Short takes: Orion digital pain therapeutic to be commercialized by Newel Health; Verma to head Oracle Health; CVS to shut 25 LA-area MinuteClinics

Orion Health licenses its chronic pain therapeutic to Newel Health. Orion’s ODD-533 (Rohkea), classified by FDA and the EU MDR as software as a medical device (MDSW or SaMD) will be developed, manufactured, and commercialized by Newel. Newel, located in Salerno, Italy, designs and commercializes digital medicine and digital therapeutics (DTx) for the US and EU such as Soturi, a digital therapeutic app for Parkinson’s Disease [TTA 23 Feb 23], Orion, located in Espoo, Finland, develops primarily human and animal pharmaceutical products. Orion release

Oracle wastes no time in finding a new Oracle Health head, Seema Verma. Conveniently in-house, the former head of the Center for Medicare and Medicaid Services (CMS) from April 2017 to January 2021 joined Oracle in April last year as senior VP in charge of life sciences.  As executive VP, she will oversee both Oracle Health and life sciences as general manager. Verma’s appointment was announced internally in December, according to Bloomberg. In January, Oracle Health’s general manager, Travis Dalton, announced his departure effective 1 March to join MultiPlan as CEO and president. Verma’s government experience will come in handy, as she has the difficult situation of the stalled Millenium EHR at the VA as well as finalizing the Military Health System rollout, ensuring interoperability–as well as growing the faltering hospital EHR business. By combining the positions, Oracle also eliminates one large C-suite salary. Becker’s

And confirming signs of softness in the clinic business [TTA 24 Jan, JPM’s new reality], CVS announced the closure of 25 MinuteClinics in the Los Angeles area. Closing date is 25 February. They will retain 11 MinuteClinic locations in the Los Angeles area, including an on-demand virtual care practice. Clinics are losing out to virtual care and for more immediate needs, urgent care. This follows Walgreens’ closure of a planned 60 VillageMD adjacent practice locations and softness in their CityMD clinic group. List of 25 closures (LA Times), Becker’s

Wrapping up many changes at Walgreens, VillageMD, CVS Health, Oracle Health

Walgreens’ multitudinous c-c-c-changes from the suites to the streets. Financially, Walgreens’ US Healthcare segment in Q1 2024 (Oct-Dec 2023) grew sales to $1.9 billion versus prior year’s $989 million. This included VillageMD’s revenue from Summit Health and some growth at CareCentrix (home care) and Shields Health Solutions (specialty pharmacy). But losses continued, with an operating loss of $456 million and adjusted operating loss of $96 million, reduced from the prior year’s $152 million loss. This is also after their November layoff of several senior staff and 5% of corporate workers following a May layoff [TTA 10 Nov 2023]

  • On the earnings call, new CEO Tim Wentworth confirmed that VillageMD has closed 27 under-performing clinic locations. This is a little less halfway through the 60-location previously announced closure. This is a key part of the $1 billion in 2024 cuts announced at the end of last quarter by then-acting CEO Ginger Graham [TTA 18 Oct 2023]. Healthcare Dive
  • VillageMD’s weakness has been filling physician ‘patient panels’. A patient panel is one doctor’s patient count treated over typically 12 to 18 months. This can be as high in primary care as 2,500 patients, though no numbers were cited for VillageMD. According to Wentworth, VillageMD is now “on a diet”; fewer locations, more patient concentration at available clinics, patient panels and profitability goes up. Or so the math goes. Forbes
  • Walgreens also has trouble in the IT department. Key indicators: Neal Sample is their third CIO in a year, layoffs in staff among employees and contractors, departures of key managers, and the need for new technology including AI to support operations. Graham has cited the new pharmacy inventory system to more accurately forecast demand using AI as an example of the direction she sees IT taking. (Let’s hope it will quiet the rebellious pharmacists.) The former CIO, who departed in September, stocked up on AI and engineering talent at the expense of other needed roles. The Wall Street Journal’s deep dive from December.

Year’s end brought a stop to some of the musical chairs in the CVS Health C-suite. CFO and appointed president of Health Services Shawn Guertin turned his leave of absence due to family health reasons into a formal departure at the end of May. Interims Tom Cowhey moves from SVP corporate finance to CFO and Mike Pykosz, the CEO of Oak Street Health, becomes president of Health Care Delivery. Release, FierceHealthcare

Oracle Health also has the music up and the chairs out.

  • General Manager Travis Dalton is departing on 1 March to join MultiPlan as president and CEO. He succeeds Dale White, who moves to executive chairman replacing the retiring chairman Mark Tabak after 23 years with the company. MultiPlan is a payer cost management company that serves about 700 payers in payment and revenue integrity, network-based and analytics-based services. Dalton is the fifth of 10 senior executives from Cerner to depart after the late 2021 sale to Oracle.MultiPlan releaseHIStalk 1/5
  • Oracle Health’s chairman, Dr. David Feinberg, has also been making some transitional moves of his own, joining Aegis Ventures as a senior advisor while remaining at Oracle. His role is to help Aegis work with a consortium of health systems on developing and launching digital health products. Interestingly, there has been no disclosure of the percentage of time he will spend at Oracle versus Aegis. Dr. Feinberg also is a Humana board member. He joined Cerner from Google Health and within a few months, Cerner was sold.  Modern Healthcare

Signs of the next phase in 2024? Veradigm CEO, CFO booted (updated); SmileDirectClub fails, TeleDentists steps up; FruitStreet sues Sharecare for $25M; Walgreens’ former CEO Roz Brewer’s platinum parachute

As your Editor reflects on 2023’s BloodOutOfARock versus 2020-2021’s Alcoholic Bender or the ‘new normal’ touted by the Usual Suspects (with 2022 only a burp on the way), she actually sees some Signs of Hope. 

Having lived through the Digital Health Slough of Despond of 2008-2009 as the marketer for an early telemonitoring company, there are many actions that to the observant are markers that the board is being cleared of the also-rans and never-should-have-beens. They are like dead plants and brush that need to be cleaned out so that new growth can happen. We are cycling through some of them already as we move to a New Reality and winding this up, with some examples. 

  • Early stage companies still in the red, with promising financials, but needing to get to the next stage, suddenly unable to get even modest funding (an early indicator of funding drought)
  • Large companies that can get funding snapping up smaller companies at knock-down rates to fit a ‘vision’. Watch for fill-ins, add-ins, bolt-ons that later are revealed to have taken place ‘just in time’. (And may be sold or spun off later in the cycle.)
  • Large companies veering off into lines of business that look like meadows but are minefields–and hiring expensive senior executives who don’t know one or the other but then have to run both at very high levels. They then depart (or are departed) with expensive packages.
  • VCs and PEs really snapping the purses shut–and shutting. (The latest is OpenView in Boston, not even much of a healthcare player except for a couple in HIT over a decade ago but a recently participant in a Series B for RPM Optimize Health)
  • Public companies moving from party-hearty unicorns to hoarding pens and Post-It notes to locking the doors bankrupt in two to three years. (Cracked SPACs, IPOs, and more)
  • Too many players competing with each other with near-identical services in what turns out to be a limited market–and gaining advantage by cutting patient health, privacy, and regulatory corners. (DTC telemental care and drug prescribing)
  • Layoffs at companies that over-hired in the boom spreading to larger companies that largely did not, cutting their next generation of leaders in response to Mr. Market and creating internal chaos. (Instigating panic at blue-chips like CVS and Walgreens)
  • Stupid (yes) acquisitions being acknowledged and cleaned off the books–none too quietly, but done for survival’s sake. (Somewhere there should be a memorial to Teladoc-Livongo. Sorry, Teladoc.)
  • Increased Federal and state regulation of normal business processes. (FTC’s sudden prominence adding to the usual DOJ antitrust pile-on and senatorial posturing)
  • A general cleansing of the cant and hype infecting a sector. (Look to the conferences and press releases for changes in language.)

In this Editor’s observation, another latter-stage sign is when C-levels don’t survive management failures and are sent packing. Another is seeing a small company sue a larger one over failed partnerships, usually involving IP or program design theft. This past week had examples of these two, plus examples tracking with the above markers.

Veradigm still minus 2022-23 financial statements, boots and replaces its CEO and CFO. The former Allscripts has failed to file financial statements for full year 2022 and to date in 2023 due to a massive flaw in its financial reporting software adopted in 2021 that affected its revenue reporting going back to then. While it is still trading on Nasdaq despite 14 November and earlier 16 August, 18 May, and 20 March notices from the exchange under Nasdaq Listing Rule 5250(c)(1) (Veradigm release), there still is no resolution about when their statements will be filed with the SEC. The company’s latest move was to force the resignations of CEO Richard J. Poulton and CFO Leah S. Jones, replacing them with two interims. From the board, Dr. Shih-Yin (“Yin”) Ho becomes CEO for six months and Lee Westerfield, CFO of Clearsense, becomes CFO. Mr. Poulton, a 10-year veteran, will receive a $1.6 million severance. Ms. Jones will receive a six-month continuation of salary plus additional payments to “provide business-development related services” which is corporate-speak for paying you to transition to her replacement. The board will search for permanent replacements for the CEO and CFO positions.

According to their announcement, the management changes resulted from “the Audit Committee’s previously disclosed, ongoing independent investigation, which is being conducted by legal counsel and relates to the Company’s financial reporting and internal controls over financial reporting and disclosure controls”. Reading it, Job #1 for the new team appears to be reviewing the fiscal 2023 guidance that was released on 18 September and regaining compliance with the Nasdaq Listing Rule. Veradigm also reiterated that they will have a 2020-22 revenue reduction “relating to certain revenue recognition practices.”  

Additional board changes include the chairman, Greg Garrison, as executive chairman and the appointment of Carol Zierhoffer (bio), retired CIO of Bechtel Corporation, as lead independent director. Perhaps Ms. Zierhoffer can help with the conundrum of a software company engaged in vital health and financial information transmitted via practice EHRs and practice management having its own massive accounting software problem derailing them for two years. CFO Dive has more details on the audit and a shareholder suit filed in November.

Update: A Nasdaq panel spared Veradigm’s exchange listing, for now. Mark 27 February 2024 as the date Veradigm is required to provide their 2022-2023 financial reporting to Nasdaq as required under Listing Rule 5250(c)(1). This was reported in Veradigm’s 8-K filing to the SEC on 13 December. Note that Nasdaq’s release states “The Company plans to file its Form 10-K and the Form 10-Qs as soon as possible; however, no assurance can be given as to the definitive date on which such periodic reports will be filed.” (Editor’s emphasis) Stay tuned. Healthcare Dive

No rescue for direct-to-consumer clear dental aligner provider SmileDirectClub. SmileDirect, which along with Byte (acquired 2021 by dental industry giant Dentsply Sirona), NewSmile, SnapCorrect, and several others market DTC aligners and teledentistry, failed to find a buyer or new financing after its Chapter 11 filing in September. The plan centered around the once-billionaire founders buying the company back, but they could not get their main lender HPS Investment Partners and other creditors owed $900 million, nor new investors, on board.

Heavily advertised SmileDirect IPO’d in 2019 with a valuation of $8.9 billion, but never turned a profit from its combination of DIY and teledentistry. Other drains were a patent fight with CandidCare and multiple patient complaints including jaw damage, migraines from misalignment, and tooth loss. Candid, like Invisalign, now works only through dentists who do the impressions, filings for tooth separation if needed, progressive aligner delivery, and tracking progress over what is typically one year for children, teens, and adults (over 60% of business)

In the FAQs on the lone page on its website, SmileDirect no longer will honor customer contracts for aligners and dental checkups or lifetime guarantees, but continues to demand payment from patients on SmilePay contracts. (Good. Luck. With. That!) The Hill, Fortune, HIStalk 11 Dec. For the teledentistry service The TeleDentists, it is a marketing opportunity to join with Byte in prescribing and providing dentist services for their clear aligners (email promotion). The TeleDentists is also partnering with WebMD Care for consumers seeking care after researching a dental condition. (Release

(Editor’s note: Having gone through Invisalign as an adult to correct a growing problem with alignment, your Editor cannot conceive of a DIY approach to a complex process that also required a significant amount of daily self-discipline.)

Fruit Street Health sues former partner Sharecare for $25 million. The interestingly named Fruit Street provided its diabetes management program to digital health conglomerate Sharecare as part of Sharecare’s unified virtual health management platform for individuals and enterprises. Starting in 2018, Fruit Street had a business agreement with Sharecare to offer its CDC-recognized diabetes prevention program (DPP) on Sharecare’s platform. Sharecare now has its own diabetes prevention program, “Eat Right Now”, which Fruit Street claims violates the terms of its agreement. The lawsuit was filed in Fulton County, Georgia. Sharecare claims not only that the lawsuit is without merit, but also that Fruit Street owes them $3 million in payments.

Fruit Street was founded in 2014 as a public benefit corporation [explained here TTA 24 Feb] headquartered in NYC by Laurence Girard. It is modestly funded at $35 million. Atlanta-based Sharecare was founded 2018 by serial entrepreneur and WebMD founder/CEO Jeff Arnold with Mehmet Oz, MD, surgeon, TV celebrity, and former Senate candidate. Sharecare went public on Nasdaq in the palmy days of early 2021 via a SPAC with Falcon Capital Acquisition Corp. It broke out of the gate with a $3.9 billion valuation, but like most SPACs it cracked downward within months and shares now trade at an anemic $0.99. In January, current CEO Arnold will be transitioning to executive chairman. Long-time Centene exec and retired president Brent Layton will move from a board director position to the CEO chair (release). MedCityNews, Axios

Former Walgreens CEO Roz Brewer eyewatering compensation revealed. A final example of our third bullet above is the excellent financial arrangement Ms. Brewer had with Walgreens Boots Alliance. Her package of compensation and stock options awarded by the board was $71 million for about 30 months, which included a $4.5 million signing bonus to lure her from Starbucks, over half a million in moving expenses, and $60 million in three years of compensation. According to the information in The Messenger, a good portion was in stock which fell in value 57% during her time at Walgreens, continuing a trend before her arrival. It was also consistent with an executive termination without cause, which also tied her to non-disparagement and non-disclosure agreements. Was her departure by mutual agreement with the board? That is fairly typical language, but reports in the article attributed the real cause in this statement from a source indicating loss of confidence by the most important man at WBA, Stefano Pessina: “Stefano thought she was a lightweight and unable to do the hard, transformational things he needed her to do.” (Was buying the majority of VillageMD, starting the joint store/practice location plan, buying CareCentrix and specialty pharmacy Shields Health Solutions during her tenure, not quite enough? Perhaps too much spent in a hot market and not enough return, especially by VillageMD on Summit Health and CityMD?) 

Her departure and replacement by a healthcare veteran with directly related management and organizational expertise, Tim Wentworth, is yet another example of this particular cycle coming to completion. And now that we’re in the midst of clearing the field, what happens next?

Turmoil smacks retail healthcare (updated): Walgreens to shut 60 VillageMDs, as Village names 3 new presidents; CVS shakeup continues; Rite Aid bankrupt; Amazon’s One Medical rebrands Iora

Walgreens shuttering 60 VillageMD locations adjacent to stores in five markets. This follows a second disappointing quarter for Walgreens Boots Alliance [Q3 TTA 28 June] and a fiscal Q4 net loss of $180 million, or 21 cents per share. Their CFO attributed the loss to charges for certain legal and regulatory approvals and settlements (in September, $44 million for their Theranos fling), and one-time charges related to Walgreens’ cost-cutting program. Cuts announced by acting CEO Ginger Graham are $1 billion in 2024. Shares perked up slightly; since the start of 2023, share value has been down 39% for the year before the earnings call on 12 October. 

Cutting 27% of co-located VillageMD clinics in ‘non-strategic locations’ is a start. Currently, about 220 are co-located with Walgreens which followed an original plan of about 200 in 2023. However, since WBA bought a 63% share in VillageMD for $5.3 billion in 2021, VillageMD has aggressively expanded. They bought Summit Health last November for $8.9 billion ($3.5 billion from WBA) which included CityMD, acquired Starling Physicians in Connecticut, Family and Internal Medicine Associates in central Kentucky, and Dallas (Texas) Internal Medicine and Geriatric Specialists for a whopping 700 locations [TTA 9 Mar]. Last quarter’s revenue grew by 17%. But expansion can be problematic. Together with the underperformance of CityMD, which came with the acquisition of Summit, and weak retail sales, for WBA this led to an adjusted operating loss of $172 million for the US Healthcare segment. But…there may be more. HISTalk cites an analysis by AI company founder Sergei Polevikov that attributes half of WBA’s projected 2023 $3 billion net loss, its first ever, to…VillageMD. Yet it appears, at least in the press, that Walgreens is staking a great deal on VillageMD, even though it may be a ‘gamble’. FierceHealthcare

As noted last week, WBA has experienced problems from the streets to the suites. Pharmacy workers have walked out, the CEO was given the heave-ho before Labor Day and replaced in record time, the CFO exited in July, and the CIO mysteriously departed at the top of this month. Bad earnings and a depressed retail/pharmacy outlook, without Covid’s ‘black swan’ stimulus, will do that. Even the US Healthcare head on the earnings call resorted to the anodyne “We will continue to grow in 2024 but with a renewed focus on more profitable growth.”  TTA 11 Oct, Chain Store Age, CNBC

Updated & Breaking  VillageMD’s three new divisional presidents. Village Medical’s new president is Rishi Sikka, MD, who is joining from president of system enterprises at Sutter Health. CityMD is promoting Dan Frogel, MD to the dual role of president and chief clinical officer. He joined in 2013 as a founder of Premier Care which was merged into CityMD and has had other positions within CityMD and Summit Health. At Summit Health, Becky Levy, JD moves to the new position of president of Summit Health and Starling Physicians. She has been with Summit Health since 2011, previously as chief legal officer, chief administrative officer, and chief strategy officer. Business Wire 18 October

CVS Health continues to Shake & Bake. Chief financial officer and recently announced president of Health Services Shawn Guertin is taking a leave of absence due to “unforeseen family health reasons”. The CFO role will be covered by Tom Cowhey, SVP of corporate finance with Mike Pykosz, CEO of Oak Street Health, stepping in as the interim president of health services. Interestingly, the CVS release included Kyle Armbrester, the CEO of Signify Health, as being “highly involved in the Health Services strategy”. Both Oak Street and Signify were part of a CVS buying binge this year and last that topped $18.6 billion. Neither is reportedly profitable. As usually happens when the numbers don’t look good, CVS will be laying off 5,000 in the next few months, with the first tranche of 1,200 this month [TTA 23 Aug].  FierceHealthcare, Healthcare Dive

Retail pharmacy chain Rite Aid declared Chapter 11 last Sunday. One of the US’ largest chains with 2,000 locations in 17 states, it will close 150 locations and sell its pharmacy benefit manager Elixir. Rite Aid has been beleaguered with over 1,600 lawsuits over opioid prescriptions from Federal to state and local governments, hospitals, and individuals, as well as high debt and heavy competition from other retailers like Walgreens, CVS, and Walmart, as well as Amazon. The greatest numbers are in Michigan, California, New York, New Jersey, and Pennsylvania.  Reuters, The Hill

And for Amazon, Iora Health is now One Medical Senior. Iora was acquired by One Medical in 2021 but never rebranded. It was quite different than One Medical’s membership concierge-style practices in serving primarily Medicare patients in full-risk value-based care models such as Medicare Advantage (MA) and Medicare shared savings programs at 46 locations in seven states. One Medical intends to be able to serve patients of any age at all sites, according to One Medical VP Natasha Bhuyan’s comments to Healthcare Dive at HLTH last week.

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.

Mid-week roundup: Optum buying Amedisys home care for $3.3B; Clover Health settles 7 shareholder lawsuits around SPAC non-disclosures; Walgreens cuts 2023 outlook, stock plummets 11%

UnitedHealth Group expands home health again, aces out Option Care Health in all-cash deal. Amedisys had previously accepted Option Care’s all-stock deal in May valued at $97.38 per share. Optum’s offer is at $101 per share in cash, a dollar higher than its previous offer, creating a valuation for the company at $3.7 billion. Amedisys will add to UHG’s $5.4 billion acquisition of the LHC Group in February, including the hospital-at-home market from its acquisition of Contessa Health for $250 million in 2021. 

Option Care is a public (Nasdaq: OPCH) post-acute and home infusion care company for which Amedisys in-home care delivery would have been an exceptional fit. It was last heard from in August making a run at Signify Health for home health and ACO providers. At that time, the not-well-known company was discovered to have some impressive backing from Goldman Sachs. Walgreens Boots Alliance also backed the company but cut its stake in March and sold the rest for $330 million earlier this month. Option Care will receive a termination fee of $106 million. Healthcare Dive, FierceHealthcare

Insurtech Clover Health settles seven lawsuits around its 2021 SPAC. Clover, with Medicare Advantage plans in eight states, went public in January 2021 at the very peak of ‘blank check’-dom. Almost immediately, after an explosive report by Hindenburg Research that revealed that the Department of Justice (DOJ) had been investigating the company on investor relationships and business practices starting in fall 2020 [TTA 9 Feb 2021], there were multiple lawsuits filed by shareholders (derivative litigation) over not revealing this material fact. Shares took the expected dive from their intro of $15.90 to today’s $0.85. The seven derivative lawsuits were in Delaware, New York, and Tennessee courts and are being settled without payment. According to Clover’s release, “the defendants in the derivative lawsuits will receive customary releases and the Company will implement a suite of corporate governance enhancements. The settlement does not involve any monetary payment, other than payment of an award of fees and expenses to plaintiffs’ counsel, which has not yet been set. The defendants have denied all wrongdoing and have entered into this settlement to avoid the burden, expense, and distraction of ongoing litigation.” In April, Clover settled a securities class action in which the class will receive $22 million, $19.5 million paid by the company’s insurance. Mobihealthnews

Walgreens Boots Alliance missed Wall Street expectations and lowered its outlook for the year. In their Q3, net earnings fell 59% to $118 million, mostly due to lower operating income. Their topline was healthy–$35.4 billion, up 9% year over year–driven by the US health provider segment (VillageMD, Summit Health, and CityMD plus at-home care provider CareCentrix and specialty pharmacy Shields Health Solutions) which was up 22%. However, both retail consumer sales and CityMD underperformed due to the absence of COVID and a mild respiratory illness winter. Together with VillageMD’s clinic expansions, this led to an adjusted operating loss of $172 million for US Healthcare. WBA cut its earnings guidance for the year to $4.00 to $4.05 per share from its previous outlook of $4.45 to $4.65. Walgreens has been selling off businesses or investments that are peripheral to providing healthcare services, such as its investment in Option Care (above). FierceHealthcare, Healthcare Dive

News roundup: Transcarent buys 98point6’s virtual care; Best Buy-Atrium hospital-at-home; Walgreens/VillageMD buys another practice group; WW-Sequence digital weight management; UKTelehealthcare events; 300 out at Color

Enterprise health navigator Transcarent is buying 98point6’s virtual care platform and related assets. 98point6’s tech is a text-based virtual care platform that uses an AI chatbot to collect and relay health information to a provider. According to CEO Glen Tullman’s interview with Forbes, the assets picked up in addition to the tech include 98point6’s physician group, self-insured employer business, and an irrevocable software license in a deal worth potentially $100 million. This fits in Transcarent’s platform that works with large employers to steer their employees to higher quality, lower cost care settings based on actual users only in risk-based agreements, versus the more common per member per month care management model. 98point6 will continue in a leaner form, licensing its software to third parties, but out of the treatment business. Its major relationship is with MultiCare Health System in Washington state. 98point6 had raised over $260 million from 2015 through a 2020 Series E.  Mobihealthnews

Best Buy Health is providing telehealth equipment and installation to North Carolina-based Atrium Health’s hospital-at-home program. In the three-year deal, Best Buy’s Geek Squad will install peripherals based on the patient’s needs, transmitted through a Current Health telehealth mobile connectivity hub and using their software. Terms were naturally not specified, but Atrium is purchasing the devices from Best Buy. The Geek Squad services serve for both installation and retrieval after care. Atrium is paid via insurance including Medicare and Medicaid. Atrium, part of Ascension Health, has 10 hospitals in the program already and is aiming for 100 patients in the program each day. CNBC

VillageMD expands again, adds Starling Physicians in Connecticut. Starling has 30 primary care and multi-specialty practices, including cardiology, ophthalmology, endocrinology, and geriatric care. VillageMD’s total is now over 700 locations. Transaction costs were not disclosed. VillageMD has been on an acquisition tear, powered by Walgreens’ and Evernorth-Cigna funding for Summit Health, Family and Internal Medicine Associates in central Kentucky, and Dallas (Texas) Internal Medicine and Geriatric Specialists. HealthcareFinance, Healthcare Dive.

WW (the former Weight Watchers) has an agreement to acquire Sequence, a subscription telehealth platform for clinical weight management. Sequence is targeted to healthcare providers specializing in clinical care, lifestyle modification, and medication management for patients being treated for overweight and obesity. It also manages the navigation of insurance approvals. Terms were not disclosed, but Sequence since going live in 2021 serves 24,000 members and has a $25 million annual revenue run-rate business. WW is building out a clinical weight management pathway and intends to tailor a nutrition program for this segment. Release

UKTelehealthcare has an upcoming digital event, TECS Innovation Showcase 2 on Wednesday 15th March 2023 (10:30-12:30 GMT). Also, there are links to the webinars given during today’s event, TECS Innovation Showcase 1, January’s Analogue to Digital Transformation Update, and several more. Register for the 15 March event and links/passwords for previous events here or click on the UKTelehealthcare advert at the right and go to the Events page. These events concentrate on the analogue-digital switchover and TECS in the UK.

Color, a population health technology company that expanded into Covid-19 testing and later telemental health during the pandemic, is now laying off 300. Their CEO Othman Laraki confirmed in a post on LinkedIn (which seems to be a corporate communications trend) that this reflects decreased demand for Covid testing and the end of the public health emergency. Their future direction will be in distributed testing and telehealth for government programs and prevention tools for employers and large healthcare companies. The CEO’s post included a spreadsheet of the laid-off individuals including links to their LinkedIn profiles and desired positions, another corporate trend in addition to those laid off posting about it almost immediately. It seemed to be heavy on software engineers, data scientists, support leads, and product managers.

The company pivoted from genomics to public health with major Series D and E raises of $167 and $100 million respectively in 2021, totaling $482 million since start in 2014, and was valued at $4.6 billion by November 2021. It bought into behavioral health services with the acquisition of Mood Lifters, an online guided group support system, in 2022. The (happy) decline of Covid is affecting testing-dependent businesses across the board. Lucira Health, which had received a EUA for its combination Covid/flu testing, filed for Chapter 11 bankruptcy reorganization in February.  Beckers, Mobihealthnews 3 Mar, 27 Feb

Breaking: Amazon closes One Medical $3.9B buy, despite loose ends–and is the Antitrust Bear being poked?

The Big Deal closes, but loose ends and larger issues remain. Today’s news of Amazon closing its purchase of the One Medical primary care group is being received in the press, especially the healthcare press, enthusiastically. This Editor cannot blame her counterparts, as since last year there’s not been much in the way of good news, compared to 2020-21’s bubble bath. Her bet as of a couple of weeks ago was that the deal would not go through due to Amazon’s financial losses in 2022 and/or that the FTC would further hold it up, both of which I was wrong, wrong, wrong on. (Cue the fresh egg on the face.)

Wiping off said egg, here is what Amazon is buying and their first marketing move. (Information on size and more from the 1 Life 2022 year end 10-K):

  • Amazon acquired 1Life Healthcare Inc. for $3.9 billion, or $18 per share in cash.
  • The practices are primarily branded as One Medical, closing out 2022 with 836,000 members and 220 medical offices in 27 markets
  • It is a value-based primary care model with direct consumer enrollment and third-party sponsorship across commercially insured and Medicare populations. Their Net Promoter Score (NPS) is an extremely high 90. (NPS is a proprietary research metric that indicates customer loyalty and satisfaction.)
  • They also have at-risk members from the $2.1 billion Iora Medical acquisition in seven states, in Medicare Advantage (MA) and Medicare shared savings value-based care (VBC) arrangements [TTA 27 July 22].
  • One Medical has contracts with over 9,000 companies, establishing Amazon at long last in the desirable corporate market.
  • One Medical also provides a 24/7 telehealth service exclusively to employees of enterprise customers where there are no clinics.
  • Amazon will be offering a discounted individual membership of $144 versus $199 for the first year, without an Amazon Prime subscription.

The Federal Trade Commission (FTC), which had additional questions about the buy as part of a Second Request in the Hart-Scott-Rodino Act reporting process, did not act in time to prevent the closing. Nor did the SEC or DOJ. This is CEO Andy Jassy’s first Big Deal at Amazon and certainly, the champagne and kvelling are flowing at HQ plus One Medical’s investors and shareholders for a successful exit. But should Amazon be looking over their shoulder? 

What are the open issues? Is a large, hungry Bear called Antitrust being poked, or lying in wait for its prey?

  • The FTC has the right to probe into the transaction despite the closing and a deadline passing for antitrust review. In FierceHealthcare and STAT, FTC spokesman Douglas Farrar is quoted as telling the WSJ (paywalled) in a statement that “The FTC’s investigation of Amazon’s acquisition of One Medical continues. The commission will continue to look at possible harms to competition created by this merger as well as possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical.”
  • As previously reported here, only in December did the FTC send out subpoenas to current and former One Medical current and former customers as part of its investigation. That’s late to stop a buy–unless FTC had something else larger in mind.
  • Early February reports in Bloomberg and the WSJ indicated that this may be part of a larger FTC action in developing a wide-ranging antitrust lawsuit against Amazon on multiple anticompetitive business practices. Their chair, Lina Khan, is highly critical of Amazon’s business practices. Amazon’s buy of iRobot, maker of Roomba, which at $1.7 billion was a comparative snack, is still not closed and has received a lot of negative attention for possible misuse of consumer information. 
  • Sidebar: This FTC is ‘feeling its oats’ on antitrust. GoodRx found itself making history as FTC’s first culprit of the 2009 Health Breach Notification Rule, used to prosecute companies for misuse of consumer health information. This was for their past use of Meta Pixel, discontinued 2019, to send information to third-party advertisers. One Medical is a HIPAA-covered entity which puts it at a far higher risk level. 
  • The Department of Justice (DOJ) has not publicly moved to approve or disapprove–yet. 
  • The change of ownership has not been reported as passing muster by regulators in multiple states. Example: Oregon approved it, but with multiple stipulations [TTA 6 Jan]–and there are only five One Medical clinics in Oregon. States like New York, Massachusetts, Connecticut, and California are not exactly pushovers for approval, with California alone having two approval entities.
  • Congress is increasingly feisty on data privacy–consumer health information and its misuse in telehealth [TTA 9 Feb]. 

Will this be ‘buy now, regret later’, a lá Teladoc’s expensive acquisition of Livongo, or Babylon Health going public with a SPAC? Is this a clever trap laid for Amazon?

  • Amazon is already under a Federal and state microscope on data privacy. Information crossing over from One Medical to their ecommerce operations such as Pharmacy and Prime will just add to the picture. 
  • Accepting Medicare/Medicare Advantage increases scrutiny on quality metrics and billing, to name only two areas. At-risk patients in Medicare and other VBC models, especially Medicare Shared Savings Program (MSSP) fall under CMS scrutiny. Amazon may take a look at that and spin-off/sell off the former Iora Health practices/patients.
  • Amazon has failed in healthcare previously, as a partner in the misbegotten Haven and in its own Amazon Care ‘home delivery’/telehealth model selling to companies, now closed. Its asynchronous virtual care service, Amazon Clinic, is too new to judge its success. 
  • Office-based, brick-and-mortar healthcare provided by doctors, nurses, and allied health professionals is an entirely new area for Amazon. Will they be satisfied with their new masters–and new metrics? It is also expensive. One Medical has never been profitable and did not project breakeven for years. (If one asks how this is different than CVS acquiring Oak Street Health, or Walgreens acquiring VillageMD and Summit Health, CVS and Walgreens have experience for decades in multiple aspects of providing healthcare–profitably and in compliance.)
  • One wonders how heavy of a hand Amazon will place on One Medical’s operations. How their management, doctors, and other professionals will feel after a year or two of Amazon ownership is anyone’s guess. This Editor doubts they will remain in place or silent if unhappy.
  • Selling to enterprises–and account retention–is a vastly different relationship-building process and buyer journey than 1:many consumer transactions. One Medical made a go of it with 9,000 companies and enrolling employees at about a 40% rate, so they did something right. By contrast, Amazon failed to sell Amazon Care well to companies. Humility and service, for starters, are required.
  • Last but certainly not least, is how Amazon will deal with regulation and compliance at multiple levels.

Expect that the FTC and DOJ will not be done with Amazon any time soon in what looks like a wider antitrust pursuit that may take some time, which they have. Amazon has tens of millions in government business (AWS) at stake and shareholders expecting a reversal of losses. Pro tip to Amazon: run One Medical as a separate operation with minimal integration and no information sharing until past this. And then some.  Healthcare Dive, Becker’s

Is CVS’ Oak Street Health deal genius? Or a waste of time and $10B?

A sample of the split opinion. In the buccaneering between CVS and Walgreens, plus Walmart and Amazon, to add primary care, CVS definitely buckled the swash with three deals: Signify Health (being questioned by DOJ and FTC) [TTA 21 Oct 22 latest], a $100 million investment in Carbon Health [TTA 11 Jan], and Oak Street Health [TTA 9 Feb]. These are in line with their strategy of acquiring companies to expand their capabilities in primary care, provider enablement, and home health. The wisdom of the first–primary care–is being questioned by a few in healthcare. 

The basic argument is that primary care is money-losing, ‘unless you have significant ancillary revenue and downstream referral income’ according to Randy Davis, vice president and CIO of CGH Medical Center, based in Sterling, Illinois. Oak Street’s Medicare Advantage business is also money-losing because of its dependence on increasing severity scores (risk adjustment) and is generally an ‘uphill battle’. This Editor will add that as previously noted–and lauded in CVS’ release–Oak Street is notable for serving underserved patient populations–50 percent of Oak Street Health’s patients have a housing, food, or isolation risk factor. That equates to greater expenses that may or may not be reimbursable. Oak Street certainly has proven the money-losing part, forecasting a loss of $200 million for 2023 and not projecting a profit until 2025. Mr. Davis was blunt, calling it a deal that made no sense and “CVS better have a plan they implement in 18 months or they’ll get slaughtered.”

Another rap on the deal is that it is not big enough. Given the size of Oak Street at about 169 offices and the national figure is quoted as 600,000 ambulatory sites, it’s tiny. However, what isn’t considered is Aetna’s existing relationships with primary care physicians through ACOs formed as joint arrangements, and if Signify Health goes through, the Signify/Caravan ACOs. In fact, this may be a factor in the DOJ/FTC consideration of antitrust.

Others see opportunity in integrating primary care into CVS’ retail locations (Carbon Health) and serving historically underserved communities–much the same tack that Walgreens is taking with VillageMD (acquiring Summit Health) and Walmart with Walmart Health clinics. Becker’s Hospital Review

And as to Amazon, this Editor’s prediction is that Amazon will strike its Jolly Roger and sail away from the One Medical buy.

CVS works their plan in Oak Street Health buy talks, Carbon Health $100M investment + clinic pilot; VillageMD-Summit finalizes (updated)

CVS, Walgreens, Amazon, Walmart all chasing the same type of companies to expand their service continuum. During their Q2 2022 earnings call, CVS Health announced that they were determined to enhance their services in three categories: primary care, provider enablement, and home health. And CVS’ CEO Karen Lynch was pretty blunt about it: “We can’t be in the primary care without M&A” (sic). So CVS’ latest moves should come as no surprise.

Oak Street Health: CVS is in talks with this value-based care primary care provider for primarily older adults in Medicare and Medicare Advantage plans. With 100 offices nationally, it’s not too small, not too large to combine with other operations. As a public company traded on the NYSE but puttering along in the $13-$22 per share range since the fall from a high of $30 in August, the news of CVS’ interest has boosted them above $28 and a market cap of just under $7 billion. Although Oak Street has previously maintained that they have no interest in a sale, it has never been profitable and is on track to lose $200 million this year. That is not a good look for CVS but they are working a strategy. Previously, CVS walked away from primary care group Cano Health [TTA 21 Oct 22]. Bloomberg News (paywalled) reported that CVS could pay $10 billion which would be over $40 a share. Healthcare Dive, Reuters

Carbon Health: CVS leads their Series D with a $100 million investment plus piloting Carbon Health operations in primary and urgent care clinics in their retail stores. However, the deal came at a price. Last week, prior to the investment announcement, Carbon announced that it would wind down lines of business in public health, remote patient monitoring, hardware, and chronic care programs, cutting 200 jobs in addition to a June cut of 250, at the time about 8% of their workforce. Carbon will now concentrate on their clinic core business. 100 are presently located across Arizona, Nevada, Colorado, Kansas, Florida, Massachusetts, and California (San Francisco, Bay Area, and San Jose).

In the last two years, Carbon raised $350 million and grew by acquiring four clinic chains. It diversified by buying Steady Health (chronic care management in diabetes) and Alertive Health (remote patient management)–both businesses they are departing. Reportedly last month they bought Inofab Health, an Istanbul-based digital health platform for patients with asthma, chronic obstructive pulmonary disorder, and cystic fibrosis. Crunchbase, FierceHealthcare, Mobihealthnews, SF BizJournal,

CVS is still working its Signify Health acquisition past the Department of Justice (DOJ) and the Federal Trade Commission (FTC). It went into a Second Request for information in late October under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), which adds 30 days to the review timetable after the Second Request has been complied with. There is some competitive overlap between CVS and Signify in home health management and accountable care organization (ACO) operations, and some divestitures may be necessary. A closing in Q1 as planned seems optimistic. Acquiring Oak Street may complicate matters since their clinics operate as a Direct Contracting Entity (DCE, now ACO REACH). This present administration is not friendly towards healthcare consolidation of any type, especially with entities participating in Federal programs. (See UHG’s acquisition of Change Healthcare, with court approval being appealed by DOJ.) Reaching (so to speak) deep into CMS programs could be a red flag.

Walgreens’ VillageMD finalized their Summit Health acquisition for $8.9 billion yesterday (9 Jan) (updated). Now with 680 provider locations in 26 markets and 20,000 employees, the group adds to VillageMD’s primary care practices specialty practices in neurology, chiropractic, cardiology, orthopedics, and dermatology plus 150 City MD urgent care locations. 200 VillageMD locations are already adjacent to Walgreens locations. Walgreens Boots Alliance (WBA) and Evernorth, the health services business of Cigna, were the two investors. WBA raised full-year sales guidance from $133.5 billion to $137.5 billion. The current chair and former chief executive officer of Summit Health, Jeffrey Le Benger, MD, will be the interim president until VillageMD finds a permanent president reporting to VillageMD CEO Tim Barry. Release, RevCycleIntelligence, Forbes  At this point, Walgreens hasn’t moved forward with the rumored acquisition of ACO management services organization Evolent Health [TTA 1 Oct 22], which would be far more complex. 

Amazon is still awaiting Federal approval for One Medical as well as in multiple states (Oregon only the first; expect scrutiny). It is also closing Amazon Care and opening asynchronous non-face-to-face telehealth service Amazon ClinicWalmart continues on an internal strategy of opening Walmart Health clinics in underserved areas. Earlier in 2022, they announced the opening of more health ‘superstores’ in Florida, having established 20 in Arkansas, Illinois, and Georgia starting in 2019. Walmart’s approach to retailing health services and products, since getting serious about it in 2018, has wavered with multiple changes of strategy and executive departures [TTA 22 Nov 22]

VillageMD opens the Walgreens purse, set to buy Summit Health for $8.9B

Moving from rumor to deal in a New York Minute. Primary care provider VillageMD has moved to a definitive agreement to acquire specialty/urgent care provider Summit Medical in an $8.9 billion deal including debt. This was heavily rumored last week [TTA 1 Nov]

This will create a provider behemoth of 680 provider locations, 750 primary care providers, and 1,200 specialty care providers in 26 markets. The fun facts:

  • VillageMD has 342 total primary care clinics in 22 southern and northeastern markets covering 15 states, with 152 co-located with Walgreens; these will eventually increase to 200.
  • Summit Health has 370 locations in New York, New Jersey, Connecticut, Pennsylvania, and central Oregon. VillageMD and Summit do not overlap (except in NJ) on markets.  
  • VillageMD consists of primarily owned and affiliated primary care practices; Summit Health specialty practices (neurology, chiropractic, cardiology, orthopedics, dermatology) plus 150 CityMD urgent care locations.
  • VillageMD has successfully mastered value-based care models in Medicare and entered advanced Medicare ACO models early and vigorously (Editor’s information). Summit Health presently is primarily is fee-for-service with some participation in value-based programs.

The participation in this one is interesting: 

  • Walgreens Boots Alliance (WBA) will invest $3.5 billion through an even mix of debt and equity 
  • Cigna’s health services organization Evernorth will become a minority owner; the exact percentage is not disclosed at this point
  • It’s not disclosed at this time whether Summit Health’s current majority owner, Walburg Pincus, will retain an interest in the combined companies. 

WBA remains the largest and consolidating shareholder of VillageMD, but with this acquisition, reduces its ownership share from approximately 62-63% to 53%. WBA’s other US non-retail healthcare interests include specialty pharmacy company Shields Health Solutions and at-home care provider CareCentrix.

Based on their release, the acquisition is expected to close in January 2023, subject to the usual Hart-Scott-Rodino Act (HSR) premerger notification and report with the DOJ and the Federal Trade Commission (FTC) that initiates a 30-day waiting period.

Bet on VillageMD and Summit closing deeper into Q1–but closing. This Editor’s over/under is that this is overly optimistic given the current DOJ and FTC’s scrutiny and apparent dislike of healthcare acquisitions, even though the provider groups don’t overlap except in a minor way in NJ. But perhaps Amazon, with a healthcare footprint primarily in pharmacy and shuttering Amazon Care, thought OneMedical would move smartly. CVS thought the same with Signify Health, yet both are on information Second Requests that extend the waiting period. DOJ is after all smarting hard with a Federal District Court nixing their challenge of UHG’s Optum with Change Healthcare, but it’s hard to throw typical antitrust at this one.

Go big or go home, indeed.     Healthcare Dive, Becker’s

VillageMD considering $5-$10B merger with Summit Health provider group: reports

Two large provider groups, VillageMD and Summit Health, reportedly are considering a merger. VillageMD, which now is majority owned (62%) by Walgreens Boots Alliance, has 342 total primary care clinics in 22 southern and northeastern markets covering 15 states, with 152 co-located with Walgreens eventually increasing to 200. Summit Health has 370 locations in five states, including specialty practices and CityMD urgent care locations. Summit Health is majority owned by Walburg Pincus.

This reinforces a trend of cross-healthcare sector buys, consolidations, and control. VillageMD’s move from a co-location deal with Walgreens to majority ownership (but controlled by an independent board) was one step starting during the pandemic in July 2020 [TTA article series here].

  • Amazon agreed to acquire OneMedical (1Life) for $3.9 billion at the end of July, and abandon Amazon Care, though now running into FTC/DOJ review headwinds with a second request for information [TTA 15 Sep].
  • CVS Health has made no secret of its desire to acquire primary care, provider enablement, and home health companies (Signify Health, also under DOJ scrutiny), but apparently has abandoned or put on hold a deal with Cano Health [TTA 21 Oct].
  • Walmart continues to go direct by opening full-service clinics, announcing the expansion of 16 based in the Tampa, Jacksonville, and Orlando areas in 2023 (Healthcare Dive, Healthcare Finance News).

Valued at $12.9 billion and with Walgreens’ backing, VillageMD has the ‘go big or go home’ resources to execute Walgreens’ version of this strategy.

Why this very well may happen. The two do not overlap (except in NJ) on markets. VillageMD is primarily owned and affiliated primary care practices; Summit Health specialty practices (neurology, chiropractic, cardiology, orthopedics, dermatology) and CityMD urgent care. VillageMD has successfully mastered value-based care models in Medicare and entered advanced Medicare ACO models early and vigorously (Editor’s information); Summit Health primarily is fee-for-service with some participation in value-based programs. More to come. Bloomberg, Becker’s, and a very big hat tip to research from Jailendra Singh of Truist Securities  (paper here)

News briefs, catchup edition: UnitedHealth/Change decision October?, CVS wins $8B Signify Health auction, Walgreens majority buy of CareCentrix, FTC requests more info on Amazon-One Medical

Your Editor is semi-returned from Almost Two Weeks in Another Town, with a few more days to close out September (and summer into autumn) coming up. A lot of big news broke despite the usually slow Labor Day holiday week.

UnitedHealthcare Group/Change Healthcare Federal lawsuit to be decided in October–reports. The bench trial in the US District Court in Washington DC pitted the Department of Justice and state plaintiffs against UHG’s massive $13 billion acquisition of claims and EDI/data processing giant Change. It concluded 16 August with closing arguments presented 8 September. Dealreporter via Seeking Alpha reported that UHG and Change effectively countered DOJ’s antitrust objections to the acquisition. Change Healthcare had previously sold their claims editing business to TPG Capital to ease antitrust concerns.  Whether that will be enough in the current environment with greater sensitivities around healthcare consolidation remains to be seen. If approved, Change will be folded into OptumInsight. For a deeper dive into the issues, see TTA’s earlier reporting 3 August and 23 March.

CVS Health beat out other contenders with an $8 billion cash bid for Signify Health. It was a busy Labor Day for CVS as Signify’s board met and decided that day on CVS’ cash offer of $30.50 per share in their unusual auction. Amazon, UnitedHealth Group, and little-known Option Care Health were the other bidders. Signify is a strategic boost for CVS in becoming a major player in primary care, provider enablement, and home health as we’ve summarized here from CVS’ Q2 earnings call. Signify’s capabilities in in-home health delivery and provider services were cheaper to buy than to develop. Based on the weight given to it in the CVS release, Signify’s Caravan Health and their Medicare ACOs furnishing value-based care management services to 170 providers was a significant factor in the top price paid.

New Mountain Capital and their investors own 60% of Signify and will be exiting. Signify had in July announced their own exit from the costly and problematic Episodes of Care/BPCI business acquired with Remedy Partners back in 2019. This led to most of the over 480 staff layoffs announced last month. The sale is, as usual, pending regulatory approvals and isn’t expected to close until first half 2023. Kyle Armbrester, Signify’s CEO Kyle Armbrester will continue to lead the company as part of CVS Health. Healthcare Finance, FierceHealthcare

Rival Walgreens Boots Alliance completed their acquisition of a majority share of home care coordination platform CareCentrix. Walgreens’ final payment was $330 million for 55% of the company at an $800 million valuation. As noted previously, Walgreens ‘go big or go home’ strategy in primary care kicked off in 2020 with growing investments in VillageMD, culminating in last year’s $5.2 billion for 63% of the company. The plan is to co-locate Village Medical offices with 600 Walgreens locations by 2025 [TTA 14 Oct 2021]. CVS’ recent actions can be seen as a reaction to Walgreens’ aggressive moves. Healthcare Finance

Amazon now under FTC scrutiny for One Medical acquisition. If shutting down the much-publicized Amazon Care wasn’t quite enough last month, the Federal Trade Commission (FTC) will be reviewing Amazon’s $3.9 billion buy of One Medical. This was announced in a 1Life Healthcare (parent of One Medical) 8-K filing with the Securities and Exchange Commission (SEC). Both 1Life and Amazon received requests for additional information on 2 September, above and beyond the usual required Hart-Scott-Rodino Act (HSR) reports that will be reviewed by the FTC and DOJ. Effectively it extends the HSR waiting period by 30 days after One Medical and Amazon have substantially complied with the additional information ‘second request’.

The FTC isn’t winning popularity contests with Amazon’s legal department, as the agency is reviewing their acquisition of iRobot, maker of robot vacuum cleaners. Mobihealthnews

Week-end wrapup: CVS plans to expand primary care, home health; Cera Care raises £264M; Linus Health’s AI enabled dementia screener, Cognito’s cognitive therapy slows brain atrophy

The sandal (it’s summer) drops at CVS Health in primary care–and maybe more. On their Q2 earnings call, CVS discussed that they are determined to enhance their services in three categories: primary care, provider enablement, and home health. The footwear that dropped was from CEO Karen Lynch: “We can’t be in the primary care without M&A” (sic). It was inevitable, given that rival Walgreens has a $5 billion deal with VillageMD for freestanding Village Medical clinics, Amazon with the pending One Medical buy–which it passed on only weeks prior [TTA 7 July], and Walmart picking along the edges with in-store clinics and telehealth. CVS’ criteria: strong management team, strong tech stack, strong scale, strong ability to build a pathway to profitability. (Certainly not an easy set of hurdles) CVS’ urgent care and in-store MinuteClinics have been doing well, with business up 12% to 2.8 million patient visits year to date. HISTalk, FierceHealthcare, Motley Fool transcript of earnings call

London-based Cera Care Ltd. raised £263.6 million ($320 million) in an equally split debt/equity round. Equity funding came from existing investor Kairos HQ, then the Vanderbilt University Endowment, Schroders Capital, Jane Street Capital, Yabeo Capital, Squarepoint Capital, Guinness Asset Management, Oltre Impact, 8090 Partners, and technology investor Robin Klein. Debt was not disclosed. The fresh financing will go towards expanding patient capacity in the UK plus Germany from the current 15,000 to 100,000.  Cera delivers in-home care, nursing, telehealth, and prescription delivery services using a digital platform and AI algorithms that use the data gathered to predict changes in patient status. TechCrunch, UKTechNews

Two developments from separate companies in the vital areas of improving dementia and Alzheimer’s diagnosis–and outcomes:

  • Linus Health has debuted its cognitive assessment and patient questionnaire platform for clinical use by primary care providers. The assessment tests for subtle changes in cognitive function, which in the preclinical phase will often go undetected. The concept is to push forward diagnosis and therapies to slow disease progression. It is based on an iPad and includes their DCTclock, an AI-enhanced version of the traditional paper-based Clock Drawing Test using a digital stylus or pen that can also spot symptoms of early-stage Parkinson’s. The evaluation including the DCTclock takes about 10 minutes. Release, FierceBiotech
  • Cognito Therapeutics is still in the investigational stage with its GammaSense headset which delivers sound and light therapy to cognitively impaired patients. The sensory stimulation evokes gamma oscillations in the brain that reduces neurodegeneration and brain atrophy. Their paper delivered last week at the Alzheimers Association conference tracked subjects who used the headset one hour per day for six months. The therapy reduced white matter shrinkage to about 0.4%, compared to a historical tracking of about 2%. An earlier study also showed slowdowns in the decline of memory and cognitive function. FierceBiotech

Short takes: 2022’s big kickoff with Babylon-Higi, Vera-Castlight buys; will funding slow down in ’22, eye-tracking telehealth for MS, vital signs tracking lightbulbs at CES 2022, and three catchups!

Babylon Health closed out 2021 by acquiring health kiosk Higi for an undisclosed amount. Babylon had earlier invested in Higi’s Series B [TTA 30 May 20] and was reported in October to be exercising its $30 million option to buy Higi after closing their SPAC. Release

Vera Whole Health, an advanced primary care provider and clinic group based in Seattle, is acquiring Castlight Health, a data and care navigation platform. Vera will acquire Castlight in a $370 million all-cash deal. Strategic partners and investors include Anthem, Morgan Health (the JP Morgan Chase & Co business for the transformation of employee healthcare), Central Ohio Primary Care, and Clayton, Dubilier & Rice funds. Former Aetna chairman and CEO Ron Williams will become chairman. Release.

Which leads to the usual question…will funding in 2022 continue the hot streak of 2021? It’s one opinion, but Lee Shapiro of 7wireVentures, formerly with Livongo, is sensing a slowdown, citing increased interest rates (money), the US midterm elections (which don’t affect the rest of the world), less new money, and investors wising up on the length of time any healthcare or health tech investment takes to pay off. 2021 with 79 digital health M&As plus an abundance of SPACs that tailed off by end of year will be hard to match. Mobihealthnews

XRHealth, a telehealth clinic that provides treatments in patients’ homes based on virtual reality treatment, has integrated Tobii‘s eye-tracking technology into the XR platform and the Pico Neo 3 Pro Eye VR headset. XR Health provides rehabilitative and pain management therapies via VR. The Tobii system will enable treatment using the headset for multiple sclerosis (MS), Parkinson’s, and other neurological conditions. According to the release published in Multiple Sclerosis News Today, “detecting subtle changes in eye movement can help diagnose these diseases at an early stage, as well as assess disease progression and response to treatment. Tobii‘s eye-tracking technology is able to detect those changes in real time, providing data and insights to clinicians during therapy sessions.” Hat tip to Editor Emeritus Steve Hards

CES 2022 is on this week, far less splashy than before as an in-person/virtual hybrid event. Debuting at CES is the Sengled Smart Health Monitoring Light. Looking like a standard LED lamp bulb, it contains sensors that network and can take passive vital signs measurements of sleep quality, breathing, heart rate, and motion of occupants in the home. The more bulbs the better, of course. Whether or not they can detect falls, as the article touts, is likely an inference on motion. They feed into either Alexa or Google Assistant, plus Sengled’s app, using Frequency-Modulated Continuous Wave (FMCW) radar operating in the 2.4 GHz range. Expect it to be coming out towards the end of the year and probably twice the price of conventional LED smart bulbs. TechRadar Hat tip to Adrian Scaife via LinkedIn

Catching up…

Walgreens and VillageMD continue on the ‘go big or go home’ highway with nine more Village Medicals at Walgreens in San Antonio, Texas. Plans are to build 600 Village Medicals at Walgreens in more than 30 markets by 2025, growing to 1,000 by 2027. HealthcareFinance

Centene, the health payer conglomerate, finalized its $2.2 billion acquisition of Magellan Health, a major behavioral health management company. It will likely be CEO Michael Neidorff’s swan song, as an activist investor forced his retirement (at age 78 after over 25 years at the helm) this year and significant board changes. Magellan’s former COO and president Jim Murray will become Centene’s chief transformation officer, a new position, lead what they term the Value Creation Office as well as the Centene Advanced Behavioral Health division. Forbes, Centene release

And suitors with a spare billion or so may be lining up to buy IBM Watson Health. The first offers came in on 4 January with the winner to be announced possibly by end of the month. IBM spent over $4 billion over time to build up Watson Health, but now wants out, badly. Axios

Short takes: Walgreens now majority share of VillageMD, CareCentrix; Lark Health lifts $100M, UnitedHealth Group’s profitable Q3 and Change delay

Walgreens has ‘gone big’ with its VillageMD primary care practice investment, putting on the table $5.2 billion. It’s now t the majority owner with 63% of the company, up from 30% last year. Their projected number of co-located full-service Village Medical practices is projected to grow to 600 by 2025, up from a current 52. VillageMD is still planning an IPO in 2022, making for a potential great ROI for Walgreens. Walgreens Boots Alliance also invested $330 million in CareCentrix, a post-acute and home care provider, for 55% of the company. CareCentrix was a recent investor in Vesta Healthcare [TTA 9 April]. Wrapping it all up is their new Walgreens Health, for tech-enabled consumer-directed primary care, post-acute care, and home care.

Weight loss and chronic conditions app Lark Health flew into a $100 million Series D, led by Deerfield Management Company, with PFM Health Sciences and returning investors Franklin Templeton, King River Capital, Castlepeak, IPD, Olive Tree Capital, and Marvell Technology co-founder Weili Dai. Their total funding since 2011 is over $195 million (Crunchbase). Lark claims an AI-based platform for individual coaching in weight loss along with related conditions such as diabetes, pre-diabetes, diabetes prevention, cardiovascular, and behavioral health. The platform logs and provides immediate feedback on food and tracks data from sources like Apple Health. The new funds will be used for R&D and to expand its virtual care integrations to more payers. Current payer partnerships include Anthem, Highmark BCBS, and Medical Mutual. Release, MedCityNews, FierceHealthcare

UnitedHealth Group, parent of UnitedHealthcare and Optum, reported $4.1 billion in profit for Q3, notching $72.3 billion in revenue for the quarter, a tidy gain over year prior’s $65.1 billion. The mega-acquisition of Change Healthcare to fold into OptumInsight is further delayed, being worked towards a closing of early 2022, having hit more than a few strong regulatory headwinds and the rocks of DOJ [TTA 14 Aug].  Becker’s Payer Issues, FierceHealthcare