Weekly Health Tech Reads 9/29/24

Zing's C-SNP funding, Brightline restructures, Particle v. Epic, and more

Author

Kevin O'Leary
September 29, 2024

Sponsored by: Elation Health

Elation Health surveyed 150+ primary care clinicians to uncover key challenges and understand the impact of AI in their practice. 

There’s a lot of optimism about the positive potential impact of AI in supporting  practices and reducing "pajama time." Nearly 70% of clinicians surveyed see AI as a key to increasing efficiencies in care delivery. Yet there is also concern about the implementation of AI, specifically around AI errors, implicit bias, and patient privacy risks.

With AI tools gaining traction quickly, the survey results provide valuable, balanced insights for those building and championing AI across organizations.

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C-SNP FUNDING

Zing Health raises $140 million for plan targeting D-SNP and C-SNP plans

Zing announced a $140 million capital infusion to grow its C-SNP product (Chronic Conditions Special Needs Plans) in the Medicare Advantage market. Zing was started in 2019 and, per data from the Medicare enrollment files, it currently has ~13,000 enrollees across three states — Illinois, Indiana, and Michigan. ~63% of Zing’s membership is enrolled in C-SNP plans, with the majority of those members in Illinois.

✍️ Going Deeper

C-SNP plans seem like an interesting market to keep an eye on, with Zing as one of the leading startups in the market, particularly with this funding round. The C-SNP market is tiny relative to the broader Medicare Advantage market, but it experienced massive member growth in 2024, jumping from ~520k to ~700k enrollees. This Milliman report provides a great overview of the C-SNP market if you want to go even deeper. C-SNP and D-SNP (Duals) plans seem like a glimmer of hope in an otherwise bearish Medicare Advantage market.

Zing has had a busy year:

  • In July, Zing partnered with Story Health to implement a VBC partnership connecting Zing members with Story Health’s virtual cardiology care model

  • In June, CMS retracted sanctions it had previously placed on one of Zing’s three MA contracts (H7330, it’s longest-standing contract). Zing’s contract had scored less than 3.0 Stars for three consecutive years. This put it in a position to be terminated until CMS recalculated Stars scores, which bumped Zing to a 3.0 Star plan.

  • In September, Zing partnered with UST HealthProof. UST HealthProof will provide core health plan admin functions to Zing through a BPaSS offering. As an aside, UST HealthProof has an interesting model with 55 payor clients, including Zing and Clover

At a glance, it seems odd to me that a startup health plan is able to raise $140 million on the heels of outsourcing all of its back-office operations while narrowly avoiding having a contract terminated for poor performance. Those seem to indicate some major challenges the plan has had the past few years. Given that, this feels like a bet on the broader C-SNP market moreso than it feels like a bet on Zing’s ability to outperform others. It seems like the thesis for investing would go something like:

  • Part one: Demonstrate outsized membership growth. A C-SNP plan can continue demonstrating solid membership growth given its tailored benefits package for specific chronic conditions.

  • Part two: Demonstrate improved medical margins. A C-SNP should be able to manage medical margin well compared to a typical MA plan — presumably driven both by the tailored offering for a specific chronic condition and the higher revenue PMPMs on C-SNP members.

If Zing can demonstrate those two things, the result should theoretically be a fast-growing, profitable plan given it has outsourced core admin functionality.

Despite some of Zing's challenges, I see why that would be a hypothesis worth testing in the broader MA market, particularly in this current environment.

CARE DELIVERY INNOVATION

Brightline restructures operations, pivoting away from national virtual employer-focused model

Pediatric mental health provider Brightline said it has restructured operations and moved away from the virtual employer market despite growing from 9 employer customers in 2021 to 430 employers by December 2023.

Moving forward, Brightline will prioritize operations in a handful of strategic markets where it will open in-person clinics and focus on driving awareness via partnerships with the local ecosystem — providers, schools, and health systems. Brightline will become an in-network provider in those markets, focusing on Medicaid, building on its partnership with California.

✍️ Going Deeper

I thought this was a well-done post articulating the challenges that I’d imagine many other virtual care providers are also going through in the employer market. While employers have presented an exciting top-line growth opportunity, it can be really challenging to translate that into actual adoption of the solution, leaving virtual care providers in a strategic predicament.

On that front, I found this section of the post particularly insightful, discussing Brightline’s adoption with employers:

But simply put, they [families] are having too hard of a time finding us. Because we don’t sell directly to employers in our model, but rather through their health plans and partners, we aren’t top of mind enough for benefits leaders and therefore we don’t see enough of the types of marketing campaigns that really drive awareness amongst members.

Moreover, our own research was indicating that families actually were looking for mental health services for their kids through means other than their employer, namely through pediatricians, google searches, word of mouth, and hospital systems. Finally we started to see data indicating that — while many families love the convenience of virtual care for child and youth mental health services — many families would prefer in-person or believe in-person to be superior for their child (especially for higher acuity needs). It’s also very important to many parents that the care they receive is local to them, and that it’s covered by their insurance.

Approximately half of the individuals most involved in managing their child’s care — according to surveys we conducted — did not receive insurance coverage directly from their own employer. It was often via their spouse’s employer, which means they were often two steps further removed from our solution, i.e. us.

Those couple paragraphs seem to share a lot of valuable insight from the Brightline experience over the past few years. As I read it, I see the following:

  1. While employers have big populations that seem appealing, getting in front of those employees is challenging

  2. People don’t look to their employer for pediatric mental health support - instead listening to pediatricians, Google, health systems, and their personal network

  3. Half the time, employees who were managing care were covered through a spouse’s plan rather than their own employer

It underscores both the challenges of driving awareness through employers and also the challenges of building your brand as a provider organization with a 50-state virtual model. In a market where people rely on local referrals, it makes a ton of sense why an organization would choose to focus on building out a presence in a handful of local markets. This seems like one of the underlying reasons why that mantra about “all healthcare is local” exists.

I imagine this isn’t the last virtual care startup we’ll see pivot towards a hybrid model focusing more on building geographic density as an in-network provider. That approach certainly will have its own set of pros and cons, and will present some interesting questions, not the least of which will be the continued debate over whether these provider models can generate venture-scale returns. Yet for a business like Brightline, given all the above, it seems like a very natural evolution of the model.

NEWS

GLP-1s: a $200 billion market in 2031?

Morningstar released an interesting report looking at the state of the GLP-1 market and how it will evolve over the next several years. The headline: they expect GLP-1s to be a $200 billion market in 2031, with Eli Lilly and Novo Nordisk controlling 67% of the market. The chart below from the report walks through the math. For context, a $200 billion GLP market would put it at roughly at the GDP of Greece, the 54th largest country in the world by GDP. I’m not sure how this market plays out, but something seems like it has to give.

INTEROPERABILITY LAWSUIT

Particle files an antitrust lawsuit against Epic

In news that set the interoperability nerd community ablaze (as evidenced by the 100+ message chain in HTN Slack), Particle Health filed a lawsuit against Epic, claiming that Epic has violated the Sherman Act by using its monopoly power in the EHR market to force Particle out of the payer platform market.

Particle notes in the lawsuit that Epic’s actions have brought business operations to a standstill, sapped employee morale, and caused customers to stop working with Particle that did not want to jeopardize their relationship with Epic. Ultimately, it appears Particle needs some relief to remain an ongoing business as it is now hitting only 1/3 of its projections, and it is getting worse.

Epic responded this week by first arguing that Particle was accessing patient data for impermissible purposes and then calling on Particle to ask the Carequality Steering Committee to release the resolution related to the dispute that Epic filed.

Read the Particle complaint
Read the MedCity News coverage (a nice summary of the case and complaint)

Other Noteworthy News

  • MSK provider Hinge Health has hired bankers and is in the process of going public. According to the Business Insider reporting, Hinge is aiming for an early 2025 IPO.

  • Pomelo Care acquired The Doula Network, a network of doulas that contracts with payors on a FFS basis with a focus on Medicaid. The Doula Network was started in Florida via a partnership with UnitedHealthcare in 2019, and it has now grown to contracts with over twenty payors in ten states. The Doula Network will be integrated into Pomelo Care’s virtual clinical model. It’s a really interesting move for Pomelo Care to make after its recent $46 million funding round, as it’ll have to integrate different models on a number of fronts: virtual and in-person care, value-based and fee-for-service payment models, and different clinical roles.

  • ProPublica investigated how Texas conducted its Medicaid unwinding process. The article discussed how the state sped through the process of disenrolling people, despite multiple red flags raised regarding how the process was conducted.

  • The OIG has asked Humana and CVS for refunds for Medicare Advantage overpayments that the OIG estimated occurred a few years ago. For Humana, the OIG estimates that it was overpaid by $13 million in 2017 and 2018, and is asking for a refund of $6.9 million. For CVS, the OIG estimates that a CVS subsidiary, HealthAssurance, received $4.2 million in overpayments for 2018 and 2019. The OIG reports provide a good glimpse into how these sorts of audits are conducted, as well as the pushback CVS and Humana shared with the calculations.

  • CMS issued a final rule holding ACOs harmless for catheter billing fraud that occurred in 2023. If you haven’t read about this story, you should. It’s a fascinating story of a massive spike in catheter-related payments and how ACOs helped identify those payments.

  • The OIG released a report on remote monitoring, finding that additional oversight is required after the number of Medicare enrollees that received remote monitoring grew 10x from 2019 to 2022 (from 55,000 to 570,000). Remote monitoring payments grew by 20x, from $15 million in 2019 to $300 million in 2022. The report asks some reasonable questions about whether enrollees are using remote monitoring services as intended when 43% of enrollees have a claim for one of the three key parts of remote monitoring (education/setup, a device, and ongoing treatment management).

  • HHS will be investing $75 million in rural healthcare. $54 million of that will go to substance use disorder treatment, $9 million for mental health services in the Delta region of the South, and $12 million for rural hospitals.

  • ARPA-H will provide up to $44 million in funding to the No Kidney Left Behind project over the next five years. The project will attempt to help recover half of the 8,000 kidneys a year that can’t be transplanted due to viability concerns.

  • UnitedHealthcare partnered with Hazel Health to offer school-based virtual mental health services to up to 1 million students across 14 states.

  • Mount Sinai and Noom have partnered for a weight loss offering. Mount Sinai providers can now refer patients to the Noom Weight app, and Noom customers will have access to Mount Sinai clinicians.

  • The saga related to Done, an Adderall pill mill, somehow gets stranger. A WSJ report this week highlighted how the company is still filling Adderall scripts because it has moved operations to China, despite its US-based executives having been arrested and charged with fraud. The CEO, Ruthia He, is currently under house arrest because she has been deemed a flight risk, but she is allowed a landline telephone to run her business. How this company is still able to operate in the US currently is beyond my comprehension.

Funding Announcements

  • Centivo, a health plan for self-insured employers, raised $75 million in equity and debt funding.

  • Tennr, an AI platform attempting to automate faxes in healthcare, is raising $33 million in funding. This Business Insider article is a good read on the round — it is reportedly at a $300 million valuation; Tennr is on a revenue run-rate of $3 million - $5 million annually.

  • Praia Health, a patient engagement platform, raised $23 million.

  • Moxie, a company helping nurses launch MedSpas, raised $10 million

  • Dimer Health, a hospital discharge planning company, raised $2.95 million.

Great Reads

Direct Primary Care: Financial Analysis and Potential to Reshape the U.S. Healthcare Landscape by Halle Tecco, Faraan Owais Rahim, Pooja Lalwani, and Sandeep Palakodeti
A helpful paper providing an overview of the DPC model, suggesting that DPC practices cost slightly less than FFS primary care. Read more.

Roadmap: Healthcare AI by Morgan Cheatham and Steve Kraus
This post shares the Bessemer team’s perspective on how they’re viewing AI investment opportunities. Read more.

An Epic Saga: The Origin Story by Brendan Keeler
This provides helpful background on how Epic has grown into the dominant organization it is today. Read more.

Part 2: Siloed Documentation in a Collaborative World by Alex Butler
This was an interesting perspective questioning whether we collectively should be spending so much time and energy attempting to automate clinical notes versus rethinking them. Read more.

Director, Strategy & Operations - Quality, Education & Member Experience at Included Health, a virtual care platform for employers. Learn more.
$150k — $275k | Remote

VP of Central Operations at Oula Health, a modern maternity clinic. Learn more.
$200k — $220k | Remote

Director of Strategic Finance and Corporate Development at Lyra, a mental health care provider for employers. Learn more.
$150k — $229k | Remote

Head of Marketing at Planned Parenthood Direct, the digital arm of Planned Parenthood. Learn more.
$120k — $150k | Remote

Chief of Staff at RadAI, an AI platform automating radiology workflows. Learn more.
$165k — $240k | Remote (SF)

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