The doctor’s office of the future might not even have a doctor in it, at least if Forward can execute on its vision for CarePods using the $100M of Series E funding it locked in last week.
Forward got its start in 2016 building high-tech primary care clinics that offload as much as possible from doctors and nurses onto hardware and software. Now, it’s looking to take that model to the extreme with fully self-service AI medical stations called CarePods.
CarePods use proprietary AI layered on top of full-body scans, diagnostic tools, and lab tests to generate care plans called Health Apps, which patients can access via the Forward mobile app. Here’s how it works:
- You unlock the CarePod using your smartphone, then step in to find a large touchscreen and a glowing ring on the floor that marks the full-body scanner.
- A voice starts guiding you through the process, and the screen begins serving up Health Apps for conditions such as diabetes, hypertension, and anxiety.
- Depending on the selection, a drawer will open with the sensors needed to perform the test, as well as a needleless collection device to draw blood for any lab work.
- After the ~15 minute process, the diagnosis is displayed on the screen and an AI-generated care plan gets reviewed by a physician and pushed to the app.
The plan is to start by launching 25 CarePods in malls and offices before doubling the footprint next year, with a $99/mo membership providing unlimited access to the CarePods, Forward app, and virtual visits with Forward doctors.
- It’s worth noting that TechCrunch quoted Forward as planning to launch over 3,200 CarePods by the end of 2024… ambitious if true.
The initial reaction to CarePods was unsurprisingly polarized. The believers think that an accessible AI diagnosis is better than a skipped screening and no diagnosis at all. Easy enough to see their point.
- Others are up in arms arguing that “jukebox medicine” underestimates how much gets lost when you take human interaction out of the equation. You might be able to automate primary care services, but automating primary care is out of the question.
Forward’s mission is to deliver “the world’s best healthcare to one billion people,” and the only way that’s going to happen is if it can succeed in transforming “healthcare services” into “healthcare products.” There simply aren’t enough clinicians to deliver that much care without reimagining how that care gets delivered, and Forward sees CarePods as the next piece in solving that puzzle.
Direct primary care seemed more alive than ever at last week’s Hint Summit, which brought together physicians looking to escape the fee-for-service “hamster wheel” and companies building the tools to make that possible.
That of course includes Hint Health, who introduced its new Hint AI solution to help DPC physicians focus on their patients by automatically generating visit notes.
For a quick refresher on direct primary care, it’s a membership model where providers offer a fixed monthly rate for their services, eliminating the need for payor involvement as well as the mountain of administrative work that comes along with it.
- DPC also allows physicians to work for their patients instead of the system, resulting in shorter waits for appointments and more time for each visit (45min vs. 18min for FFS).
- Despite its advantages, DPC still represents less than 1% of US primary care, in large part due to the hurdles of standing up a practice without the usual foundation of payor revenue. That’s where Hint comes in.
Hint’s All-in-One platform automates membership management and billing, while also serving as an EHR, communications solution, and now an AI assistant. Basically DPC-in-a-box.
- Every feature within the platform is designed to bring DPC physicians closer to their patients, which Hint AI accomplishes by automatically transcribing visit notes and generating summaries that can be directly embedded into the patient record.
- Unlike similar tools used by the wider healthcare system, Hint AI is tailored to the unique complexities of direct care, ensuring that anyone practicing under the DPC umbrella has access to the same technology without having to make compromises for their use case.
AI built for traditional healthcare will center around the problems of traditional healthcare, and the clashing aims of payors and providers will undoubtedly create plenty of new tools that reinforce these systems instead of fixing the underlying issues. Direct primary care physicians work outside of this status quo, only adopting tech like Hint AI that makes a tangible impact on patient care, and making DPC a great place to keep an eye out for the innovations actually moving the needle on care delivery.
Although we touched on Walmart’s rumored acquisition of ChenMed last week, the ongoing talks are continuing to drum up lots of conversation around the healthcare strategy of major retailers and the potential implications if the deal goes through.
Here’s a quick primer on Walmart’s healthcare strategy, which so-far can be bucketed into three themes: Medicare and MA health plans, primary care, and employer virtual care.
- Back in 2018, Walmart looked into making one of the grandest entrances to the market imaginable with a $67B acquisition of Humana. When that didn’t materialize, it pursued a more balance-sheet-friendly approach by launching its own in-house Medicare and MA plans, as well as partnering with UnitedHealth on a co-branded MA plan.
- Walmart Health then debuted in 2019, and it’s a more comprehensive offering than it seems to get credit for. The 30 current locations provide primary care, urgent care, labs, imaging, optometry, audiology, and even dentistry.
- When Walmart scooped up telehealth provider MeMD in 2021, it began offering virtual primary care and behavioral healthcare through commercial payors and employers.
Enter ChenMed, a senior-focused primary care provider with over 125 clinics across 15 states, making it the last major M&A target in the space following CVS-Oak Street and Amazon-One Medical.
- ChenMed also takes on full-risk risk for the cost of its patients’ medical care, incentivizing long-term relationships and preventive care as opposed to the typical retail clinic model focused on episodic needs.
The acquisition would stake Walmart’s claim in the primary care land grab, allowing it to continue its push into the ever-growing Medicare Advantage market while leveraging ChenMed’s proven platform instead of building from the ground up.
- At one point, Walmart had ambitions to open 4,000 of its own clinics – plans that have since been scrapped – yet now only has four new locations planned for next year after a string of operating challenges caused it to pump the brakes.
- With some of Walmart’s largest competitors diving head first into care delivery, and limiting the options of late entrants in the process, the timing makes sense to either go all-in or risk losing ground to the competition.
The number of attractive primary care clinic operators isn’t getting any bigger, and Walmart’s window of opportunity is shrinking if it wants to take the side door into the industry. There isn’t much of a ceiling on the splash that Walmart’s $600B in annual revenue and 4,300 retail locations could make in healthcare, especially if it can pick up an operator like ChenMed with the expertise and track record to help pull it off.
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.
If there was still any debate about the flavor of the month in the digital health VC club, primary care enablement company Vytalize Health just settled it with its $100M Series C round.
Primary care enablement is the name of the game 2023. In the last few weeks alone, Aledade acquired Curia, Pearl raised $75M, and Privia launched new ACOs in Connecticut, North Carolina, and Delaware.
Vytalize is now adding to that momentum with a nine figure funding round less than a year after raising its $53M Series B. The company got its start as a Medicare-focused primary care practice in 2014, but has since vertically integrated to combine a risk-bearing entity with an in-home clinic model that supports other clinics with their transition to value-based care.
- The Vytalize platform’s feature list includes all the usual suspects: patient data analytics, practice management tools, enrollment support, and finance solutions.
- Vytalize’s biggest differentiator is that it equips its clients with a virtual and in-home clinic that helps manage high-risk populations outside of the office setting – a task made easier due to the acquisition of patient communication company MedPilot in 2021.
The influx of capital will help Vytalize integrate a wider network downstream from its primary care partners (hospitals, specialty networks, ancillary providers), while also establishing relationships with more Medicare Advantage and commercial plans.
- Vytalize currently partners with 400 practices delivering care to more than 250k senior patients. Roughly two-thirds of these are small practices, with the remaining third mostly larger provider orgs.
- The funding will also help Vytalize keep ahead of any growing pains. It now operates in 36 states, up from 16 during its last raise in April 2022.
Decisions made at the primary care level have a huge impact on care quality and costs given how much downstream utilization is directed by PCPs. Plenty of startups have sprung up to help providers improve these decisions while being reimbursed for their success, but Vytalize is looking to carve out a niche as a novel type of ACO with its own virtual / in-home clinic to help deliver better patient outcomes in the white space between appointments.
CVS said it was going to do it. People doubted CVS would do it. CVS did it.
To say that the retail health giant’s fourth quarter revenue beat was overshadowed would be an understatement, but in case your internet was out this week: CVS acquired Oak Street Health for $10.6B ($39/share).
Here’s the Q4 report by the numbers, then we’ll get to the juicy stuff:
- Full year revenue of $322.5B, up 10% (Caremark up, Aetna up, Retail up)
- CVS now 5th largest US company by revenue after Apple, Amazon, Walmart, United
- Full year net income of $4.2B, down 48% ($5B of opioid lawsuits didn’t help)
Now for Oak Street. The general idea behind the acquisition is also the title of its snazzy investor presentation: Creating the Premier Medicare Value-Based Care Platform.
- Oak Street Health employs 600 primary care physicians across 169 clinics. It focuses on capitated primary care for Medicare Advantage and Medicare (59k at-risk patients).
- Unlike many of the other primary care operators left on the market after Amazon / One Medical and VillageMD / Summit, Oak Street has locations in 21 states – decent enough proof that the model is scalable and translates to different geographies.
- It’s also one of the only companies that checks every box on CVS’ list: strong leadership; integrated tech platform; agnostic to different geographies and payors; demonstrable capability to improve outcomes; clear path toward profitability.
As for synergies, CVS sees 500 million of them, or at least five that can unlock $500M in value.
- Accelerating Oak Street patient growth through CVS Health channels
- Improving Oak Street’s economics through integration with CVS assets
- Improving the retention of Aetna MA members through the Oak Street experience
- Driving greater utilization of CVS Pharmacy and Caremark capabilities
- Reducing costs from external public company and lease expenses
CVS is a big company, and it needed to acquire a big player to move the needle in primary care. Although $10.6B is a hefty cost – and definitely a result of the physician M&A wars that CVS helped start – it only represents a 3.1x multiple on Oak Street’s project revenue for 2023. By comparison, Amazon forked over a 2.9x multiple for One Medical half a year ago.
Looking ahead, CVS expects Oak Street to expand to 300 clinics by 2026 at its current growth trajectory and without any further boost from the acquisition. When asked about this on its conference call, CVS said that it’s “exploring alternative avenues of accelerating synergy realization.” Buzzword Bingo. That means CVS doesn’t have a plan to speed this up yet, but it’s looking into it.
Either way, it’s hard to imagine that CVS’ existing scale won’t help make this work for both sides. CVS unlocks extra capacity with 1,100 MinuteClinics, has Aetna plans that can highlight Oak Street, and might soon have Signify home visits bringing patients into the ecosystem. This is a tipping point acquisition, and it’ll be exciting to watch.
Sometimes when there’s smoke, there’s fire, and that was definitely the case with the recent rumors suggesting that VillageMD was getting set to acquire Summit Health.
Walgreens-backed VillageMD locked in the acquisition of Summit for the cool sum of $8.9B, immediately establishing it as one of the largest primary care providers in the country.
Summit Health was formed in 2019 by the merger of multi-specialty Summit Medical Group and urgent-care center operator CityMD, and has since doubled in size to 370 locations and 2,800 providers.
- The general idea behind combining the companies is that adding Summit’s specialty care operations to VillageMD’s value-based primary care business will allow Walgreens to better manage patient spend throughout their care journey. Capturing that extra revenue probably doesn’t hurt either.
- The combined reach of the joint company now includes 4,100 providers (2,150 PCPs), 7M patients, and 125,000 full-risk Medicare Advantage lives – all backed by an expansive 680 location footprint.
- The transaction was made possible through a $3.5B investment from Walgreens, which retained a 53% stake in VillageMD, as well as a minority investment from Cigna-subsidiary Evernorth.
With only so many high quality primary care assets available, it’s easy to see how VillageMD’s acquisition of Summit, not to mention Amazon’s acquisition of One Medical, might be making other would-be acquirers feel pretty motivated to get something done sooner rather than later.
- CVS recently took some heat in the Q&A portion of its Q3 earnings call for its own primary care acquisition (or lack thereof), originally promised before the end of the year.
- Although acquiring Signify gave CVS momentum within patient homes, negotiations to scoop up Cano Health apparently fell through, leaving CVS without a true beachhead in the primary care market.
VillageMD is already Walgreens’ largest driver of revenue growth, and adding Summit’s huge physician base will only help with Walgreens’ transition from corner drugstore to bona-fide health services company. Other pillars of that strategy include specialty pharmacy company Shields Health Solutions and in-home care provider CareCentrix, meaning Walgreens is well on its way to being a major force in retail healthcare… assuming it can integrate all those moving pieces.
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.
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.
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.
Direct primary care startup Hint Health closed $45M in Series B funding to support its ambitious mission of giving providers a way to get off the fee-for-service “hamster wheel” through an end-to-end platform for opening membership-based direct care practices.
Direct primary care (DPC) is a membership model where patients are charged a monthly rate (usually between $50 and $75) in exchange for a predetermined list of services from their primary care physician, aligning incentives similarly to value-based structures but without any third party payor involvement.
- DPC allows physicians to work for patients as opposed to the healthcare system, which results in shorter waits for appointments and more time spent in each visit (45min avg, compared to 18min for FFS models).
- According to Hint’s in-depth overview of the market, DPC membership has increased 241% since 2017, but has yet to break into the mainstream. The 300k patients enrolled across 1.6k DPC practices still represent less than 1% of total US primary care.
- Critics argue that DPC could worsen physician shortages because doctors see fewer patients under the model, but considering how frequently we cover stories related to burnout and early retirements, lower volumes might not be as bad as it sounds.
Hint is leading the charge of driving DPC adoption with its HintOS platform that reduces the administrative burden of opening a direct care practice by automating enrollment, membership management, and billing.
- HintOS supports the direct-to-employer contracting frequently used by DPC practices by managing eligibility and other aspects of the relationship that typically rely on a FFS infrastructure.
- Hint also operates a national DPC network called Hint Connect that connects providers to potential employer partners, and the new funding will be used to expand this network while continuing to build out HintOS.
Getting physicians to abandon the payor revenue that’s traditionally served as the foundation of their business sounds like a tough pitch, but Hint’s DPC operating system probably makes the conversation a lot more interesting. Until recently, there hasn’t been a turnkey solution to enable the creation of a DPC practice, and if Hint can use its new funding to become that solution, it will make the model a viable path for plenty of other physicians looking to cut out the payor middleman and spend more time working with patients.