Means Committee passed the Preserving Telehealth, Hospital, and Ambulance Access Act by a vote of 41-0. The bill would extend many of the Medicare and Federal program telehealth waivers and flexibilities established during the pandemic to the end of 2026. It is now expected that the House will bring the bill to the floor for a full House vote in the fall session. Ways and Means’ jurisdiction is over most financial and revenue-raising Federal measures, such as taxation, Social Security, and Medicare. Highlights of the bill:

  • Geographic and originating-site waivers
  • Ability for Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) to continue to furnish telehealth services
  • Expanded list of eligible Medicare providers, allowing physical therapists, occupational therapists, speech language pathologists, and audiologists to render telehealth services
  • Ability to offer audio-only services
  • Repeal of telemental health in-person requirement
  • Preservation of the Acute Hospital Care at Home Program through CY2029

Parts are controversial, such as the telemental in-person requirement, hospice recertification, and guardrails around durable medical equipment (DME) and clinical diagnostics requiring reports to prevent fraud, waste and abuse. The bill did not include remote prescribing of controlled substances. Expect further markups to be made before passage in the House, later in the Senate, and the joint bill. The American Telemedicine Association (ATA) applauded the bill with the main caveat being around telehealth controlled substance prescribing. Full text, FierceHealthcare, ATA release

Glen Tullman rules out a sale of Transcarent–but not an IPO. On the heels of a substantial $126 million in Series D funding and a  jumbo $2.2 billion valuation [TTA 8 May], Transcarent’s CEO Tullman, in an interview with MedCityNews, stated that he had “no interest” in selling the company. Transcarent is already run “like a public company”, has a strong leadership team already in place, and “we’ll make any exit decisions for the right reasons.” Mr. Tullman has already run four public companies and IPO’d three: CCC Information Systems (in auto insurance), Livongo, Allscripts (now Veradigm), and Enterprise Systems. Livongo was sold to Teladoc in 2020, with consequences. Veradigm, the former Allscripts, went public in 1999–25 years ago in a vastly different world. Their big bet in enterprise health navigation is now on AI for both physicians and members.

Back to the New Reality, Bizarro World edition. NeueHealth, which is achieving a world record in Dodging Disaster while paying out leadership bonuses, eked out a decent Q1. The former Bright Health Group managed to squeak out revenue of $245.1 million, operational net income of $5.7 million, and an adjusted EBITDA of $2.5 million compared to a Q1 2023 loss of $5.7 million. This doesn’t mean it was profitable because its net income for Q1 was a negative $28.5 million. Revenue dropped by 18%–$55 million–compared to Q1 2023. New Enterprise Associates (NEA) must be pleased, as they are now 60% owner of the operation with another loan of $30 million secured by penny warrants [TTA 16 Apr]. The full year guidance was reaffirmed at $1 billion in revenue with 70% coming from its NeueSolutions business (their management services for ACOs and IPAs), and adjusted EBITDA between $15 million and $25 million. What remains, of course, are the UXBs–the problems with their financial reporting as noted in their 2023 results and that ever-so-nasty $400 million in payments due to CMS in March 2025, as well as to Texas on their exited ACA plans. But NeueHealth has played both ends against the middle and tied up creditors in Gordian knots for a couple of years, so why not keep on keepin’ on for now? Release, earnings call transcript, FierceHealthcare   TTA 5 April

The much-touted partnership of big Cigna and insurtech Oscar Health is breaking up. The Cigna + Oscar joint program covers the small group business. As of the end of Q1, it had 61,428 members enrolled. The program, which had no forecast of profitability, will end in 2025. CEO Mark Bertolini’s statement was rather forceful in this regard. Oscar is shifting to marketing ICHRA, or individual coverage health reimbursement arrangements that permit small businesses to offer employees individual health plans subsidized by employer contributions. Cigna will continue to offer plans for the small and midsize group market. Becker’s

Cyberattacks strike DocGo, Ascension Health. DocGo reported a data breach in its 7 May Form 8-K filed with the SEC. It involved a limited but unspecified amount of protected health information (PHI) of patients using its ambulance services, but was confined only to that. No other report of the breach has been made. This followed a positive Q1 report of revenue up to $192.1 million, from $113 million in the same quarter 2023. Net income was $10.6 million versus last year’s net loss of $3.9 million. Adjusted EBITDA went up to $24.1 million versus $5.6 million. DocGo provides telehealth/RPM, mobile urgent care, disease management, and medical transportation services. It recently lost its lucrative but controversial NYC migrant service contract but retains city Health + Hospitals contracts and some smaller housing service contracts. Mobihealthnews Ascension Health, on the other hand, has had a serious disruption in some clinical operations affecting an undisclosed number of hospitals and systems, but was reported in Michigan. On Wednesday, Ascension detected unusual activity in select technology-network systems. They advised business partners to sever connections to their systems and have brought in Mandiant to assist in investigation and remediation efforts. Ascension is one of the largest health systems in the US, with 140 hospitals in 19 states plus the District of Columbia. Healthcare Finance, Detroit Free Press, Ascension website

Ascension Update: Reports since yesterday are now far more exact. Its EHR, MyChart, several systems for ordering tests and medications, plus some phone systems are unavailable across the system. Some appointments and surgeries have been postponed. There are emergency diversions of care in some locations. Ascension’s statements to media has been that ‘downtime procedures’ will be in place ‘for some time’. There is no timeline given for restoration. Becker’s, Healthcare Dive

 

Mid-week roundup: DEA extends telehealth prescribing waiver to November; telehealth usage continues to erode; NextGen EHR hacked, 1M records breached

May 11, 2023 | by

The answer: 11 November. The question: how long was the Drug Enforcement Administration (DEA) planning to extend their telehealth waiver of in-person prescribing requirements on Schedule II and higher controlled substances?  Both the DEA and the Substance Abuse and Mental Health Services Administration (SAMHSA) issued the “Temporary Extension of COVID-19 Telemedicine Flexibilities for Prescription of Controlled Medications”rule on 9 May before the Public Health Emergency (PHE) expired on 11 May. It’s a six-month reprieve for the beleaguered telemental health providers/prescribers and their patients–and sure to be hotly debated over the next few months as a final rule must replace the temporary extension rule and the Ryan-Haight Act isn’t going away. DEA release, TTA 4 May

FAIR Health’s tracking of telehealth medical claims has languished in the Fives–as in 5%–since last year. February is the latest month of tracking and it declined from 5.9% in January to 5.5% in February. Again, the vast majority of claims are for mental health codes (66.7%) far ahead of diagnosis #2, acute respiratory diseases and infections, where Covid-19 once resided. However, the latter accounted for 25.6% of asynchronous (store and forward) telehealth diagnoses. A new metric on the report is audio-only telehealth, which is only slightly more popular in rural versus urban areas. The greatest difference from the national norm is in the West, where February telehealth claims were 7.6%. Monthly national summary, FAIR Health main page for monthly and regional summaries.

NextGen’s EHR/practice management system hacked, 1.05 million patient records breached. Information stolen included patient name, dates of birth, addresses, and Social Security numbers. This was revealed in a filing with the Maine attorney general’s office since it included over 4,000 Maine residents. The hack of the NextGen Office system took place between 29 March and 14 April 2023. It’s been a bad year for NextGen’s IT and security teams, as it also experienced a short-term ransomware attack in January by AlphV/BlackCat. (The two couldn’t be related…could they?) No word yet on class action lawsuits or Federal penalties.  TechCrunch