Happy Tuesday, Hospitalogists! I'm still not recovered from the absolute yearly ambush that is Daylight Savings Time's spring forward. If I'm on UnitedHealth Group's timeline, it'll take me another 21 days to get there. (Sorry couldn't resist that one) Thanks so much to WellSky for sponsoring today's send - their first Hospitalogy sponsorship! Show them some love below. Welcome to Hospitalogy, my newsletter breaking down healthcare strategy, finance, M&A, and innovation twice weekly. |
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State of the Union Healthcare Highlights and Policy updates from Federal Spending Bill |
Since most of Biden's speech catered to his base, and given that the State of the Union is largely a clown show these days, here were some high level healthcare takeaways: - Making ACA subsidies permanent (they expire in 2025) which really seems like a band-aid on the broader affordability problem;
- Expanding the Inflation Reduction Act to 500 drugs over the next decade, or 50/year claiming $200B in cost savings to be reinvested into support for child care services or other needed functions
- Making the $2k/year drug cost out of pocket cap applicable to both Medicare AND private insurance
- Protecting IVF in the wake of the Alabama fiasco and reinstating Roe
- Investing into women's health & women's health research
As far as the $460B federal budget deal is concerned, here are several healthcare things of note: - Congress is halving the cut to physician professional reimbursement, from -3.37% to -1.68% (a positive EBITDA impact of around $2M as characterized by US Physical Therapy). Clearly physicians are not happy with a pay cut, and advocacy groups like the AMA are urging Congress for a permanent fix to the problem plaguing physician practices and driving consolidation in the industry. One of the biggest sticking points the AMA bemoans: the lack of an inflationary adjustment factor for professional reimbursement. Calls to tie professional reimbursement to the Medicare Economic Index, a basket of healthcare services cost trends, are heating up. (Link)
- Yet another delay to $8B in planned cuts in disproportionate share payments to hospitals
- $270M in new funding for FQHCs
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Public Fallout for UnitedHealth Group |
UnitedHealth Group provided updates on when key functionalities for Change Healthcare services would come back online, after what many are describing as healthcare's Silicon Valley Bank moment. Change Healthcare systems - which include pharmacy services, payments, and medical claims - are expected to resume in 'mid March.' Fallout: Despite being a $500B enterprise, UHG has never been in the public eye more than we've seen over the past month. Right now, they're in a no-win PR situation. Among healthcare publications, any move they've made is being weaponized to an extreme degree. For instance, non-material acquisitions / rollups for Optum - including the Corvallis Clinic - are increasingly scrutinized and met with skepticism around profiteering and patient harm - especially given recent rhetoric around M&A activity. Nobody has bought up more healthcare delivery than UnitedHealth. Someone can fact check me on that, though. Adding insult to injury for provider organizations, UHG sent out an amended 8-k SEC filing saying the materiality of the Change Healthcare event on profitability isn't clear: Who it's really impacting the most are the players most materially disadvantaged to begin with - smaller provider groups. As for broader fallout within healthcare, expect ramped up focus on cybersecurity, scrutiny of all M&A - a present theme in 2024 - and discussion around consolidation/connectivity of healthcare assets. The irony of a company called Change Healthcare being at the center of this isn't lost on me. So…will anything really change? More reading: |
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Strategy and Policy Updates |
Key considerations for decision makers. Notable moves, policies, and strategies. |
Cuban & CHS Team Up: Cost Plus Drugs is partnering with Community Health Systems to address drug shortages for the for-profit health system in CivicaRx-like fashion. The MCCPD drug factory is now operational and all systems go. Also, this Mark Cuban takedown of PBMs was cathartic. R1 RCM Forms Strategic Committee: On the heels of R1 RCM's 'friendly' takeover offer from New Mountain Capital, the revenue cycle management firm has formed a special committee to see what options it has to drive more value for shareholders. Elevance's $190M Star Ratings Bump: After successfully winning a lawsuit, Elevance will recoup $190M in star ratings payments. (Link) Wegovy and Heart Health: After a landmark trial which included a 20% reduction in major cardiovascular events, GLP-1 Semaglutide becomes the first weight loss medication to be approved for cardiovascular disease. (Link) Rhode Island APM Assessment: CMS published its assessment of Rhode Island's Integrated Care Initiative VBC model and found no impact on service utilization or quality of care measures, except for an increase in E&M visits relative to a control group. It also increased costs to Medicare: "The demonstration was associated with an increase in Medicare costs over the first four years of the demonstration." (Link) Aledade's Whistleblower Nothingburger? KFF published a summary of a whistleblower case against primary care enablement firm Aledade, claiming Aledade is gaming risk adjustment and incentivizing upcoding seniors to increase financial performance. From the lawsuit: "Aledade did whatever it could to make patients appear sicker than they were." Which unfortunately sounds like par for the course in risk adjustment. I'd be surprised if Aledade were one of the more egregious offenders in this category. The bigger scandal would be if Aledade is more aggressive than other industry players, leading to unfair financial outperformance compared to its peers. Overall the whole thing sounds like a whole lot of hoopla considering the DOJ declined to intervene in the case, but I'll be tracking any developments. Meanwhile Aledade announced $100M in accelerated payments to support its partner physicians, identifying a clear marketing goodwill opportunity. I mean hey, at least they're putting those risk adjustment dollars to work? (Link) PE-Backed Physician Group Growth: Over a decade, physician groups backed by private equity experienced a 600% growth. (Link) BrightSpring's Expansion Post-IPO: Following its IPO, BrightSpring is set for further deals and expansion. (Link) Molina Healthcare Contract Loss: Molina Healthcare lost its Virginia Medicaid contract, affecting 140,000 members. (Link) Lifestance Clinic Closures: Lifestance Health has closed 82 clinics, indicating a halt in near-term deals. (Link) Noncompete Clauses in Healthcare: Physicians are increasingly vocal against noncompete clauses. (Link) CommonSpirit's Digital Initiative: CommonSpirit Health is set to launch a new digital consumer experience. (Link) Utilization Management in Part D: A study shows that utilization management in Medicare Part D has increased significantly over the past decade. (Link) |
Healthcare financial summaries and interesting merger activity |
Rubicon's Healthcare Fund: Rubicon Founders has secured nearly $1.18 billion for its second healthcare fund, according to WSJ. (Link) Some notable investor days this week: - InnovAge's first investor day as a pure-play PACE program provider. No deep analysis here (yet) but PACE is an interesting space to me as is, relatedly, the growing interest in all facets of Medicaid. (Link - Slides)
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Cigna's investor day slides were a doozy, which should probably interest a large swath of my fellow Hospitalogist degenerates. (Slides here). Some interesting tidbits: |
- Evernorth generates 60% of enterprise earnings, split 50%/50% between PBM (Express Scripts) and Specialty/Care delivery.
- As far as care services are concerned, Evernorth in particular is taking a capital-light approach, in direct contrast to CVS. It's focusing on 'high growth' segments of healthcare including behavioral (launching a Behavioral Health Group), home health, and virtual care. Goes without saying, but they'll continue to make acquisitions or other strategic moves in this area. Evernorth acquired MDLive in 2021 and then tacked on Bright.md in late 2023 to expand its virtual capabilities.
- Express Scripts, is of course, massive - but also its slowest growing offering given the available penetration.
- Evernorth also announced the launch of the first ever 'financial guarantee for GLP-1 spend' which will provide employers and plans with more predictability around GLP-1 spend for the $719B Cardiodiabesity market (first time I'm hearing that term!!)
- Cigna also wants in on the individual and family plan market, noting the $150B opportunity and a mid-teens growth outlook for the insurance segment.
- Finally, the vertical integration slide!! Or rather, the cross-leverage slide:
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- "…we view [cross leverage] as a structural advantage to have a service company and a health benefits company under the same umbrella, which is the Cigna Group. We see that as a structural advantage, and it gives us opportunities to be thoughtful on a client-by-client basis."
- "…cross enterprise leverage is critically important for our company because it's mutually reinforcing of our 2 growth platforms. So it helps our Cigna Healthcare offerings be more competitive in the market, helps with client retention…So today, we utilize, within Cigna Healthcare, the capabilities of Evernorth such as pharmacy benefit services, Accredo, home-based care, EviCore, virtual care, behavioral health, so there's a number of things that we already pulled through, and there's more opportunity going forward, both to increase the penetration of those solutions, but also, as Eric talks about expanding the addressable market, particularly within the care services portfolio and Evernorth, that will give us more solutions that can be cross-levered back over into Cigna Healthcare." - Brian Evanko, Executive VP, CFO and President & CEO for Cigna Healthcare
Kaufman Hall February Flash Report: (Link) - Margins improved year-over-year
- Improvement in labor expenses
- Inflation pressures from drugs & medical supply costs remain
Providence reports full year 2023 EBITDA (I guess it's technically EBIDA for them) of $502M, or ~1.7% margin, on $28.7B in revenue: |
Medical malpractice lawsuits have surged in Philadelphia which will only incentivize physicians to move away from the city. Mounting malpractice insurance is a huge cost issue that's only going to get worse. (Link - Paywall) |
Partnership, Products, and Pilots: |
Collaborations and launches to keep a pulse on. |
I double checked this list this time just so Matthew Holt doesn't get onto me about accidentally having duplicate stories on here! Also playing around with format - which do you like better? The link embedded in the action word, or the link at the end of the phrase/sentence? - Oschner launched an ambient listening pilot in February
- Humana and kidney care enablement firm Strive expand their partnership to 5 states.
- Nebraska Medicine reduced 1st year nurse turnover by 47% in collaboration with Laudio
- Intermountain partners with Memora Health to optimize workflows and patient communications in their oncology service line with plans to expand from there.
- Memorial Hermann selects Charlie Health to address gaps in critical mental health services, focusing on accessible care. (Link)
- Novant Health acquires majority interest in two ASCs in Mount Pleasant, South Carolina - The sites include Southeastern Spine Institute's Ambulatory Surgery Center, which has six surgery/procedure rooms, and Mount Pleasant Outpatient Surgery Center, which has two procedure rooms with a gastroenterology focus. (Link)
- Suki partners with Amwell to incorporate AI into telehealth services (Link)
- Cancer Care Specialists of Illinois collaborates with Canopy to enhance continuous care management (Link)
- Dynamic Access introduces Dynamic Infusion, a specialty home infusion nursing provider. (Link)
- Findhelp announces a strategic partnership with the Oklahoma Health Care Authority to launch a statewide electronic referral system, aiming to streamline healthcare access. (Link)
- DELAWARE FIRST HEALTH partners with PYX HEALTH to address the loneliness epidemic, enhancing mental health support. (Link)
- Align ENT + Allergy announces a partnership with Ear, Nose, and Throat Specialists of Connecticut. (Link)
- FarmboxRx launches a Maternal Health Program for underserved populations, aiming to improve maternal and infant health outcomes. (Link)
- tango and WellSky® partner to transform post-acute care benefit management, enhancing care coordination and patient outcomes. (Link)
- AllHealth Network partners with Gray Matter Analytics to leverage analytics for value-based care initiatives, aiming to improve care quality and reduce costs. (Link)
- First Fertility expands its nationwide footprint into Texas by partnering with Fertility Specialists of Texas, enhancing access to fertility services. (Link
- UMass Memorial Health and Google Cloud partner to improve healthcare with predictive analytics for advanced cardiometabolic therapies, aiming to enhance patient care. (Link)
- WellSpan Health aims to improve patient experience with Nuance's DAX copilot, focusing on enhancing clinical workflows and patient-doctor interactions. Nuance is also working on an expanded partnership with Providence. (Link)
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Cool initiatives and reasons for optimism |
Rex Salisbury published a list of 'exceptional startups' or companies qualified under the following criteria: - At least $5m in run-rate revenue,
- At least 100% year over year growth, (50% minimum if revenue is above $20m)
- Raised money from a list of venture capital firms that we maintain.
The healthcare startups on that list: - AcuityMD
- Alma
- Drata (loosely)
- Enveda Biosciences
- Hone Health
- Kalderos
- Medallion (shout out to a great Hospitalogy sponsor!)
- Medely
- Paytient
- Prenuvo
- Rula
- Rupa Health
- SiteRx
- Venteur
- Verifiable (another Hospitalogy sponsor!)
- Virta Health
- Vivante
- Viz.ai
Microsoft and 16 health systems form a new partner network to operationalize AI in healthcare, aiming to enhance clinical operations and patient care. (Link) Oscar publishes yet another post on AI applications in healthcare - this time on commission reconciliation and communication with brokers. (Link) Innovaccer previews its new Provider AI Copilot at HIMSS24, showcasing advanced AI tools designed to support healthcare providers. (Link) Sunoh.ai Medical AI Scribe integrates with Epic®'s Open Interoperability Platform, enhancing clinical documentation and efficiency. (Link) Zocdoc launches an advanced partner program focused on specialty care, enhancing access to specialized healthcare services. (Link) Aidoc collaborates with the American College of Cardiology (ACC) to revolutionize cardiovascular care with AI. (Link) |
Recent notable funding rounds. AI-generated. |
- Overjet raises $53 million, marking the largest investment in the history of dental AI. This funding aims to advance their AI technology for dental care, promising significant improvements in diagnostics and patient care. (Link)
- Healthee garners $32M to enhance its health benefits navigation platform, aiming to simplify the process for users to manage and understand their health benefits. (Link)
- Chamber Cardio secures $8M in seed funding to advance its cardiovascular health solutions, contributing to the field of cardiac care through innovative approaches. (Link)
- Milu Health announces a $4.8M Seed Round led by a16z Bio + Health, partnering with employers to expand employee access to its AI-driven health savings platform, emphasizing the importance of accessible health savings solutions. (Link)
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| My favorite healthcare essays from the week |
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Here are some jobs that I'm curating for the healthcare industry. You can see the full list of jobs I've curated here. If you're looking to hire, use the promo code HOSPITALOGY to get your first job listing free on my curated job board. |
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Fun, random stories & updates from Blake I managed to get in around 12 holes on Saturday afternoon and my wife and baby Madden joined me for that outing! It was a beautiful day in Dallas, and Jack's first outing was such a fun one. I was around 5 or 6 over through 12 holes which was good enough for a 6 or 7 differential - not too shabby but need to get my touch back!! |
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Thanks for the read! Let me know what you thought by replying back to this email. — Blake |
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