Weekly Health Tech Reads | 11/24/24

Lots of discussion about policy changes, Dexcom invests in ŌURA, and more

Author

Kevin O'Leary
November 24, 2024

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POLITICAL WINDS

The discussion of Trump’s appointments picks up

It was a big week in terms of nominations for the new administration — we saw Dr. Oz picked as the new CMS administrator, Marty Makary as FDA commissioner, Dave Weldon as CDC director, and Janette Nesheiwat as Surgeon General. This week also saw a lot of discussion of what these picks might mean for various government healthcare programs. I’ll run through some of the more interesting things I read from the week below:

  • Profiles of Dr. Oz. Modern Healthcare, NPR, and others profiled Dr. Oz, noting his support of the Medicare Advantage programs. Oz has a number of investments in healthcare companies that present potential conflicts. This includes between $5 million and $25 million in ShareCare (which he co-founded in 2010), ~$550k in UHG, ~$50k in CVS, and ~$50k in HCA. In 2020, Dr. Oz co-authored a piece with vocal MA supporter George Halvorson advocating for the idea of Medicare Advantage for All, suggesting the program be extended to cover all Americans not on Medicaid, paid for by a 20% payroll tax on all workers.

  • CPT code changes? Several outlets, including the Washington Post and Financial Times, reported that RFK is in the early stages of revisiting how CMS calculates FFS rates, developing a plan to remove the American Medical Association from the process of creating CPT codes and instead bring that process in-house. Per the Financial Times reporting here, the AMA generates more than half of its $495 million in annual revenue from CPT codes and other royalties. The Washington Post article does a good job highlighting the critiques of the system, including Senator Elizabeth Warren calling the process “unethical”.

    • The history of the AMA involvement in CPT codes is a fascinating one. This 2020 article from Eric Reinhart and Dnaiel Brauner provides a good look into the history of how the AMA initially developed RVUs as a result of its opposition to government involvement in healthcare.

  • The scope of the HHS Secretary. This Tradeoffs podcast with former HHS Secretary Kathryn Sebelius provides some insight into the role of HHS Secretary, what RFK may or may not be able to do in the role, and some of the potential concerns to keep an eye on.

  • Wall Street’s view on the incoming administration. Keith Figlioli interviewed Lisa Gill (Managing Director at JPMorgan) on the Healthcare is Hard podcast. It provides a good perspective on how Wall Street views potential upcoming healthcare changes from the new administration, noting that it might be Q1 2025 before we really understand what change is really coming. Gill also shares some good insight into the cyclical nature of healthcare innovation from the lens of a Wall Street analyst, particularly how Gill views the most recent cycle of value-based care innovation, which I’d summarize as “it’s harder than you think”.

  • ACA subsidies. Both public health systems and insurers have shared they expect that the ACA subsidies will be extended in some manner on recent investor calls, as covered here in Stat. Health systems like the subsidies because it keeps more people in the exchanges (which have the second highest rates after commercial, at least according to HCA). Insurers with an ACA footprint like the subsidies because the ACA is a stable, profitable risk pool at the moment (for most).

  • Broader ACA reform. While the prevailing sentiment appears to be that there won’t be any efforts to fully repeal the ACA, “massive reforms” might be on the table. This KFF Health News article runs down what those changes might look like.

  • Medicaid changes. Outgoing CMS Medicaid leader Daniel Tsai told Stat that Republican plans to overall Medicaid are “bad policy” and risk the progress made in Medicaid over the last four years.

  • Medicaid policy changes. On the Medicaid front, it seems that there may be a push for block grants that will cap Medicaid spending at the federal level, among other changes, including work requirements. This article does a nice job summarizing those changes, including the chart below indicating what initiatives might be on the table:

DIABETES MANAGEMENT

ŌURA and Dexcom announce a strategic partnership

Smart ring maker Oura announced a partnership with diabetes medical device manufacturer Dexcom. Dexcom will invest $75 million in ŌURA as part of the partnership, valuing ŌURA at over $5 billion. The press release noted that ŌURA is profitable and will hit ~$500 million of revenue in 2024, double 2023 sales. ŌURA has sold 2.5 million rings. The strategic partnership will involve co-marketing efforts and integrating data between the apps of the two companies.

✍️ Going Deeper

The ŌURA partnership comes on the heels of Dexcom launching its Stelo product in August, the “most expansive product launch in our company’s history” (per Dexcom’s CEO on its Q2 earnings call). Stelo is an over-the-counter glucose biosensor, meaning anyone over 18 can go to the Stelo website and purchase the biosensor to track their glucose.

Dexcom’s Q3 earnings call highlighted its excitement over the positive early adoption of Stelo, with an analyst referring to it as a “gateway product” for Dexcom getting into prediabetic populations and moving them into Dexcom’s continuous glucose monitor product. Dexcom has 70,000 people using Stelo and expects to generate ~$40 million of revenue from Stelo in 2024.

Taken together, the ŌURA partnership and Stelo launch seem to indicate Dexcom’s interest in moving upstream into the broader health and wellness community over time. Dexcom published an updated investor deck on its website earlier in November that provides a glimpse into how it might be thinking about the strategic rationale for a partnership and investment like this. Check out this slide from the presentation, highlighting the journey of a patient with Dexcom over two years:

You can see the positive impact Dexcom knows it can have on patients — in this case a 56 year old woman lost 53 pounds, improved her A1C, and got her glucose levels under control over the 2.5 year journey, while also discontinuing a GLP-1 and SGLT-2.

Looking at this slide, I can also envision how Dexcom sees a huge opportunity in getting upstream of this journey. They noted their excitement about seeing 70,000 patients using Stelo — so you can imagine that Dexcom would be excited about accessing the consumer base behind the 2.5 million ŌURA rings that have been sold, helping that group manage its metabolic health, and having it serve as a top of funnel for its CGM product. Seems like a large opportunity for Dexcom to go after moving forward.

PRIMARY CARE

A white paper discusses the role of primary care in ACO performance

This paper published by the Primary Care Collaborative is a good read looking at how ACOs with more PCPs have performed better in the MSSP program over time. The chart below shows the consistent outperformance in ACOs where PCPs represent >50% of providers (note the paper defines PCPs as providers, not NPs or PAs, because of data limitations). The paper also includes case studies of three PCP-centric ACOs — LA MSSP Enhanced ACO; OneHealth Nebraska ACO, LLC; and Community Health Provider Alliance. The case studies include lots of insights into the “blocking and tackllng” done to perform in ACO contracts.

Despite the positive results PCPs have demonstrated in these programs, the article notes that MSSP is not bringing in more PCPs forming ACOs. The percentage of PCPs relative to other providers in MSSP has slightly declined (although the article notes that is true of the broader workforce as well). The article calls MSSP ACO Primary Care Flex a “welcome addition” that could help change this trajectory given its combination of upfront payments and FFS payments to “low-revenue ACOs”.

Other Top Headlines

  • UHG won its recent Star Ratings lawsuit against CMS, with a judge ordering that CMS recalculate UHG’s Star Ratings for 2025.

  • As part of its Chapter 11 bankruptcy proceedings, VBC primary care provider CareMax has reached an agreement to sell its MSO platform and an agreement in principle to sell its primary care clinics. Revere Medical, the organization that purchased Steward Medical Group and Steward Healthcare Network, is purchasing the MSSP lives on CareMax’s MSO platform. CareMax will wind down its ACO REACH and Medicare Advantage business. CareMax purchased the MSO business from Steward back in 2022, paying $25 million of cash to Steward and approximately $110 million of CareMax shares (at that time).

  • Mental health provider Headspace laid off 13% of its staff and is transitioning all therapists from employed roles to contract roles in an effort to “reset” the business and rightsize its financials. Headspace previously laid off 15% of its staff in July 2023.

  • Commure and Tenet Physician Resources (TPR) a division of Tenet, announced a partnership to roll out ambient AI across its employed physician network. TPR appears to be the arm of Tenet that acquires and operates existing local provider organizations as part of USPI, Tenet’s ambulatory care network.

  • Medline, a medical supply business owned by a private equity firm, is planning a 2025 IPO, per Reuters. The IPO could raise approximately $5 billion and value Mediline around $50 billion.

  • ~300 primary care providers employed by Mass General Brigham have begun the process of unionizing, and a vote on whether to unionize could happen in the next two months.

  • Initiate Ventures, a new healthcare / life sciences venture fund / studio, launched with $45 million.

  • NaviMed Capital, a lower middle market healthcare private equity firm, closed a new $450 million fund.

  • Behavior change platform Vitality announced the acquisition of coaching platform WellSpark from EmblemHealth.

  • Another Medicare Advantage plan, Medical Mutual in Ohio, announced it is cutting commissions in order to slow new enrollments.

Funding Announcements

  • Cortica, an autism care provider, raised $80 million. The press release notes that Cortica has 24 medical home clinics across eight states and now employs over 2,000 experts across various clinical disciplines (not sure if that means they’re all clinicians or not). It will serve over 20,000 children and families with autism this year, noting it is seeing a 34% annual savings rate per patient.

  • TailorMed, a specialty pharmacy model that helps providers boost revenue by connecting patients with financial assistance, raised $40 million. Six health system venture arms participated in the funding round (Providence Ventures, OSF Healthcare, Inception Health, Ballad Ventures, UH Ventures, and UnityPoint Health Ventures). The TailorMed website has several case studies that provide a good look into the value prop here. According to this Axios article, TailorMed is considering more M&A after acquiring VivorCare in 2021.

  • Synapticure, a virtual care model for patients with neurodegenerative disorders like ALS, raised $25 million. Synapticure announced back in August that it is participating in the CMS GUIDE program in partnership with Pearl Health.

  • Seen Health, a PACE provider for Asian and Pacific Islander communities, raised $22 million.

  • New Lantern, an AI platform that makes radiologists more efficient, raised $19 million.

  • Citizen Health, a consumer health and advocacy platform for individuals with rare diseases, raised $14.5 million.

  • World Class Health, a Center of Excellence model for surgical care, raised $8 million.

  • Jimini, an AI-based mental health platform, raised $8 million.

  • ThoroughCare, a digital care coordination platform, raised $5 million.

Great Reads

Inside the C-Suite — Payer & Provider Leaders Share Their Vision for AI by Define Ventures
A survey of payor and provider leaders looking at AI adoption with some helpful insights into how each type of organization views the opportunity. Read more

Reflections from the Trenches of Digital Health by Duncan Greenberg
A good read on lessons learned from someone building in digital health for the last decade, highlighting some of the challenges and opportunities ahead for the market. Read more

Dream, Pivot, Deliver: How Our Journey to Redefine Palliative Care Led to Caregiver Empowerment by Emily Queen
A look at the unpaid family caregiver market and how to build a business / value prop that resonates with the various constituents in the market. Read more

Sleep Health is Getting Interesting by Nikhil Krishnan
An interesting perspective on the state of the sleep market and opportunities for innovation there. Read more

Digital Health’s Great(er) Responsibility: Failing Without Failing Patients by Amith Parikh and Arpan Parikh
A helpful take on how considerations for care delivery organizations when they shut down and how they manage patient care in the process, highlighting Forward Health as a recent example of what not to do. Read more

Winding Down From a $400M Fundraise, or How to Move Forward After Forward (with Adrian Aoun) by More or Less Podcast
Forward’s CEO Adrian Aoun discussed shutting down Forward in this podcast. It’s a fascinating listen that takes an oddly congratulatory tone for “landing the plane well,” particularly after reading the article above. If nothing else, it’s a good reminder of the Silicon Valley worldview, for better and worse. Listen here

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