Weekly Health Tech Reads | 8/4/24

Other Q2 Earnings Sessions

In addition to Teladoc (covered above), here were some other notable healthcare earnings announcements from the week:

• Alignment Healthcare’s stock remained flat this week despite beating expectations and increasing membership guidance for 2024. Alignment noted that MLR is trending higher because of supplemental benefit expenses. This is increasing medical spend by 0.5%, which is being offset by the added membership growth. Alignment continues to express confidence about its strategic position heading into 2025 in the MA market and its’s hard to argue with it.

  • Read the Fierce Healthcare summary

  • Read the press release

  • Read the earnings transcript

• Cigna continues to make the affordability of the coming wave of pharmaceutical innovation a central part of its thesis — highlighting that the median annual price for a new drug coming to market was $300,000, up 35% from 2022. While GLP-1s are the #1 pharmacy trend driver today, there are over 1,000 gene therapy and cell therapies in the pipeline coming to market. Cigna noted that Express Scripts held the price of new drugs flat in 2023 as it defended the role of the PBM in the market. Interestingly, an analyst asked Cigna about its perspective on the ICHRA market and whether it is an opportunity — Cigna described it as a “niche market”, but one they’re keeping an eye on should it grow into anything material. Not quite the bullish perspective on ICHRA we’ve seen from some other insurers.

  • Read the earnings transcript

  • Read the press release

• Humana shares slumped 7% on the week despite beating revenue expectations on higher-than-expected Medicare Advantage membership growth. Humana’s new CEO shared a letter with investors, suggesting that Humana is “not realizing the full promise of the company,” partly due to the external pressures MA has been facing recently. But there was also an interesting commentary that analysts picked up on in Q&A about the challenges of multiyear planning in the Medicare Advantage market — essentially with Humana’s CEO seemingly saying it’s hard to plan further than one year in advance given the annual planning cycle. This seems like a concern if true, given the multiyear margin recovery process insurers are on. During the earnings call, Humana mentioned that while the MA business is performing well, it is seeing higher inpatient costs due to the two-midnight rule. On the bright side, Humana doesn’t appear to be seeing the same pressure in Medicaid as others as it baked in different assumptions about the acuity of the population after redeterminations.

  • Read the press release

  • Read the Forbes summary

  • Read the letter from Humana’s new CEO, Jim Rechtin

  • Read the earnings transcript

Other Key Headlines

• 23andMe’s Board quickly rejected CEO Anne Wojcicki’s take-private proposal this week, noting its disappointment with some terms of the proposed deal while giving Wojcicki a small window to submit a revised proposal. The letter hints at the challenges in operating the business amid all this, as the Board is hiring a consultant to develop a new business plan for 23andMe focused on achieving profitability. The Board expects Wojcicki to support this work, while also asking that she withdraw her intent to block any alternative transactions as they seek alternatives to maximize shareholder value.

• UnitedHealthcare and HCA are in a rate dispute, according to this STAT report. If the two sides don’t reach an agreement before September 1st, some HCA facilities will go out-of-network for UHC members. The article does a nice job of highlighting the typical back and forth here — UHC is saying HCA is seeking rate increases of up to 30%, while HCA is saying UHC is proposing below-market rates. The truth, as always, seems like it is somewhere in between, but it highlights how each party is attempting to use its negotiating leverage.

• Forbes reports that CVS and Oak Street Health will be rolling out co-located clinics, building on a pilot of the effort in Houston. CVS expects to have 25 Oak Street clinics located next to a CVS pharmacy before the end of 2024, starting with three Chicago locations. New York, Dallas, and Columbus will also have co-located clinics. Oak Street will also open 25 additional stand-alone clinics before the end of the year.

• This was an interesting Slate article discussing VC-backed care delivery startups focused on the LGBTQ+ population (Folx, Plume, and Carrot were discussed) and some of the challenges these models have in achieving the level of transformation that they seek to drive in the industry.

• R1 RCM is being taken private by two private equity firms, CD&R and TowerBrook, for $8.9 billion.

• CMS finalized a 2.9% increase in inpatient rates for 2025. This Healthcare Dive report provides a helpful summary of the changes and why the AHA is still perturbed by the increase, suggesting that it’ll hurt hospital margins.

Funding Announcements

• Flo, an ovulation and period tracking app, raised $200 million from General Atlantic, valuing it at over $1 billion. Flo shared that it has 5 million paying subscribers and expects to hit $200 million in gross bookings in 2024.

• Endpoints News reported that Devoted Health, a Medicare Advantage payvidor model, raised $112 million at a $13 billion post-money valuation.

• Mental health provider Spring Health raised $100 million at a $3.3 billion valuation. Spring shared it covers 10 million lives via direct contracts with 450 employer groups and another 27,000 groups that can access Spring via a channel partner.

  • Kinnevik, an investor in Spring, shared an update noting that Spring is preparing to become a public company after having grown run-rate revenue 15x since 2021.

• WellBe Senior Medical, an in-home primary care model for seniors, raised an undisclosed amount from Intermountain Ventures and Excellus BlueCross BlueShield (a Blues plan in upstate New York). WellBe serves 135k patients today across 8 states and expects to hit 160k patients by year end. WellBe and Excellus launched a partnership in March where Excellus is providing care to 30,000 Excellus MA members.

Reads from the Community

Food for Thought: The Untapped Potential of Benefit Programs by Emily Queen
This is a great read looking at the opportunity to build a startup to facilitate online shopping for the WIC program (Special Supplemental Nutrition Program for Women, Infants, and Children). It highlights the complexity that got this effort stuck in the mud — it stuck out to me that they reached out to all 50 state agencies, heard back from 15, and most wanted to be “fast followers” versus “trail blazers”. Read more.

The future of Health and PharmaTech: SignalFire’s perspective by Yuanling Yuan and Sooah Cho
A perspective from early-stage investors at SignalFire on key trends in healthcare, including investment opportunities they see across healthcare data, pharmatech, labor shortages, an aging population, and GLP-1s. Read more.

Re-engaging Hospitalists, Rebuilding Care Teams, and Improving Length of Stay by Bonnie Proulx and Jill Annala-Rogers
This Kaufman Hall article discusses how, after COVID-19, hospitals struggled with communication pathways for team members, leading to increased length of stay. Kaufman Hall is working with health systems to reduce length of stay by “getting back to the basics” and reprioritizing the hospitalist's role at the head of care teams. Read more.

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