Weekly Health Tech Reads | 8/8/21

News:

• Honor, a startup that's been building a platform for home health agencies, just acquired a large home health agency, Home Instead. It brings the combined organization's annual revenue to $2+ billion. It's an interesting full-circle move for Honor. If you'll recall, back in 2015 it started as a next-gen home health agency, focused on employing caregivers directly. It struggled to scale with that approach, and pivoted to scaling by becoming a tech platform for home health agencies. Now its next play appears to be acquiring those home health agencies. It's a playbook I anticipate we'll see more and more over the coming years as venture funds seek scale from their virtual care model investments and adopt the playbook that private equity practices have found lucrative for years. Although quotes like this from venture investors, in this case Silicon Valley demigod and Honor Board member Marc Andreessen, make me a bit queasy: "Nobody has been able to figure out how we deliver high-quality care at scale, until now... This acquisition fundamentally transforms the senior care space, flipping it from analog to digital...." Okkkkkkkkk, I know we're all excited but lets maybe slow our roll on that one a bit. Link.

• Truepill appears to have had an up and down week as its CEO announced via Twitter that Truepill is powering the Optum Store, an initiative UHG mentioned on its most recent earnings call (sans Truepill). Of course, said Twitter announcement is now deleted, which certainly makes it seem as though Optum wasn't quite as excited as Truepill was about sharing that news. It does seem like a big deal that Optum chose to find an external partner in Truepill to build that platform rather than building internally with the resources Optum has. You can understand why Optum perhaps wasn't too pleased about Truepill sharing this news. Link (Optum Store, since the tweet was taken down). 

• One Medical hosted its earnings call. Interesting to see the analyst question as to whether One Medical would try to take more risk with employers, and the short answer appears to be - they'd happily do so but employers aren't interested in it. Link.

• Bright Health reported earnings that beat on top line but missed on EPS sending shares tumbling by about 20%. Bright is now down ~50% since IPO. This will be interesting to watch as while it may be a back to reality correction from a hot IPO market and/or a mismanagement of Wall Street expectations post-IPO. It could also be a market overreaction of not understanding Bright's business model within the current environment. Higher than expected MLR seemed to be the primary driver of the EPS miss, which should eventually stabilize and another strong year in the individual exchanges this fall could leave some room for strong gains from these levels. Link.

• Avera's eCare business was acquired by PE firm Aquiline Capital Partners. For all of the times I have been asked about examples of successful health system innovation, this seems like an incredibly good, and yet under the radar, example. Back in the early 2000s Avera built a tele-ICU, and it has grown from there. In 2020 it had 200+ employees offering services at 600 sites across 29 states. It's a really good example of a health system successfully developing a new venture, which now appears to have netted a nice financial return for Avera. Link.

• PE firm Welsh Carson launches a new fund, Valtruis, a $300 million fund focused on investing in value-based care companies. It's curious to see Welsh make this move, and equally curious to see them going out of their way to describe it as a "WCAS portfolio company" every step of the way. It's not often that you see a PE firm launching a new fund and calling it a 'portfolio company'. Link.

• Bloomberg featured a list of the top 10 highest paid executives this year... and five of them are from two healthcare companies? The list is includes three Oak Street co-founders and two GoodRx co-founders, who collectively made $2.1 billion. Now, virtually all of that it seems is tied to one time gains tied to stock issuances. And of course, those folks started companies that have done well and they deserve to do well. But man, there's a lot to ponder here. If I'm a primary care provider in this country I am scratching my head at how an organization serving 75,000 patients generates that kind of wealth for three smart dudes. And if I am a front-line Oak Street employee you can be sure I am raising my hand at the next town hall wondering what's going to happen to all of that money. It's a very strange collective hallucination we're all living in. Link.

• Radix and Relatient, two startups focused on helping health systems with patient engagement, announced they're merging and receiving $100+ million in growth equity from Brighton Park Capital. Link.

Funding:

• Kidney care startup Cricket Health raised $83.5 million from WCAS's new value-based care fund, Valtruis. Link.

• Vera Whole Health, a primary care for employers startup, raised $50 million from JP Morgan's new healthcare focused fund, Morgan Health. Link.

• Cadence, a remote care management platform, raised $41 million. Link.

• Smile CDR, a clinical data platform, raised $20 million. Link.

• Rey, a mental health startup leveraging virtual reality for treatment, raised $10 million. Link.

• Modern Age, a D2C wellness startup, raised $6 million. Link.

• Cayaba Care, a startup building a maternity platform, raised $3 million. Link.

Opinions:

• Also on the topic of profits this week, One Medical also was featured in a piece suggesting they are putting profits over patients. Leaving aside for a second that One Medical's CEO was the second highest paid CEO last year (bringing in $200 million again related to the IPO), the issues cited don't actually seem all that unique to One Medical. They seem pretty similar to any care delivery organization trying to turn a profit. I read these sorts of articles and wonder what we're going to think in 10 years looking back at this period - once you rub off all the gloss of VC financing and unicorn valuations, the One Medicals of the world start to feel a lot like your run of the mill care delivery orgs dealing with run of the mill care delivery things. Of course the workforce is trying to unionize - ask health system leaders about the joys of working with unions. Of course they're cutting visit lengths - look at the financials of a FFS primary care visit. Someone in the slack channel quoted The Dark Knight on this topic, which feels like a very appropriate summary: "You either die a hero, or you live long enough to see yourself become the villain." Link.

• This Health Populi article highlights how doctors have become debt collectors largely as a function of increased cost sharing for patients. Things like this make it really easy to see why physician burnout is so high (see second bullet in the Data section). Link.

• This is an interesting deep dive on Healthcare in Action, the new nonprofit medical group addressing homelessness. created by SCAN, a southern California insurer. SCAN has invested $6 million into the effort, which will use mobile clinics to provide care to the homeless population. It expects to serve 1,000 patients next year and aims to grow to 5 - 6,000 patients over the coming years. Link.

• NY Times featured an opinion on how nursing homes need an overhaul, looking at some efforts at building new models such as the Greenhouse Project. Link.

Data:

• A new Health Affairs study suggests that hospitals who have a higher share of Medicare patients are more likely to be acquired or close. Link.

• This is a rather depressing survey of ~700 primary care clinicians on the primary care landscape. It found that 40% of respondents worry that primary care will be gone in 5 years, and 21% expect to leave practice in the next three years. Worrisome if those results materialize. Link.