Weekly Health Tech Reads | 11/21/21

Public Co Q3 Earnings / Investor Day News:

• Teladoc hosted its investor day, and if the slides are any indication, as Teladoc becomes more of a virtual health system, the business is becoming just as confusing and complicated as your typical local health system. I have a tough time summarizing a narrative coming out of the day from the slides, so I've instead included some commentary on specific slides that seemed the most helpful below. Link. (slides referenced below).  Slide 12: Leaving aside how confusing a 2x2 matrix with four sliding scales is to look at, it's interesting to note that where Teladoc is heading has nothing to do with virtual care specifically. Every care delivery organization is trying to move to the upper right of that chart. Think about One Medical's business for a second - they're headed for the exact same "Tomorrow" circle. Interesting to think about from the perspective of the competitive landscape over the next 5-10 years, who winners are likely to be, and who might join forces rather than compete. Slide 35: Teladoc highlights financial advantages of landing & expanding employer client relationships. It sees an opportunity to expand a 10k life employer from $130k a year in revenue to $527k a year in revenue by adding products. If you try to back into the math, it appears there is a number missing on the slide - the penetration of eligible employees. For example, in the initial diabetes-only scenario, 6% of 10k employees @ $70 PPPM is not $130k, it's $504k. It appears that when Teladoc lands with the diabetes use case, it expects ~26% penetration ($130k / 10k * 6% * $70 * 12) of eligible employees. When it expands to a broader offering including mental health and weight loss, that penetration drops to ~10% ($527k / 10k * 44% * $95 * 12). Even with the expansion of addressable eligibles from 6% to 44% via multiple products, it's interesting to see the assumed penetration decline so significantly - will be a key number to watch in this strategy. Slide 44/45: These slides describe Teladoc's primary care model, as well as how it intends to coordinate last mile delivery services. They talk about doing so via partnership, and given Teladoc's acquisitive history, it'll be interesting to watch whether they acquire an asset that gives them an in-home care delivery arm at some point, particularly as they seek to move toward more risk-based relationships.  Slide 59/60: Teladoc provides for some unintentional comedy with these slides, as they are the entirety of the section on Teladoc's "integrated experience". For context: there are five main sections in the slide deck before Q&A. The other four have 10+ pages of detailed content... and this has one slide with three bullets. I'm sure there's more to it, but its a bit funny for a company that is in the news for significant challenges related to the integration of Livongo, to call it out as a key topic and then have a single slide on it.  Slide 75: BetterHelp, Teladoc's D2C mental health brand, is growing quite quickly in 2021. Super odd to see them comparing it to two competitors that saw almost no growth in 2021... what D2C mental health companies didn't see rapid growth in 2020 / 2021?Slide 109: Teladoc highlights how 40% of members now have access to multiple products, versus less than 10% in 2017. It's worth noting that the number has been relatively flat since 2018 though, with <50% of members having access to more than one product each year. What has grown substantially is the number of members with access to 3 or 4+ products.  A slide that isn't there: One thing that is missing from the deck is any explanation of how Teladoc intends to move into value-based care contracts moving forward. There's a few references to it as a key part of the future for Teladoc, and you can certainly infer how they might think about it. But it is not clear at all from the slides how exactly they intend to make that transition. Seems like a natural acquisition at some point when they get serious about it. 

• Talkspace, the virtual mental health company that SPAC'd five months ago, waited an extra week but its the leading vote-getter for the Q3 '21 Earnings Dumpster Fire Trophy(TM). As a start, Talkspace announced the departure of its two co-founders amongst a daunting set of challenges the organization appears to be facing. The interim CEO cited a need to focus on "execution, product innovation, network optimization, and to promote operational and financial discipline throughout the organization." Which... sounds like pretty much the whole business aside from the D2C brand. It would appear the $3.4 million write down Talkspace had to take during the quarter might have had something to do with the co-founder's departure. The company is struggling mightily with submitting claims to payors, and took a write down as it no longer expects to be paid for those $3.4 million in claims. It's a healthy reminder for D2C organizations attempting to go B2B in healthcare that it is helpful to hire healthcare people who understand the business fundamentals. It's also wild to see that Talkspace has B2B relationships covering 75 million eligible lives, but it has only ~61k active users at the end of Q3, with B2B users consisting ~32k of that. That equates to 0.04% penetration of their B2B covered lives. To put into perspective how small that number is... if a 10,000 person employer signs up with Talkspace, that means that four employees are using it. Lots of opportunity for them to increase penetration there. It's also worth noting the new Talkspace leadership team emphasizing the need for W2 versus 1099 providers in order to improve customer satisfaction and retention. Seems like there's a story to be told behind that learning, but at the very least should also highlight the importance for virtual care delivery startups to build their provider networks thoughtfully. Link.

Other News:

• AAA and Ohio-based health system ProMedica announced a partnership to launch something called AAA HealthCONNECT powered by ProMedica. It's a 50/50 Joint Venture that was apparently two years in the making, serving as a one-stop shop for people 55+ who sign up as members to help them navigate the aging process. It's certainly seems like a good underlying idea - and you can see why AAA and a health system think they can execute on it with their brands / relationships with seniors. Will be interesting to watch whether they succeed in doing so. Link.

• CVS announced it is closing 900 stores over the next three years as part of its reorganization around its health strategy, again calling out it will have three types of stores moving forward: 1. primary care clinics, 2. HealthHUBs, and 3. traditional CVS pharmacies. It continues to feel like CVS is a very different organization today than it was pre-Aetna acquisition - impressive how quickly the organization is reinventing itself. Link. 

• A couple of large private equity firms are getting close to a ~$17 billion leveraged buyout of AthenaHealth. Link.

• Ro sees a big opportunity in the weight management space, pre-ordering $30 million worth of a new weight-loss pill Plenity. It would appear that Plenity's manufacturer, Gelesis, is having some supply chain issues, causing challenges keeping up with demand. It'll be interesting to watch how Ro manages these relationships moving forward - I'd guess that Gelesis is happy for the sales channel that Ro is providing, but whose brand ultimately controls the patient relationship? Gelesis certainly sees a bright future for Plenity and is pursuing partnerships with a number of parties - Ro, Noom, and WeightWatchers, among others. Link.

• New York health plan CDPHP has partnered with a large independent multi-specialty group, Community Care Physicians. The two entities will create a MSO together, as CDPHP builds an integrated delivery system. Every large independent provider group must be getting calls non-stop from suitors these days looking to partner. Link

• Bain Capital acquired a majority stake in Florida-based primary care provider InnovaCare. Summit Partners previously own a majority stake in the practice, which treats 250,000 patients a year, 27,000 of which are Medicare Advantage. Bain is looking to triple the footprint of the practice, in part by helping other practices transition from FFS to value-based payments. Link.

• Population health company Lightbeam acquired CareSignal, a "deviceless remote patient monitoring" platform, which as far as I can tell means they text message patients using different clinical protocols. Link.

• Two home diagnostic testing startups have joined forces as LetsGetChecked acquired BioIQ. Link.

• Jefferson Health and Bayada Home Health Care partnered, creating a JV to provide post acute home health services for Jefferson's patients in New Jersey and Pennsylvania. Link.

Funding:

• Nurse staffing platform Trusted announced its raised $149 million across two rounds of funding recently. Link.

• EasyHealth raised $135 million for a new Medicare Advantage enrollment platform. Its core model looks like an insurance brokerage, but Easy is also adding clinical functions into the mix to do in home visits with patients upon enrollment in a plan. One of Easy's main clients is Bright Health, where Easy is doing in home visits with up to 80% of members, versus an industry average (according to Easy) of 5% - 20% of members. Seems like a fairly straightforward pitch to smaller MA plans like Bright who don't have the infrastructure to perform HRAs in the same way as the big players. I'm guessing the recent OIG report highlighting how much payors can make doing HRAs has made Easy's sales pitch, well... easy. Leaving aside all the questions about whether the risk adjustment business model should exist, it'll be interesting to see if Easy can leverage the purchasing experience to build an ongoing relationship with consumers - it certainly seems like a large opportunity to step in where traditional brokers haven't focused historically. Link.

• LinkedIn-for-doctors platform H1 raised $100 million. Link.

• InsurMedix raised $65 million for an insurance platform for fertility treatments. Link.

• Behavioral health platform AptiHealth raised $50 million. Link.

• Ribbon Health, a platform improving provider directory data, raised $43.5 million. Link.

• PathologyWatch, a labs and path platform for dermatologists, raised $25 million. Link.

• MedArrive, a platform leveraging EMTs and paramedics to do in home visits, raised $25 million. Link.

• PayZen raised $15 million. PayZen is attempting to solve the problem of medical debt and healthcare affordability by... helping health systems get paid more via payment plans for patients. It's always interesting to try to square press releases like this that claim to make healthcare more affordable for patients, meanwhile the company cites data on how health systems are getting paid more. In this case, Geisinger collected 23% *more* in payments after implementing PayZen's platform. Given that, I fail to understand how it's helping affordability for patients when they are quite literally paying health systems 23% more. It's a really smart business model, and no wonder VCs are excited given Cedar's success, but like Cedar it also sounds a lot like a well-branded collection agency for health systems. Link.

Opinions:

• This article from Sebastian Caliri of 8VC provides a solid summary of the financial incentives driving VC interest in risk-bearing primary care models, and the excitement around the opportunity Direct Contracting presents (i.e. doubling the addressable market of that bar on the right of the chart below). Yet I can't help but be disappointed to see how the article starts off and concludes with a discussion about how these models are like motherhood and apple pie in our quest to achieve better care at lower costs. Meanwhile, the article glosses over the meaty discussion around whether these models are actually lowering costs or taking advantage of risk adjustment incentives. The author relegates that topic to a brief mention in footnote 8, citing this article from former BCBS NC team members. That BCBS article outlines pretty clearly how these models are likely increasing overall spending via risk adjustment, an argument that has gained steam elsewhere lately. The 8VC article here makes this statement in the conclusion: "A lack of strong incentives to do better than yesterday plagues our American healthcare system. It is frustrating that exceptions are hidden away from all but industry insiders." Quite true. And it is frustrating, indeed, to see VCs behaving in the same way as the industry insiders they're complaining about by hiding real conversation about important incentives that are driving this activity in the footnotes, which conveniently results in a more compelling narrative aligned to their financial interests. Link.

• This is an interesting conversation on the hospital-at-home space from some folks who know it really well, including the hospital-at-home OG Bruce Leff. Among other things, the commentary on health equity is interesting - Leff makes the point that a patient of his didn't want to go to the hospital because Johns Hopkins does a terrible job operating a hotel. It's going to be an interesting space to watch evolve over the next few years. Link.

• This is a curious article in HBR on the idea of Medical Malls. I say curious because I keep reading the article wondering to myself... isn't this concept basically just creating a new hospital in an abandoned mall? Like, doesn't the paragraph  highlighted below describe something that sounds a lot like... a hospital? I get there might be some cost savings by renting space and whatnot, and the health equity angle is certainly interesting, but do we really need a new term for hospitals renting space in malls? Link.

• Stat News dug into the success of Ascension's investment arm, highlighting the tension inherent in a charitable organization doing very well in the world of private equity.  Despite the tension, I'm sure a lot of other health system leaders would love to have the financial gains Ascension's investment arm is throwing off for that org. Link.

• Direct Contracting startup Pearl Health released a nice explainer of how capitation works in the Direct Contracting model. Link.

Data:

• HCCI data shows that while utilization of ER visits went down by 4% since 2012, overall spending still increased by 51% because the price went up by 58%. Next time you see a capitated primary care model cite reduced ED visits as proof that the model works in managing costs, but yet it stops short of demonstrating it actually reduces costs... its worth remembering this chart. Link. 

• Cigna's services business Evernorth released data suggesting timely access to outpatient mental health services can reduce healthcare spending by $1,377 in one year and $3,109 in two years. Link

• The Commonwealth Fund released a scorecard evaluating racial and ethnic disparities across different states. Not surprisingly, there's a lot of variance in outcomes across different states. Link. 

• Interesting survey data from GoodRx sharing consumer and provider feedback on telehealth, generally showing that people like their virtual care. Funny to see that FaceTime is the third highest used service provider for telehealth, according to this data. Also a bit funny to see InTouch and Teladoc listed separately - presumably that means doctors don't know they're the same organization? Link.