Weekly Health Tech Reads | 10/13/24

2025 MA Stars results, more capital flows into the AI scribe market, bending the cost curve, and more

Author

Kevin O'Leary
October 13, 2024

Welcome to this week’s free weekly newsletter! I thought I’d try out a new section up top this week, which is a quick reflection on what was on my mind during the week. If it’s helpful / you want to see more of this (or don’t), share some feedback.

While Stars results provided exciting fodder for Medicare Advantage nerds, I spent a lot of the week reflecting on the CVS news of last week, specifically the implications for vertically integrated models more broadly. I found myself re-reading this excellent post from Jeff Goldsmith last year, arguing that vertical integration doesn’t work (this version of the post in THCB was more approachable). This sentence stands out to me as an underlying reality: “The main problem with the vertical integration strategy in healthcare: professional judgment and the personalized care guided by it does not scale very well.”

While CVS’s challenges might stem from more idiosyncratic issues presented by various strategic decisions, I also think we’re seeing the implications of that statement showing up in a number of different ways. For example, I can’t help but think about it when looking at the MA Stars results this week, given Humana and UHC appear to be the biggest losers (see below).

More on Stars performance and other news of the week below!

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MA STARS

2025 Stars released; overall scores drop but many plans appear happy with results

CMS released the 2025 Medicare Advantage and Part D Star Rating, with average Star ratings falling to an average of 3.92 stars, down from 4.07 for 2024, as highlighted in the CMS table below. This performance will have a meaningful impact on 2026 financials for Medicare Advantage plans, as plans receiving 4+ Stars for 2025 will receive a 5% revenue bump from CMS in 2026.

CMS’s release calls out two distinctions in plans that have drastically different performance:

  • For-profit vs not-for-profit status: 50% of non-profit contracts are 4+ Stars, while only 36% of for-profit contracts are 4+ Stars

  • Tenure in MA: Only 28% of contracts that have been around less than five years achieved 4+ Stars. This increases to 37% for contracts between five and ten years old, and 47% for contracts older than ten years

✍️ Going Deeper

This chart and blog post from the Lilac Software team did a really nice job contextualizing overall Stars results and the downward trend in performance over the past several years, which looks more and more like there was a COVID bump and we’re returning to pre-COVID levels:

While the headline is that average Stars went down for 2025, underneath that is a story of varying performance for plans. Specifically, Humana and UHC consistently experienced declines, while many other plans saw positive performance. Peter Yates shared this helpful treemap visualizing how various contracts performed year-over-year (green = increase, red = decline):

The striking part of that chart to me is how consistently red Humana and UHC appear as they saw performance declines across key contracts. Meanwhile, most other insurers appear to have consistently improved performance.

Kaiser performed quite well, with 100% of its membership now in 4+ Star plans, up from 80% in 2024. Elevance has two of the seven CMS contracts that earned 5 Stars. CVS held steady and has 88% of members in 4+ Star plans. It wasn’t just the big players that performed well, as we heard from several plans celebrating their performance:

  • SCAN Health Plan issued a press release noting 98% of its members are in 4.5 Star plans and that it has brought in the former CEO of Disney to advise on member experience.

  • Clover’s CEO shared that 90% of its members are now in a 4 Star contract, and it will begin marketing that to members immediately. Clover stock is now up 320+% year to date

  • Alignment’s CEO shared that 98% of its members are in 4+ Star plans

AI SCRIBES

Capital continues to pour into the AI Scribe space

The AI Scribe market continued its tear this week. On Thursday, Suki announced it has raised $70 million in funding, at a reported $500 million valuation. Also on Thursday, The Information reported that Abridge is raising another $250 million in capital at a $2.5 billion valuation.

Abridge is on a growth tear lately, as reflected in its skyrocketing valuation: Reuters reports it has increased from $200 million in late 2023 to $850 million in February 2024 to the reported $2.5 billion valuation here.

Abridge’s approach to partnerships seem to be differentiating it in the market — in addition to the relationship it has forged with Epic, Abridge announced a new partnership this week with Wolters Kluwer to integrate UpToDate into the Abridge platform.

✍️ Going Deeper

If you’re interested in going deeper on the AI Scribe topic this weekend, this interview with Brendan Keeler in Sacra provides a very thoughtful perspective on the landscape. In particular, the point he makes questioning whether AI scribes are actually a wedge to disrupt the industry or not seems quite relevant, given all the capital pouring into these companies at the moment.

BENDING THE COST CURVE

Peterson-KFF looks at CMS estimates of national health expenditures

For about as long as I’ve worked in healthcare, I’ve heard about this idea of “bending the cost curve” with the general feeling that things would be so much better if only we could bend the cost curve. So it’s fascinating to look at this Peterson-KFF data suggesting that we have, in fact, bent the cost curve meaningfully over the last decade. CMS projected 2032 spending is now $2 trillion(!) less than CMS projected back in 2010. Yet, despite that, it still feels like we have a long way to go.

Other Top Headlines

  • Four health systems (Baylor Scott & White, Memorial Hermann, Novant, and Providence) have joined forces to launch Longitude Health. Longitude reads to me like it is a venture studio that launches for-profit startups funded by the health systems. The first batch of startups will be three companies: a drug development company, a Medicare Advantage care coordination company, and a patient payments company. The health systems selected these three ideas from a list of forty potential businesses, and the systems intend to collectively launch more NewCos over the next five years. Like many health system innovation efforts, the logic of this approach seems pretty sound, so it will be worth watching how committed these systems are to executing the idea over time.

  • The Peterson Health Technology Institute (PHTI) released a survey exploring how health plans, employers, and health systems purchase digital health tools. The survey provides valuable insights into how each purchaser evaluates digital health solutions and should serve as a helpful annual benchmarking exercise for the market.

  • Rock Health released its Q3 2024 digital health funding update, highlighting how deal activity is down slightly, but check sizes have held steady.

  • Henry Ford Health launched a new non-profit subsidiary, Populance, that will provide VBC population health services to other providers and payors.

  • Fullscript, a PE-backed platform that dispenses supplements, acquired Rupa Health, a specialty lab platform.

  • Reveleer, a VBC-enablement platform, acquired Curation Health, a platform that integrates with EHRs to give providers clinical insights at the point of care.

  • The CBO released a report examining the impact of potentially allowing Medicare to cover GLP-1s.

Funding Announcements

  • Abridge, an AI scribe platform, is reportedly raising $250 million at a $2.5 billion valuation.

  • Maven Clinic, a women’s and family health company, raised $125 million at a $1.7 billion valuation. The blog post on the funding lays out a 10-year roadmap for Maven, including the growth of its fertility benefits model, a focus on value-based maternity care, and AI-driven patient engagement.

  • Suki, an AI scribe platform, raised $70 million at a reported $500 million valuation

  • Eleanor Health, an outpatient addiction treatment provider, raised $30 million.

  • Centaur Labs, a company gamifying medical data labeling for AI models, raised $16 million.

  • Radiant Graph, an AI-based patient engagement platform for providers, raised $11 million.

  • Reema Health, a community health worker model for Medicaid populations, raised $7.6 million.

Perspectives from the Community

How Long Til We’re All on Ozempic? by Greg Justice
This is a great analysis in Asterisk that seeks to answer the question: “How many GLP-1 agonist medications will be sold in 2030 in the United States?” It finds that 23 million people will be on GLP-1s in 2030, up from ~8 million today. Read more

So what should a Chief Medical Officer do, anyway? by Andrew Schutzbank
A good read that highlights five hats that CMO roles tend to wear: sales support, admin, development & training, clinical operations, and clinical care. It underscores the level of variation across CMO roles in the industry. Read more

Medicare Advantage insurers bank on Special Needs Plans in 2025 by Lauren Berryman
This report in Modern Healthcare does a nice job of walking through why insurers are bullish on DSNP plans in 2025. As the article notes, an average pre-tax margin of 6.4% for DSNP plans versus 2.8% for MA overall certainly helps. Read more

$500 Billion Long-Term Care Challenge Is About To Get Worse by Rahul Ekbote, Parie Garg, and Martin Graf
A team from Oliver Wyman provided a helpful perspective on the challenges ahead for the long-term care market. Read more

Investable Strategies in Direct Primary Care by Rebecca Springer
A helpful Pitchbook report on the state of Direct Primary Care. If you’re looking for an overview of the opportunity that companies like Marathon Health and Premise Health have, this is well worth the read. Read more

Data, 23, and me by August Bournique
A detailed look at the nuance around 23andMe’s ownership of genetic data and the legality of user requests to have their data deleted. Read more

The Unwinding Odyssey: Understanding Where We Are Today by Kate McEvoy
A perspective on the state of Medicaid unwinding, looking at the work that has been done to date as well as the work still to be done. Among other things, it highlights the work the US Digital Service has done to support unwinding processes, which I didn’t realize worked with ten states through the unwinding process. Read more

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