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Breaking down Optum’s $6.4 Billion Acquisition of LHC Group

I’m delighted to have a new contributor on THCB today. Blake Madden writes an excellent health care business newsletter called The Healthy Muse, which I highly suggest you subscribe to. Recently he gave his take on Optum’s latest big acquisition and it’s the first of I hope many pieces of his we’ll run on THCB–Matthew Holt

by BLAKE MADDEN

On March 29, UnitedHealthcare’s Optum announced its acquisition of LHC Group for $170/share. The transaction values LHC at about $6.4 billion including debt.

I know we all joke about working for UnitedHealthcare one day, but it’s terrifying when you think about their sheer scale. Even scarier when you look at Optum’s growth:

  • Optum Revenue in 2012: $29.4 billion
  • Optum Revenue in 2021: $155.6 billion. Like. What.

LHC Group is an important acquisition for Optum. Payors are continuing to morph into ‘payviders’ and UHG / Optum has a huge competitive advantage given its 60k aligned physician base. Acquiring LHC Group accelerates this payvider trend but also allows UHG to catch up to Humana, who now owns all of Kindred, in the post-acute sphere.

Meanwhile, Optum is deploying its grand vision of integrated care delivery right before our eyes. It’s happening whether you like it or not.

Even though I provided a first-impressions breakdown on Twitter related to the deal, I had to break this deal down into more detail and give you guys my thoughts on why the LHC acquisition is so significant.

Let’s dive in.


Investment and Deal Thesis.

LHC Group is well-positioned on a few fronts in the fast-growing home health sector:

  • They’re partnered with 435 health systems, giving Optum access to hundreds of hospital joint ventures.
  • Home health and at-home care is a MUCH more desirable care setting for Medicare beneficiaries. Comfort and patient experience is a huge factor.
  • Of all post-acute care settings, home health is the most cost-effective. Home health costs way less than skilled nursing. Lower costs = lower medical loss ratio for United. By keeping patients out of SNFs and hospitals, these programs could disrupt facility-based care delivery in the coming years.
  • From a demographics standpoint, home health benefits from an aging baby boomer population. Medicare will cover 79 million people by 2030 a major secular trend for healthcare. I’m sure you’re all WELL aware of that!
  • PDGM and other headwinds for smaller agencies will run out of relief funding, resulting in consolidation. This consolidation will benefit larger home health platforms.

In summary, LHC Group is a great operator in a high-growth industry: Home Health.

Continue reading…

#HealthTechDeals Episode 20: Clarify Health, Season, Altoida, nirvanaHealth, and Pluto

What’s with my baseball hat? Find out in this episode! Apparently, someone thinks my hair is a bit out of control and needs some trimming. In this episode of Health Tech Deals, Jess and I review Clarify Health raising $150 million; Season raising $34 million; Altoida grabbing $20 million; nirvanaHealth getting $60 million; and Pluto Health raising $9 million–Matthew Holt

Ukraine’s Secret Weapon – “Moral Superiority”

BY MIKE MAGEE

Two hundred and ten years ago, on September 7, 1812, a Putinesque commander, narrowly won a battle, but lost a war and entered a downward cycle that ended his reign. The battle was the Battle of Borodino, a town on the river Moskva, 70 miles west of Moscow. The commander was Napoleon.

The facts are clear-cut: Napoleon arrived with 130,000 troops, including his 20,000 Imperial Guards, and 500 guns. Opposing him were 120,000 Russians with 600 guns. The battle engaged from 6 AM to Noon. The French took 30,000 casualties, while the Russians lost 45,000 men, but survived to fight another day.

As Leo Tolstoy describes the scene of carnage on page 818 of his epic novel, War and Peace, in 1867“Several tens of thousands of men lay dead in various positions and uniforms in the fields and meadows where for hundreds of years peasants of the villages…had at the same time gathered crops and pastured cattle. At the dressing stations, the grass and soil were soaked with blood over the space of three acres. Crowds of wounded and unwounded men of various units, with frightened faces, trudged on…Over the whole field, once so gaily beautiful with its gleaming bayonets and puffs of smoke in the morning sun, there now hung the murk of dampness and smoke and the strangely acidic smell of saltpeter and blood. Small clouds gathered and began to sprinkle on the dead…”

But in the next paragraphs, it becomes clear that Tolstoy’s intent and focus is not to describe why and how Napoleon had won the Battle of Borodino, but rather how this was the beginning of the end of his army and the Napoleonic reign.

Tolstoy writes: “For the French, with the memory of the previous fifteen years of victories, with their confidence in Napoleon’s invincibility, with the awareness that they had taken part of the battlefield, that they had lost only a quarter of their men, and that they still had the intact twenty-thousand-man guard, it would have been easy to make the effort (to advance and annihilate the Russians)….But the French did not make that effort….It is not that Napoleon did not send in his guard because he did not want to, but that it could not be done. All the generals, officers, and soldiers of the French army knew that it could not be done, because the army’s fallen spirits did not allow it….(They were) experiencing the same feeling of terror before an enemy, which, having lost half his army, stood as formidably at the end as at the beginning of the battle. The moral strength of the attacking French was exhausted…(For the Russians, it was) a moral victory, the sort that convinces the adversary of the moral superiority of his enemy and of his own impotence, that was gained by the Russians at Borodino.”

The Russians not only retreated, but did not stop in Moscow, continuing another 80 miles beyond their beloved city. But as Tolstoy describes, “In the Russian army, as it retreats, the spirit of hostility towards the enemy flares up more and more; as it falls back, it concentrates and increases.” 

As for the French, they take Moscow but stop there. Again from Tolstoy, “During the five weeks after that, there is not a single battle. The French do not move. Like a mortally wounded beast, which, losing blood, licks its wounds, they remain in Moscow for five weeks without undertaking anything, and suddenly, with no cause, flee back…without entering a single serious battle…”

Putin’s aging dreams of conquest likely are Napoleonic in scale. But as his hesitant forces observe the Borodino-like human carnage that they have unleashed on Mariupol, at the estuary of the Kalmius and Kalchik rivers, and prepare to enter Kyiv, the first eastern Slavic state which, a Millennium ago, acquired the title “Mother of Rus Cities”, their vulnerability and lack of “moral strength” is already apparent. Lacking a rational stated goal other than dominance, the young Russian conscripted soldiers and their commanders must certainly grow more concerned day by day.  They too have become entrapped, and are “experiencing the same feeling of terror before an enemy, which, having lost half his army, stood as formidably at the end as at the beginning of the battle.” 

As for Putin, like Napoleon, he may feel the winds of fate blowing heavily on his shoulders even now. Napoleon did make it back to Paris. But three years after the Battle of Borodino and the 5-week occupation of Moscow, he met his Waterloo on June 16, 1815, at the hands of the Duke of Wellington.  He died in exile on the island of Helena on May 5, 1821. In his last will, he wrote, “I wish my ashes to rest on the banks of the Seine, in the midst of that French people which I have loved so much.”

Putin likely feels a similar love for Mother Russia, but ultimately the Russian people may choose not to return the affection.

Mike Magee, MD is a Medical Historian and Health Economist, and author of  “CodeBlue: Inside the Medical Industrial Complex.“

MedPAC Got It Wrong (pt 3)

By GEORGE HALVORSON

This is the third part of former Kaiser Permanente CEO George Halvorson’s critique of Medpac’s new analysis of Medicare Advantage. Part 1 is here. Part 2 is here. Eventually I’ll be doing a summary article about all the back and forth about what Medicare Advantage really costs!-Matthew Holt

Risk status and RAF

What is on the MedPac radar screen and what keeps their attention and what actually takes up several long portions of the annual report this year is the other factor that changes the payment levels to the plans — the risk status of their enrollees.

The capitation levels that are paid to the plans are affected very directly by the health status levels of the actual enrollees.

Risk levels for the members set and change the payment levels for the plans. The very first capitation programs didn’t factor in relative risk status for the members, and it was possible for some care sites to make major profits on capitation just by enrolling healthier than average people and by being paid an average cost level for each area for the people they enrolled.

That initial payment process has evolved very intentionally into having diagnosis-based cost factors that attempt to link the health status of the members and a fair payment level for the plans. The plans identify for the risk filing process the diagnosis levels for the members and their payment levels as plans are directly affected by the risk levels they report for their members.

People have had some concern about whether some parts of that coding process have been done badly, incorrectly or with purely avaricious intent.

There have been significant levels of concern expressed about whether the plans might be able and willing to produce and present inaccurate and distorted information in the process. That alarm was triggered in part by the fact that some of the plans made getting that information into their annual filings a high priority and some were more successful than others in that process.

It is good to have accurate diagnosis information.

We actually should as a nation and a health care macro system want to see an expansion of our data base and our medical records on basic levels of diagnostic information.

As a nation and as a macro care system we should definitely want to have full diagnosis information for each patient. Care can be better when caregivers have the right diagnosis for all of their patients.

How CMS  has changed Risk Adjustment

CMS just did a brilliant thing and completely eliminated the filing system and process for risk coding and data.

The CMS Hierarchical Conditions Categories Risk Adjustment Model was just killed. CMS just took the system that has created the vast majority of concerns and churn about the issues of coding intensity and shut it down.

It no longer is a factor for any risk scores. CMS will still look at the relative risk levels of patients but will get that information completely from patient encounter filings and direct patient information and not from any plan filings or reports.

An entire industry of organizations working to enhance risk scores just became obsolete and irrelevant.

Continue reading…

Well Health Wants To Stay Unknown: The White Label Platform Behind Provider-to-Patient Text Messages

BY JESS DaMASSA, WTF HEALTH

Well Health is flying under-the-radar as a white-label patient communications platform that lets more than 400 healthcare providers text message their patients via their hospital’s EMR. In the “is it a feature or is it a company?” debate that often surrounds digital front door startups, I ask CEO Guillaume de Zwirek why Well Health has decided to go out as an infrastructure play rather than own the patient relationship itself. How does he see this strategy lending itself to long-term growth?

One of the best-funded startups that I’ve never heard of (they’ve quietly raised $97 million from the likes of Dragoneer, Lead Edge Capital, Twilio Ventures and others) we get into the details behind the business model, the tech that’s supporting their patient comms platform, and why I haven’t heard about these big fundraises.

988 and 911: Justice System Involvement in Mental Health Crises

BY BEN WHEATLEY

A woman was walking in the crosswalk of a busy intersection as the rain started to come down. She looked cold, but more than that, she looked off. She had no shoes on her feet and her countenance was in disarray. It seemed to me that she was in the midst of a mental health crisis. 

The woman approached where I was standing and I suggested that she go into the Starbucks on the corner to look for her shoes. At least in there, it would be warm. She didn’t go inside, but instead went to the entrance and sat down on the ground. 

Someone must have called 911 because a policeman and an ambulance with an emergency medical technician showed up. The EMT brought a stretcher down from the ambulance as the policeman watched over the situation. The woman got on the stretcher and the EMT placed a blanket over her. As this played out, the policeman stood in the background, allowing the EMT to take primary responsibility for the interaction. Since the woman seemed to pose little risk to herself or others, the response seemed to be the appropriate one. 

Continue reading…

April Fools….Data Driven Analysis

By MATTHEW HOLT

I have always thought that THCB almost always had an April fools post. I mean never on the Epic scale–today they’re merging with the other Epic, the Fornite gang–but most years I’d have said we had one. So in an effort to avoid the work I should be doing I went back to to archives to look and find the truth.

THCB started in August 2003 and in April 2005 the “tradition” started with this very worthy & not very clever April Fool about how George W Bush had signed national health care into law. The nothing more April Foolish until 2009 when then TCHB editor John Irvine wrote a piece about me joining Cato.

I got going on the whole thing in 2010 when just after the ACA was passed I declared that THCB and all its various contributors were finding other stuff to do. (They’re all basically back on #THCBGang these days!). The theory was that health care was now solved and we were going to cover fly fishing and renewable energy. If I had just bought that Tesla stock…

So now we were getting into the swing of it and yet no more fools for 4 years! The next one was a goodie though. At the time I was railing against the term mHealth which was battling my preferred term Health 2.0 as the definitional term for the sector. Neither term realized that “digital health” was winning. I explained that we were renaming Health 2.0 “mHealth & Associates” and that employees were going to be referred to as mHealth Ass. and Indu thought I was the “biggest mHealth Ass”. The wonderful coda to this is about 3 weeks later Indu and I met our then most important client, Holly Potter at Kaiser Permanente. She asked us when the name change was happening!! I still tease her about that when I see her!

Then another 4 year gap. In 2018 I revealed that Trump had appointed me to run the VA. I also predicted war with Russia in 2021. So wasn’t too far off! Then we hit a roll, in 2019 I scooped the world with the news that Facebook was entering the EMR business….not too far from the truth.

Finally in 2020 Michael Millenson told us that Trump was urging Covid sufferers to only get care at for-profit facilities. As it turned out, given how well so many hospital systems have done in the pandemic, he may not have been joking.

So in 19 years we have run 7 April Fools. Which by my calculation suggests that THCB is about 35% foolish. Which I guess is lower than I thought.

Matthew Holt is the publisher and main fool at THCB

Health Care Organizations Must Prioritize Cybersecurity Before Undergoing Digital Transformation

By TRAVIS GOOD

The health care industry is rapidly embracing new technologies. Covid-19 changed the way many industries operate, and healthcare is one industry that was particularly affected by the pandemic. Many health care organizations were already undergoing digital transformations, but Covid exponentially sped up those processes. Health care providers and health-tech companies were forced to adapt to the new normal and change the way they operate. Here are 3 major ways health care has changed in recent times. 

1. Increased popularity of telehealth services:

Covid made telehealth appointments a necessity, but even in a post-Covid world virtual visits are likely to remain a core component of modern healthcare. According to McKinsey, telehealth utilization was 78 times higher in April 2020 than in February 2020. It remained nearly 40 times as popular in 2021 as compared to pre-pandemic levels. 

Research shows that both patients and physicians are fans of telehealth. Many patients prefer the convenience of being able to speak to their doctor from home and physicians feel that offering telemedicine allows them to operate more efficiently. Phone and video-based medical appointments became mainstream in 2020, and they are unlikely to go away anytime soon. 

2. More wearable medical devices with connected ecosystems:

The number of wearable medical devices in use has skyrocketed over the past 5 years. The wearable medical device market is expected to reach $23 million in 2023, a major increase from $8 million in 2017. Gadgets like heart rate sensors, oxygen meters, and exercise trackers are all becoming increasingly popular. Many popular consumer products such as cell phones and smartwatches ship with built-in medical tracking technology.

Continue reading…

WTF Health: Why Aren’t You Part of The Advancement League?

BY JESS DaMASSA, WTF HEALTH

For healthcare leaders who are “committed to community and career happiness” there is the Advancement League, a membership org dedicated to helping create the right circumstances and connections for both. Co-founders Alex Maiersperger and Antwan Williams tell us about the career development activities Advancement League has become known for, how they’re helping healthcare professionals at all levels of their career, and why their emphasis on community impact is important to anyone with a healthcare role. From ViVE 2022 in Miami, we also talk about getting together for Advancement League’s signature event, Young Health Leader Summit in Raleigh, North Carolina, on August 3-5, 2022.

#HealthTechDeals Episode 19: Brightline, Brightside, OssoVR, Podimetrics, AmplifyMD

This episode of Health Tech Deals is brought to you from the parking lot of a MacDonald’s in New Mexico. Yes, Jess is driving cross country from Florida! She and I hash out some health tech deals that happened this week: Brightline raises $105 million; Brightside raises $50 million; OssoVR raises $66 million; Podimetrics raises $41 million; and AmplifyMD raises $23 million.

-By Matthew Holt

assetto corsa mods