Why Healthcare is a Squid Game

Biotech veteran Wah Yan made a big splash across digital health social media last week after putting out a fantastic article that explores how a playing field of well-intentioned actors has managed to turn healthcare into a Squid Game.

If you missed the wildly popular Netflix show, the article’s subtitle tells you everything you need to know: “why healthcare stakeholders keep trying to punch each other in the face”

Yan lays the foundation for the article by explaining how improving the US healthcare system is difficult due to the mismatch between how revenue is generated vs. how value is measured.

  • Revenue is commonly generated per “unit of economic activity” (i.e. per visit or per procedure), so that increasing revenue depends on increasing activity.
  • On the other hand, measurements of healthcare value (i.e. a healthier population) are often tied to decreasing healthcare activity (i.e. a healthier population = less visits).

While that might sound like Healthcare 101, Yan goes on to illustrate how this relationship creates an inherently hyper-competitive market because “the value of an innovation is often dependent on declining utilization of other products & services at the population level – even if they’re not in the same vertical.”

  • The value of new interventions – whether a drug, a diagnostic, or a service – is increasingly defined by its impact on total cost of care regardless of the reimbursement channel.
  • As a result, everything competes with everything else for revenue, regardless if the final payer is a health plan, employer, or patient (e.g. home care reducing hospital utilization, pharmaceuticals replacing procedures).

This hyper-competitive landscape is what Yan contends is accelerating a growing number of Squid Game dynamics, including a land grab for scarce resources and a tendency to favor control over collaboration (e.g. acquiring companies vs. remaining partners).

The Takeaway

Whether or not the shift to value-based care is creating a healthcare Squid Game, Yan’s article provides a great lens for looking at the incentives influencing stakeholder behavior (and vice versa). He goes into a lot more depth than we can cover here, so it’s worth checking out for anyone looking to understand some of the dynamics driving healthcare innovation.

Privia Health Reports Strong Momentum in Q2

Privia’s a tough company to pin down with a one sentence definition. It’s a physician enablement platform, a multi-specialty medical group, and a risk bearing entity rolled into one.

It’s also one of the best performing digital health IPOs of the past few years, and the wide scope of its operations made its Q2 earnings report a solid bellwether for some of healthcare’s biggest themes.

Here’s the quarter in three bullets:

  • Privia’s total Q2 revenue was $335.5M (+49%), adjusted EBITDA came in at $15.5M (+55%), it repaid all outstanding debt, and it raised its full-year guidance. Not bad at a time when layoffs are growing more common than funding rounds.
  • Privia’s platform helps physicians strengthen their practices while preserving their independence, and part of its success can be attributed to the fact that it caters to all provider types, all care settings, and all reimbursement models. 
  • This flexibility has helped Privia scale to nearly 900 locations, 4M patients, 3,500 providers, and over 850k lives under value-based contracts. It operates in 8 states, leaving 42 to go.

Unlike many of its peers, Privia’s asset-light approach doesn’t involve building out its own clinics, even though it technically has all the pieces in place to do so. This has played to its advantage as the market cools off and profitability becomes the flavor of the month.

  • Instead, Privia forms its providers into regional medical groups then equips them with its full technology stack and management services, enabling them to generate shared savings.
  • Privia then takes it a step further by forming the risk bearing entity that leverages the provider network and payor relations to enter value-based contracts, giving it one of the most robust strategies of any “physician enablement” company.

The Takeaway

The main takeaway from Privia’s Q2 call probably depends on your corner of the market, but the broad-based momentum it reported makes it an interesting case study on a unique model that appears to be firing on all cylinders. Privia’s role at the intersection of SaaS, management services, and value-based care makes it worth keeping an eye on, and so far it looks like there’ll be plenty more news to keep up with.

CVS In Talks to Acquire Signify Health

“People familiar with the matter” are hitting a hot streak with market moving healthcare news, especially after one of them informed the Wall Street Journal that CVS Health is in talks to acquire tech-driven value-based care enabler Signify Health.

The setup for this headline barrage started last week when the WSJ ran a separate piece about Signify enlisting Goldman Sachs and Deutsche Bank to help identify “strategic alternatives” that included a potential acquisition.

  • Signify’s platform helps payors and providers establish in-home care programs and transition to VBC – a combination that could draw interest from both private equity and managed care organizations.
  • The initial offers are due this coming week, and although there’s no guarantee any agreement will be reached, there’s also a non-zero chance that something gets announced and makes this old news before it reaches inboxes on Thursday.

It would be tough to come up with a better company than Signify to meet CVS Health CEO Karen Lynch’s description of an ideal acquisition target: “primary care, provider enablement, and home health… with a robust management team, background in tech, and that can grow quickly.”

  • Signify’s core VBC business already checks a lot of boxes, and its recent $300M acquisition of Caravan Health added ACO management and population health icing to the cake.
  • With a $135B market value and plans to expand its in-home operations by the end of this year, it makes sense why CVS has emerged as a frontrunner to scoop up Signify, which popped 20% to a ~$6B market value on the announcement.

The Takeaway
As CVS looks to expand into primary care and in-home health, it can either build or acquire the pieces to make it happen, and it’s been pretty transparent about which strategy it prefers. That said, the last time CVS threw its hat in the ring to acquire a high-profile company was for primary care provider One Medical, and we all know how that turned out.

Aledade Raises $123M to Fuel MA Growth

Medicare Advantage. Value-based care. Positive earnings. Aledade is hitting all the right themes with the announcement for the close of its $123M Series E funding round.

The raise lifted the value-based care enabler’s private valuation to $3.1B, and it intends to push its advantage at a time when many health tech startups are cutting back due to frothy-at-best market conditions.

Aledade partners with independent practices and health centers 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 currently works with over 1k independent primary care practices to generate more than $300M in annual revenue, and it ranks among the coveted digital health startups consistently turning a profit.
  • Aledade’s nearly 150 value-based care contracts collectively cover over 1.7M lives, including 220k Medicare Advantage patients. At this scale, Aledade says that a 1% increase in the savings rate attained by its risk-bearing partners would generate an additional $100M in revenue.

The fresh funding will help Aledade expand deeper into the Medicare Advantage market, while also enabling it to deliver more services directly to patients under its new Aledade Care Solutions branch formed during the January acquisition of Iris Healthcare. 

  • Aledade Care Solutions provides wraparound services like Iris’ advanced care planning solutions to Aledade’s partner practices. 
  • The business unit lets Aledade leverage its existing data platform to identify and deliver care to the patients that would benefit the most from additional services, and Aledade CEO Dr. Farzad Mostashari lists kidney care and behavioral health as possible expansion areas.

The Takeaway

Aledade’s software-led model for enabling risk-based arrangements is highly scalable, allowing it to be more capital efficient than competitors focused on building value-based primary care clinics from the ground up. Although these efficiencies have led to two years of positive earnings that probably indicate Aledade could have held off on a funding round, the difficult conditions of the current market have created the perfect moment for Aledade to take on new capital and gain ground in key areas like Medicare Advantage while its competitors are on their heels.

Vytalize Raises $53M for Medicare Expansion

When your target market is growing quickly, it takes funding to keep up, which is why Vytalize Health recently closed a $53M Series B round to help bring value-based care to Medicare enrollees and their primary care physicians.

The latest funding brings Vytalize’s total raise to just over $75M as it looks to enter new partnerships within a Medicare market that’s projected to double in size over the next decade.

Vytalize got its start as a Medicare-focused primary care practice in 2014, but has since developed a vertically integrated platform that combines a risk-bearing entity with an in-home clinic model to help other practices transition to value-based care.

  • As an ACO, Vytalize connects physicians and specialists to wrap care around the Medicare population, aiming to improve preventive health services while reducing avoidable hospitalizations.
  • The company doubled its patient base to 130k seniors over the past year, and is now partnered with 280 primary care practices across 16 states that account for a combined $2B in annual care delivery.

To help manage high-risk populations, Vytalize equips its clients with a virtual in-home clinic that helps practices deliver better care in the white space between appointments, 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.

The Takeaway

The Medicare population is one of the hottest corners of the healthcare market, and many startups have sprung up to help providers transition away from volume-based reimbursement. 

These companies are making big moves to gain an edge – just look at Devoted Health’s hefty $1.15B Series D round or One Medical’s acquisition of Iora Health for some recent examples – but Vytalize’s latest funding could help it carve out a niche as a novel type of ACO focused on helping strengthening patient-provider relationships through value-based primary care.

Clarify Gains Momentum With $150M Raise

Value-based care is a common line item on the strategy whiteboards of many digital health startups, but few are executing on a real-world gameplan at the level of Clarify Health.

Less than a month after acquiring Embedded Healthcare to drive provider behavior change, Clarify is once again the top story of the week following the completion of a massive $150M Series D funding round led by Softbank Vision Fund 2.

To recap Clarify’s solutions, it builds cloud-based applications on top of its Clarify Atlas Platform, which maps over 300M patient journeys to illuminate areas that can be optimized to improve value-based performance.

  • The platform links clinical performance to financial impact to boost payer-provider collaboration, while helping target behavioral nudges at the moments when they’ll be most effective.
  • Clarify’s scale allows it to apply what it calls a “Moneyball-style” analytical method to healthcare, objectively assessing provider performance to identify the most efficient incentives and interventions.

Clarify’s latest investment is earmarked to accelerate the adoption of its intelligence offerings and payments technology beyond the 75 healthcare organizations it currently serves.

  • Although scaling up the client roster is obviously a top priority for most companies, it’s doubly important in the value-based care space, improving the AI-driven models that allow quality care to be compensated fairly and building the provider trust that serves as the foundation of risk-based arrangements.

The Takeaway

Clarify Health President Todd Gottula stated that the company was founded to help healthcare organizations benefit from “the big data efficiencies of the banking and consumer industries.” Clarify’s been quickly bolstering its services to make this vision a reality, and if the past year has shown us anything about the company, it’s that it won’t shy away from using its newly replenished coffers to acquire companies aligned with that goal.

Clarify Acquires Embedded to Scale Value-Based Care

Value-based analytics company Clarify Health is acquiring Embedded Healthcare to help cross what it refers to as the “last mile” of creating durable shifts in care models: behavior change.

Although the terms of the transaction were not disclosed, the acquisition comes on the heels of Clarify’s $115M Series C funding round in March 2021, which gave it plenty of capital to invest in companies like Embedded that help make insights from data platforms more actionable.

  • Clarify’s cloud-based applications are built on the Clarify Atlas Platform, which maps over 300M patient journeys to illuminate areas that can be optimized to improve value-based performance. The platform links clinical performance to financial impact to boost payer-provider collaboration.
  • Embedded was spun out of the UPenn’s Healthcare Transformation Institute in 2019 to apply behavioral economics principles to provider behavior change, such as selecting higher-value care sites for elective procedures. Embedded reports that targeted incentives delivered to the point of care have proven to change 10% of physicians’ decisions in under nine months.
  • Combining the Clarify Atlas Platform with Embedded’s incentive framework should help with targeting behavioral nudges at the moments when they’ll be most effective, such as giving early bonuses as soon as positive performance is identified.

Five Pillars of Value Based Care

In an interesting interview with Modern Healthcare, Clarify CEO Dr. Jean Drouin laid out what the company views as the five key pillars for value-based care technology:

  1. Trusted baseline to assess performance of care delivery
  2. Digital contracts to help automate progress tracking
  3. Contracts well-designed to align incentives
  4. Clinicians are aware of incentives before they make a decision
  5. Predictive analytics to reduce the lag between action and incentive

Clarify’s core analytics platform centers around the first pillar, while its acquisition of Apervita’s value-based care digitization business in summer 2021 took care of the second one. Now, Embedded’s behavior change technology directly addresses the third pillar, and it doesn’t seem like too much of a stretch to say that clinician communication (pillar 4) and predictive analytics (pillar 5) are now Clarify’s top priorities as it looks to round out its product portfolio.

Signify Health Acquires Caravan for $300M

Signify Health is celebrating the one year anniversary of its IPO with style. The value-based care platform is acquiring Caravan Health for a lofty total of $250M, with another $50M set aside for future performance incentives. 

Upon closing, Signify will have one of the largest networks of providers engaged in risk-based contracts in the US, reaching over 3,200 health systems and covering more than 500k lives.

  • Signify’s technology platform and nationwide physician network help payors and providers develop value-based care programs and shift health services to the home.
  • Caravan enables accountable care organizations (ACOs) to excel in population health management and commercial risk arrangements, focusing primarily on medically underserved patients.
  • Signify’s mobile physician network and at-home services are well-positioned to assist Caravan’s ACO partners with improving access to care by extending the resources of local care teams.

Why It Makes Sense

Combining Caravan’s population-level insights with Signify’s at-home services creates an “end-to-end suite” of value-based care enablement, allowing organizations to manage larger populations while improving care coordination beyond traditional clinical environments. 

To top it off, Signify can also leverage its payor relationships and post-acquisition scale to improve provider participation in value-based care programs by increasing the percentage of patients in a provider’s panel that are covered by the arrangements.

Get the top digital health stories right in your inbox

You're signed up!

It's great to have you as a reader. Check your inbox for a welcome email.

-- The Digital Health Wire team