Month: June 2023

DexCare Lands $75M to Merchandise Care

Posted on by Jason Barry

Healthcare consumerization is all the rage, and not many startups are driving it forward faster than DexCare, which just landed $75M in Series C funding just two years after spinning out from Providence.

The round brings DexCare’s total funding to $146M as it looks to help health systems attract new patients, capture more downstream revenue, and control costs to fuel growth.

How does DexCare achieve this holy trinity of value propositions? By allowing providers to “merchandise their care” and manage both sides of the access problem.

  • On the front-end, DexCare helps generate demand by making the right care more discoverable through search engines and provider websites. The platform matches patients to best-fit providers, settings, and care modalities, then facilitates seamless appointment booking.
  • On the back-end, DexCare manages workforce supply by forecasting demand and monitoring staff utilization, then precisely coordinates scheduling across service lines / modalities to optimize capacity and operational costs.

DexCare already reaches more than 57M patients across all 50 states, but the additional funding will continue to accelerate its expansion while building out its product portfolio.

  • Since the spin out, DexCare reports that it’s boosted new-patient bookings by 30%, generated 20% cost reductions per patient encounter, and increased downstream revenue for its partners by a whopping 8x multiple. 
  • Those are some pretty impressive stats, and the fact that DexCare was able to raise an oversubscribed round in a tough funding environment seems to back them up.

The Takeaway

Although the “digital front door” tag might be overplayed, DexCare’s platform really lives up to the title. Providers are still investing heavily in the infrastructure to capture a new generation of hybrid-care-first consumers, and last time we checked frontline workers were still burned out. DexCare is well positioned to capitalize on both trends, and its value proposition will only resonate louder if hospitals continue to struggle with financial and workforce challenges.

Medicare Advantage’s Favorable Selection Problem

Posted on by Jason Barry

Medicare Advantage plans could be on track to reach over $75B in overpayments this year – nearly 3x prior estimates – causing researchers at the USC Schaeffer Center for Health Policy and Economics to issue a pressing call for policy reform.

The USC study found that traditional fee-for-service Medicare beneficiaries with lower-than-average expenditures are significantly more likely to switch to Medicare Advantage plans. Favorable selection at its finest. 

  • For context, CMS sets MA rates based on the county-level expenditures of those in traditional FFS Medicare, and they’re intended for beneficiaries with average expenditures – not systematically below average.
  • As a result, risk-adjusted expenditures for the 16.9M new MA beneficiaries who made the switch from traditional Medicare between 2006 and 2019 were substantially below average, causing large overpayments due to the favorable selection effect.

This pattern of favorable selection more than doubles the $27B (6%) overpayment estimate from MedPAC for 2023, which primarily reflected “coding intensity” ($23B) and Star Rating (quality) bonuses, but didn’t include an adjustment for selection bias.

  • The researchers estimate that favorable selection alone could cause overpayments to the tune of 14.4%, which would surpass $75B when combined with MedPAC’s estimate of other factors.

The authors propose two potential strategies for improving the accuracy of MA rates:

  • Reform the current approach of linking MA rates to average expenditures of traditional Medicare beneficiaries by including measures to reduce the impact of aggressive coding and mandating new data reporting requirements to improve comparability.
  • Abandon the current approach and institute competitive bidding by MA plans to let market forces determine rates with the aim of capturing efficiency gains for taxpayers instead of increasing revenue for MA plans.

The Takeaway

Medicare Advantage enrollment has been skyrocketing over the past decade, and over half of all eligible beneficiaries are now enrolled in a private plan. As traditional Medicare enrollment continues to decline, basing MA rates on FFS expenditures will only grow increasingly problematic, and this study does a great job underscoring the need for some serious reform.

Aledade Closes $260M for VBC Enablement

Posted on by Jason Barry

If we’re in a digital health funding rut, Aledade definitely missed the memo. The primary care enablement company just raised what looks like its “last funding round needed” after securing an eye-popping $260M in Series F capital.

Aledade partners with independent primary care practices to establish tech-enabled accountable care organizations. It uses data analytics and guided workflows to help better manage high risk patients, then shares in the success of its partners’ value-based contracts.

  • The company works with over 1,500 practices across 45 states, and the 500 that joined this year make it the country’s largest network of independent PCPs.
  • Aledade’s 150+ VBC contracts cover more than 2M lives (including 1M Medicare Shared Savings Program, 250k Medicare Advantage), collectively controlling over $20B in total healthcare spending. 
  • Although Aledade has many “fellow travelers” in this space (namely Privia, Agilon, et al.), it views fee-for-service as its real competition, and recently walked the talk by converting to a Public Benefit Corporation.

The funding is earmarked for accelerating the growth of Aledade’s primary care network and its strategic partnerships with payors, but it will also allow Aledade to keep an “opportunistic” eye on potential acquisitions.

  • Aledade already picked up VBC analytics platform Curia in February, marking its second M&A move after acquiring end-of-life care planning company Iris Healthcare last year.
  • The recent launch of Aledade’s Care Solutions division also gives it a way to help PCPs deliver wraparound services, and the companies that provide these services are high on the M&A target list (behavioral health and kidney care were honorable mentions).

The Takeaway

Aledade’s flywheel is clearly getting up to speed, with each practice that it signs making it easier to get payor contracts, which in turn makes it easier to sign practices. That virtuous cycle and a $260M Series F round might suggest that a public market debut is on the horizon, but in the words of Aledade’s CEO Dr. Farzad Mostashari, “An IPO is not a destination.” Aledade’s focus is on the journey of bringing value-based care to the masses, but “if we’re ready and the public markets are ready… then that’s what we’ll do.”

Laudio Lands $13M to Tackle Burnout

Posted on by Jason Barry

Workforce management startup Laudio landed a $13M Series B round to tackle labor productivity and burnout, two challenges proven large enough to attract funding in any environment. 

Unlike staffing solutions aimed at adding more people, Laudio helps retain the talent healthcare organizations have already invested in by automating repetitive work and nudging managers toward next best actions.

  • Laudio’s AI-driven software automates tasks such as employee rounding, new hire check-ins, quality audits, and overtime assessments. It also helps with reminders for events like employee birthdays and work anniversaries. 
  • Example: If a nurse has worked several consecutive shifts with new employees, Laudio will alert the manager to reach out and thank them, deliver scheduling recommendations, and suggest follow-ups.

Laudio plans on using the funding to build out its AI capabilities and recommendation engine, while adding more partnerships with health systems throughout the country.

  • Over 20 health systems already use Laudio, and it attributes its early success to its focus on becoming an all-in-one platform for frontline managers, who frequently turn to a variety of point solutions for quality audits and employee engagement.
  • Laudio counts major systems like Novant and UNC Health among its early adopters, and reports that the platform has reduced RN turnover by 26% by driving a single meaningful interaction every month between frontline managers and nursing team members.

The Takeaway

Health systems have been stuck in a vicious cycle of high turnover leading to burned out workers leading to even more turnover. If Laudio can use its Series B funds to prove it can break that chain, it’ll have no shortage of hospitals lined up to streamline the workflows of their frontline managers.

Postponed Care Means Bad News for Payors

Posted on by Jason Barry

The pent-up-demand narrative is back on the menu. Speaking at Goldman Sachs’ Global Healthcare Conference, the CEO of UnitedHealthcare’s Medicare business Tim Noel said that costs are on the rise due to elevated demand for outpatient procedures.

  • “We’re seeing that more seniors are just more comfortable accessing services for things that they might have pushed off a bit like knees and hips.”

That quip sent shares of UnitedHealth Group sliding over 6%, wiping out roughly $29B from the healthcare giant’s market capitalization in one of its largest single-day drops in years.

  • United now expects its Q2 medical loss ratio (percentage of spend on claims versus premiums collected) to be moderately above its full year forecast (82.1% to 83.1%).
  • The stocks of other major Medicare players took a pretty significant sympathy dive, with CVS (-7%) and Humana (-11%) getting the worst of it.

Why is this important? Payors have been enjoying a lull in surgery expenses due to hospital-wary patients postponing care during the pandemic, but that trend might be reversing.

  • Although several surveys have suggested that some of these skipped appointments are lost for good, United’s comments show that Medicare patients are getting back on track.

That’s good news for hospital operators and medical device companies, whose revenue is closely tied to surgery frequency.

  • Shares of hospital operators Tenet Healthcare and HCA Healthcare each jumped on the news, while joint replacement and implant manufacturers like Stryker and Zimmer Biomet climbed around 4%.

The Takeaway

Investors are listening closely for any signs of increased payor costs as patients start catching up on postponed care, and United’s role as the bellwether for the group means that even off-the-cuff comments at conferences are heard loud and clear. While the extent of the pent-up-demand remains to be seen, United seems to think the pressure could start shifting from hospitals to payors in the second half of the year.

The Volume and Cost of Quality Metric Reporting

Posted on by Jason Barry

A Johns Hopkins-led study in JAMA reached a conclusion that many health systems are already all-too-familiar with: reporting on quality metrics is a costly endeavor. 

The time- and activity-based costing study estimated that Johns Hopkins Hospital spent over $5M on quality reporting activities in 2018 alone, independent of any quality-improvement efforts.

Researchers identified a total 162 unique metrics:

  • 96 were claims-based (59%) 
  • 107 were outcome metrics (66%) 
  • 101 were related to patient safety (62%) 

Preparing and reporting data for these metrics required over 100,000 staff hours, with an estimated personnel cost of $5,038,218 plus an additional $602,730 in vendor costs.

  • Claims-based metrics ($38k per metric per year) required the most resources despite being generated from “collected anyway” administrative data, which the researchers believe is likely tied to the challenge of validating ICD codes and whether comorbidities were present on admission. 

Although the $5M cost of quality reporting is a small fraction of Johns Hopkins Hospital’s $2.4B in annual expenses, extrapolating those findings to 4,100 acute care hospitals in the US suggests that we’re currently spending billions on quality reporting every year.

That conclusion raises questions that are outside the scope of this study but extremely important for understanding the true value of quality reporting.

  • Do the benefits of quality reporting outweigh the burden it places on clinicians?
  • Would the time and effort required for quality reporting be better spent on patient care?
  • Do quality metrics accurately reflect a hospital’s overall quality of care?

The Takeaway

Non-clinical administrative costs are a giant slice of the healthcare spending pie, and quality measurements unintentionally contribute due to increasing spending on chart review and coding optimization. Quantifying the burden of quality reporting is a key step to understanding its overall cost-effectiveness, and although this study doesn’t tackle that issue directly, it lays the foundation for those who are.

Optum Competes for Acquisition of Amedisys

Posted on by Jason Barry

We’ve got a good ol’ fashioned home care standoff, with UnitedHealth Group’s Optum division throwing a wrench in Option Care Health’s takeover of Amedisys by submitting a competing offer of $100 per share, 100% cash.

Optum’s offer values Amedisys at about $3.2B, whereas Option Care’s already-accepted all-stock offer valued the home health and hospice provider at $3.6B barely over a month ago.

  • Amedisys shareholders now have the option to back out of the Option Care acquisition, which is probably tempting since the all-stock transaction would give them less liquidity, expose them to a ton of downside risk, and was met with pretty tough analyst reactions.
  • The Optum announcement prompted Option Care to reiterate its confidence in the acquisition, which it says could reduce costs by over $50M right out of the gate and lead to $9B in combined revenue by 2027 (vs. $6B today).

Besides showing that it can steamroll any would-be competitors’ moves, Optum is picking up home care providers left and right as a way to expand its margins by keeping patients in their homes and out of higher-cost healthcare facilities.

  • Amedisys operates close to 350 home health agencies, 160 hospice care centers, and is a major hospital-at-home figure thanks to its 2021 acquisition of Contessa Health.  

Here’s a look at the top five US home health providers and their current market share:

  • Kindred – 6.0%
  • Amedisys – 5.0%
  • LHC Group – 4.4%
  • Encompass – 3.9%
  • AccentCare – 1.7%

Kindred has already been scooped up by Humana. Amedisys is moments away from an acquisition. LHC group was recently acquired by Optum. It’s anyone’s guess who the next targets are, but there’s a pretty clear trend among the top players.

The Takeaway

Although Amedisys is still bound to its agreement with Option Care, Optum’s approach likely qualifies as a “superior proposal” that would let shareholders dissolve any existing obligations. The market currently looks like it’s picking Optum as its favorite to get the acquisition, with shares of Amedisys jumping over 10% on the new offer, and shares of Option Care also rallying since its investors weren’t too enthused about the acquisition in the first place.

Retailers in Healthcare: A Catalyst for Provider Evolution

Posted on by Jason Barry

The era of retail healthcare has arrived, with Definitive Healthcare’s latest report showing that retail clinic claims volumes have tripled since 2017, outpacing growth in urgent centers, EDs, and physician practices.

Definitive’s deep dive gives a great overview of the current landscape and lays out several paths for traditional providers to respond to the wave of new entrants gunning for market share.

Big retailers dominate the market, with 85% of the nation’s 1,800 retail clinics owned by major players like CVS (63% share), Kroger (12%), and Walgreens / VillageMD (8%).

  • These clinics are more likely to be in high density areas where they’re easier to staff and can reach a larger population, but it was still surprising to see that only 2% of them are in rural areas considering how often retail clinics are touted as a way to improve access.
  • Retail clinics’ most popular use cases in 2022 were immunizations (39%) and COVID exposure (31%), but claims were still up 21% after excluding COVID-related procedures.

Definitive lays out three options for provider orgs wondering whether to partner or compete as retail clinics start capturing patients with promises of lower costs and greater convenience.

1) Partner with retailers. As a partner, retailers bring large store footprints, robust consumer analytics, and provide an important referral stream for both PCPs and specialists.

  • Ex. Target retail clinics in some Southern California stores are staffed with Kaiser Permanente clinicians, giving Target a well-established healthcare brand to draw customers into its stores and giving KP a way to attract new members with high-traffic locations that don’t require a huge infrastructure investment.

2) Compete with retail-like strategies. Traditional providers can start leveraging consumer-first strategies to prevent patients from flocking to retail clinics for convenience.

  • Ex. That might look like offering extended hours and more walk-in appointments to meet patients when they’re available. Definitive cites a Robert Wood Johnson survey that found 59% of consumers choose retail clinics because of convenient hours, while 56% choose them because they don’t need to make an appointment. 

3) Consider acquiring retail clinics. Health systems can acquire retail clinics to add access points while leveraging their brands, NPs to staff clinics, and physicians for oversight.

  • Ex. When Walgreens shuttered 160 retail clinics in 2019, Advocate Health and Piedmont Healthcare acquired ownership to benefit from the already-established clinical spaces and their ability to generate demand based on pre-existing trust in local communities.
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