🏥 A $9 Billion Price Tag

VillageMD's $9B acquisition of Summit, plus earnings announcements and other healthcare news from the week

PARTNERED WITH Welcome back to another Tuesday edition of Hospitalogy, bringing you ALL of the latest healthcare news across business, finance, strategy, M&A, and digital health.   In case you missed it, here's the link to last week's edition: Read More   This week we dive into: VillageMD's $8.9B acquisition of Summit (yes, I rounded up for the headline. Sue me.) One Medical's final earnings ApolloMed's Q3 earnings graphic Health Tech performance in 2022 Everything else you need to know! Was this email forwarded to you? Subscribe Here SPONSORED BY CAPABLE HEALTH 79% of patients who have used virtual primary care say that it's allowed them to take charge of their health.   You need a virtual care offering in 2022.    But existing infrastructure to build and manage virtual care sucks. How do you unlock the future of care delivery and tech-enabled services?   Capable Health — they make it easy.   You focus on patient care, Capable does the rest. Launch, scale and manage your digital health solution with 80% less time, money and code.    Hit the easy button: Meet Capable M&A VillageMD ties the $8.9B Knot with Summit Health After swirling rumors of acquisition talks between the two, VillageMD announced that it's buying Summit Health for $8.9B early Monday morning (can't let a guy sleep in, can you healthcare?)   Combined, VillageMD NewCo will operate 4,100 providers (2,150 primary care physicians), 680 locations, 7 million patients, and 125,000 full-risk Medicare Advantage lives. That's a pretty big deal (pun absolutely intended) as NewCo vaults itself into becoming one of the largest primary care providers in the country and geographically dense (an important feature in value-based care) in the Northeast. Details: VillageMD will acquire Summit with investments alongside Walgreens and Evernorth (AKA, Cigna's services arm). Through the acquisition, VillageMD will now have 680 locations (physician clinics and urgent care locations) in 26 markets. You can see the expansive Summit footprint above! Walgreens will invest $3.5B (50/50 debt + equity) into VillageMD but the transaction dilutes its ownership in VillageMD by 10% FROM 63% TO 53% Walgreens upped its 2025 (wow, that's a bit of a ways out) U.S. healthcare sales revenue expectations by $3.5B to $4.5B, now expecting between $14.5B to $16.0B in 2025. Its adjusted EBITDA expectations for 2023 sit at around breakeven as it works to integrate the cluster of assets it just bought, and it'll be slightly accretive to EPS. Evernorth will hold a minority stake in VillageMD-Summit NewCo Deal will close in Q1 2023 Madden's Musing: Like I've mentioned before, this is a fantastic asset for VillageMD and a nice leeway for Walgreens to continue along with its healthcare strategy. Summit's large physician base allows it to enter into risk-based arrangements with payors and CMS, a large avenue for growth. The CityMD footprint doesn't hurt, while less important.   Resources: Check out the 8-k filing on 11/7/2022 for the press release and deal slides starting on page 10 (Read More) Deal announcement press release (Read More) Retail health updates from CVS, Walgreens, Amazon, and Walmart (Read More) About Summit Health (Read More) EARNINGS Taking one final look at One Medical... Final check in on One Medical (one less primary care comp…sigh) before Amazon closes the deal (expected Q4). Since I'm a freak, I was interested to see how the company performed in Q3 and was tracking as compared to both (1) their earnings guidance (which hadn't been updated since the deal) and (2) the banker projections.   Based on its last-twelve months financials ended Q3 2022, One Medical's care margin deteriorated a bit more, to 17.4% from 19.3% last quarter. (19.5% expected for full-year 2022) Overall, One Medical's consumer and enterprise members are in line with guidance that was issued prior to the Amazon takeover announcement, while Iora's are (currently) slightly under the expected midpoint of 42k members.   One Medical overall seems to be tracking slightly under its 2022E guidance, but Q4 is always a good, busy quarter for most healthcare providers. It's hard to know for sure whether the Revenue, Adjusted EBITDA and Care Margin gaps would have closed in Q4, or if One Medical management would have updated its forecast during Q2 or Q3.   Based on its trailing, LTM care margin and revenue figures and the acquisition price of $3.9B, One Medical is trading at a 3.9x revenue and 22.4x Care Margin multiple.   This multiple compares to an expected 3.6x revenue and 17.7x Care Margin forward 2022E multiple on the acquisition projections (my breakdown here).   Resources: One Medical Q3 earnings release (Read More) EARNINGS Graphic: ApolloMed's Q3 MARKET MOVERS Here's a question I posed on Twitter - out of these 20 or so companies listed above and their YTD 2022 performance, which 3 would you choose to increase in value the most over the next 5 years? Answer here!   Partnerships and Strategy Updates:   Enablement firm Privia Health announced its latest partnership with Novant Health, in which it'll create a clinically integrated network, launch Privia Medical Group - North Carolina, and joint venture with Novant Health's professional corporation. Privia will manage the JV and assist with the transition to value-based arrangements. (Read More)   Kaufman Hall's October hospital flash report showed another slight rebound in financials for hospitals, but a slow recovery continues. (Read More)   CVS seemed to officially launch its CVS Health Ventures arm this week. (Read More)   UnityPoint spun off 3 Illinois hospitals to Carle Health. (Read More)   Finance and M&A Updates:   Johnson & Johnson is buying heart pump maker Abiomed for $16.6B. (Read More)   Pennsylvania's Department of Health is suspending operations at Delaware County Memorial Hospital after Prospect Medical Holdings failed to adequately staff the hospital. The move comes after Prospect failed to (1) convert DCMH into a behavioral facility, then (2) sell Crozer Health, a Prospect subsidiary, to ChristianaCare. This news also comes on the heels of the Atlanta Medical Center closure. (Read More)   Kaiser Permanente reported a $1.5B loss for Q3. (Read More)   U.S. Physical Therapy acquired 60% of a 14-clinic physical therapy practice in the Houston area for $19.3 million, a 2.1x revenue multiple. (Read More)   Digital Health and Startup Updates:   Two instances of venture capital groups partnering with health systems this week: General Catalyst partnered with Hackensack Meridian Health - a 17-hospital system based in Edison, NJ. Then, a16z's Bio + Health fund partnered with Bassett Healthcare, a 5-hospital system based on upstate NY. Details are fuzzy, but both of these partnerships will work together as "think tanks" to leverage the VC firms' portfolio companies, incubate, & strategize on where to invest next.   Also remember that General Catalyst launched a $670M fund in July 2022 and holds partnerships with 33-hospital system Intermountain (and also snagged Intermountain's former President and CEO Marc Harrison along with AdventHealth's former CEO Daryl Tol in July 2022), UK-based Guy's and St. Thomas' NHS Foundation Trust, 8-hospital system Wellspan Health, 182-hospital system HCA Healthcare (AKA the largest health system in the U.S.), and 18-hospital system Jefferson Health in late October 2021. Its Health Assurance portfolio contains some of the biggest names in digital health including Olive, Cadence, Capital Rx, Cityblock, Circulo, Color, Commure, and more.   One year after its $3 billion merger with Ginger, Headspace Health has rolled out a new, unified product experience that brings together meditation and mindfulness services with Ginger's on-demand coaching, therapy and psychiatry services. (Read More)   Transcarent partnered with Prescryptive Health to help build out Transcarent's new pharmacy program for self funded employers and health systems. (Read More)   Hint Health acquired AeroDPC, an EMR and software company also tailored to direct primary care providers. (Read More)   Policy and Payment Updates:   CVS, Walgreens, and Walmart collectively will pay a $13.8B settlement related to opioid claims. (Read More)   A new AMA study seems to indicate that Medicare Advantage markets are anti-competitive. "Nearly 4 out of 5 MSAs had MA markets with low levels of competition as these local-level markets ranked 'highly concentrated' according to federal guidelines." Some interesting tidbits on national payor MA market shares too. (Read More)   A WSJ report indicated that a United-AARP-branded Medicare drug plan is pretty expensive compared to other plans in the market. Goes to show how sticky MA plans are over time. (Read More - paywall)   A few pro-price-transparency stakeholders have come together to form Project Clarify. (Read More)   RCM provider and startup Cedar is now providing its integrated billing platform to Highmark and Allegheny Health Network customers. (Read More)   Costs, Data, and Other Updates:   In 2021, an average of 1.95 healthcare data breaches of 500 or more were reported EACH day!! (Read More)   RSV is a real concern for children's hospitals across the country. (Read More)   Some interesting stats on contract labor during 2022 from Beckers (Read More) HOSPITALOGY TOP READS Rik Renard and I are hosting an 'analyzing healthcare stocks 101' crash course, which will be a high-level webinar diving into some stocks, resources you can use to understand what's going on, and more! Register here. Rock Health put out a must-read on digital health M&A trends, including archetypes for different kinds of M&A, and deals conducted thru Q3 2022. (Read More) Sam Sirell over at Woodside Capital Partners published his quarterly review of health tech in Q3 2022 - lots of great insights this time around. (Read More) Ann Sommers Hogg at the Christensen Institute published a nice report on health system strategy and decision making related to fee for service and value-based business models. (Read More) Finally, Sachin Jain came out guns ablazing in his healthcare predictions for 2023. In November no less! I need to step up my game. (Read More) JOBS Here are some jobs that I'm curating for the healthcare industry. Use this link to submit your role to be featured if you're looking to hire.   Turquoise Health is going full-steam ahead on its price transparency and related initiatives and needs support across several impactful roles! Check out the ones below:   Enterprise Customer Success Manager, Payer/Provider Contracting   In this role, you will become an expert on all Turquoise products and services in order to keep a pulse on customer engagement as well as anticipate opportunities for expanding revenue within current customers.   Full Stack Python Developer   The developer's role will be wide-ranging as a part of Turquoise. One day you might be building new features for a website, but the next day you might be building an ML model to help classify data. You would get to work with a wide range for exciting tools to find pragmatic solutions to challenging real-world problems. You would be able to leverage what you already know while having the opportunity to learn new things constantly.   Account Executive, Bio/Life Science   As part of Turquoise's Enterprise Growth team at Turquoise Health, you will be the face of the company in the market and directly responsible for sales and expansion in the Bio/Life Sciences/Pharmaceutical space. You will own the full sales cycle, building relationships with key stakeholders, designing solutions, managing negotiation, and finalizing contracts. View More Thanks for the read! Let me know what you thought by replying back to this email.   — Blake   Written by me, Blake Madden. Let's chat on Twitter or LinkedIn. Want your message in front of 10,500 executives and healthcare decision-makers? Partner With Me Workweek Media Inc.  2952 Higgins Street Austin, TX 78722   Want to ruin my day? Unsubscribe.