|Fourteen of the nation’s largest health systems announced this week that they have joined together to form a new, for-profit data company aimed at aggregating and mining their clinical data. Called Truveta, the company will draw on the de-identified health records of millions of patients from thousands of care sites across 40 states, allowing researchers, physicians, biopharma companies, and others to draw insights aimed at “improving the lives of those they serve.” |
Health system participants include the multi-state Catholic systems CommonSpirit Health, Trinity Health, Providence, and Bon Secours Mercy, the for-profit system Tenet Healthcare, and a number of regional systems. The new company will be led by former Microsoft executive Terry Myerson, who has been working on the project since March of last year. As large technology companies like Amazon and Google continue to build out healthcare offerings, and national insurers like UnitedHealth Group and Aetna continue to grow their analytical capabilities based on physician, hospital, and pharmacy encounters, it’s surprising that hospital systems are only now mobilizing in a concerted way to monetize the clinical data they generate.
Like Civica, an earlier health system collaboration around pharmaceutical manufacturing, Truveta’s launch signals that large national and regional systems are waking up to the value of scale they’ve amassed over time, moving beyond pricing leverage to capture other benefits from the size of their clinical operations—and exploring non-merger partnerships to create value from collaboration. There will inevitably be questions about how patient data is used by Truveta and its eventual customers, but we believe the venture holds real promise for harnessing the power of massive clinical datasets to drive improvement in how care is delivered.
- Haven began informing employees Monday that it will shut down by the end of next month, according to people with direct knowledge of the matter.
- Many of the Boston-based firm’s 57 workers are expected to be placed at Amazon, Berkshire Hathaway or JPMorgan Chase as the firms each individually push forward in their efforts, the people said.
- One key issue facing Haven was that each of the three founding companies executed their own projects separately with their own employees, obviating the need for the joint venture to begin with, according to the people, who declined to be identified speaking about the matter.
Haven, the joint venture formed by three of America’s most powerful companies to lower costs and improve outcomes in health care, is disbanding after three years, CNBC has learned exclusively.
The company began informing employees Monday that it will shut down by the end of next month, according to people with direct knowledge of the matter.
Many of the Boston-based firm’s 57 workers are expected to be placed at Amazon, Berkshire Hathaway or JPMorgan Chase as the firms each individually push forward in their efforts, and the three companies are still expected to collaborate informally on health-care projects, the people said.
The announcement three years ago that the CEOs of Amazon, Berkshire Hathaway and JPMorgan Chase had teamed up to tackle one of the biggest problems facing corporate America – high and rising costs for employee health care – sent shock waves throughout the world of medicine. Shares of health-care companies tumbled on fears about how the combined might of leaders in technology and finance could wring costs out of the system.
The move to shutter Haven may be a sign of how difficult it is to radically improve American health care, a complicated and entrenched system of doctors, insurers, drugmakers and middlemen that costs the country $3.5 trillion every year. Last year, Berkshire CEO Warren Buffett seemed to indicate as much, saying that were was no guarantee that Haven would succeed in improving health care.
One key issue facing Haven was that while the firm came up with ideas, each of the three founding companies executed their own projects separately with their own employees, obviating the need for the joint venture to begin with, according to the people, who declined to be identified speaking about the matter.
Coming just three years after the initial rush of fanfare about the possibilities for what Haven could accomplish, its closure is a disappointment to some. But insiders claim that it will allow the founding companies to implement ideas from the project on their own, tailoring them to the specific needs of their employees, who are mostly concentrated in different cities.
The move comes after Haven’s CEO, Dr. Atul Gawande, stepped down from day-to-day management of the nonprofit in May, a change that sparked a search for his successor.
Brooke Thurston, a spokeswoman for Haven, confirmed the company’s plans to close and gave this statement:
″The Haven team made good progress exploring a wide range of healthcare solutions, as well as piloting new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable,” Thurston said in an email.
“Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of our individual employee populations and locations,” she said.
The 35-hospital system announced June 2 that a management group of Steward physicians led by the company’s CEO and founder acquired a controlling interest of Steward from Cerberus Capital Management, a private equity firm. The physicians will control 90 percent of the company and Medical Properties Trust will maintain its 10 percent stake.
“The COVID-19 global pandemic has exposed serious deficiencies in the world’s health care systems, with a disproportionate impact on underserved communities and populations,” Steward CEO and Founder Ralph de la Torre, MD, said in a news release. “We believe that future health care management must completely integrate long-term clinical needs with investments. As physicians first, we will focus on creating structures and timelines that meet the long-term needs of our communities and the short-term needs of our patients.”
Steward was founded more than a decade ago, and Cerberus invested in the company in 2010. Today, Steward has 35 hospitals in nine states and more than 40,000 employees.
Private equity companies have borrowed at least $1.5 billion from HHS through two programs intended to provide funding to healthcare providers facing financial damage due to the COVID-19 pandemic, according to Bloomberg‘s analysis of more than 40,000 loans disclosed by HHS.
The Medicare loans were made to hospitals, clinics and treatment centers controlled by private equity firms through two programs administered by CMS: the Advance Payments Program and the Accelerated Payments Program. Those programs were expanded earlier this year to help offset the financial impact of COVID-19.
HHS approved loans totaling more than $60 million to subsidiaries of companies owned by private equity firm KKR, which has roughly $58 billion of cash to invest, according to Bloomberg. Healthcare facilities owned by private equity firm Apollo Global Management received $500 million in loans, and Cerberus Capital Management’s Steward Health Care System received roughly $400 million in loans. Steward physicians announced June 2 that they’re acquiring the health system from Cerberus.
CMS Administrator Seema Verma said the goal of the programs was to get funds to healthcare providers as quickly as possible. The loan applications did not include questions about beneficial ownership of the healthcare companies seeking loans.
“We don’t look into ownership, what we look into is are they Medicare-enrolled providers,” Ms. Verma told Bloomberg.
Access the full Bloomberg article here.
National physician staffing firm Envision Healthcare is considering filing for bankruptcy, according a report from Bloomberg. Sources say the company, backed by private equity (PE) firm KKR, which acquired Envision for $9.9B in June 2018, has hired restructuring advisors and is working with an investment bank. The abrupt halt to elective surgeries and reduction in emergency room volumes due to COVID-19 has caused Envision’s business to shrink by 65 to 75 percent in just two weeks at its 168 open ambulatory surgery centers (ASCs), compared to the same time period last year.
The Nashville-based company, which employs over 25,000 physicians and advanced practitioners, has already been reducing pay for providers and executives, in addition to implementing temporary furloughs. Envision is also struggling with a debt load of more than $7B, resulting from its 2018 leveraged buyout, and has been unable to convince its bondholders to approve a debt swap.
It remains to be seen whether Envision will be a bellwether for how other PE-backed physician groups will weather the ongoing COVID crisis. While Envision’s composition of mainly hospital- and ASC-based providers, coupled with its huge debt load, leave it on especially shaky financial footing, many PE-backed physician groups will struggle this year to achieve anything close to the 20 percent annual rate of return often promised to investors.
If high-profile PE-backed groups like Envision end up declaring bankruptcy, it will likely impact the calculus of the many independent practices which may have previously looked to PE firms for acquisition, and temper the enthusiasm of investors, who might see physician staffing and practice roll-ups as less attractive as volumes continue to fluctuate.
The San Mateo County (Calif.) Board of Supervisors voted March 10 to allocate $5 million annually over the next four years to keep Seton Medical Center in Daly City, Calif., open, according to Bay City News.
The county supervisors voted 4-1 to give $20 million in funding to the company that buys the hospital from El Segundo, Calif.-based Verity Health. The funding package will come with conditions, including that the purchaser must keep the hospital open and fully functional.
Verity entered Chapter 11 bankruptcy in August 2018. In January, the health system closed St. Vincent Medical Center, a 366-bed hospital in Los Angeles, after a deal to sell four of its hospitals fell through. The system had been planning to close Seton Medical Center as soon as this week, according to the report.
There are currently two companies bidding to purchase the hospital in Daly City and Seton Coastside in Moss Beach, Calif. The funding will help ensure Seton Medical Center, which sees roughly 27,000 patients per year, keeps its doors open.
The nation’s largest private insurer has been terminating its contracts with physician staffing firms in a bid to extract lower prices, part of a years-long pattern analysts say could spur other payers to follow.
UnitedHealthcare contends it is simply trying to curb the rising cost of healthcare by driving out high-cost providers that charge far more than the median rate in its network. The payer said it had hoped to keep these firms in network “at rates that reflect fair market prices,” a UnitedHealthcare spokesperson told Healthcare Dive.
The most recent action targeted Mednax, a firm that provides specialty services including anesthesia, neonatology and high-risk obstetrics in both urban and rural areas. United cut Mednax contracts in four states, pushing those providers out of network, potentially putting patients at risk of balance bills.
United also recently canceled its in-network contracts with U.S. Anesthesia Partners in Texas, starting in April, which caused Moody’s to change its outlook to negative for the provider group because the contracts represent 10% of its annual consolidated revenue.
These latest moves to end relationships with certain physician staffing firms seem to have escalated in recent years, Sarah Kahn, a credit analyst for S&P Global, told Healthcare Dive.
Since the insurer’s 2018 tussle with ER staffing firm Envision, “it’s sort of ramped up and become more aggressive and more abrupt and more pervasive,” Kahn said of the contract disputes.
United said the volume of negotiations it’s involved in has not changed in recent years, and added that it expects to renegotiate the same amount of contracts in 2020 that it did in 2019. However, United pointed a finger at a small number of physician staffing firms, backed by private equity, that are attempting to apply pressure on United to preserve the same high rates.
Private equity firms have been increasingly interested in healthcare over the past few years, accelerating acquisitions of medical practices from 2013 to 2016. Private equity acquired 355 physician practices, representing 1,426 sites of care and more than 5,700 physicians over that time frame, according to recent research in JAMA. The firms had a particular focus on anesthesiology with 69 practices acquired, followed by emergency physicians at 43.
Mednax is a publicly traded company. But Envision is owned by investment firm KKR; TeamHealth is owned by private equity firm Blackstone; and U.S. Anesthesia Partners is backed by Welsh, Carson, Anderson & Stowe.
Proposed legislation around surprise billing may be influencing United’s actions, Kailash Chhaya, vice president and senior analyst at Moody’s, told Healthcare Dive. Congress has been weighing legislation that seeks to eliminate surprise billing, mainly through two vehicles, either using benchmark rates or arbitration.
If Congress ultimately decides on a bill that uses benchmark rates, or ties reimbursement for out-of-network providers to a benchmark rate (or average), it would benefit insurers like United to lower its average rate for certain services, Chhaya said. One way to do that is to end relationships with high-cost providers.
“It would help payers like UnitedHealth if that benchmark rate is low,” Chhaya said.
In late 2018, United threatened to drop Envision from its network, alleging the firm’s rates were responsible for driving up healthcare costs, according to a letter the payer sent hundreds of hospitals across the country. United and Envision eventually agreed to terms, but United seemed to outmuscle Envision as the deal secured “materially lower payment rates for Envision” that resulted in lower earnings, S&P Global analysts wrote in a recent report.
In 2019, United began terminating its contracts with TeamHealth, which has a special focus on emergency medicine. The terminations affect two-thirds of TeamHealth’s contracts through July 1. The squeeze from United caused Moody’s to also change Team Health’s outlook to negative as an eventual agreement would likely mean lower reimbursement and lower profitability for company, the ratings agency said.
“They’re trying to lower their payments to providers. Period,” David Peknay, director at S&P Global, told Healthcare Dive.
Data shows prices — not usage — is driving healthcare spending. Physician staffing firms are frequently used for ER services and the ER and outpatient surgery experienced the largest growth in spending between 2014 and 2018, according to data from the Health Care Cost Institute.
United said it had been negotiating with TeamHealth since 2017 and does not believe TeamHealth should be paid significantly more than other in-network ER doctors for the same services. United alleges its median rate for chest pains is $340. But if a TeamHealth doctor provides the care it charges $1,508.
“As Team Health continues to see more aggressive and inappropriate behavior by payors to either reduce, delay, or deny payments, we have increased our investment in legal resources to address specific situations where we believe payor behavior is inappropriate or unlawful,” according to a statement provided to Healthcare Dive.
TeamHealth said it will not balance bill patients in the interim.
The pressure from payers, particularly United, is unlikely to relent. The payer insures more than 43 million people in the U.S. through its commercial and public plans.
“I don’t think anyone is safe from such abrupt terminations,” Kahn said. However, United disputes the characterization of abruptly terminating contracts and says in many cases it has been negotiating with providers to no avail.
Likely targets in the future may include firms with a focus on emergency services, which tend to be high-cost areas, S&P’s analysts said. In their latest report, Kahn and Peknay pointed to The Schumacher Group, which is the third-largest player in emergency staffing services. However, it commands a market share of less than 10%, far less than its rivals Envision and TeamHealth.
Smaller firms may not be able to weather the pressure as effectively as very large staffing organizations.
For those smaller groups, it may be wise for them “to sit tight on their cash or prepare from some pressure,” Kahn said.
Although some believe it may influence other payers to follow suit, Dean Ungar, vice president and senior analyst with Moody’s, said United may be uniquely placed to exert this pressure because it has its own group of providers it can use and considerable scale.
“They are better positioned to play hardball,” Ungar said.
Humana, the nation’s second largest Medicare Advantage (MA) insurer, is partnering with a private equity (PE) firm to expand its senior-focused subsidiary medical group, Partners in Primary Care.
The arrangement will be structured as a joint venture between Humana and Welsh, Carson, Anderson & Stowe, with a combined initial $600M investment that will give the PE firm majority ownership of the medical group. The new venture is likely to double the number of centers that Humana’s Partners in Primary Care operates—currently 47 throughout Texas, Kansas, Missouri, Florida and the Carolinas.
While Humana has been looking to grow its MA membership, patients need not be Humana members to access care at the centers. Humana has established other partnerships in the physician practice space, including last fall’s announcement that it is teaming up with Iora Health to add 11 additional Iora-branded primary care practices to its MA networks in Arizona, Georgia, and Texas.
Humana has previously partnered with private equity to acquire postacute providers Kindred Healthcare and Curo Health Services. These latest moves suggest the company is shifting its focus to the front end of the delivery system, looking to control costs of care for seniors by quickly building a primary care physician network focused on reducing high-cost referrals to hospitals and specialists.
Private equity (PE) investment in US healthcare has ballooned over the past decade—2018 and 2019 saw record numbers of deals, representing more than $100 billion in total value. As we show below, in 2018 just under a fifth of these transactions were in the physician practice space, with the largest number of deals in dermatology and ophthalmology.
While these two specialties remain active areas of PE investment, a growing number of recent deals have focused on women’s health, gastroenterology, and urology practices.
Across all these areas, PE firms see an opportunity to grow revenue from high-margin ancillary services, cash procedures, and retail products.
Physician groups are pursuing PE investment as an alternative to joining health systems or large payer-owned physician organizations to access capital and fund buyouts of legacy partners. Doctors’ heads are increasingly being turned by the current sky-high multiples PE firms are offering, often up to 10 or even 12 times EBITA.
Private equity roll-ups of physician practices are far from over. Recent activity suggests that the behavioral health market is heating up, as it remains very fragmented in a time of increasing consumer demand.
And we predict a rush for further investment in cardiology and orthopedic practices, as investors look to profit from the shift of lucrative joint and heart valve replacement procedures to outpatient facilities.
Sen. Bernie Sanders still may eke out a win in Iowa, and is the consensus front-runner in New Hampshire.
- But most venture capitalists investing in America’s health care industry — the primary target of Bernie’s ire — have shoved their heads so deep in the sand that they’ve found water, Axios’ Dan Primack writes.
Why it matters: At some point, it could become a failure of fiduciary duty.
Health care accounts for over 20% of all U.S. venture activity.
- A majority of that is in biotech/pharma, which last year saw 866 deals raise around $16.6 billion.
- Investors view many of those deals as binary: Either the drug doesn’t work, resulting in a total write-off, or it does work and the financial sky’s the limit. Strike out or grand slam.
- Sanders pledges to limit the upside, either by limiting drug prices under the current system or (if he gets Medicare for All) by establishing a single, centralized buyer.
Few health care VCs Dan spoke with are working on a Plan B in the event of their risk/reward models being made obsolete. Three main reasons:
- They don’t believe Sanders will win.
- Even if he does win, they don’t believe Sanders will get Medicare for All.
- If Sanders wins and implements his full plan, then it’s such a revolutionary shift that there’s not much health care VCs can do to counter it.
The bottom line: For now, health care venture’s strategy is see no Bernie, hear no Bernie. We’ll see how long that’s viable.