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- Weekly Health Tech Reads | 4/16/23
Weekly Health Tech Reads | 4/16/23
UHG earnings, a bunch of funding rounds, McKinsey data on the exchanges, & more!
Amanda DiTrolio & Kevin O'Leary
April 16, 2023
News:
UnitedHealth reported another solid quarter, added 700k fully capitated lives
UHG again reported another good quarter and increased its 2023 guidance based on strong Medicare Advantage enrollment. The big topic coming into Q1 earnings was what UHG’s take would be on 2024 Advance Notice. UHG addressed it head on early in the conversation, noting that the decision to spread out the changes over three years would allow them to adjust without an impact on the business. In the analyst Q&A, UHG doubled down on this position, saying they’re “excited and optimistic” about Medicare Advantage, and that the changes won’t impact UHG’s long term earnings growth trajectory. So if CMS’s changes to risk adjustment were designed to reel back profitability in MA, it doesn’t seem like it’s happening here.
Perhaps the biggest discussion point in the earnings call was that Optum now serves 4 million patients in fully capitated contracts. This number grew by 700,000 patients in Q1 alone, and is up from 2 million at the end of 2021. Not surprisingly, the majority of these 4 million patients are UHC insurance members in Medicare Advantage. But UHG does expect to see meaningful growth from the commercial and Medicaid markets moving forward. Analysts asked a lot of questions on this topic, both how many of these fully capitated contracts are with non-UHC insurers, and what the commercial book of business looks like. UHG didn’t share much in the way of numbers there. You can see the analysts trying to understand how payor - provider negotiations are going on these fully capitated contracts, and if MA changes have impacted them.
It’s also worth noting that Surest again showed up on the earnings call as a major success for UHC. Surest is responsible for driving over a quarter of UHCs insurance member growth in the commercial market. For those who lament the ability of healthcare incumbents to drive meaningful innovation, Surest provides a really good counter-argument to that narrative. If Surest were venture-backed rather than owned by UHC, we’d be hearing about it non-stop as the most meaningful insurance startup out there.
Amazon’s annual investor letter discusses its healthcare ambitions
Amazon’s annual investor letter included discussion of its healthcare ambitions, which perhaps not surprisingly centered around the One Medical acquisition. It’s interesting to see how Amazon describes what stood out about One Medical - the digital care experience, same day / next day in person appointment availability, and partnerships with health systems for access to specialty care. It’s also interesting to note there was no mention of Amazon Clinic in the investor letter, the virtual care marketplace Amazon launched a few months ago (which somehow One Medical is not a part of). Seems to provide some indication of where the various healthcare initiatives stand internally among Amazon’s senior execs.
Devoted reduces losses while driving significant member growth in Medicare Advantage
Devoted’s insurance business reported a net loss of only $32 million in 2022, an improvement from a $116 million loss the year before. This despite the fact that Devoted nearly doubled its membership in 2022. Devoted appears to be charting a path towards to success where many of its insurtech peers have struggled. Driving the insurance business toward profitability while also growing as much as it has is an impressive accomplishment for Devoted. As we covered in our deep dive on Devoted last year, they seem to have been growing efficiently leveraging relationships with PCP groups, which appear to be paying dividends. We’d love to see what the financials look like for Devoted Medical Group to see what the full picture of profitability for the business looks like.
Olive sold its utilization management business to Availity
With the sale, Olive will focus exclusively on providing revenue cycle management services to health systems moving forward.
UHG quietly acquired Crystal Run
News trickled out this week that Optum quietly acquired Crystal Run, a physician group in New York with 400 physicians.
PCP enablement platform Vytalize buys an IPA with 3,000 providers in New York
Data analytics platform Arcadia raised $125 million
Mental health startup Spring Health raised $71 million at a $2.5 billion valuation.
It seems notable that a digital health startup is raising funding at a valuation slightly above the $2 billion valuation it raised at eighteen months ago. You’d imagine this means that the revenue multiple has come down significantly on Spring’s valuation assuming Spring has grown at a decent clip over the last 18 months.
Recuro Health, a virtual primary care & mental health provider, raised $47 million
98point6 raised $32 million for its virtual care platform for health systems
This funding comes just over a month after 98point6 sold its primary care business to Transcarent for $100 million. It‘ll be interesting to watch how quickly 98point6 is able to sign up new health systems onto its platform - the article here notes that MultiCare is a client but doesn’t mention any other names. MultiCare was the initial health system 98point6 launched this platform business with six months ago.
Oshi Health, a virtual care model for GI conditions, raised $30 million
This news comes on the heels of Oshi’s VBC deal with CVS last week for Aetna’s commercial members. Seems like Oshi is establishing itself at the front of the GI market.
Scene Health, a medication adherence platform, raised $17.7 million
MedArrive, a network of EMS professionals doing in-home visits, raised $8 million
Opinions
An overview of the Children’s Health Insurance Program (CHIP)
We broke down the CHIP program with HTNer Jonathan George, exploring topics like how CHIP is structured and financed, what eligibility requirements are, and more. In the second half of the article we get into opportunities for innovation in the space.
Tradeoffs podcast dives into Medicare’s hospice carve-in
The podcast does a nice job highlighting how the changes to the hospice program are inevitable, and how Medicare is seeking to change how it pays for hospice care. Gone is a flat daily rate, which the article discusses as a key driver of increasing costs of the program. Instead, payors are given more leeway to set rates, which predictably is resulting in some payors cutting rates to providers. It provides for an interesting example of how CMS is trying to drive change in a market.
Keckley’s perspective on how hospitals are responding to AI and VBC
It’s an interesting perspective on how hospital leaders are viewing the opportunity associated with both artificial intelligence and value-based care. The article highlights that while there certainly is potential there, health systems probably won’t be able to take advantage of it any time soon given the resource constraints within the system today. Investments that do happen will need to produce short term ROI.
Data
McKinsey data on the exchanges
Don’t look now, but the exchanges appear to be a really healthy insurance market at the moment, even with the issues that have been plaguing insurtechs (particularly Bright and Friday) recently. It is particularly interesting to see the growth in insurtech membership, highlighted in the chart below, coupled with the decrease in lowest cost plans offered by insurtechs. It lends some credence to the idea that Bright and Friday had mispriced their products leading to market exits, while Oscar has potentially found stable ground for itself. But on the whole, insurtechs are actually a pretty small part of the exchange story on the whole. It’s worth remembering that the exchanges will receive a huge potential boost in membership starting this year as Medicaid redeterminations kick people into the exchanges. The report does a great job summarizing where the market is today and how it has changed over the past decade.
Bain data shows global PE deals in healthcare hit $90 billion in 2022
Similar to the VC landscape, PE deal-making slowed down from a peak in 2021, but is still seeing consistent activity. Bain reporting 2022 was the second largest year of deals on record. Blake Madden does a nice job summarizing some of the key takeaways from the report - strategic acquirer activity, the continued opportunity in VBC, ASC multiples, and more.
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