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
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!)
DNA Storage in a Yottabyte Era
By KIM BELLARD
Did you know we are living in the Zettabyte Era? Honestly, did you even know what a zettabyte is? Kilobytes, gigabytes, maybe even terabytes, sure, but zettabytes? Well, if you ran data centers you’d know, and you’d care because demand for data storage is skyrocketing (all those TikTok videos and Netflix shows add up). Believe it or not, pretty much all of that data is still stored on magnetic tapes, which have served us well for the past sixty some years but at some point, there won’t be enough tapes or enough places to store them to keep up with the data storage needs.
That’s why people are so keen on DNA storage – including me.
A zettabyte, for the record, is one sextillion bytes. A kilobyte is 1000 bytes; a zettabyte is 10007. Between gigabytes and zettabytes, by powers of 1000, come terabytes, petabytes, and exabytes; after zettabyte comes yottabytes. Back in 2016, Cisco announced we were in the Zettabyte Era, with global internet traffic reaching 1.2 zettabytes. We’ll be in the Yottabyte Era before the decade is out.
Continue reading…The Healing Power of Even Virtual Human Connection
By HANS DUVEFELT
Almost two years into this new age of varying degrees of self quarantine, I am registering that my own social interactions through technology have been an important part of my life.
I text with my son, 175 miles away, morning and night and often in between. I talk and text with my daughter and watch the videos she and my grandchildren create.
I not only treat patients via Zoom; I also participate, as one of the facilitators, in a virtual support group for family members of patients in recovery.
I have reconnected with cousins in Sweden I used to go years without seeing; now I get likes and comments almost daily on things that I post. I have also video chatted with some of them and with my brother from my exchange student year in Massachusetts 50 years ago.
I have stayed in touch with people who moved away. And I have made new friends through the same powerful little eye on the world I use for all these things, my 2016 iPhone SE.
Members of my addiction recovery group stay in touch with each other via phone or text between clinics. They constantly point out the value of the social network they have formed, even though they only meet, many of them via Zoom, once a week. The literature has supported this notion for many years and is very robust: Social isolation is a driver of addiction.
Continue reading…THCB Gang Episode 73, Dec 2 1pm PT – 4pm ET
#THCBGang is back from its Turkey day snooze! Joining Matthew Holt (@boltyboy) at 1pm PT 4pm ET Thursday for an hour of topical and sometime combative conversation on what’s happening in health care and beyond will be patient activist, author & entrepreneur Robin Farmanfarmaian (@Robinff3); Queen of all employer benefits related issues Jennifer Benz (@Jenbenz); medical historian Mike Magee (@drmikemagee); and patient safety expert and all around wit Michael Millenson (@MLMillenson)
You can see the video below live at 1pm/4pm or it’s kept here for posterity. If you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels
Health in 2 Point 00, Episode 242|Owlet, EasyHealth, Luma Health, Calal Health, and more
Today on Health in 2 Point 00, Jess and I talk about the FDA informing Owlet, whose CEO Jess interviewed about their products and business model, that they can no longer sell their socks. EasyHealth, a medicare advantage broker, gets 35 million plus 100 million credit. Luma Health gets 130 million, bringing their total up to 170 million. Calal Health gets 77 million dollars, led by Ascension Ventures. Evercore buys Dr. Chrono. -Matthew Holt
Where’s Our National Health Tech Academy
By KIM BELLARD
It has been said that if your company has a Chief Innovation Officer or an Innovation Department, it’s probably not a very innovative company. To be successful, innovation has to be part of a company’s culture, embraced widely, and practiced constantly.
Similarly, if your company has a Chief Digital Officer, chances are “digital” is still seen as a novelty, an adjunct to the “real” work of the company. E.g., “digital health” isn’t going to have much effect on the healthcare system, or on the health of those using it, until it’s a seamless part of that system and their lives.
What got me thinking about this, oddly enough, was a report from the U.S. Government Accountability Office (GAO) as to the advisability of a Federal Academy – “similar to the military academies” – to develop digital expertise for government agencies. As the GAO noted: “A talented and diverse cadre of digital-ready, tech-savvy federal employees is critical to a modern, efficient government.”
Boy, howdy; you could say that about employees in a “modern, efficient” healthcare system too.
Continue reading…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.
Health in 2 Point 00, Episode 241| Papa, Sword, Trevueta, Trusted Health, Ieso, and Talkspace
Today on Health in 2 Point 00, Jess and I talk about fundraising efforts this past week, as well as leadership issues within Talkspace. Papa raises 150 million dollars, bringing their total to 240 million. Sword raises 189 million dollars, with a secondary of 26 million dollars, bringing their total to 320 million dollars. Trevueta raises 105 million, and Trusted Health raises 149 million dollars. Ieso raises 57 million dollars. Talkspace had no growth in their third quarter, and their founding team left the company while their COO resigns after a review of conduct at a company offsite event. -Matthew Holt
Subscribe to WTF Health’s YouTube Channel: https://www.youtube.com/channel/healt… Follow Jess DaMassa on Twitter: https://twitter.com/jessdamassa Follow Matthew Holt on Twitter: https://twitter.com/boltyboy Subscribe to our channel and tweet us your questions using the hashtag #healthin2point00
The Kids Aren’t Alright
By KIM BELLARD
America, like most cultures, claims to love and value children, but, gosh, the reality sure seems very different. Three recent reports help illustrate this: The Pew Research Center’s report on the expectation of having children, Claire Suddath’s searing look at the childcare industry on Bloomberg, and a UNICEF survey about how young people, and their elders, view the future.
It’s hard to say which is more depressing.
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Pew found that the percentage of non-parents under 50 who expect to have children jumped from 37% in 2018 to 44% in 2021. Current parents who don’t expect to have more children edged up slightly (71% to 74%). The main reason given by childless adults for not wanting children was simply not wanting children, cited by 56% of those not wanting children. Among those who gave a reason, medical and financial reasons were cited most often. Current parents were even more likely – 63% – to simply say they just didn’t want more.
This shouldn’t come as a huge surprise. Earlier this year the Census Bureau reported that the birthrate in America dropped for the sixth consecutive year, the largest percentage one year drop since 1965 and the lowest absolute number of babies since 1979. It’d be easy to blame this on the pandemic, but, as sociologist Phillip N. Cohen told The Washington Post: “It’s a shock but not a change in direction.”
In many ways, having children seems like ignoring everything that’s going on. We have a climate change/global warming crisis that threatens to wreak havoc on human societies, we’re still in the middle of a global pandemic, and our political/cultural climate seems even more volatile than the actual climate. One Gen Xer told The New York Times: “As I think of it, having a child is like rolling dice with the child’s life in an increasingly uncertain world.”
Yikes.
Continue reading…
