Weekly Health Tech Reads | 8/25/24

LetsGetChecked acquired Truepill, financial impact of the TEAM model, employer cost growth, and more

Author

Kevin O'Leary
August 25, 2024

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MY REFLECTION

Reflecting on last week’s AI scribe discussion

My commentary on the Kaiser / Abridge partnership last Sunday spurred a healthy discussion about the merits of the partnership and AI Scribe space more generally during the week. I’d summarize two key themes from the reactions I heard as follows:

  1. We should celebrate a vendor transition like this as a healthy sign of a competitive healthcare IT market versus traditional healthcare IT dynamics where providers get locked into vendors and can’t switch. This ability to switch vendors is a win for providers and, ultimately, patients. It’s an issue for the vendor business model, but they can still compete on the merits of their offerings, and it’s not bad if the market gets thinned out. Mark Sendak articulated this point well on LinkedIn.

  2. Given the size and influence of The Permanente Medical Group within Kaiser, it seems unlikely that those physicians were against the decision to move to Abridge. This would imply perceived differentiation in Abridge’s product, which runs counter to the idea there is no differentiation in the space — it seems there was here. It’s not exactly a surprise that a press release from a large organization didn’t dive into this topic in detail, but Abridge’s partnership with Epic seems like a big selling point.

They’re both good points that various folks raised during the week, and helpful considerations both as we think about the specific partnership here as well as broader market dynamics. I am still left with lingering questions about what happens to the competition in this market over time, what that means for the viability of the many vendors here, and how investors think about funding AI use cases.

While it’s unclear what happens to the vendors in the AI Scribe landscape, it seems very clear that this concept has taken the mantle as the leading provider use case for AI in healthcare. Given that, this topic is one that has a lot of people watching to see how it plays out. It will be interesting to keep an eye on how startups and incumbents alike (Epic in particular) address the evolving market.

EMPLOYER HEALTH COSTS

A survey of large employers indicates employer costs will grow 8% in 2025

The chart below highlights the growth in employer healthcare costs since 2019 - costs are up ~28% since then. This cost increase appears to have been largely paid for by employer contributions to premiums. The survey also suggests we’ll see employers seek to manage costs by managing vendors better via new RFPs seeking improved pricing, replacing underperforming vendors, and removing vendors that are underutilized.

Source: Business Group on Health

CMMI TEAM MODEL

An estimate of hospital gains / losses from the TEAM model

A consulting group shared an analysis exploring the impact of CMMI’s Transforming Episode Accountability Model (TEAM). TEAM is a new mandatory bundle model that will start in 2026 and require that almost 700 hospitals take financial risk on five surgical episodes that collectively represent ~15% of hospitals Medicare revenue. As the chart below shows, IAC estimates that a majority of hospitals will lose money on each case based on historical Medicare data, with some hospitals losing upwards of $4,000 per case.

Other Noteworthy Headlines

  • LetsGetChecked and Truepill are merging as they attempt to chart path forward. The merger seems like a rather complicated move that combines two unprofitable businesses with uncertain futures into a more stable entity. While Truepill is being acquired for up to $525 million, only $25 million is in cash; the remainder is in stock. $200 million of that is in the form of revenue-based earnouts. According to the Axios reporting on the deal, both companies were still burning tens of millions of dollars in 2024, and LetsGetChecked revenue was on the decline.

  • In a deal that flew under the radar last week, Francisco Partners sold Qgenda, a healthcare workforce management platform, to Hearst for a reported $2 - $3 billion. Hearst is a massive conglomerate that currently operates five healthcare brands, including Homecare Homebase. The exit represents a 15x return since Francisco first invested in 2016.

  • OneOncology announced the acquisition of United Urology Group, a large MSO for urologists. OneOncology’s PE backers, TPG Capital and Cencora, will provide growth capital. It seems like a logical path to pursue growth for the entity given prostate cancer is the second leading cause of cancer deaths for men.

  • Walgreens’ Chief Pharmacy Officer laid out a plan to revive the pharmacy business over the next several years in an interview with Endpoints News. Central to the plan is to lobby CMS to expand the role of pharmacists and allow them to bill as healthcare providers for the treatment of certain conditions so that it can increase reimbursement rates.

  • UNC Health has launched a new PBM, UNC Health Pharmacy Solutions. This comes after UNC Health moved away from its PBM in 2019 and being developing an internal solution. The new PBM is being funded by a VC firm, Two Dot, and will seek to begin working with employers next year. The Modern Healthcare article does a nice job discussing some of the strategic considerations for a health system-backed PBM.

  • Santa Clara County plans to buy a 258-bed hospital in San Jose from HCA for $175 million in order to keep a Level 1 trauma center open. HCA had downgraded the trauma center at the hospital, which caused a spike in trauma cases in another safety net hospital that Santa Clara County operated. The story provides an interesting glimpse into how a for-profit hospital versus a county government thinks about the viability of a hospital.

  • Humana is paying $90 million to settle a whistleblower lawsuit filed in 2016. The lawsuit centered around Part D benefits and how Humana knowingly offered less benefits than it included in its bids.

Funding Announcements

  • Slingshot AI recently raised $30 million from a16z, and then a follow-on round from Menlo Ventures at a $225 million valuation. The report notes the initial a16z round valued Slingshot at over $100 million. Slingshot is building an AI-based therapist. Seems like a sign of the times in the AI market.

  • Solace Health, a care management marketplace that connects patients with health advocates, raised $14 million.

  • Mindset Care, a company that helps individuals with mental illness to access disability benefits, raised $13 million.

  • BeMe Health, a virtual mental health care provider for teens, raised $12.5 million.

  • Clarium Health, a platform for hospital supply chain management, raised $10.5 million.

  • CancerIQ, an analytics platform for health systems’ genetics programs, raised a growth equity round.

Head of Healthcare Economics at Pomelo Care, a virtual maternal care company. Learn more.
$220,000 — $260,000 | Remote

Senior Manager, Healthcare AI Strategy & Design at EY, a management consulting firm. Learn more.
$124,300 — $227,900 | Hybrid (Multiple Locations)

Associate General Manager at Maximus, a virtual men’s health provider. Learn more.
$130K — $200K | Remote

Chief of Staff, Clover Care Services at Clover Health, a Medicare insurance and physician enablement company. Learn more.

Director of Business Operations at Rula, a virtual mental healthcare provider. Learn more.
Remote

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