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News
​Privia’s stock jumps as it shifts near-term focus away from VBC given market dynamics

Summary:

Privia’s call provided a lot of interesting insight into the risk-bearing provider landscape. It joined the chorus of folks talking about headwinds in MA, noting v28, utilization, and Star ratings as the key challenges. Privia also shared that they’ve seen payors “adjusting plan benefit designs and setting MLR thresholds in risk-based MA contracts that do not sufficiently compensate provider groups taking risk downstream.” It was a big topic throughout the call, and worth noting that Privia thinks payors are resetting in 2024 and the impact on provider groups will come in 2025 before the market normalizes in 2026. Those MLR thresholds in particular seem like a key topic between payors and providers at the moment - agilon mentioned they are renegotiating those as well.

Given the current market environment, Privia is renegotiating contracts for almost 20,000 MA members, moving them from capitation arrangements into upside / downside contracts. Privia is also exiting its Delaware ACO, which had 12,000 MSSP members. As of January 1st, here was Privia’s breakdown of Medicare Advantage attributed members (also check out the slides for a good visual of their membership breakdown):

• Upside only arrangements: ~129,000
• Upside / downside: ~27,520
• Capitation: 16,000 (this is down from 35,900 at end of 2023)

This move away from capitation will reduce practice collection revenue for Privia by ~$200 million in 2024. On the whole, Privia expects practice collections to be flat year-over-year as the VBC loss will be offset by a 10% increase in fee for service collections. The narrative on the call was that Privia still sees substantial opportunity in the longer term in capitation arrangements, and that its core strategy of building density in a market with providers and then moving them to VBC contracts remains unchanged.

Interestingly, Privia noted it thinks it is well positioned to grow during this market dislocation because of its cautious approach to taking VBC contracts, and will be there to support provider groups who have grown dissatisfied with MSO partners who have focused on VBC contracts that may no longer be financially advantageous. This will obviously be a dynamic to keep an eye on as the MSO market continues to evolve given all of the players seem to think they're well positioned to take share from others, despite very different approaches at the moment.

Links:

• ​Privia Q4 2023 Earnings Transcript​
• ​Privia Q4 2023 Earnings Release​
• ​Privia Q4 2023 Investor Slides​

News
​Alignment thinks it’s in a good spot in the MA market, cedes ACO REACH risk to provider group

Summary:

Alignment continues to express optimism about its position in the MA market over the next two years, a result of its approach to risk adjustment, maintaining Star ratings, and ability to drive down MBR for retained members. Alignment has not seen a meaningful utilization spike, crediting its success to its tech platform, which allows it visibility and control over medical spend that other insurers don’t have. Here’s a breakdown of what Alignment saw in terms of utilization:

• Flu / RSV inpatient utilization. Declined year over year
• Outpatient utilization. Essentially flat, running within a few dollars PMPM of 2022. 2024 prior auth volume is indicating it is flat in 2024
• Inpatient unit cost. No material impact of two-midnight rule, particularly in California which already has a defacto rule in place, while a modest increase in other markets
• Supplemental benefit expense. Higher in 2023 (as forecasted) and will be higher in 2024. The supplemental benefit trend had some interesting dialogue around it - costs went up because Alignment improved on its service offering. This led to more members using the service, which means more cost but also more engagement and better retention.

Alignment is seeing solid membership growth and retention in MA, noting it will hit its target YE 2025 membership a year early, while also seeing a 24% reduction in member churn YoY and 82% of its new sales coming from switchers from other plans. There was some interesting dialogue about MBR progression for retained members, noting that new members generally come in at an 89% MBR and the model drives an 800 bps improvement in MBR over 5 years.

Alignment sees a big opportunity in MA as it is relatively well positioned versus the industry in terms of v28 and Star headwinds. This is a really good quote from Alignment’s CEO walking through the impact of V28 and how it is different for different orgs, and how big of an impact some plans are going to be seeing:

"We've been very conservative on risk adjustment. And you put that in the context of some others that have been more aggressive on risk adjustment that are going to go down, in some cases, 20%. And just to remind everybody, 20% from just hypothetically at 1.5, 20%, that's 30 basis points. And if each basis point is worth $8 PMPM, that's a meaningful hit to revenue that is being borne functionally by a lot of these globally capitated providers. It's a hard pill to swallow, but more, I think, importantly, is Stars. When you add Stars to the equation, somebody dropping from 4.5 to 3.5, that's, what, $80 of potential hit."

As part of the earnings announcement, Alignment shared it has eliminated downside risk in the ACO REACH program by signing a capitation agreement with a provider group. This move followed $2 million of unfavorable development in Q4, and in total the ACO REACH business ran at a 100%+ MLR in 2023. The decision was explained in opening remarks briefly as one to focus the team on executing in MA. It’s interesting to think about why Alignment’s tech platform didn’t translate to success in the ACO REACH business given the success it is having in MA, and also why a provider group thinks it will be able to manage this book of business profitably when Alignment could not.

Links:

• ​Alignment Q4 2023 Earnings Transcript​
• ​Fierce Healthcare: Alignment healthcare to eliminate ACO REACH exposure​
• ​Alignment Q4 2023 Earnings Presentation​
• ​Alignment Q4 2023 Earnings Release​

News
​agilon health posts a net loss of $230 million in Q4 2023 as medical costs ballooned

Summary:

agilon’s earnings call echoed Privia’s remarks about the dislocation happening in medicare Advantage, making the case that the core fundamentals of the business are intact while the environment changes around it.

The challenge for agilon is that even after taking a hit in January and revising medical margin estimates for 2023 down from $463 million to $350 million, they actually came in at $299 million for the year. This means between January and this week there was an additional $51 million in 2023 medical costs that emerged, $38 million of which were attributed to Q4 and $13 million was prior periods. They’re also reducing 2024 medical margin guidance by $155 million, from $580 million to a midpoint of $425 million.

agilon’s investor presentation slides include some interesting data on how medical margin is progressing across various cohorts, which they use to make the case that much of the core business is performing well and being dragged down by a few key areas, including the 2023 cohort. Slide 11 specifically is quite interesting, highlighting how new membership in existing markets has been dragging down medical margin. It’s a bit odd to me to think that agilon is just now seeing evidence of this in its 2018 and 2019 cohorts, given they’ve been around for five and six years respectively. It creates the impression that the wheels just fell off this year.

agilon expects that over the next 12 - 24 months, payors will adjust their bids and plan designs to recapture margin, while CMS will need to reset benchmarks to account for the rising medical cost trend. It is certainly going to be interesting to watch how agilon seeks to navigate through this period and retain confidence in its model. Look no further than the analyst question about whether agilon has considered moving away from capitation contracts given market dynamics. That question feels like a huge shift from the tone of the market in years past. agilon shared it is not intending on moving away from capitation. Rather, it is focused on renegotiating contracts with payors in two ways - one, receiving a higher percent of premium, and two, carving out things out of agilon’s control. agilon specifically referenced supplemental benefits, Star rating scores that agilon doesn’t control, and aggressive bids by payors as things that it is renegotiating. They said it’s too early to tell if payors will be open to these changes, although they’re optimistic and think payors see the value in having a PCP partner like agilon. It goes without saying these negotiations will be critical to agilon’s ability to right the ship moving forward.

Links:

• ​agilon Q4 2023 Earnings Transcript​
• ​agilon Q4 203 Earnings Presentation​
• ​agilon Q4 2023 Earnings Release​

News
​Astrana Health highlights its growth opportunity in moving to full risk capitation arrangements

Summary:

Astrana (formerly ApolloMed) posted a solid quarter and reiterated its expansion plans, mentioning its plans to grow into 1 or 2 markets a year with a planned entry cost of $5 million to $10 million per market. It has already entered two new markets outside of California - Nevada and Texas - and noted on the earnings call that it expects Nevada to be run-rate breakeven by the end of 2024.

Astrana seems like it is zigging while its public peers are zagging at the moment. While you’ve got Privia aggressively moving away from capitation, and agilon cautioning about the dislocation in the market for the next 12 - 24 months, Astrana appears to be going full steam ahead attempting to move to full risk capitation contracts with its payor partners. The recent partnership with BASS Medical Group came up during the call, with Astrana noting it will be providing a suite of VBC-related services so that BASS can succeed in a value-based care contract over time. Astrana noted that this full-risk business is separate from what BASS has been using Privia for (Privia noted on its earnings call that its relationship with BASS hasn’t changed).

There was also some interesting, very nerdy, dialogue in the earnings call about a Restricted Knox Keene license approval and how members are moved to full risk over time. An analyst was confused about why the percentage of capitation revenue in full risk deals grew from only 46% of revenue to 49% of revenue, which led to a conversation about how the California Department of Managed Health approves contracts for full-risk.

Links:

• ​Astrana Q4 2023 Slides​
• ​Astrana Q4 2023 Transcript​

News
​Hims & Hers stocks jumps 30%+ on profitable growth in Q4

Summary:

Hims reported that revenue for 2023 jumped 65% yoy to $872 million on 48% subscriber growth. It also posted its first quarter of positive net income in Q4, squeaking by with $1.2 million in net income for the quarter. Hims is focusing on five core specialties, all of which it believes have the opportunity to be $100 million lines of business moving forward: sexual health, men’s dermatology, women’s dermatology, mental health, and weight loss. It expects weight loss to be an $100 million business in 2025, just a year after launching.

The chart below from the shareholder letter (linked below) is particularly interesting. It is quite impressive how quickly Hims & Hers has been able to take share from key competitors.

Hims & Hers seems to think it’s MedMatch tool, which enables personalized treatment options is a key driver here for the business and spent a good deal of time in the earnings call talking about the personalization opportunity. I'm not entirely sure I grasp why it's such a meaningful step forward, though, nor do I really understand why its current product offering isn't already personalized. Either way, per the shareholder letter, Hims & Hers is seeing 85% long term retention (defined as being a customer for over two years). That seems like really impressive performance in this D2C market.

Links:

• ​Hims & Hers Q4 & FY23 Shareholder Letter​
• ​Hims & Hers Q4 2023 Earnings Transcript​
• ​CNBC: Hims & Hers soars 31% on rapid growth in mental health, weight loss and dermatology treatments

Medicare Advantage model predicts a $33 nationwide PBPM reduction in benefits value in 2025

The Berkley Research Group released a whitepaper, sponsored by the Better Medicare Alliance, projecting that Medicare Advantage medical cost inflation will increase by 4% to 6% in 2025. This is higher than the 2.4% growth factor that CMS included in the 2025 Advance Notice. BRG forecasts this will result in a 1% drop in payments per beneficiary per month, and that plans will need to reduce the value to beneficiaries by $33 per month on average. As the chart above notes there is some massive variation, with Nevada in particular seeing a $90 PBPM drop. The paper does a nice job of explaining the broader macro dynamics driving the upcoming reduction in value for MA members.

Virta Health members see no regain in body weight following 12-months post de-prescription of GLP-1s

Virta Health, a virtual diabetes program, announced results from its recent peer-reviewed research study published in Diabetes Today, looking at outcomes of the company's approach to supporting users after the discontinuation of GLP-1 medications. The study demonstrated that Virta members who were de-prescribed from GLP-1 medication achieved sustained weight loss improvements, seeing no change or regain in body weight at a 12-month follow-up after stopping the use of the drug. These results seem like an exciting development if they hold considering the previously demonstrated concerns that many people who stop using GLP-1s experience quick weight regain and worsening blood sugar.

The outages associated with the Change Healthcare cyberattack are now into week two. UHG is preparing for this outage to go on for multiple weeks from here, according to STAT reporting on a discussion between UHG leaders and hospital cybersecurity officers. The ripple effects of this outage seem like they're just starting to appear, with national news reports that small and mid-sized practices that need timely reimbursement to stay afloat are potentially going to need to shut down. The AHA submitted a letter to the HHS Secretary asking for federal support for hospitals that are being impacted both by not being able to submit claims, and also not being able to complete eligibility checks. This is a massive issue for the entire industry, and coupled with the news immediately below it presents a real challenge for UHG to navigate.
​Link / Slack (h/t David Kolacny Jr.)

UnitedHealth's rough week was compounded on Monday when The Examiner News reported that the DOJ launched an antitrust investigation into Optum in October 2023. As a brief aside, the Examiner News is a local news organization in New York that has done a thirteen part series about the issues about a local provider group called CareMont that Optum appears to have acquired back in 2022. It provides a fascinating local perspective on a provider acquisition. Back on the antitrust case, the WSJ picked up on the news Tuesday afternoon, and reported that investigators are in the early stages of an investigation and have been interviewing various industry representatives. Specifically, the DOJ appears to be asking about the relationship between UHC and Optum.
​Link​

R1 RCM received a buyout offer from private equity firm New Mountain Capital for $5.8 billion. New Mountain, which already owns ~33% of R1, has been in talks for at least a few weeks to buy out R1. The offer represented a 28% premium to R1's stock price prior to the news was made public. R1's stock is down ~40% from its previous twelve month high, prompting some analyst discussion about whether the buyout undervalues R1 RCM.
​Link

Mississippi is one step closer to Medicaid expansion as a bill passed the Republican-led House and will now go to the Senate. Mississippi is one of ten remaining states that have not expanded Medicaid. If passed, it would give access to 210,000+ Mississippi residents access to Medicaid coverage.
​Link / Slack (h/t Nikita Singareddy)

CVS and Walgreens are set to starting selling abortion pills in select stores across New York, Pennsylvania, Massachusetts, California and Illinois this month with the aim to expand access to care.
​Link / Slack (h/t Evan Benkert)

In additional Walgreens' news, the retail giant plans to close all of its VillageMD clinics in Illinois. The news comes just a week after the announcement of the company shutting down all VillageMD clinics in Florida and additional closures earlier this month in Massachusetts, Indiana, and New Hampshire.
​Link / Slack (h/t Shannon Swaford)

Nuvance Health and Northwell Health announced a planned merger, which would create a 28-hospital health system including 14,500 providers. The deal would help New York-based Northwell expand into Connecticut.
​Link / Slack (h/t Blake Madden)

WebMD announced its acquisition of the operating assets of Healthwise, a patient health education & engagement platform, These assets include content, products, tech, and client relationships.
​Link / Slack (h/t David Cooper)

Veradigm, a healthcare data & analytics platform, announced its planned acquisition of ScienceIO, a healthcare AI startup, for $140 million in cash. The deal will allow Veradigm to leverage ScienceIO's proprietary AI models on Veradigm's data set, inclusive of 400,000 providers and 200 million+ patients.
​Link / Slack (h/t Cole Roberts)

Reveleer, an AI-enabled data & analytics company, raised $65 million in funding. The startup providers a software platform that helps payors with several VBC-focused workflows, including risk adjustment, quality measurements, and member engagement.
​Link

b.well, a FHIR-based data platform, raised $40 million in Series C funding.
​Link / Slack (h/t David Kolacny Jr.)

Moxe Health, a healthcare data exchange platform, secured $25 million in growth capital to scale operations.
​Link​

Redi Health, a healthcare digital front door startup, raised $14 million in Series B funding to launch new products and accelerate growth.
​Link​

SalvoHealth, a GI enablement company, raised $5 million of fresh capital. The startup enables local physicians across the country to offer wraparound GI care via Salvo's telehealth and app-based support.
​Link / Slack (h/t Michael Ceballos)

FamilyWell, a maternal mental health startup, secured $4.3 million in Seed funding. The company serves pregnant and postpartum patients access mental health services that are integrated with existing OB-GYN practices.
​Link​

Upheal secured $3.25 million in Seed financing. The startup is building a clinical workflow platform to support mental health providers.
​Link / Slack (h/t Juraj Chrappa)

​6 Ways Employers Can Prepare for their Expanded Role as Health Fiduciaries by Erica Everhart, JD, Blair Mohney, MBA, and Joe Mercado, MBA, MS

Recent legal changes to ERISA require self-funded employers to remove "gag-clauses" from contracts with TPAs, thus giving employers access to claims and pharmacy data needed to assess their employees' utilization of healthcare benefits. The move ultimately places additional legal and financial responsibilities on employers to ensure those benefits are being used wisely. The CareJourney teams offers 6 actions employers and TPAs can take to prepare for the future state.

​Strategic Preparation 1: On Measurement by Andrew Schutzbank

In his new series on the topic of Strategic Preparation, Andrew explores the basics of measurement and covers how he has approached frameworks related to OKRs, performance evaluation, KPIs, health measures, and more.

​The Alabama Pause by Neel Shah, MD

Following Alabama Supreme Court's recent decision to restrict IVF services across the state, Dr. Shah unpacks the history leading up to the ruling, the situation on the ground in Alabama, the politics driving these decision, and provides resources to several organizations on the frontlines tackling this issue (i.e. Yellowhammer Fund, Knights and Orchids Society, and West Alabama Women's Center).

Vice President of Partnerships at Third Way Health, an end-to-end front office platform. Link​

VP, Care Marketplace at Headspace, a virtual mental health provider. Link​

Market Enablement Manager at Oasis Health Partners, Inc., a value-based care company. Link​

General Manager at TailorCare, an MSK platform. Link​

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