Weekly Health Tech Reads | 8/29/21

News:

• Two big names in the mental health landscape are joining forces as Headspace and Ginger are merging. The new combined entity, Headspace Health, has $300 million of bookings in 2021 and a valuation of $3 billion. Prior to the merger, Headspace's valuation was $1.8 billion, with over 73 million downloads, pegging Ginger's valuation at around $1.2 billion. It seems to make a lot of sense for both parties to join forces as they're both targeting different segments in the mental health landscape, enabling the combined company to offer a broader solution for customers and compete in the platform wars. Link.

• Two practice management solutions in the women's health space have teamed up as Unified Women's Healthcare acquired Women's Health USA. Collectively they'll provide services to 2500 providers across 900 locations. Link.

• Virtual primary care provider K Health acquired mental health startup Trusst, which connects patients with therapists via text messaging. Given K Health's heavy emphasis on text communication, the Trusst acquisition appears to make sense. Link.

• Alight, a benefits administration platform for HR teams, has acquired ConsumerMedical to help its employer customers navigate their healthcare benefits. ConsumerMedical is a healthcare navigation / second opinion / decision support tool that has traditionally sold itself to employers as a bolt on to the insurance plans. It is interesting to see a broader HR benefits admin player making this acquisition rather than a payor trying to compete for the value that these healthcare navigation / decision support solutions have captured as standalone entities. For everyone selling healthcare benefits to employers it should serve as a good reminder of two things: 1) how healthcare is just one small piece of the puzzle for the HR teams you're selling to and 2) there are other potential partners outside of insurers to get into employers. Would not be surprised to see if other health benefits navigators go down this route too. Link.

• Definitive Healthcare ends the healthcare IPO drought over recent weeks as it filed it's S-1 this week. Definitive is a provider data company that provides business intelligence to life sciences, providers, HCIT, and other industries selling into healthcare. There are a bunch of different use cases for that data, making it a challenging business to describe succinctly. The example use cases Definitive provides, broken down by different customers is probably the most helpful way to see what it is up to (pg. 130 - 134). It currently has over 2,600 clients, driving $118 million of revenue in 2020 (pg. 99). 48% of that revenue is coming from life sciences companies, 24% from non-healthcare, 21% from HCIT, and 7% from providers. (pg. 90). 272 of Definitive's customers are enterprise contracts generating over $100k a year in sales (pg. 136). Definitive provides an example of a pharma company that was paying $500k a year for access to provider and patient data for their sales strategy in a rare disease market. Definitive then expanded the relationship with that pharma company to a few other drugs / teams and now has a $1.5m annual contract with them (pg. 136 - 137). The majority of their revenue growth is from expanding relationships with existing customers (pg. 99). That dynamic of landing and expanding, combined with a 45% adjusted EBITDA margin (pg. 94), appear to make this pretty attractive business. Of course the net loss number is pretty substantial at a $51m loss in 2020, but a good chunk of the difference between EBITDA and net loss is $36m of interest expense and $58m of amortization. Definitive was purchased by private equity group advent in 2019 for $1.7 billion - we’ll see what the valuation range starts at, but assume this will be a nice return on a two year flip for the PE firm. Link.

• Remote-monitoring startup 100plus was acquired by Connect America. Link.

• Vizient announced a partnership with Panda Health to help health systems vet & adopt digital health tools. Seems like a sign of maturity that we're starting to see GPOs actively play in the digital health space - it must mean that health systems are starting to devote more energy and budget to the space if Vizient is paying attention. Vizient and a number of health systems are funding Panda. It will be interesting to watch how the digital health consolidation train impacts the need for vetting startups here. Link. 

• Carbon announced that it has acquired two urgent care clinic chains, shining some light into how it is using its recent $350 million capital raise, as well as the growth strategy it's pursuing. Link.

• Evergreen Health, a startup in the kidney care / dialysis market. is now the second company launched out of Adam Boehler's incubator Rubicon Founders. Evergreen will receive a commitment of at least $25 million. This is an interesting quote from Boehler on the opportunity to align provider payments with patient outcomes: "Who gives a sh*t how many patients you can see in a day at a dialysis center? Instead of seeing 20 patients, see three and get them to a place where they can be treated at home or get a transplant." Link.

• Verily is partnering with Mayo Clinic to build clinical decision support tools for cardiovascular and cardiometabolic conditions. They'll deploy at Mayo first and then look to deploy at other Verily customers. Link. 

• Robotic process automation company Olive announced this week that it has launched... its own venture studio? I suppose if you're Olive I could see the logic as a low risk way for you to encourage people to build using the Olive platform. There are two startups in the program - one called Rotera, which essentially sounds like a services org helping implement Olive products. The other is Violet, a financial product that appears to be just a landing page at the moment. Those aren't exactly confidence inspiring launch partners for the program. This feels like the kind of effort an organization decides to launch when it has raised more money than it knows what to do with. Link.

Funding:

• Calibrate, a virtual weight loss program that's a little over a year old, raised $100 million. The funding is going toward growth - noting they're pursuing "partnerships with policy makers, insurers, and manufacturers". Interesting to see Optum and Tiger as two of the investors here. Presumably the Optum team likes the clinical results and thinks there's an opportunity to scale with UHG. Will be curious to watch the growth strategy unfold here. This also seems like a major early win for the venture studio model and Redesign Health, which appears to have incubated Calibrate. Link.

• AllStripes, a platform helping to find new treatments for people with rare diseases, raised $50 million. Link.

• Covera Health, a quality analytics platform focused on identifying Centers of Excellence for radiology, raised $25 million. Link.

• Equum, a teleICU platform, raised $20 million. Link.

• Recuro Health, a virtual care platform that's gained a foothold with employers via a COVID-19 testing offering, raised $15 million to fund digital health acquisitions. Given the market these days it seems like an odd amount to raise... I'm not sure what sort of assets $15 million can buy you. Link.

• Antidote Health raised $12 million, claiming to set up the first "virtual-first HMO" even though it's not offering an insurance product. I gotta admit it really grinds my gears when companies use insurance language to sell their product (they talk about plans and copays and affordable coverage... which is the way an insurer talks) when they're not actually selling insurance coverage! Where do they make it clear that this isn't insurance? Oh, it appears to be in Paragraph 3 of their Terms of Use. Not exactly front and center anywhere in their signup / payment flow. What Antidote actually appears to be selling is a monthly membership for people to access Antidote's virtual PCPs and some meds. And that's cool, it's like a virtual direct primary care model for $29/mo - lots of interesting companies are playing in that space. But why deceptively market this as an insurance product rather than membership primary care model? Where does Antidote explain that for anyone with a healthcare need that you still need to pay for the same health insurance everyone else does? Nowhere. It feels deceptive at best, particularly when your organization is targeting the uninsured and underinsured population. If any of those people show up in the ER in a given year thinking they're covered via their Antidote plan, who is left holding the bag? That individual. Boooo. Link.

• Kintsugi, a company using vocal biomarkers to detect anxiety and depression just from listening to 20 seconds of speech, raised $8 million. Link.

• SCAN Health Plan continues to be very active in innovation land, announcing an investment in MedArrive, an in-home EMS model (which, like Calibrate, was incubated in Redesign Health). Link.

• Rezilient raised $2.5 million to build an interesting approach to a virtual / hybrid primary care for employers - it features physical locations with nurses on site and doctors via telehealth visits. Link.

Opinions:

• This article on the menopause market from provides a nice market map of the space (see below). The key insights from the article are generalizable to basically any health condition at the moment: 1. Condition X is complex, 2. there's a shortage of specialists for it making it harder to manage, 3. virtual care options provide a convenient way to address this shortage and provide more access to care, 4. employers are a first mover to test this with. The points raised within each of these as it relates to the menopause space are interesting - particularly the points made on the trust needed to execute on this space and the need to listen. Link.

• The Weekly Gist this week featured a quite interesting perspective from the CEO of one of their health system clients regarding how Boomer-aged doctors are looking to PE groups for buyouts as they approach retirement and are looking for their nest egg. With all the practice buyouts going on at the moment, it will be interesting to watch how long they can retain docs for. Link.

Data:

• The New York Times featured a widely covered article on hospital prices last weekend, yet again highlighting the insane pricing structure of healthcare in this country. Charts like this one below highlight the wild variation in prices one hospital can charge between insurers (and how cash pay often times costs less than insurance). Link.

• The Business Group on Health released a survey of what large employers are thinking about from a plan design perspective moving forward. The executive summary hits on some of the key highlights you'd expect - mental health is top of mind for everyone, employers expect to see deferred care from COVID, etc. Some of the findings are also a bit more unexpected, for instance employers general interest in addressing social determinants and health equity. Link.