I cough my way through this episode of Health in 2 Point 00 in his original interview sweater. There’s $60m for Quartet (mental health), Ribbon Health gets $43.5m to fix provider lists, Lyn Health reinvents the medical group with $10m (sort of), Medallion gets $30m to fix cross-state line provider credentialing & Safely You gets $30m to use AI to prevent falls in nursing homes. -Matthew Holt
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Matthew’s health care tidbits: Athenahealth & Private Equity
Each week I’ve been adding a brief tidbits section to the THCB Reader, our weekly newsletter that summarizes the best of THCB that week (Sign up here!). Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt
For my health care tidbits this week, it’s time to delve into the private equity firms’ buying and selling of Athenahealth. That’s of course the practice management/EMR firm bought by private equity companies led by Elliot Capital Management–they of the Israeli spy agency dirty tricks division–for roughly $6.5bn in 2018. Many (including me) have wondered how, given it was already doing about $1bn a year in revenue then, Athenahealth could be sold for $17bn three years later. After all it’s hardly likely to have tripled its revenue in a mature market! This comment by “Debtor 23” on @histalk is very instructive:
“Elliott did quite a bit better than 3x on its investment. The original deal was funded with about $4.8B of debt and $1B of equity from the hedge fund sponsors. Add in the acquisition cost of Centricity (call it $500M of equity, $500M of debt) and the equity investors are all-in with $1.5B of equity and $5.3B of debt. They sold off some assets for a total of ~$600M in cash, so net equity in play is $900M. They turned that equity into $11.7B (assuming no interim debt pay down), which is a 13x return. 13x feels ridiculous….but….if you’d invested that same levered-up $6.8B in the Nasdaq (QQQ) on the same timeline (Elliott began buying ATHN in spring 2017)…you could sell today for $18.1B. Absurd as this whole deal sounds, it has actually underperformed the market. This story is more about tech multiple expansion/bubble broadly than it is about improving management or running the business.”
So much like Renaissance and other hedge funds that rely on leverage, essentially Elliott leveraged Athenahealth up with debt to the tune of 80% of its value. So after slashing and burning R&D, selling assets (like the HQ which they apparently got $500m for) they probably got costs down & profits way up. When it was public under CEO Jonathan Bush, Athenahealth never tried to be that profitable. It was always fixated on the next big thing (the last one was building the future state inpatient EMR with Toledo & using the BIDMC tech it bought from John Halamka). That’s one reason its PE ratio was 100+.
So if Elliott can get some sucker to pay up and manages to turn $1bn into $13bn, how do the next greater fools–H&F and Bain Capital–do it? Well they need to layer Athenahealth up with even more debt (as money is currently so cheap) and keep generating enough cash to pay the debt. Of course at that price and with this mature a market it’s going to be super hard to grow the company enough to justify another leap in sales price, but it might be doable to service or even pay down some of the debt and take it for an IPO for a couple of billion more if the market stays nutso. So if H&F and Bain Capital basically shrink their equity portion down to $1-2 billion, and get it to IPO in a year or so for say $20Bn, they will at least double or triple their money. Not quite 13 x but not terrible.
And if it all goes wrong and Athenahealth can’t service the debt? Well the beauty of leverage and debt is that it attaches to the company – not to the PE fund that put it in that position. So all the new owners will have at stake is a reasonably small amount of equity. Of course if the shit hits the fan and Athenahealth goes bankrupt the employees and customers may not be so happy, but who cares about them? (Apart from that hasbeen CEO who got kicked out!)
Lyn Health Out of Stealth: A Niche Healthcare Navigator for Polychronic Patients
By JESSICA DaMASSA, WTF HEALTH
Straight out of stealth and launching today! Lyn Health is out to provide specific, personalized care for patients with three or more chronic conditions in a way that’s meant to compete with healthcare navigator-advocators like Accolade, Transcarent, and Included Health INSTEAD of the crowd of digital health chronic condition management platforms like Teladoc’s Livongo, Vida Health, One Drop, Omada Health, etc. etc.
With employers and health plans getting increasingly burnt-out on point solutions for chronic care – leading many of those businesses to “platform out” themselves in recent years – will a niche-market navigator really stand-out? Is effective care for polychronic patient populations so specialized that it merits adding a specific, targeted service on top of the more general navigator, primary care provider, or chronic care platform solution that an employer or plan might already have in place?
Lyn Health’s CEO Rick Abbott stops by to introduce us to this seed-funded startup, which has raised $10M (backed by Summer VC) and has already attracted some yet-to-be-named health plan and Fortune 500 employer clients. Rick explains that market need that Lyn Health is aiming to satisfy, and how he’s leveraged what he’s learned about the cost of polychronic care from his past life at Premera Blue Cross into an approach that he believes will work to help employers both reduce spend and improve the day-to-day patient experience of managing multiple chronic conditions. Lyn Health is set-up to deliver care with its own physicians and social workers, connecting with patients in a digital-plus-bricks-and-mortar format. And, as for that business model, we get into the big question: at-risk or not?
Excited to meet this startup on the day of its official launch!
Inside FarmboxRx’s Groundbreaking Work in SNAP/EBT Benefits to “Eradicate Food Deserts Overnight”
By JESSICA DaMASSA, WTF HEALTH
HUGE news on the “food-as-medicine” front for Medicaid/Medicare Advantage beneficiaries! Now, they can get fresh fruits and veggies delivered directly to their doorsteps and they can pay for them using their SNAP/EBT benefits. FarmboxRx is behind this first-of-its-kind partnership with the U.S. Department of Agriculture, and here to talk through EXACTLY why this is groundbreaking (and what precedent it could set for the food-as-medicine movement in terms of payor support) is founder and CEO, Ashley Tyrner.
As Ashley explains it, FarmboxRx’s produce deliveries have been previously covered by Medicare Advantage and Medicaid, but only under the limited ‘over-the-counter’ healthy foods benefits those plans provide. In some states, this nets to just $20-$25 per month for a family of one. With the addition of SNAP/EBT funding, the budget available for spending on these farm-to-table deliveries expands to $164-$230 per month. A potential game-changer.
We unpack Farmbox further and get into how they’re differentiated from Amazon and Walmart, which also take food stamps online, but don’t deliver produce nationally like Farmbox does. This is a move Ashley describes as having the ability to “eradicate food deserts overnight.” There’s so much more about food insecurity, the way FarmboxRx is working with health plans to use food as member engagement and trust-building tool, and, of course, the backstory behind the business which is basically BOOTSTRAPPED (there’s some venture debt) and raising a Series A.
Matthew’s health care tidbits: Drug prices
Each week I’ve been adding a brief tidbits section to the THCB Reader, our weekly newsletter that summarizes the best of THCB that week (Sign up here!). Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt
For my health care tidbits this week, I am going to talk drug pricing. Anyone who gets basically any health policy newsletter has seen some of the cash PhRMA has splashed trying to make it seem as though the American public is terrified of drug price controls. But as Michael Millenson on a recent THCB Gang pointed out, when Kaiser Health News asked the question in a rational way, those PhRMA supported numbers don’t hold. 85% of Americans want the government to intervene to reduce drug prices.
Big pharma whines about innovation and how they need high prices to justify R&D spending but health care insiders know two things. First, for ever Big Pharma has spent about twice as much on sales and marketing as it’s spent on R&D. This was true when I first started in health care thirty years ago and it’s still true today. Second, the “R” done by big pharma is resulting in fewer breakthrough drugs per $$ spent now compared to past decades. Which means that they should be increasing that share spent on R&D and need to improve the “R” process. But that’s not happening.
Finally, pharma is very good at increasing prices of branded products and extending their patent protection. Lots of dirty games go on here. Look into it and you can expect a lot of discussion about insulin pricing or discover how Humira is still raking in $16bn a year in the US, despite the fact its original patent expired in 2018. With 85% of the American public in favor, you’d think then that a Democratic Congress would leap at the change to pass a bill that might save the taxpayer $50bn a year in drug costs. But of course that’s not going to happen. There is about $30bn a year in savings in the House version of Build Back Better that passed last week, but there’s little chance of much of that being in the Senate version given Joe Manchin’s daughter’s role running a drug company, and Krysten Sinema being a recent recipient of PhRMA’s largesse. And that’s assuming any version of #BBB gets through the Senate.
Instead hope something small happens to help desperate patients, and wonder how we ended up in a political system that apparently disregards what 85% of the public wants.
#Healthin2Point00, Episode 239: Hinge, Femtec, Science37, Augmedix
On a special Saturday edition of Health in 2 Point 00, Jess and I talk about her amazing forecasting and the huge scale of one deal. Yes, the Tiger pounces and Hinge Health takes its total raise to $1 billion. There’s also an complex combo deal for Femtec, raising $38m buying Birchbox and more, and we give a quick mention to the brief history of public companies Science 37 & Augmedix – Matthew Holt
Walmart Picks Transcarent: Tullman on First ‘Everyday Low Prices’ Offer for Self-Insured Employers
By JESSICA DaMASSA, WTF HEALTH
Walmart is looking to scale its healthcare business in a brand-new way: setting its sights on self-insured employers. Today the retail giant announced a go-to-market partnership with Transcarent that will make its “everyday low price” prescription drugs and healthcare services available to self-insured employers for the very first time. Transcarent’s Executive Chairman & CEO Glen Tullman drops in to give us the inside story on the deal with Walmart, what it means for the industry, and how it could once-and-for-all ignite the ‘disruption of the payer’ that we’ve been waiting for since JP Morgan, Berkshire Hathaway, and Amazon came together to found Haven.
Transcarent and Glen are hell-bent on re-making the healthcare payment model by eliminating as many middlemen as possible, reshaping the health and care experience along the way. So, what does this partnership with Walmart mean for that mission and for Transcarent? Is this “THE Deal” we’ll look back on as the one that catapulted Transcarent into a new phase of growth? Remember when Glen’s last company, Livongo, shot into the stratosphere after its deal with CVS Health? I ask Glen if he’s running the same play in a much bigger game and finally concede: Transcarent is NOT a healthcare navigator!
THCB Gang Episode 65 – Thurs September 30
It has been WAY too long and for too many reasons (conferences, travel, a hurricane flooding out 4 East Coast guests) we haven’t got together but #THCBGang is back.
Joining Matthew Holt (@boltyboy) will be fierce patient activist Casey Quinlan (@MightyCasey); THCB regular writer Kim Bellard (@kimbbellard); ; medical historian Mike Magee (@drmikemagee); and board-certified patient advocate Grace Cordovano (@GraceCordovano).
We opined a lot on the latest machinations in Congress, we talked about access to data (especially images) and we really enjoyed getting in touch with each other for a great hour!
You can see the video below & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.
#Healthin2Point00, Episode 230 | Commure, Spring Health, UniteUs, Nomad & Xealth
It’s been quite a while since Jess & I did a Health in 2 Point 00 and that one was buried in our Policies|Techies|VCs conference in the first week of September. But, as John Malkovich says, We’re back…
Commure gets $500m and maybe one day we’ll know what it does, Spring Health adds to the mental health funding party, UniteUs buys competitor NowPow; Nomad banks $63m for its nurse hiring service, and Xealth adds $24m, even though I’m not sure it’s more than a feature! – Matthew Holt
Matthew Holt
Policies|Techies|VCs: What’s Next For Health Care–Virtual Conference is Sept 7-10
Policies|Techies|VCs: What’s Next For Health Care? is the conference bringing together the CEOs of the next generation of virtual & real-life care delivery, and all the permutations thereof. You can register here or learn how to sponsor.
This is a big week. We are one week out and we’ve started pre-recording a few sessions and they’ve been fascinating. Keynotes include government officials from the 3 most important agencies for digital health –Pauline Lapin (CMS), Micky Tripathi (ONC) & Bakul Patel (FDA). But wait there’s more! Keynotes from techies Glen Tullman (Transcarent), Sean Lane (Olive), Jonathan Bush (Zus Health), Jeff Dachis (One Drop) & Andrew Dudum (Hims & Hers). And we’re not forgetting the VCs sprinkled through the program, with a keynote from Andreesen Horowitz’s Julie Yoo.
Please look at the agenda for 20 power-packed panels and over 100 speakers – and then sign up!
Shout out to our sponsors – This week we welcome new Gold sponsor data privacy company Skyflow and new Silver sponsor Amwell. Thanks to both of them for supporting the conference. They join Avaneer Health (our Platinum sponsor) & exclusive Agency sponsor 120/80. Sliver sponsors are Transcarent & Lark . More sponsors are Aetion. Merck GHIF, Crossover Health, Zus Health, Newtopia, Aetion & Big Health! Many of them will have sessions you can catch on the web site.
It’s going to be a great conference–no need to leave your seat as it’s happening virtually September 7-10. Register here!! — Matthew Holt
