VillageMD Acquires Summit Health for $8.9B

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.

The Takeaway

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.

Cano Health Explores Potential Acquisition

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.

The Takeaway

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.

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.

Hint Health Raises $45M for Direct Primary Care

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.

The Takeaway

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.

Hims & Hers Partners With Carbon Health

Direct-to-consumer telehealth company Hims & Hers is partnering with hybrid care provider Carbon Health to give its California patients better access to in-person primary care. 

The new partnership enables licensed medical professionals on the Hims & Hers platform to direct patients to Carbon Health clinics if in-person treatments are needed.

Hims & Hers has been quickly integrating its retail and virtual care offerings as it looks to create “a one-stop shop for a new generation of consumers” in search of convenient healthcare.

  • The company launched in 2017 with a focus on D2C men’s health products, but has since broadened its platform to include virtual primary care and therapy services.
  • These new services allow Hims & Hers to offer a wider range of care options to its growing membership base, which doubled to 609k active users in 2021.
  • The Carbon Health collaboration adds another brick-and-mortar provider to Hims and Hers’ partner network, which now allows its members to access comprehensive primary care in seven states.

Carbon Health currently operates 83 clinics across 12 states, and recently raised $350M to help scale to 1,500 clinics by 2025.

  • Working together with Hims & Hers should give momentum to Carbon Health’s patient acquisition efforts, and it wouldn’t be surprising to see the partnership expand to other states if successful in California.

The Takeaway

By embracing partnerships with companies like Carbon Health, Hims & Hers can provide access to in-person care without the burden of developing its own brick-and-mortar clinics. This strengthens Hims & Hers’ value proposition to its large membership base while allowing it to serve as a referral partner for local providers, which seems like a solid approach as long as it can execute on the strategy.

TimeDoc Health Raises $48.5M for Virtual Care

Virtual care enablement company TimeDoc Health recently clocked in $48.5M in Series B funding to help physicians establish new remote care capabilities for a post-pandemic environment.

The latest financing pushes TimeDoc’s total raise to $58.2M, with recent demand for hybrid care and staff support creating a need to quickly expand the company’s growing roster of over 150 care coordinators.

  • TimeDoc’s virtual care platform aims to lighten the burden of overworked physicians through three major service lines: chronic condition management, remote patient monitoring, and behavioral health integration for primary care.
  • The company positions itself as a way to increase the bandwidth of primary care teams by allowing them to leverage additional personnel alongside its services as standalone solutions, or as supplements to existing approaches.
  • Unlike other care coordinators that often go D2C, TimeDoc works directly with PCPs so that they can better manage their patients in between appointments, while also driving reimbursements for remote patient monitoring and chronic care management.
  • The new funding will be put towards doubling the size of TimeDoc’s care coordination team and expanding its customer base beyond primary care practices towards more traditional health systems and accountable care organizations.

The Takeaway

TimeDoc is no stranger to the fact that the benefits of virtual care programs are best realized through long term engagement. By recognizing that care coordinators are instrumental in making this happen, then offering flexible services that tailor staff support to the needs of individual organizations, TimeDoc could gain an edge by truly meeting providers where they are instead of taking a one-size-fits-all approach.

Mantra Raises $22M for Student Mental Health

Many mental health startups are beginning to take a specialized approach to treating a specific population, a strategy that is delivering impressive results for Mantra Health.

Student-focused clinic Mantra Health closed a $22M Series A round to address the growing prevalence of mental health disorders on US college campuses, raising its funding total to $27M.

  • Mantra Health equips campus counseling offices with dedicated therapists and a digital platform to work as an extension of on-campus providers. Since introducing its Higher Education solution in 2020, Mantra has expanded to 52 US colleges accounting for over 500k students.
  • The treatment model begins with an online assessment to introduce students to their care options, before allowing them to schedule an initial video consultation. The Mantra provider then works alongside the student to create a personalized care plan involving therapy, lifestyle adjustments, and possibly medication.
  • The funding will be used to enhance Mantra’s clinical infrastructure to handle more complex diagnoses and expand its nationwide provider network. The company stated that it will need to quadruple its team within the next year to meet overwhelming demand – 100% of its partner campuses renewed or expanded services in 2020.

Mantra’s Future After Funding

As part of its expansion, Mantra is launching a new program to support students with long term mental healthcare needs, working with the students’ health plans as the payor instead of the school.

The long term care program allows graduating students to keep their current provider or make an appointment with a new one that has access to a Mantra Collaboration Portal designed to ensure patients receive care continuity during a major life transition.

Aledade Acquires Care Planning Company Iris Healthcare

Value-based care enablement company Aledade announced the acquisition of Iris Healthcare, a provider of Advance Care Planning (ACP) solutions for the seriously ill.

  • Aledade uses data analytics and guided workflows to help primary care practices with the shift to value-based care. The company’s platform helps practices identify and better manage their highest risk patients.
  • Iris Healthcare provides ACP services aimed at reducing unnecessary care while ensuring that critically ill patients receive care consistent with their values and preferences by formally documenting those wishes in an advance directive.
  • The tuck-in acquisition will see Iris’ ACP offerings folded into Aledade’s new health services unit called Aledade Care Solutions, which is designed to give the company’s partners more ways to address their current inefficiencies.
  • Combining Iris’ services with Aledade’s predictive algorithm and data will help better identify patients who could benefit from ACP, which demonstrated better outcomes and higher patient satisfaction following a successful pilot program last year.

Change the Model, Change the Results

Aledade’s software-led model for assisting providers is highly scalable, allowing it to be more capital efficient than competitors that are building value-based primary care clinics from scratch. The company’s contracts collectively cover more than 1.7M patients (up 20% from last year), and it’s operations rank it among the coveted healthcare startups that are turning a profit.

Aledade was profitable for the second straight year in 2021 with gross revenue of $300M, a figure that it expects to double by 2023.

Vera Acquires Castlight for $370M

Healthcare’s long march towards value-based care recently took another step forward with the announcement that Vera Whole Health is acquiring care navigation company Castlight Health for approximately $370M.

Vera will acquire all outstanding shares of Castlight for $2.05 per share (a 25% premium), which will be welcome news for recent investors but do little to ease the losses of those that picked up shares for nearly $40 following Castlight’s 2014 IPO. 

  • Castlight’s digital platform combines health benefits and care navigation to help employers and health plans make better decisions surrounding plan design, while also enabling members to easily connect with “the right care at the right time.”
  • Vera’s model centers around whole-person care through its network of primary care providers and clinics. The company operates entirely at risk, allowing it to retain any savings from care management after a flat per-member, per-month rate for customers.
  • The combined company aims to scale value-based care in the employer market by integrating Castlight’s navigation platform with Vera’s clinical network, while also allowing employers to participate in full risk-sharing for their commercial populations.

The Takeaway

Merging value-based primary care with navigation has been a go-to strategy for providers looking to offer more personalized care while simultaneously controlling expenses. We saw a similar move with the merger of Doctor on Demand and Grand Rounds early last year, and Vera’s acquisition of Castlight could be a sign of more consolidation to come in 2022.

Hydrogen Health Begins Primary Care Roll Out

When Hydrogen Health launched in April of this year, it set out to bring new digital health tools to consumers and employers, a goal that is coming into fruition with the announcement of the nationwide rollout of its Virtual Primary Care offering.

  • Hydrogen Health is a joint venture between K Health, Anthem, and Blackstone, offering payors and employers a platform to integrate text-based chats and telehealth visits into their existing services.
  • K Health is Hydrogen’s flagship product, leveraging AI to provide patients with personalized information about how their symptoms compare to others experiencing similar symptoms, while collaborating with affiliated clinicians to improve outcomes.
  • Virtual Primary Care was originally piloted by Anthem over the summer, but Hydrogen is now expanding to other large employers and health plans to help reach an additional 10M people by the end of 2022.

The Next Generation of Virtual Primary Care

Virtual Primary Care advances Hydrogen’s strategy of building continuous primary care relationships, complete with end-to-end diagnosis and management of chronic conditions without a reliance on in-person visits.

The approach combines K Health’s digital-first platform with a recently expanded affiliated clinician network, addressing issues with traditional care models such as low doctor availability and long wait times.

If a patient requires a referral to specialty care, a board-certified clinician will help navigate them to appropriate providers, creating an easy way for consumers to transverse digital and in-person care.

You’d be hard pressed to find a digital health startup that isn’t talking about removing friction from healthcare, but Hydrogen Health clearly plans to be a leader among those walking the talk.

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-- The Digital Health Wire team