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Transcarent acquires 98point6's care delivery arm, Weight Watchers acquires a GLP-1 telehealth platform, more advance notice discussion & more
Amanda DiTrolio & Kevin O'Leary
March 12, 2023
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News:
Transcarent acquires 98point6’s care delivery business for up to $100 million
If you’ll recall, 98point6 was originally a text-based virtual primary care provider for employers. It pivoted six months ago to focus on selling its software platform to health systems. By focusing on life as a software business, 98point6 no longer needed its employer contracts or clinical team, and so its entirely logical here that it found a buyer for that part of the business. Transcarent is also a logical buyer here as it seeks to expand its product offering in order to provide a one-stop shop for employers. In the deal, Transcarent will acquire 150 clinicians / clinical staff, 98point6’s self-insured employer clients, and a license to 98point6’s chatbot. The combined entity will have 200 employer clients and 4 million customers, with 98point6 bringing in 100 clients and 3 million customers.
It’d be interesting to see what the messaging is here for 98point6’s existing self-insured customers. How hard does Transcarent push on those customers signing-up for Transcarent’s broader offering? I’d have to imagine that this is a significant portion of the transaction value for Transcarent here.
Weight Watchers acquires telehealth startup Sequence for $106 million
Sequence is a telemedicine platform selling GLP-1 weight loss drugs that launched in late 2021. Sequence is doing $25 million in annual revenue run-rate across 24,000 customers. Sequence broke even in late 2022, and WW expects it to be accretive to earnings by Q4 2023. The acquisition was a key part of the discussion during WW’s earnings call this week. It’s interesting to see WW almost curtail the hype about how many people should be on GLP-1s, noting that “these medications, they're not for everyone, and there's been a lot of hype in the media, let's say, and I think that's even more reason why we need to lead the conversation from a point of responsibility.” Still, it seems telling as to the magnitude of the opportunity here that WW felt compelled to make a purchase here in order to round out the product offering. WW now thinks it has the complete offering for anyone going through a weight loss journey between behavior change and weight loss medications, and its hard to argue with that. WW’s stock briefly jumped over 50% after the news / earnings session, although came back down later in the week. It also seems like WW got into this market at a pretty reasonable valuation - 4x revenue for a profitable telehealth business - compared to where the market has been the past few years.
Atrium Health and Best Buy partnered on a hospital-at-home offering
This deal seems like a natural partnership for both parties. Atrium launched its hospital-at-home offering during the pandemic and has now served 6,300 patients through the program, which the article claims is the largest in the country. For them, they get a technology / infrastructure partner to help scale the offering. The offering expects to have roughly 100 patients at a time, making it the equivalent of a mid-size hospital for Atrium. For Best Buy, this comes on the heels of earnings last week where it noted how early stage its healthcare business is, but also that there’s a lot of growth potential. Remember that Best Buy entered this market in October 2021 as it acquired Current Health for $400 million. According to the Best Buy earnings call, Current Health has signed up 5 of the top 10 health systems as customers, and 40% of its provider clients launched in Q4 2022. Obviously that’s a nice trajectory for the business, but Best Buy also referred to this deal as a “three year development partnership” which seems to underscore how early things are here.
Aledade and CareFirst BlueCross Blue Shield announce partnership
Aiberry, a mental health screening startup, raised $8 million
Iron Health, a tech platform for OB/GYNs, raised $4.5 million
Health Gorllia has partnered with CLEAR to help consumers access their PHI
Opinions
Another week full of commentary on the impact advanced notice
Perhaps not surprisingly, AHIP doesn’t appear too thrilled at the proposed changes. Among other things, AHIP urged CMS to withdraw the proposed changes to risk adjustment for 2024. It also highlights how the changes are particularly likely to impact dual-eligible populations, with an average cut of 6.4% for duals. AHIP also discussed how wide the variation is in impact for different plans - there is an 140% variation between the individual MA plans that are the least and most impacted. Interestingly, Humana shared publicly this week that it doesn’t think it will be particularly impacted, suggesting that the change will actually be a net positive for its business relative to other insurers. It continues an interesting trend from earnings last week where we are hearing a number of public companies coming out saying they will be just fine (Humana, Clover, etc). Yet at the same time, you have associations like AHIP, APG, and Better Medicare Alliance sounding the alarm. The recent MedPAC commentary seems to highlight that it is a relatively small number of plans that are likely to get hammered here, with the chart below underscoring the issue. MedPAC shows how for the HCC codes at issue in the conversation here, there are a handful of plans that are coding at significantly higher rates here than other plans / Medicare FFS. Seems like the MA plans in the top deciles of coding intensity are going to be taking a big hit here.
Elemy is pivoting away from patient care
Elemy has faced some significant challenges over the past few years as it has attempted to scale its pediatric autism care delivery model. It’s worth highlighting that Elemy raised $219 million from Softbank at a $1.15 billion valuation in October 2021, with plans to hire 2,000 clinicians and scale nationally. It appears from this article that Elemy is now moving away from this core business, and instead will focus on selling software to clinicians moving forward. It’s a sad outcome, mostly for the families who were left high and dry here.
It feels like we’re going to see a number of care delivery startups follow this path of pivoting away from care delivery towards a SaaS model this year. Look at 98point6 / Transcarent as another proof point of this. Why? In this tougher, profitability centric financial environment we’re in, care delivery startups are recognizing that employing clinicians is a costly endeavor, particularly when you haven’t yet reached scale. So rather than employ those clinicians, why not just sell them the software they need? Theoretically, this should result in a unit economic model that is more aligned to venture style growth. Yet at the same time I’m hard pressed to see a path for Elemy to get back to its 2021 valuation here.
A deep dive on the learning difference treatment market
This is an interesting series from HTNer Zach Miller on the learning differences market. It dives into the financials of how educational therapy practices work and interface with both students and payors.
Data
Trilliant data on the behavioral health market
It’s a really helpful report with lots of data on both patient demand for behavioral health as well as the challenges of provider supply. It’s worth flipping through the various charts in the report as there’s a lot ot get through. It includes some interesting data like the chart below, which highlights the increase in patient volumes from pre- to post- pandemic. Perhaps it shouldn’t be too surprising given the different demographics, but it’s still interesting to see how different Medicare Advantage looks from Commercial or Medicaid. It stands out how much eating disorder treatment has grown in both Medicaid and Commercial populations, and it’s one of the few categories where rural health volumes increased more than urban volumes.
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