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- Weekly Health Tech Reads | 11/17/24
Weekly Health Tech Reads | 11/17/24
Accountable Health Communities Model shows cost and quality savings, ACO REACH shows cost savings in financial report, Forward shuts down, and more
Kevin O'Leary
November 17, 2024
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SOCIAL DETERMINANTS OF HEALTH
CMS releases 5-year results for the Accountable Health Communities Model; sees cost and quality improvements
This week, CMS released the Accountable Health Communities Model Third Evaluation Report, covering the entire five years of the model. The Accountable Health Communities Model tested whether connecting individuals with health-related social needs with community resources would improve quality and reduce costs. It was a massive effort across five years, from April 2018 to January 2023, in which 29 health systems screened 1.1 million unique Medicaid and Medicare beneficiaries for health-related social needs. The model demonstrated both improved quality and reduced costs over that time, as illustrated in the chart below.
✍️ Going Deeper
I happened to work at one of the health systems that was implementing the Accountable Health Communities model, and so I had a front-row seat to see the amount of work inside the health system, along with startup partners like NowPow, that went into launching it. This Health Affairs article from 2022 summarizes that work really well. I’d highly recommend reading the article if you’re at all interested in the SDOH space. It was a massive endeavor that required dedicated leaders driving a huge amount of change management and still requires a lot of ongoing thought about how this sort of work is paid for outside of a CMS model like Accountable Health Communities.
Logically, it makes sense to me that a model like this should demonstrate improved quality and overall cost savings, as the CMS evaluation report appears to confirm here. Seeing a model like this demonstrate such positive results is very cool and refreshing, particularly given all the challenges facing healthcare innovators today. Hopefully the momentum supporting SDOH interventions continues to build beyond the AHC model.
ACO REACH
CMS released PY 2023 ACO REACH Financial Results
Last Friday, CMS released payment year 2023 results for the ACO REACH program. Across 132 ACOs, the program generated $1.6 billion in gross savings and $695 million in net savings. This represents a substantial increase from the PY 2022 results for GPDC, the predecessor program to ACO REACH.
NAACOS responded to the positive results, suggesting the government should extend ACO REACH beyond its current end date in 2026 for another four years, which coincides with CMS’s 2030 target of having all beneficiaries in accountable care relationships.
Despite the improvement in financial results from 2023 over 2022, it is worth noting that this report uses a different methodology than the evaluation report that will ultimately be released for performance year 2023. For comparison, the financial results in 2022 indicated that GPDC generated $870 million in gross savings and net savings of $372 million, while the 2022 evaluation report found that gross spending actually increased by $171 million.
CMS noted the evaluation report will come out in summer 2025. As I learned over the summer when I dove into the GPDC evaluation report for 2022, it is the evaluation report that will ultimately be the more impactful report from a policy perspective moving forward.
The financial and quality performance results released last Friday are used to determine payments to participating entities, but the evaluation report is what policymakers will theoretically use to determine whether to expand the program moving forward. So, it will be worth watching whether that report shows savings as well.
[Note the difference between the ACO REACH results and the Accountable Health Communities results discussed above — AHC is the evaluation report]
✍️ Going Deeper
I spent some time putting together a summary of some of the financial results for some of the companies involved in ACO REACH — the ones you’ll see generally covered in this newsletter. Collectively, the 22 entities displayed in the chart below account for 38 of the 132 ACOs in the program. A couple interesting takeaways from putting the data together:
agilon and villageMD stand out for their solid performance at scale in the ACO REACH program. They represent two of the largest entities in the program when I roll up their ACOs (the largest ACO in the program was UT Southwestern Accountable Care Network at 102,525 beneficiaries), and they have solid net savings rates at 10% and 8% respectively across their books.
Check out the drastic difference in performance between the Oak Street ACO and the CVS Accountable Care ACO. Oak Street performed quite well, generating net savings of 19%, albeit on only 11k lives. Meanwhile, CVS’s ACO has 76k lives, but generated a -1% savings rate for a net loss of almost $9 million
Iora and One Medical had a similar dynamic in terms of savings rates — Iora generated 17% net savings on 15k lives, while One Medical generated 0% net savings on 3k lives. I’m not sure I understand why One Medical would have had its own ACO separate from Iora. Either way, it appears that the One Medical ACO was terminated at the end of the year. Cityblock and Clover also terminated their ACO REACH entities this year.
NeueHealth had three ACOs, one of which was far and away the worst performing ACO in the program — it’s ACO with 40k lives generated a net loss of $44 million, a -8% savings rate. Its other two ACOs generated positive savings that were more in-line with other ACOs.
The CMS announcement also highlighted two interesting data points related to the performance of different entities:
High needs and new entrant ACOs performed better than Standard ACOs, which CMS attributed to more generous benchmarks and fewer participants in high needs and new entrant ACOs
The cohort of ACOs that started in PY 2021 performed best (6.0% net savings rate), while PY 2022 cohort and PY 2023 cohorts were at 1.8% and 1.7% net savings, respectively.
Source: My analysis from the CMS data file
PRIMARY CARE
Forward Health, an AI-powered primary care startup, shuts down after $650+ million in funding raised
Forward, a tech-centric primary care startup that reportedly raised over $650 million over the last seven years, announced abruptly on Tuesday it was shutting down. Forward initially launched in 2017 as an effort to reinvent healthcare as a consumer experience via a concierge-like primary care clinic. The initial funding round came from a Who’s Who of Silicon Valley leaders — Khosla Ventures, Founders Fund, First Round Capital, John Doerr, Eric Schmidt, Marc Benioff, and others.
By 2021, Forward had become a unicorn after a $225 million funding round that saw Softbank and The Weeknd join as investors. By 2022, this Fortune coverage of Forward indicated it had 25 primary care clinics across ten states.
In November 2023, Forward announced another $100 million in funding (equity + debt) and a pivot to launch CarePods, primary care kiosks that would be placed in malls and office buildings. At that time, the plan was to launch 3,200 CarePods within a year. As reported in Business Insider this week, Forward ended up opening five CarePods over that period. The rollout was plagued by a variety of issues, from logistical challenges with building codes to patients getting stuck inside the CarePods.
This all culminated in Forward abruptly sending a notice to patients this Tuesday, still posted on its website here, that it would be closing locations, canceling scheduled appointments, and shutting down its mobile app effective immediately.
✍️ Going Deeper
If you’ve spent any time on LinkedIn this week, chances are you’ve already seen some strong opinions on this from the healthcare and broader startup community this week. Whether you applaud Forward for taking a big swing at a bold idea or critique them for any number of issues, it seems clear that this company touched a nerve in its quest to upend a broken system.
I think the reactions to this company are a byproduct of a few things that seem almost purpose-built to elicit these strong opinions. With Forward, you have a huge amount of capital raised (from non-healthcare people) compared to the external view of progress made. You have a brash CEO with a heavy disdain for healthcare innovators and incumbents alike (see this and this for good examples, including where he once offered Carbon Health’s CEO $1 million to not take insurance while on stage). But even more than that, you have a company vision centered on one of the lightning rods of healthcare innovation — the Khosla-esqe notion that AI will turn care delivery from a service into a product, replacing the role of humans with technology, starting with a high-end concierge product that will trickle down to the masses.
One of the more impressive accomplishments of Forward is how much capital it raised from really smart people, seemingly based on the thesis of AI disrupting a broken healthcare industry. If you listen to Aoun talk you, can see the allure of the story he tells. Check out this quote from him on a panel earlier this summer talking about the opportunity for AI in healthcare (h/t Mark Sendak for sharing):
I think healthcare should be roughly zero dollars for everybody. And I don’t mean like, oh, the government is just going to pay for everyone. I don’t think shifting who the payor is makes that much of a difference.
But, if I said I truly want it to be actually so cheap that we don’t even think about it again, you’d say, that sounds ridiculous Adrian. It’s like 17% of GDP and its growing, doubling every ten years, how are you going to get there?
But remember, we had this problem in other industries. We used to sit there and have libraries. When i was growing up I used to go to libraries all the time, i was a big nerd and I loved libraries. And I remember reading this thing once that was like oh, these starving kids in Africa, they don’t have libraries. And I sat there and was like, I’m going to work to get libraries to every corner of the planet. And then these two guys named Larry and Sergei came along and were like, you idiot, we’re just going to build a search engine. And now we have libraries for the whole planet. We’ve democratized information. It’s so inexpensive to have access to information that we don’t think about it any more.
But when you look at healthcare today, why are we not there? What is the limiting factor? Again, from first principles. Let’s ignore how the industry has developed. But just from first principles, what is the thing that is so expensive? I always try to remind people. So, my brother a few years ago had a heart attack and he had to go in and have some surgeries and all this stuff. And I just remember that there was like $100,000 worth of bills. And I was looking at it like, what did we pay for? If you go in and get open heart surgery, is there some platinum? Is there some uranium being used? Is there a $5 million dollar machine? No, it’s kind of a dude with a fork and a knife, except they call it a scalpel and something else. And they’re cutting… and where did all this cost go?
And what you realize is we’ve bloated the system. And the big fear that I have today, and I think unfortunately the fear is being realized, is that we’re starting to use these technologies to continue to bloat the system. As opposed to say, let’s rethink it, and let’s just get healthcare to be a true commodity that maybe nobody makes money off of because, you know what, it’s so uninteresting, there’s so few dollars working through healthcare. Imagine how great that world would be.
The interesting part of all of this for me is that I find myself agreeing with many things Aoun says. I can understand why people, particularly from outside healthcare, get really excited about that narrative. Clearly the healthcare system is deeply broken, and I understand his concern about the system using AI to continue to bloat the system. In the interview, he talks about regulatory and financial challenges as the two biggest impediments to implementing AI in healthcare. Agreed. Yet, while the allure of zero-marginal-cost healthcare for everyone is certainly appealing, I can’t escape the feeling that either he or I seem to have a fundamental misunderstanding of the reality of healthcare in this country today.
Take, for instance Aoun’s library, analogy. It is seems quite appealing to think that Google’s search engine has made libraries obsolete in Africa because access to knowledge is democratized. It also seems factually incorrect. Before we even get to Africa, where apparently only 37% of people used the internet in 2023, lets first visit Google’s backyard, Silicon Valley. There, organizations like Teach for America are still attempting to solve the “digital divide” for the 15,000 homes in Silicon Valley without devices or internet access in 2020. Tara Bannow covered nicely the “story of haves and have nots” in accessing health care in San Francisco in 2020. Three months before the Aoun quote above, The Bill and Melinda Gates Foundation published research highlighting the important role that public libraries play in solving the digital divide in this country, but also that they struggle to sustain the service. It all hints at the privilege associated with someone saying that we don’t have to think about accessing information anymore.
As I think about healthcare in this country, it doesn’t seem like Aoun’s library analogy is an acceptable outcome — glossing over leaving marginalized communities behind in the name of consumerism is the antithesis of what I think we’re working toward in healthcare. That’s all even before we get into a discussion of where spending actually happens on healthcare today and what service (/product) care delivery is actually providing, which I think is fundamentally different from a consumer company like Uber or Apple. I read the Health Affairs article regarding the Accountable Health Communities work and scratch my head trying to juxtapose these two worlds.
Perhaps I’m the one with a misunderstanding here, and Aoun is right that this mindset will eventually generate zero-cost healthcare for all. Even if I am highly skeptical of that happening, I will happily eat crow if it does. It’d be a wonderful thing, and I think its a good thing people are working on it. Either way, I am certain that more efforts will come along over time like Forward that will attempt to disrupt the healthcare system, and that AI will continue to play a big role in those efforts. Given how much I think we all agree on regarding the opportunity to improve healthcare in this country and beyond, hopefully we can all learn from this experience and move forward, together.
VALUE BASED CARE
HCPLAN releases updated data on the current state of VBC payments in 2023
The latest HCPLAN measurement update was released this week, highlighting the current state of value-based payments across payor segments in 2023. I summarized the results in a chart below — the notable takeaway being that Medicare Advantage stands out versus Commercial, Medicaid, and Traditional Medicare in that it has shifted ~25% of payments from Fee-for-Service (categories 1 & 2) to Population-Based Payments (Category 4).
It is interesting to juxtapose this with recent payor and MSO earnings calls where it seems like providers have substantially less interest in these Category 4 arrangements now that payor profits have been squeezed. I’d imagine that means that 34% in MA Category 4 will decline over the next few years and we’ll see an uptick in Category 3A and 3B.
There’s a lot of work to do hit the goals set out for 2030 of 100% of MA and Traditional Medicare in Category 3B and 4 (and 50% of Commercial and Medicaid).
Source: My analysis of HCPLAN data
Other Top Headlines
Fertility benefits manager Progyny reported its Q3 results and its stock dropped 18% on the week as it missed the quarter and revised its projections for the year. The miss was driven by changing member behavior in the quarter, as the same number of people are starting treatment, but members are taking longer to move through treatments. The earnings call was a fascinating conversation about the utilization patterns here — you can see in the Q&A that analysts were confounded by the changes, and Progyny didn’t have a great explanation for why, either. Analysts were hypothesizing about things ranging from whether the election impacted utilization rates to whether GLP-1s are potentially improving fertility rates. It does sound like despite utilization challenge and the loss of Amazon as a customer, Progyny feels confident about its competitive position in the market with client retention, existing client upsells (maternity & menopause), and new client additions.
As I’m sure you’ve already heard, Robert F Kennedy Jr was nominated to run HHS. Dan Diamond has a good summary of his take on all the happenings — from whether the nomination will survive to what RFK would do in the role, to implications for career officials. I also found this Guest Essay by Emily Oster in the New York Times to be particularly thought-provoking, suggesting that public health agencies need to be more nuanced and share more context with people in order to rebuild trust that has been lost.
Amazon One Medical Pay-per-visit, Amazon’s D2C telehealth service with a name befitting a B2B healthcare product, has launched a monthly membership product offering similar to Hims & Hers and Ro. Initially, it will offer this for a handful of conditions (anti-aging skincare, men’s hair loss, erectile dysfunction, eyelash growth, and motion sickness). Given the pivots Ro and Hims have made toward GLP-1s, it’ll be interesting to see how / if Amazon One Medical Pay-per-visit chooses to tackle that (or not) over time.
The DOJ filed an antitrust suit this week attempting to block the UHG / Amedisys merger. Bob Herman and Tara Bannow provided good coverage of the antitrust suit in Stat.
This was an interesting read in the Wall Street Journal exploring how people in the last year of life are leaving Medicare Advantage for traditional Medicare as costs for those patients go up in the last year of life.
Aetna released a whitepaper making the case that Aetna’s approach to VBC contracts results in higher quality care for Aetna members.
This was an interesting deep dive in Propublica on the issue of “ghost networks” in provider directories and how state regulators are not taking action to correct this issue, despite rhetoric suggesting they are.
Propublica was on a roll this week, also featuring a deep dive into Lincare, the largest distributor of home oxygen equipment. It looks into Lincare’s checkered past with Medicare, including multiple allegations of attempting to defraud the Medicare program in various ways. Despite this, Lincare does ~$2.4 billion in revenue annually, most of which comes from Medicare.
Funding Announcements
Diverge Health, a care navigation platform for Medicaid members, raised $52 million
Stepful, a platform that trains people for entry-level healthcare jobs, raised $31.5 million. This Techcrunch article provides a nice overview of the model.
Homethrive, a caregiver support platform selling via employers, raised $20 million.
Impilo, an infrastructure platform for remote monitoring and virtual and home care, raised $11.5 million.
UpHeal, an AI-based clinical documentation platform for therapists, raised $10 million.
Fort Health, a pediatric behavioral health provider, raised $5.5 million.
Great Reads
Falling Star Ratings: What's Driving the Drop and Future Implications by Peter Yates
An HTN Guest Post describing the current state of Star Ratings, how the program is changing, and future implications for health plans. Read more.
Medicaid Unwinding by Aany Tazmin-Ewing and Andrew Schwarze
A helpful white paper from a Wakely team looking at the impacts of Medicaid redeterminations and acuity changes that have occurred during the unwinding. Read more.
Where AI Ambient Scribes Are Heading by Spencer Dorn
A good perspective on the AI Scribe landscape today and where it might head moving forward. Read more.
Primary Care Practice Telehealth Use and Low-Value Care Services by Terrence Liu, Ziwei Zhu, Michael Thompson, and others
A paper in JAMA Network Open looks at telehealth use among Medicare FFS beneficiaries who received care from PCPs in Michigan and found that telehealth use did not introduce additional wasteful or unnecessary care. Read more.
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