Weekly Health Tech Reads | 5/23/21

News:

• The health insurance capital of the US, Minneapolis (!!!), had a big week this week as Bright Health filed its S-1. It’s a really interesting filing to check out as Bright has become a quite complex business over the last 18 months. It has expanded from a narrow network individual exchange insurer to a mini-version of UnitedHealth Group that is attempting to capture the entire payor / provider value chain. In the past two years it has acquired Medicare Advantage plans, acquired primary care practices, and is building out a MSO platform for PCPs. Bright announced a new business unit in the S-1 called NeueHealth, a provider enablement platform helping PCPs manage risk-based contracts. Even though Neue is a relatively new idea and represents only 3% of Bright’s revenue today, Bright places significant emphasis on Neue, highlighting it as management’s main focus moving forward. Given the breadth of this business, I thought I’d try something a little different this week with the Bright S-1 analysis. Rather than crowding this email with a long summary, I wrote a long deep dive over on Medium with a friend of mine and fellow health tech nerd, Ryan Russell. Go check out our full thinking there if you’re interested. Link (Medium post). Link (S-1).

• Lifestance, a mental health company that was purchased by private equity firm TPG last year, also filed its S-1 this week. To be honest I was so distracted by the Bright S-1 this week so I can’t say I dug into Lifestance too much, but, here are a few things that struck me. Lifestance employs 3,300 licensed mental health professionals across 27 states, and in 2020 it treated 357,000 patients (which translated into a total of 2.3 million patient visits… a total of 6.4 visits per patient on average). Lifestance, which only started in 2017, has already completed 53 acquisitions and opened up 120 centers. Their clinics generally operate at a loss only for the first few months months while they build up a patient panel and then flip profitable in Q2. Check out this chart - in the second quarter their clinics are making somewhere around 30% - 40% margin? Woah. Link.

• Ro acquired Modern Fertility for over $225 million to expand its product offering in the women’s fertility space. Modern Fertility sells a suite of fertility products - at-home hormone testing, pregnancy tests, prenatal vitamins, etc. Ro’s CEO notes in the blog post linked below that one of the things Modern Fertility has built is a community of tens of thousands of people with ovaries. It is interesting to think about whether Ro might lean into patient communities more post acquisition, as it isn’t something I believe they’ve focused on in the past. I like this strategic acquisition a lot for Ro. Link.

• Babylon Health recently acquired Meritage Medical Group, a 700-physician medical group in CA. It’s going to be interesting to see what Babylon has in store over the coming months regarding its plan to stitch together the virtual and physical assets it is accumulating. I’d be really curious to hear how the 700 physicians in Meritage Medical Group feel about the acquisition and what they’re being told it means about their day-to-day activities. I would assume that in order to avoid a revolt, Babylon is telling those physicians that their day-to-day won’t change (for now), and that Babylon will just be referring more patients to those providers. But over time for this to be successful it would seem that they’ll have to convince the physicians they’re acquiring to make some changes to workflow to adapt to the new virtual-first world that Babylon is operating in. Whatever happens here, it is going to be fascinating to watch. Link.

• JPMorgan is taking another run at healthcare after shuttering Haven, this time launching a business called Morgan Health, which is designed to reduce healthcare costs for JP Morgan’s 165,000 employees and dependents. This approach has the benefit of more clarity over Haven - Morgan’s CEO said they’re attempting to “improve the way primary care is delivered and enhance the ability of patients to navigate their own care”. Why they’re choosing again to build a startup in this space is confusing to me - there are a number of other startups already working on care navigation that they could either buy or partner with - although apparently Morgan Health will be investing $250 million in other companies, so perhaps it’s not all a new build. Link.

• Clover reported earnings and quite honestly I’m just confused at what is going on with the business at this point. A good chunk of the earnings call was spent discussing a new partnership with Walgreens - not Walmart mind you, which they made a big deal about but then went radio silent on. Rather, apparently Walgreens is using the Clover Assistant in Walgreen’s Health Corners in New Jersey. Clover won’t share any details on the economics of the deal though, which is curious. They also focused a good portion of the talk on Clover Homecare, which does sound cool, but it’s odd to see it so front and center after it was barely discussed in the SPAC conversation. On top of that, and most important, Clover posted another poor quarter - its MLR rose to 107.6% and its Direct Contracting membership came in at only 65,000 vs original estimates of 200,000. They do score points for earnings call innovation, though, as they eschewed the traditional analyst question format to take half the questions straight from Reddit. I suppose there is some brilliance to recognizing that endearing yourself to Reddit is certainly one way to drive a higher stock price these days. Link.

• Under-the-radar Medicare Advantage insurance startup Zing Health acquired Lasso Healthcare, which offers Medicare MSA products in 34 states and has signed up over 6,000 members to date. Link.

• Digital therapeutics company DarioHealth acquired wayForward, a startup building a digital cognitive behavioral therapy platform for $30 million. Link.

• 7wire Ventures raised a new $150 million fund focused on the connected consumer in healthcare. Link.

Funding:

• Mental health startup Lyra Health is rumored to be raising another $200 million, valuing it at $4.6 billion. This is up from a $2.3 billion valuation back in January, when they raised $187 million. Yes, I just counted it out on my fingers too, that was only like four months ago. The mental health space isn’t showing any signs of cooling off. Link.

• PathAI, a startup working on AI algorithms for pathology, raised $165 million. Link.

• Wheel, a startup providing a white-labeled solution to help digital health startups get off the ground, raised $50 million. I believe Wheel got its start primarily focusing on providing clinicians to help staff these companies, but it seems now to be moving in more of a Truepill like direction providing a full outsourced infrastructure for these startups to build on. Link.

• SymphonyRM, an AI platform that helps payors engage members, $25 million. Link.

• Eleanor Health, a new care model for addiction and mental health treatment, raised $20 million. Eleanor operates 18 clinics as well as a virtual model across six states, working in value-based contracts with Medicare, Medicaid, and employers. Link.

• Wysa raised $5.5 million for its AI chatbot for mental health. Apparently its already up to 3 million people using the app, which seems really high for an app at this stage. Link.

• EarlyBird Education raised $1.5 million to do pre-literacy assessments for kids. Link.

Opinions:

• Another week of good content from the Substack Health Care Writers Guild:

  • Olivia Webb wrote a good intro explainer of CMMI’s Direct Contracting model and the various forms of industry pushback that have materialized over the last several months causing the program to be paused. Link.

  • Brendan Keeler takes a look data exchange standards and how we might finally kill the fax machine in healthcare. I think he’s probably on to something in suggesting that a regulatory decree is what is needed at some point to force this change. Link.

• This is an interesting article looking at the arms race to be the digital health platform partner of choice for large employers across the US, and how all of the activity in the space is likely to drive a great deal of consolidation among the startups attempting vying for employer attention. Given all of the deals we’re already starting to see, I’d agree that we’re likely to see more and more of this over the coming months. A lot of point solutions are going to need to find homes within the bigger platforms. Link.

• This is an wild article from Kaiser Health News on dentists’ billing practices. The article highlights how some dentists will push higher profit procedures, a trend that has been exacerbated by for-profit interests coming in and managing dental practices. This quote from the article is not a great look: “Medicaid fraud is the most lucrative business model in U.S. dentistry today.” Just one example of how the healthcare industry has a lot of opportunity to do better. Link.

• This article provides a good summary of some of the investment activity in the digital behavioral health space, focusing on a number of the larger venture capital raises over the last several months from startups like Lyra, Ginger, BetterUp and others. Link.

Data:

• This is an interesting tweetstorm about a recent study on the CJR program that Medicare initiated in 2016. It’s an interesting analysis on how providers respond to incentives and how those can drive unintended outcomes, as they did in this scenario. Link.

• This is some good data from KFF on telehealth use by Medicare beneficiaries during the pandemic. 27% of Medicare beneficiaries used telehealth between last summer and fall. Which, while I’m sure is a notable increase from where it was the prior year, still shows how much room this space has to go. Link.

• The Health Cost Institute did an interesting analysis on postpartum spending, finding that most of the spending happens more than sixty days post-delivery. Link.