Teladoc’s Q2 Brings $3.1B Livongo Write Down

Teladoc shareholders can’t seem to catch a break, with the company’s second quarter results sending its shares plummeting 20% on the back of a heavy earnings miss and weak guidance for the second half of the year.

The telehealth services provider reported 18% revenue growth to $592.4M for the period, but the headline grabber from the announcement was a $3B impairment charge on its Livongo acquisition that drove a total loss of $3.1B.

Teladoc CEO Jason Gorevic shared some upbeat growth metrics on the conference call with investors, but also called out a number of headwinds that make it difficult to predict near-term performance.

  • Chronic care membership came in higher than expected, while member utilization improved year-over-year.
  • Teladoc’s BetterHelp virtual therapy business grew revenue by 40%, but continued to be hindered by competitors sacrificing margin to gain market share
  • Primary360 has been “a significant bright spot” for commercial momentum, but heightened economic uncertainty is delaying the decision making process in the employer market.
  • Teladoc is taking a look at its cost structure to maintain profitability, and will begin marketing bundles of services to expand its revenue sources.

The Takeaway
Although the market didn’t exactly react kindly to the Livongo news, the write down appears to be more of a symptom of wider market trends than the business itself, and Teladoc’s recently launched Chronic Care Complete solution is poised to be a core pillar of its long-term growth strategy. The near-term looks like a different story, as Teladoc now expects its full-year revenue to be at the lower end of its $2.4B to $2.5B guidance.

Mass General’s Hospital-at-Home Expansion

Mass General Brigham is living up to its reputation as a healthcare innovator after laying out plans for a “massive expansion” of its hospital-at-home program to help contain costs and manage the ongoing capacity crunch at its facilities.

The health system intends to grow its current program from 25 patients to upward of 200 hospital-at-home beds by 2025, with 90 fully-operational beds expected before the end of next year.

MGB’s hospital-at-home service provides hospital-level care at a patient’s residence, allowing those who are stable enough to be monitored remotely to recover from the comfort of their home. Patients have access to virtual meetings with their care teams, as well as in-person visits from physicians, nurses, and case managers.

  • As part of the expansion, MGB appointed its first-ever president of home-based care, Heather O’Sullivan, who most recently worked for one of the country’s largest home care providers, Kindred at Home.
  • Over the next year, O’Sullivan will oversee the hiring of 200 additional workers to bring MGB’s total home care staff to 1k employees, and will ramp up its fleet of remote care vehicles from 2 to 10 to enable more home testing and medical supply deliveries.

Dr. Gregg Meyer, EVP of value-based care for MGB, compared the hospital-at-home program to a house call from a doctor, which not only gives patients more convenience, but also lets providers observe SDOH factors that might impact recovery.

  • MGB cited a 2019 study showing that its hospital-at-home service led to a 38% cost reduction compared to traditional care, while other programs have lowered readmissions and helped alleviate hospital capacity issues.

The Takeaway

Mass General Brigham ranks among the most highly visible health systems in the world, and all eyes are now on the results of its hospital-at-home expansion. If MGB can successfully create a more convenient recovery experience while simultaneously reducing costs, it could cause plenty of other organizations to replicate the model. That said, hearing a health system like MGB refer to 200 patients as a massive expansion also serves as a good reminder that scaling these types of programs is far from an easy task.

Amazon Acquires One Medical for $3.9B

If you looked at any sort of healthcare news last week it was pretty hard to miss what might end up being the biggest digital health story of the year: Amazon agreed to acquire primary care provider One Medical for $3.9B.

Should the acquisition close, it will be Amazon’s third largest of all time behind Whole Foods ($13.7B) and MGM Studios ($8.5B), and the first since the company appointed Andy Jassy as its chief executive.

One Medical is a membership-based primary care provider that offers virtual care as well as in-person visits. It operates 188 US locations across a dozen markets, boasts over 750k members, and works with more than 8k employers to offer its services as a benefit.

  • The company ended Q1 2022 with a net revenue of $254.1M and a hefty loss of $90.9M due in part to its significant customer acquisition costs. Hypothetically, these expenses could be cut down by steering Amazon’s ~160M US Prime subscribers towards One Medical’s services.
  • The acquisition also helps alleviate the scaling challenges of building a brick-and-mortar presence and staffing clinics in a tight labor market, while giving Amazon access to One Medical’s existing payor and health system relationships.

Amazon’s quickly growing list of healthcare moves ranges from launching Amazon Pharmacy on the back of its 2018 acquisition of PillPack to the nationwide rollout of its Amazon Care employer telehealth program earlier this year.

  • Some of Amazon’s initiatives have seen more success than others, and its ill-fated Haven partnership with JPMorgan and Berkshire Hathway came to a sooner-than-hoped-for ending last February.
  • That said, Amazon has never had significant in-person resources to bolster its care delivery, and its One Medical acquisition is a strong acknowledgement that Amazon views the future of healthcare as hybrid.

Industry Impact 

Although we’ll have to wait and see where Amazon’s healthcare ambitions go from here, owning the primary care “front door” to the healthcare system gives Amazon a way to disrupt the industry using the same customer-first playbook that made it an e-commerce giant in the first place.

As for what comes next, analysts were quick to speculate on everything from Amazon health plans to specialty care, but the acquisition itself might also prompt other retailers like CVS and Walgreens to ramp up their own primary care services. Amazon’s laser-focus on the customer experience reshaped how long millions of consumers were willing to wait for packages and caused its competition to either catch up or get left behind, and picking up a primary care provider seems to suggest that healthcare might be in for a similar shakeup.

Happify Health Weaves a New Path as Twill

Happify Health recently re-introduced itself to the world as Twill, the Intelligent Health Company.

While a name change and a shiny new logo probably wouldn’t warrant a full feature story, Twill’s fresh identity was tied to a complete overhaul of its business, and reflects the culmination of its five-year journey from a wellness app to a clinical-grade connected care platform.

Twill’s transformation centers around its three core pillars of a connected care experience. 

  • Untangling the complex digital health ecosystem to make the process of finding the right care more personalized and engaging
  • Weaving together evidence-based digital therapeutics, wellness coaching, and third party solutions into Sequences that help patients navigate their care journey
  • No fabric pun was stitched into the press release for this bullet, but the final pillar is about leveraging AI to intelligently guide patients to appropriate care based on their clinical needs and personal preferences

To accomplish these goals, Twill provides fully-configurable Sequences that combine its digital therapeutics with existing partner solutions to address specific clinical needs. The Sequences employ AI and behavior change techniques to steer patients towards positive outcomes at each step of their journey.

  • To give an example, a patient that joins Twill’s psoriasis Sequence would be onboarded with a questionnaire and given access to a content library for their condition. If their responses indicate that their condition is still being managed by their PCP, Twill might direct them to a dermatologist before presenting them with Almirall’s psoriasis treatment after other milestones have been reached.
  • By the end of 2022, Twill and its partners will offer Sequences for four conditions: mental health (Happify), pregnancy (Elevance), multiple sclerosis (Biogen), and psoriasis (Almirall).

The Takeaway 

Even in its past life as Happify Health, Twill’s biggest strength was its ability to blend AI and intelligent design to create real behavior change. Now, with a new brand and configurable Sequences that can weave together outside solutions as needed, Twill has a much more scalable platform that should let it quickly expand into more clinical areas as it grows beyond its wellness app roots.

CVS Health 2022 Health Care Insights Study

CVS Health’s 2022 Health Care Insights Study revealed that people are eager for the next chapter in their health journeys after multiple years of delayed care and lifestyle disruptions. CVS surveyed 1,000 US consumers and 400 providers about their ideal care delivery experience, finding that the pandemic unsurprisingly caused many people to redefine what healthcare should look like.

The full study has 14 slides of insights to catch you up on the latest sentiment towards everything from patient engagement to primary care (the 1-pager can get you pretty close), but the biggest highlights fell into two main buckets.

Patients are embracing a more holistic view of their health, with 54% saying that it’s important for care plans to involve diet, exercise, and counseling. The pandemic proved to be a catalyst for positive change, with 22% of consumers reporting that they care more about their health than ever before.

  • As a result, patients are taking a more active role in managing their own healthcare, with 17% saying they’re now more likely to book their annual wellness checks.
  • 83% of consumers said good patient-provider communication and continuous care coordination is important to their health, yet 88% of providers reported that they don’t have enough time for strong patient engagement.

Virtual care is helping providers keep pace with rising consumer expectations. Nearly all consumers (92%) value convenience above all other factors when selecting a primary care physician, while 59% said it’s important to their health to have access to telehealth services.

  • 62% of consumers are likely to consider virtual visits if a physical exam isn’t needed, primarily due to convenience-related reasons such as not having to leave home (41%) or saving time (37%).
  • 53% of providers said that adding telehealth resulted in more patient visits, and a majority also believe it made patients more likely to make appointments (93%) and keep them (88%).

The Takeaway

If the CVS Health report made one thing clear, it’s that patients are engaging in their care with a renewed sense of urgency towards holistic wellness and convenience. All signs are pointing towards “coordination” and “communication” being two of the biggest watchwords for post-pandemic healthcare, and that’s a strong demand signal for solutions that make them possible.

Rock Health: Funding Cools Off in H1 2022

The numbers are in. After a record shattering year for digital health funding in 2021, the latest Rock Health venture recap shows that the sector’s frothiness has officially turned to a fade, which might actually be good news for opportunistic startups.

First things first, digital health funding totaled $10.3B across 329 rounds in H1 2022, placing it on a trajectory to end the year significantly lower than 2021’s $29.1B. As the broader market plummeted in response to recession worries and global conflict, digital health companies weren’t immune, resulting in a full year funding projection of $21B.

  • Rock Health is quick to point out that “there are two sides to every (market) story.”  While this year’s funding will likely fall far short of last year, it’s still on track to outpace 2020’s $14.7B, representing an important return to long-term growth and supporting the view that digital health is a sustainable investment sector.

The slowdown impacted nearly every corner of the digital health market. Series B round sizes declined by an average of 25% in the first half of the year, while Series C and D+ rounds fell by 22% and 12%, respectively. The one bright spot was early-stage startups unburdened by an outdated sky-high valuation, with the average Series A size of $18M staying on par with 2021.

  • We’ve covered this often but it’s worth restating here: companies prioritizing growth-at-all-costs over a sustainably profitable business model are struggling in the current funding environment. As investors re-evaluate future revenue with a less favorable outlook, not a single digital health company decided the timing was right to go public in H1 2022, down from 23 in 2021.

The most-funded clinical area defended its title once again, with mental health startups bringing in $1.3B during H1 2022 on the back of a huge round from Lyra Health ($235M). This chart gives a full breakdown of the top clinical indications.

  • The value propositions that attracted the most investment were research and development at $1.6B, followed-by on-demand healthcare and disease monitoring each bringing in $1.4B. Administrative / clinical workflow automation also saw large totals as health systems continue to build back up their worn down workforces.

The Takeaway

Although the first half of the year brought a pullback in digital health funding, the return to a multi-year growth trend is a healthy sign for a sector that was overheating throughout 2021. This particular market moment gives companies a chance to tighten their belts and reorient towards a more fundamentals-driven direction, and we should start to see more differentiation and clinical rigor from the businesses that successfully navigate the transition.

Tebra Closes $72M to Become Digital Backbone for Independent Practices

True to its name originating from “vertebra,” physician enablement company Tebra closed $72M in growth financing to become the digital backbone for independent healthcare practices.

The funding brings Tebra’s total raise to $137M while minting a new digital health unicorn that’s looking to use the fresh capital to expand its market share, launch additional service lines, and overhaul its branding.

To jog the memory, Tebra was formed through the merger of Kareo and PatientPop late last year, and provides private practices a “complete operating system for practice success.” 

  • Tebra’s Care Delivery platform enables physicians to operate independently by providing a fully certified EHR, scheduling and billing support, and telehealth capabilities. Its Practice Growth service helps in areas such as patient marketing, website overhauls, and reputation management.
  • Since the merger, Tebra has launched a two-way product integration that allows both platforms to share data and optimize performance, and it now supports over 100k providers delivering care to 90M patients.

Physician enablement companies have seen business boom throughout the pandemic as doctors look to keep pace with rising consumer expectations for personalized and remote care.

  • Tebra counts athenahealth, ZocDoc, and Privia among its direct competitors, but new entrants like NexHealth and Podium have also been raising some huge funding rounds to compete in the healthcare arena.
  • Tebra points to its unification of fragmented software as its biggest differentiator, and outside of combining Kareo and PatientPop’s solutions, it’s been building its all-in-one platform through acquisitions such as billing-automation company PatientlySpeaking and patient-communications tool DoctorBase.

The Takeaway

As healthcare systems invest heavily in digital innovation, Tebra’s practice management platform is a lifeline for private practices trying to keep up. Without the financial buffer of larger systems, independent physicians have acutely felt the pandemic-driven declines in patient volumes, and Tebra’s new funding should help it support these practices by letting them offload administration and growth functions so that they can focus on delivering care.

The Promise of Digital Health

The National Academy of Medicine published a first-rate roadmap for digital innovation that stood out for its well articulated overview of the state of healthcare transformation as well as its author list filled with dozens of leading industry voices.

“The Promise of Digital Health: Then, Now, and the Future” wasn’t short on word count or insights, and delivered plenty of each on the potential for innovation in areas such as ensuring care continuity and partnering with individuals to support self-management.

The article begins by making the case that despite important gains over the last two decades, the promise of digital health remains illusory. User interfaces of inpatient care systems are often clumsy, health data is still difficult to aggregate in a meaningful way, and there’s plenty of work to be done to incorporate SDoH factors into care plans.

  • Although there are thousands of individual applications that could have been used to explore digital health’s path toward making improvements, the authors provided a useful visualization of twelve application arenas creating the biggest impact.

Foundational infrastructure requirements were a key discussion point to help bridge the gap between digital health’s future promise and its current implementation. Of particular interest for focused efforts were individual engagement, equity and ethics, interoperability, AI/ML, and workforce.

  • This graphic presented the essential infrastructure requirements for progress, and the authors stressed that each area must be carefully addressed to establish a complete framework for durable improvements.

The paper concluded on an optimistic note with tactical actions for achieving the promise of digital health. At the top of the list was a call to create a panel to develop recommendations for engaging individual healthcare consumers that follows the adage “nothing about me without me” to ensure equity and transparency as a first principle.

  • Other line items included “rational, right-sized, risk-based regulation,” sustainable reimbursements from the CMS to ensure equitable access to new digital tools, and a full implementation of data standards from the ONC.

The Takeaway

Like most blueprints for changing healthcare, the reality is more difficult than the brochure, but the benefits far outweigh the challenges. Digital health promises to improve medical diagnoses, treatments, plus everything in between, and thought leadership papers like this one are a good step toward making that future a reality.

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