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Category: The Business of Health Care

Bad Blood & Mad Love at Theranos—Psychopaths at Work

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By MATTHEW HOLT

I’ve been kidding John Carreyrou on Twitter that I was going to give Bad Blood, his tale about the Theranos fraud, a one star review because he never sent me a preview copy. But it’s a barn burner, and I can’t recommend it enough, even though I spent my own $13.95 on the Kindle version!

By now the story is well known. The young blonde Stanford drop out with the baritone voice says she’s going to change lab testing forever, then hides in stealth in Silicon Valley. I caught a few whispers over the years that this company was doing something but as lab testing was a little away from the mainstream of health tech, I didn’t ever bother to look for more. And then in 2014 Holmes gets into Fortune and from a distance we are all cheering her on because she’s figured out a new way to disrupt a stodgy industry. The first Carreyrou piece is published in the WSJ in late 2015—even though Murdoch was a huge investor–and over the next 2 years massive fraud is exposed.

About when Holmes was starting to talk about stuff, and after the Walgreens deal eventually went live (mid 2014) there was the very odd series of events when Holmes appeared to agree to come talk at Health 2.0 and but shortly afterwards she and her PR team went totally radio silent on us. I was told by one PR flack that he’d heard that another conference had told her to choose between us and them (TedMed? I’m guessing) but who knows. She appeared at TechCrunch in September 2014 and had the interviewer Jon Shieber’s blood drawn with his results coming back while she was on stage—clearly faked we now know. I saw her interviewed by a fawning Toby Cosgrove at Cleveland Clinic, where she said that Carreyrou was lying. I stood at the end of a receiving line full of people asking her to sign things for their daughters as she was such an inspiration. When I got to the front I asked her why she didn’t come to Health 2.0 and invited her to come the next time. With me in line was Medcity News Editor Chris Seper who asked for an interview. After about 15 seconds of her not saying anything, a PR flack jumped in, pulled us away from her, got our cards and said she’d get back to us. I’m still waiting

But what is just remarkable about this whole thing is how little due diligence was done by investors who plunked down hundreds of millions.Continue reading…

Consider this Speculative Scenario on Walmart & Humana

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By TORY WOLFF

Walmart (WMT) is in talks with Humana (HUM) about a relationship enhancement, possibly an acquisition. The two already know how to work together in alliances (narrow pharmacy network, marketing collaborations, points programs). If a new structure is needed, WMT and HUM must be considering a major expansion of scope or a set of operating models where contributions are difficult to attribute and reward (e.g. joint asset builds). What is on their minds? Beyond any interim incremental moves, what could be the endgame?

Catching convergence fever

Horizontal combinations among the top five health plans have arguably reached the regulatory “permissible envelope.” But provider combinations continue apace, enhancing ability to execute on value-based care to be sure, but also increasing negotiation leverage relative to payers. Further, Amazon’s (AMZN) interest in healthcare is gaining momentum but the specific goals are still mysterious, leaving many incumbents to imagine red laser dots are on their foreheads.

Accordingly, health plans are seeking defensible terrain in convergence combinations: CS & Aetna (CVS-AET), Cigna & Express Scripts (CI-ESRX), Anthem’s PBM insourcing and growing attention to CareMore (United Healthgroup [UNH] has been ahead of the curve as usual: but their recent SCA and DaVita medical group acquisitions have clarified for the market the scope of its ambitions for OptumCare). Of course, each of these moves just contributes to the uncertainty about the new competitive paradigm, driving more land grabs in response. I view the WMT-HUM discussions as part of these developments.

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Vineti raises $33m, Amy DuRoss interview

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By MATTHEW HOLT

Any DuRoss is one of the more charming and remarkable characters in the health tech world. She lead the campaign for Proposition 71 in 2004 which funded and established the California Institute for Regenerative Medicine. Later on she was a key player at early genetics company Navigenics, and more recently after time at GE Ventures she founded Vineti, which today raised $33.4m in Series B funding. Vineti is a new kind of pharma supply chain company helping deliver gene therapy, but what does that mean? I asked Amy and she told me!

Aetion raises $36m, Carolyn Magill interview

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BY MATTHEW HOLT

It’s not every day that an analytics firm focusing on improving the efficacy and value of drugs has a big raise in the health tech world–especially one I don’t know much about. This morning Aetion raised $36m to add onto $11m they raised last year. Their new round is led by famed venture firm NEA and includes Amgen Ventures. I spoke to CEO and part-time extreme skier Carolyn Magill to find out what Aetion does and why big pharma and major payers need their help in the brave new world of value-based care.

The Conflicted-Disruption Complex

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By ART CAPLAN

Elizabeth Holmes, the founder and chief executive of the controversial company Theranos, has been charged with an “elaborate, years-long fraud” by the Securities and Exchange Commission. The SEC alleges that Holmes and former company president Ramesh “Sunny” Balwani deceived investors into believing that its key product — a portable blood analyzer —was capable of using drops of blood to do the kinds of workups that now require much more blood—up to ten milliters per test.  Holmes fooled many people including the Theranos board of board of directors, high-powered investors and high ranking members of the military including General James Mattis, a huge fan, who left the Theranos board to become President Trump’s Secretary of Defense.

Things don’t look good for the Theranos leadership in terms of the SEC charges. The company already saw a three-year partnership with Walgreen’s collapse leaving many customers wondering if they had been deceived. The technology, which Holmes and her company touted as disruptive and revolutionary, never worked. So what happened to permit so much enthusiasm and money to be spent on a useless technology?

First, the company never published on its technology. The promise of small volume blood testing sounded great and indeed is great for many reasons not the least of which a lot less misery for patients who need to get a lot of painful blood drawn for tests. But no publication, no data driven presentations at professional society meetings, a lack of transparency turned Theranos into an 8 billion dollar Dutch tulip bubble.

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2018 Forecast: Another Theranos, Hospital Hiring Slows & Successful HIT Exits

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By BOB KOCHER, MD and BRYAN ROBERTS

For what is now an annual tradition, we are once again attempting to be healthcare soothsayers. We are proud to share with you our 10 healthcare predictions for 2018. In 2017, amaz-ingly, eight of our predictions came true.

For 2018, we are betting on the following:

1. Another Theranos

We think at least one healthcare information technology company with an enterprise value of more than $1 billion (not including Outcome Health, which we could not have predicted tanking so spectacularly quickly) will be exposed as not having product results to support their hype. It will also expose embarrassed investors who did not do careful diligence and founders with poor integrity.

2. Hospital hiring slows

After a decade of sustained hiring every month, hospitals will stop. Many will downsize their administrative staffs as admissions continue to slowdown and reimbursement pressures intensify. We expect multiple months with net healthcare job losses which would be the first time this has occurred since the Bureau of Labor Statistics started tracking the data.

3. Successful HCIT exits

After a long wait, and more than $10 billion of venture capital invested in startups over the past five years, we will begin to see successful IPO and M&A exits. These will reassure growth investors to keep pouring money into companies with traction.

4. Amazon does not disrupt PBMs

Despite daily rumors, we think Amazon will not shake up the PBM sector. Instead, Amazon will limit its healthcare market footprint to its existing consumer products and distributing non- regulated healthcare goods to healthcare providers (adopting a B2B and not B2C strategy).

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Will Amazon Eat the Market?

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By PAUL KECKLEY

Last Tuesday, a trio of corporate heavy weights announced they were joining forces to fix the U.S. healthcare system. The CEOs of the three—Jeff Bezos of Amazon, Warren Buffet of Berkshire Hathaway, and Jamie Dimon of JP Morgan, vowed to create “an independent company that is free from profit-making incentives and constraints..to provide simplified, high-quality and transparent healthcare at a reasonable cost.”

Details about the proposed venture are limited but it nonetheless sent shock waves across the industry. Stocks for industry mainstays like United Health, CVS, Express Scripts, Mylan and others plummeted. And, on the heals of mega-deals like CVS’ $69 billion acquisition of Aetna two months ago, speculators theorized it might be Armageddon for healthcare as we have known it in the U.S.

First, what we know for sure:

The new venture will focus on the collective buying power as employers of healthcare for the 1.15 million employees in their organizations. Their approach features five strategies widely. widely used by large self-insured employers to contain their employee health costs. This one is expected to leverage technology in a unique way:

  • Primary care gatekeepers: Large employers vest considerable responsibility in primary care services that appropriate preventive health, manage chronic populations and control referrals to specialists and hospitals. Promotion of healthiness and wellbeing, the integration of physical and behavioral health and alternatives therapies that reduce dependence on unnecessary access prescription drugs are mainstays of the primary care gatekeeping model.
  • Narrow networks: The networks of hospitals, allied health professionals, hospitals and others will be tight. Those providing high quality, low cost services will be contracted, and employees will be empowered with data to monitor their performance.
  • Supply chain management: Every line item fixed and direct cost will be lean. Prescription drug use, for instance, will be accessed through a restrictive formulary, and so on. Amazon is known to be hyper-efficient in its operating budget: employees are expected to fly economy class and office opulence is a no no.
  • Employee choice & risk sharing: A key to the venture’s uniqueness will be the tools and responsibility given employees to select plan options that align with their needs and preferences. High deductible plans will be options, but technologies that equip them to make informed choices of doctors, treatments, hospitals, drugs and others will be a central feature.
  • Technology: Technologies that allow employees to own their medical records, interact with Alexa for information and counsel, integrate smart devices and engage with their providers are the backbone of the venture. Knowing treatment options, their costs and where the highest and best value is accessible in the employee’s provider network is central to the venture’s success.

None of these five is new, but together, they’re powerful IF implemented aggressively and at scale.

Let’s face it. Healthcare’s ripe for disruption: we cost too much, hide prices that bear faint resemblance to their underlying costs, avoid accountability for outcomes, complain we’re underpaid and over-regulated, protect our silo’s so each gets a piece of the pie, mark everything up and pass-it-through and declare we’re the best system in the world.

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A Whiff of Market-Based Health Care Change

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By BRIAN KLEPPER

Tuesday’s announcement about Amazon, Berkshire Hathaway and JPMorgan (A/BH/JPM) was short on details. The three mega-firms will form an independent company that develops solutions, first, for their own companies’ health plans and then, almost certainly, for the larger health care marketplace. But the news reverberated throughout the health care industry as thoroughly as any in recent memory.

Health care organizations were shaken. Bloomberg Markets reported that:

Pharmacy-benefit manager Express Scripts Holding Co. fell as much as 11 percent, the most intraday since April, at the open of U.S. trading Tuesday, while rival CVS Health Corp. dropped as much as 6.4 percent. Health insurers also fell, with Anthem Inc. losing as much as 6.5 percent and Aetna, which is being bought by CVS, sliding as much as 4.3 percent.

As expected, these firms’ stock prices rebounded the next day. But you could interpret the drops as reflections of the perceived fragility of health care companies’ dominance, and traders’ confidence in the potential power of Amazon’s newly announced entity. Legacy health care firms, with their well-earned reputations for relentlessly opaque arrangements and egregious pricing, are vulnerable, especially to proven disruptors who believe that taming health care’s excesses is achievable. Meanwhile, many Americans have come to believe in Amazon’s ability to deliver.

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Ambergan = Amazon + Berkshire Hathaway + JPMorgan

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By MARGALIT GUR-ARIE

Dear primary care doctor, Jeff Bezos is about to devour your lunch.

All of it. And then he’ll eat the table, the plates, the napkins and the utensils too, so you’ll never have lunch ever again. Oh yeah, and they’ll also finally disrupt and fix health care once and for all, because enough is enough already. Mr. Bezos, it seems, got together with two of his innovator buddies, Warren Buffet from Berkshire Hathaway and Jamie Dimon from J.P. Morgan, and they are fixing up to serve us some freshly yummy and healthy concoction.

Let’s call it Ambergan for now.

This is big. This is huge. It comes from outside the sclerotic “industry”.

And it’s all about technology. The founders are no doubt well versed in the latest disruption theories and Ambergan will be a classic Christensen stealth destroyer of existing markets. When the greatest investor that ever-lived combines forces with the greatest banker in recent memory and the premier markets slayer of all times, who happens to be the richest man on earth, all to bring good things to life (sorry GE), nothing but goodness will certainly ensue.

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To Err is Homicide in Britain – The Case of Dr. Hadiza Bawa-Garba  

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By SAURABH JHA, MD

The good that doctors do is oft interred by a single error. The case of Dr. Hadiza Bawa-Garba, a trainee pediatrician in the NHS, convicted for homicide for the death of a child from sepsis, and hounded by the General Medical Council, is every junior doctor’s primal fear.

An atypical Friday

Though far from usual, Friday February 18th, 2011 was not a typically unusual day in a British hospital. Dr. Bawa-Garba had just returned from a thirteen-month maternity break. She was the on-call pediatric registrar – the second in command for the care of sick children at Leicester Royal Infirmary. As a “registrar” she was both a master and an apprentice – a juxtaposition of roles necessary for the survival of acute care in the NHS. Because there aren’t enough commanders, or consultants (attendings), in the NHS trainees must fill their shoes or else the NHS will collapse.

The captain of the ship and Dr. Bawa-Garba’s supervisor, Dr. O’ Riordan, was not in the hospital but teaching in a nearby city. As horrendous as “attending not being in the hospital” sounds this, too, is not atypical in the NHS. Dr. Bawa-Garba’s colleagues, i.e. other registrars, were also away, on educational leave. Normally, a registrar each is assigned to cover the wards, the emergency department and the Children’s Assessment Unit (CAU). On that day, Dr. Bawa-Garba covered all three. She was new to the hospital, but with no formal induction – i.e. no explanation where things are and how stuff gets done in the hospital – she was expected to get along with the call and find her way around the hospital.

As anyone who has been a junior doctor in NHS can attest – the normal, the optimal, is unusual, and what is usual in British hospitals is remitting and relapsing chronic understaffing. The abnormal eventually becomes normal. You work through the anarchy. The anarchy is both the old normal and the new normal.

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