The retail healthcare buyout bonanza doesn’t seem to want to take a week off, and Cano Health is now the latest company to drum up acquisition rumors.
The Wall Street Journal first reported that “talks are serious” and could be wrapped up in the next few weeks, with Cano already attracting attention from at least two potential suitors.
The first was Humana, who already has strong ties to Cano following a $100M investment in 2019. The second turned out to be none other than everyone’s favorite drugstore turned healthcare heavyweight, CVS Health.
Before we get too ahead of ourselves, Cano Health is a value-based primary care provider with 143 clinics in 9 states and mostly focuses on the Medicare Advantage population.
- Cano went public via a SPAC merger in 2021 at a $4.4B valuation and since then has fared about as well as other SPACs of the same vintage. Let’s just say it still isn’t quite back to that $4.4B mark, even after shares popped 30% on the takeover rumors.
- Similar to Amazon’s recent pickup, One Medical, Cano has been looking for ways to raise capital to sustain its operations – and given that 44% of Cano’s 282k members are in the MA program – pursuing an acquisition by a major payor makes sense.
For Humana’s part, an interesting stipulation in its earlier investment in Cano gives the payor first right-of-refusal in the event of a sale.
- Humana is already second in the MA market behind only UnitedHealthcare, and it’s been very vocal about plans to add over 100 more senior-focused clinics by 2025.
CVS Health, and by extension Aetna, has also been aggressively pushing into the MA market and isn’t shy about acquiring the strategic pieces to do so. See Signify Health.
- After losing out on the One Medical acquisition to a tech giant with deep pockets, Cano would be a great way for CVS to continue building out its clinical assets.
Big ticket acquisitions are turning into regular fixtures in our top story coverage as the crash in high flying valuations puts plenty of appetizing startups on the M&A menu. In the case of Cano, whoever comes out on top will gain a strong foothold in senior primary care, and it’s easy to imagine that other acquirers will be hungrily eyeing other players in the space like Oak Street and ChenMed.
A bit of a slow news week gave us a chance to circle back on a recent NEJM commentary by Optum’s leadership, which laid out the key components of a futuristic home care model and the steps that Optum is taking to make it a reality.
“The vision is to unite modular point solutions around the patient to enable timely interventions and care coordination that is supported by data and technology for a seamless experience and optimized care delivery across providers and care settings.”
Sounds great, maybe a little boilerplate-ish, but the individual solutions tie it all together:
- Patient Assessments – The “pivotal first step” to identifying, engaging, and stratifying patient populations through annual in-home comprehensive clinical examinations of medical, behavioral, and social needs. Ex. Optum HouseCalls
- Care Transitions – Appropriately managing a patient’s transition from acute care facilities is essential to keeping recoveries on track, and comprehensive programs should include post-discharge engagement and 90-day follow-ups. Ex. naviHealth
- At-Home Emergent Care – At-home emergent care is convenient for patients while helping avoid readmissions, and the authors cite a 2018 hospital-at-home study demonstrating better outcomes than inpatient care. Ex. DispatchHealth
- Home-Based Medical Groups – The cherry on top of the proposed model is a call for more home-based medical groups to treat patients with chronic conditions. Services might include primary care, therapy, and dialysis. Ex. Landmark Health
Although the article was mainly intended to provide a framework for successful home care, it also gave us a great peek at Optum’s priorities. It was interesting to see the companies that the authors held up as prime examples for each solution, and it’s easy to picture each of them as potential acquisition targets considering how active Optum’s been in the M&A space.
The big are getting bigger after a federal judge denied the DOJ’s attempt to block UnitedHealth Group’s $13B acquisition of Change Healthcare, delivering a huge victory to the healthcare giant as it continues to vertically integrate its business.
As part of the decision, UHG will be required to divest Change’s ClaimsXten service line (it already has TPG Capital set to pick it up for $2B), although not much else is known about the full opinion since it “may contain competitively sensitive information” and is under seal.
UnitedHealth Group needs little introduction, but in case you’re new to the industry, it runs one of the nation’s largest payors, operates a huge pharmacy benefit manager, and employs thousands of physicians through its care centers.
- Change’s claim processing business is now getting rolled into UHG’s OptumInsight analytics arm, which it argued will help improve outcomes and reduce waste by providing better insights to physicians.
- To give you an idea of UHG’s scale, OptumInsight contributed ~$12B to its insane $288B total revenue in 2021. By comparison, Change did about $3.5B in revenue last year, and even that is getting chopped as it sheds ClaimsXten.
UHG’s position as the US’ most profitable healthcare company paints a huge target on its back for antitrust lawyers.
- The DOJ argued that acquiring Change would give UHG access to a treasure trove of data on its payor competitors and create a virtual monopoly in the claims processing space, leading to lower quality and less innovation.
- UHG countered that it already has access to this competitor data, and has never misused it since doing so would create a huge blowback on its business (we’ll also assume they said something about it being unethical). Some version of this argument clearly stuck.
Whether or not it created a monopoly, the Optum-Change combination is now a major powerhouse that doesn’t sound fun to try and compete with. DOJ top brass Jonathan Kanter wasn’t very enthused about the outcome, saying “we respectfully disagree with the court’s decision and are reviewing the opinion closely to evaluate next steps.” That looks to us an awful lot like the DOJ is planning to appeal the judgment, but UHG and Change are moving forward with combining the companies “as quickly as possible.”
Just in time to kickoff Telehealth Awareness Week, the American Medical Association released its latest digital health research report, giving us some fresh insight into the emerging tech landscape while reaffirming many of the trends we frequently cover.
The AMA surveyed 1,300 physicians in 2016, 2019, and 2022, tracking not only their current usage stats, but also their motivations for adopting new solutions.
The top line takeaway from the report is that physician adoption of digital health tools is accelerating even faster than it was prior to the pandemic, with the largest growth by-far coming from telehealth visits.
- Tele-visit utilization grew from 14% of practices in 2016, to 28% in 2019, then spiked to 80% in 2022. Remote monitoring devices lagged quite a ways behind, but still climbed from 12% to 30% over the same period.
- The adoption was driven by physicians across all practice sizes, settings, and specialties, with the average number of tools in use growing from 2.2 in 2016 to 3.8 in 2022. Definitely worth taking a look at the full usage breakdowns on slide 9.
Physicians jumped on the digital health bandwagon for a variety of reasons outside of COVID-19’s negative shock to in-person encounters.
- Improved clinical outcomes (88%) and increased work efficiency (88%) topped the list for overall digital health adoption, which is a bit surprising considering that unproven clinical benefits and new workflows are frequently cited as drawbacks of virtual care.
- Interestingly, the top motivators for adopting “remote care tech” differed completely. 72% said that adopting tools like telehealth and RPM improved resource allocation for staff, 70% said it supported value-based care, and 66% said it supported health equity.
The AMA report is a useful roadmap for anyone looking to understand where physicians are in their digital health journeys, as well as the motivations driving them to adopt new technologies. There are also some hidden gems for those diligent enough to make down to the appendix on slide 24 of the report, which includes technology adoption curves and planned timelines for adopting different subsets of tools.
Launching a healthcare company is hard. Launching dozens of them is even harder, but that’s exactly what Redesign Health is setting out to do with $65M in Series C funding.
Redesign isn’t a venture capital firm, although it’s funded more digital health startups than most VCs. It’s not an accelerator, yet it’s launched more early-stage companies in its four years of existence than post pure startup studios.
Then what is it? Good question. Redesign’s team consists of roughly 300 analysts that “accelerate the healthcare innovation cycle” by researching sectors, identifying challenges, then assembling companies to pursue solutions.
- The “assembling companies” piece is every bit as hands-on as you might imagine. Redesign funds the initial product development, handles the branding, and even installs the leadership team.
- By bringing everything in-house, the idea is that Redesign can eliminate many of the barriers that healthcare founders usually face, allowing them to deliver outsized value… and shareholder returns.
Redesign takes an equity stake in every company it launches, a fact well-known to its Series C investors like CVS Ventures, General Catalyst, and UPMC Enterprises.
- Since 2018, Redesign has launched over 40 companies, including home-health startup MedArrive, cancer-care platform Jasper Health, and mental health company UpLift.
- The latest funding will go toward Redesign’s own platform that helps its portfolio companies tackle repeatable processes, and innovation agreements with its Series C investors will ensure that they’re able to co-build companies using the technology.
Healthcare startups have high upfront capital costs, steep inflection points between business stages, and difficulty recruiting the seasoned executives needed to reach scale. Although there isn’t a magic wand that can be waved to make those problems disappear, we’re guessing that Redesign’s startups see smoother sailing than most.
It’s a unique model that’s hard to put in a box (especially one the size of a DHW top story), but Redesign’s portfolio of already-launched startups and its eye-popping $1.7B valuation seem to suggest that it’s a model that’s working.
Fresh announcements seem to be piling into the retail healthcare snowball on a daily basis, and it looks like Walmart and UnitedHealth Group don’t plan on missing out on the fun.
Walmart and UnitedHealth Group inked a 10-year partnership to deliver care to hundreds of thousands of Medicare Advantage beneficiaries through value-based arrangements, with three pillars supporting most of the collaboration:
- Beginning in January, Walmart and UHG will launch a co-branded MA plan in Georgia, dubbed UnitedHealthcare Medicare Advantage Walmart Flex.
- UHG will provide Optum analytics and CDS tools to Walmart Health clinicians, starting with 15 locations throughout Florida and Georgia.
- Walmart Health’s Virtual Care solution will now be in-network with UnitedHealthcare’s Choice Plus PPO plan, giving ~20M members access to the service.
At first glance, the partnership makes sense for both sides, offering advantages of scale that could only be achieved from a collaboration between the nation’s largest retailer and its largest payor.
- Walmart gains access to UHG’s deep clinical expertise and Medicare Advantage resources, giving it exposure to the upside of risk-based contracts without having to fully enter the complex insurance market.
- In return, Walmart’s expansive footprint provides UHG with healthcare access points all across the country, including in geographies where Optum’s own physician network isn’t active (yet).
UHG and Walmart have a clear recipe for cooking up a big impact: UnitedHealthcare covers more lives under Medicare Advantage plans than any other payor, and 90% of Americans live within 10 miles of a Walmart store. Only time will tell whether the partnership turns into a nationwide success story, but it’s hard to think of another duo that would have a better shot at pulling it off.
A new study in JAMA Psychiatry attracted a lot of attention last week after finding that pandemic-era telehealth flexibilities significantly lowered the odds of medically treated opioid overdoses among Medicare patients.
Researchers from the CDC, CMS, and NIDA examined data from Medicare beneficiaries with a prior diagnosis for opioid use disorder (OUD), separating them into a pandemic cohort of 71k patients who initiated OUD care after telehealth flexibilities were expanded and 105k who sought treatment prior to the onset of the pandemic.
The differences between the two groups were stark:
- Roughly 1 in 8 beneficiaries in the pandemic group received OUD-related telehealth services, compared with just 1 in 800 in the prepandemic group.
- The expanded access to treatment helped 12.6% of pandemic beneficiaries obtain medications for OUD (e.g. methadone, buprenorphine, naltrexone), compared with 10.8% of the prepandemic group.
- The pandemic cohort saw significantly lower odds of medically treated overdose (odds ratio: 0.67), as well as higher medication retention (OR: 1.27).
- Pandemic beneficiaries were also far more likely to access virtual behavioral health services than the prepandemic group (41% vs. 1.9%).
The study served as a boon to telehealth advocacy groups, which have been pushing to make pandemic-era telehealth flexibilities a permanent fixture. The American Telemedicine Association pretty much summed it up in their press release, touting the study as “a strong signal to policymakers that telehealth can and should be a permanent part of healthcare delivery.”
The Signify Health acquisition saga has officially reached its conclusion, with CVS Health emerging as the winning bidder over other high profile suitors such as Amazon and UnitedHealth Group.
CVS closed the transaction at $30.50/share or roughly $8B, which should be music to the ears of Signify shareholders after the stock hit a low of $11 earlier this year.
Signify offers in-home health risk assessments and provider enablement services to help organizations transition to value-based care.
- The company has a network of 10k providers across all 50 states and acquired ACO management player Caravan Health earlier this year to further expand its reach with Medicare patients.
- CVS CEO Karen Lynch said that Signify “will play a critical role in advancing our health-care services strategy and gives us a platform to accelerate our growth in value-based care.”
Through the acquisition, CVS is adding to its rapidly expanding menu of healthcare offerings that already includes over 9k pharmacies, 1k MinuteClinics staffed with nurse practitioners, and the third largest payor in the nation, Aetna.
- Acquiring a home care company gives CVS a new avenue to serve their large customer base at a time when more consumers are heading online for the everyday items that used to bring them into stores.
- As a bonus, Signify opens the door for CVS to provide proactive care in patient homes while keeping them out of the hospital, which has the potential to dramatically cut down on expenditures for patients covered by Aetna.
With the acquisition of Signify, CVS has cemented its move away from its pharmacy chain roots. The news arrives as CVS’ retail healthcare competitors are pushing aggressively into outpatient services, following close behind Amazon’s acquisition of One Medical and less than a week after Walgreens scooped up home care company CareCentrix.
CVS has made it clear that it plans to compete in healthcare by establishing itself as one of the nation’s largest primary care providers, and with such a large footprint of conveniently located stores, they have all the right building blocks to make it happen.