Naomi Allen, co-founder and CEO of Brightline.

Digital Health

Optum’s Digital Health Acquisition Spree

To some investors, this year’s brutal pullback in health company valuations might be hurting their appetite for risk. Others, like UnitedHealth Group’s Optum unit, seem to be treating the lower multiples like it’s Black Friday at the M&A store.

Last week, Optum added home healthcare provider LHC Group and behavioral health clinic operator Refresh Mental Health to its already expansive portfolio of doctor groups, surgery centers, and remote care services.

LHC Group is one of the nation’s largest home health and hospice companies, providing over 12M in-home interventions to 500k patients annually. 

• The acquisition values LHC Group at $5.4B and will see the company’s staff of 30k front-line care providers and support personnel join Optum after an expected close in the second half of the year.

• Bolstering home health services aims to support UnitedHealth’s payor division, UnitedHealthcare, in expanding the role of home services as an efficient alternative to nursing homes and a way to reduce unnecessary hospitalizations.

Refresh Mental Health operates a network of over 300 outpatient mental health, substance abuse, and eating disorder clinics across 37 states.

• Although the terms of the acquisition were net disclosed, Refresh was previously acquired by a private equity firm for $700M in 2020, and was reportedly generating $40M in revenue at the time.

• Refresh gives Optum a large access point to the growing behavioral health sector, which has proven to see sustained patient demand and telehealth uptake as the pandemic draws on.

The Takeaway

One of the reasons why UniteHealth Group has grown into an industry juggernaut is because it’s successfully been able to create value through synergies between its payor and health services divisions (almost too much success according to the DOJ’s case against its Change Healthcare acquisition). Adding new at-home and behavioral health services through M&A makes perfect sense for companies that can turn a combined service portfolio into more than a sum of its parts, and that’s exactly what UnitedHealth Group is banking on with the addition of LHC and Refresh.

Telehealth

Brightline Raises $105M for Adolescent Mental Health

Virtual mental health startup Brightline recently closed $105M in Series C funding to broaden its services as it tackles the nation’s “pediatric mental-health crisis.”

The two-year-old company is a poster child for the rise of behavioral health startups during the pandemic, with a valuation of $705M after a quick total raise of $209M.

Brightline offers adolescents and their families virtual services and educational content aimed at treating anxiety, ADHD, depression, and other behavioral issues.

• The company staffs over 85 care providers (psychiatrists, speech-language pathologists, behavioral coaches) trained to support children with unique needs such as cyberbullying or wearing masks in the classroom.

• The services are offered through employers and as in-network benefits with major health plans, including Blue Cross of California, Blue Cross Blue Shield Massachusetts, Aetna, and Primera.

The new funding will help Brightline triple the size of its care team by the end of the year while exploring additional ways to deliver specialized care through more modalities.

• This includes upcoming services specifically for the caregivers of young children with Autism Spectrum Disorder and youth who identify as LGBTQ+ and/or BIPOC.

• Brightline expects to serve over 30k children and teenagers by the end of 2022, while doubling the number of lives covered through its health plan contracts to 48M.

The Takeaway

Psychiatrists are among the most in-demand specialists, and adolescent psychiatrists aren’t exactly easier to find. Some research suggests that upwards of 75% of US counties don’t have access to a single one. If Brightline can address this supply-demand imbalance with its virtual services it could have a big impact on families affected by behavioral health challenges, and the company’s swift funding pace suggests that investors are eager to wager that they can.

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The Wire

• Brightside Series B: Not to be confused with the Brightline feature story, another digital mental health startup with a bright future, Brightside Health, raised a $50M Series B round to help provide timely virtual appointments for those battling depression and anxiety. After users fill out Brightside Health’s intake assessment, the company leverages a proprietary machine learning algorithm to assist its network of providers with tailoring treatments to individual patients.

• Poor Diversity Harms Outcomes: Nearly 75% of White patients have access to a doctor of the same race, but only 22% of Black patients can say the same, a trend that the authors of a new study from the Urban Institute said could be harming health equality. The research indicates that perceptions of a shared identity could be one way to improve patient-provider relationships due to improved trust and communication, but significant efforts towards improving medical workforce diversity will be needed to make that a reality for all patients.

• Guilty Verdict: A jury convicted former Vanderbilt nurse RaDonda Vaught of criminally negligent homicide for a medical error made in December 2017, when she inadvertently injected a patient with a paralyzer instead of a needed sedative. Prosecutors alleged that Vaught consciously ignored warnings when obtaining the wrong medication from an electronic dispensing cabinet, while the defense argued that the error did not warrant criminal charges for a deliberate act of homicide. Either way, the American Nurses Association said the trial could have a “chilling effect” on patient safety reporting and make it more difficult for already understaffed hospitals to recruit nurses.

• Opioid Recovery: A survey from virtual recovery provider Bicycle Health found that the biggest barriers to joining an opioid recovery program are cost, access, and stigma. Of the 1k respondents with opioid use disorder, close to 40% cited affordability as their primary reason for not joining a recovery program, while 29% said that not finding a nearby program that they trust was standing in their way. Given that telehealth is uniquely positioned to address these issues, and physical examinations are rarely an ongoing component of recovery, it definitely seems like we’ll continue to see more specialized virtual care platforms target this area.

• Telehealth as a Luxury Good: A recent FastCompany article penned by Trilliant Health CRO Sanjula Jain makes the case that the total addressable market for telehealth could be as low as 10M people out of the nation’s population of 330M, mirroring the reach of luxury goods such as sports cars that only cater to specific consumer segments. Telehealth’s largest user base is reported as women aged 21-40 who live in affluent areas, and to expand into other demographics, solution designers may have to take a page out of Porsche’s playbook by competing through specialized performance and branding.

• US Health Spending Flattens: Despite increased patient care demand, CMS’ 2021-2030 National Health Expenditure report revealed that national health spending growth slowed to 4.2% in 2021 (vs. 9.7% in 2020) due in part to a drop in COVID-related federal aid. CMS forecasts national health spending to increase by 5.1% annually through 2030 when it will reach nearly $6.8 trillion. Given expected US GDP growth, healthcare’s share of GDP should remain relatively steady (19.7% in 2020 vs. 19.6% in 2030).

• VivoSense Funding: As biometric data captured from wearables continues to play an increasingly important role in patient studies and regulatory approvals, VivoSense raised $25M in Series A funding to expand its informatics platform that helps clinicians make sense of the data. The VivoSense platform leverages customized wearables to recognize subtle shifts in biological signals such as respiration and cardiac function to enhance precision medicine for patients with cancer, Alzheimer’s, and other rare diseases.

• Pandemic Stress: Females and millennials were the most likely to have their mental and physical health negatively impacted by the pandemic, according to a recent athenahealth survey of 1k US adults. The research found that 64% of female respondents reported higher stress levels during the pandemic (vs. 69% of millennials), leading to worse diets, less exercise, and skipped medical appointments. As a result, athenahealth suggests targeting these heavily impacted populations with interventions to avoid a wave of costly healthcare outcomes in the future.

• AmplifyMD Specialty Care: Telehealth startup AmplifyMD recently closed $23M in Series A funding to help its network of specialists connect with more health system partners beyond the small community hospitals it currently serves. AmplifyMD forgos the D2C model of larger competitors to work directly with hospitals in need of additional specialists through inpatient telehealth, which helps reduce combined losses of “$17 billion in revenue each year due to preventable patient transfers.”

• Addressing Societal Bias: A recent new report from the US National Institute of Standards and Technology (NIST) proposed expanding our list of AI bias sources to include broader societal factors that influence how AI tools are developed and used. The NIST encouraged a “socio-technical” approach to combating AI bias that would expand AI stakeholders well beyond the current technology and data-focused groups. The new NIST guidance is intended to address all kinds of AI use cases (e.g. hiring, education, criminal justice), but their recommendation certainly applies to healthcare.