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- Weekly Health Tech Reads | 7/9/23
Weekly Health Tech Reads | 7/9/23
Walgreens Q3 earnings, Bright sells its MA lives & more!
Amanda DiTrolio & Kevin O'Leary
July 09, 2023
Welcome to this week’s free weekly newsletter, where we share our perspectives on some of the key healthcare related news of the week.
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NEWS OF THE WEEK
Sharing our perspective on the news, opinions, and data that made us think the most this week
News
Summary: Walgreens' stock fell roughly ~11% on its Q3 2023 earnings announcement after it had to adjust EPS guidance downwards by ~10% for the year. Walgreens cited lower than expected COVID-related FFS volume in CityMD locations and losses associated with VillageMD clinic buildouts as key drivers of the miss. It also noted on the earnings call that the healthcare business is running about $300 million behind expectations.
Walgreens listed five "swift" actions they're undertaking to drive the healthcare business to profitability: 1. realigned CityMD costs; 2. an accelerated VillageMD patient panel build; 3. aggressive integration of prior Summit Health acquisitions; 4. upgraded VillageMD management; and 5. an increased and accelerated synergy target for VillageMD/Summit Health.
Our Reaction:
The honeymoon phase appears to be over for Walgreens' healthcare strategy as it is being confronted with a major profitability challenge in its healthcare business. It seems clear that Walgreens will be focused on expanding within existing VillageMD markets and growing patient panels in existing clinics in an effort to avoid "J-curve" related losses associated with opening new clinics and markets. What is less clear from the earnings call is exactly how Walgreens plans to execute on this.
Reading between the lines in the earnings transcript, it appears that Walgreens leadership has been unpleasantly surprised by the lack of integration of CityMD into Summit and is attempting to move quickly to rectify the issues CityMD is facing now that volumes have slowed down.
Walgreens is smartly positioning this as a transition year for the healthcare business. It's going to be interesting to watch Walgreen's next set of moves here if it is unable to make meaningful progress moving the healthcare business quickly toward profitability.
News
Summary: Less than three years after acquiring Brand New Day and Central Health Plan for a reported $533.8 million, it is selling off those plans to Molina for an anticipated $600 million. The purchase price will be adjusted at closing if Bright's MA membership declines below 105,000, with a minimum price of $300 million. Bright, which had a market cap just under $100 million at market close on Friday, will use the proceeds from the sale to pay down its debt and shift its focus entirely to its primary care business, NeueHealth. Molina's CEO articulated the rationale for the move as follows:
“These additions fit perfectly with our strategy of serving high-acuity, low-income members and represent a textbook execution of our growth playbook. We acquire viable assets at attractive valuations, then deploy our proven team of operators to deliver improved financial results,” said Joe Zubretsky, President and Chief Executive Officer of Molina. “We are pleased to continue our meaningful growth in California as the latest realization of our national growth strategy.”
Our Reaction:
Bright's journey as an insurance business is mercifully coming to an end with this transaction after a tumultuous few years on the public markets. Hopefully the Molina acquisition will provide a more stable operating environment for Central Health Plan and Brand New Day employees to focus on serving Californians.
Don't look now, but is there light at the end of the tunnel for the NeueHealth business? Assuming that Bright is able to navigate this deal to closing and move on from the insurance business entirely, it's not hard to imagine a private equity group looking to take Neue private for the right price. At this point, seems like that would happen some time in 2024.
CHART(S) OF THE WEEK
Sharing our perspective on the news, opinions, and data that made us think the most this week
STAT highlighted that 44% of Americans would spend up to $100 per month paying for GLP-1s for weight loss. As noted in Slack, this means that 56% of Americans would spend more than $100 per month. For anyone looking for a solid data point to counter the "people won't pay out of pocket for healthcare" narrative, seems like you've got one here.
QUICK HITS
A round-up of other newsworthy items we noticed during the week
Optum won the bid for Amedisys, adding another key player in the home health market. Optum will acquire Amedisys for $3.7 billion in cash, beating out Option Care Health's offer.
Link / Slack
Kraft Heinz is suing its TPA Aetna for breach of fiduciary duty.
The complaint, which was filed in Texas District Courts, provides a glimpse into the back-and-forth between an employer trying to get its data and the TPA.
Link / Slack
BCBS Arizona has launched a new provider subsidiary, Prosano Health Solutions. Prosano has launched one advanced primary care clinic with three more in the works for 2024.
Link / Slack
Bob Kocher and Robert Wachter shared their perspective on why Academic Medical Centers struggle with implementing value-based care. It centers around a handful of core competencies needed to succeed in VBC that haven't historically been necessary in the FFS model of AMCs.
Link
Oscar's Co-founder Mario Schlosser shared a series of tweets describing how Oscar is using LLMs. It's a great look into various tangible use cases Oscar is prioritizing.
Link / Slack
Author Health raised $115 million for its platform for serious mental illness. Humana will be Author's first customer, with its initial launch in South Florida via Humana's CenterWell Senior Primary Care clinics.
Link
Spotify's co-founder raised $65 million for Neko Health, a body scanning device. The scan costs €250, takes 10 minutes, and includes an in-person consult to explain the results.
Link
Cleveland Clinic opened a new hospital where all 57 patient rooms have telehealth connectivity to Cleveland Clinic providers at other locations.
Link
Radiology Partners is seeking to raise $2 billion of equity to pay off its debt obligations that are coming due. This follows a credit rating downgrade from S&P earlier in the month.
Link
A NEJM podcast provides a look into the challenges that primary care physicians are facing.
Link
Highmark Blue Cross Blue Shield partnered with Wellinks, a virtual COPD management solution.
Link / Slack (h/t Kevin Wang)
The Urban Institute took a look at Medicare Advantage Quality Bonus Program.
Link
7Wire Ventures explores the digital health opportunity in home healthcare with a market map of startups in the space.
Link / Slack
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