A few years ago several very large employers, including Amazon, Bershire and JP Morgan were going to revolutionize employee health benefits with a company called Haven. Went nowhere and disappeared. JP Morgan picked up the remnants and has started a division called Morgan Health. That firm just made a $50 million investment in Vera Health, yet another company that intends to build a series of primary care focused clinics.
Cricket Health offers a kidney disease management service. It just raised an additional $83 million in capital. I am telling y0u the capital markets are off the rails in valuations and throwing money around. All prompted by the government.
Amwell, a telehealth company which went public recently, is following the well-trod path to try to convince investors it has a business which justifies the valuation by buying two other companies with iffy futures. One is Conversa Health, which helps providers with health messaging and visits, and the other is SilverCloud health, which does virtual mental health visits. To show you how desperate these newly public companies are, Amwell is paying $320 million for businesses which have a combined $15 million in revenue this year. That's right, lets pay over 20 times revenue.
Clinical research organizations help drug companies do the trials to get approval for new products or new indications for existing products, and some help with commercialization services. As with many businesses, the larger ones have tended to cycle between being public companies and being owned by private equity firms. Parexel is one of those firms and is being sold by one PE firm to another one for $8.5 billion.
Olive (is it a vegetable or isn't it?), which offers data analytic services for hospitals and health systems, with a focus on AI, raises another $400 million. The company has raised over $900 million in capital in total and is valued at close to $2 billion. Froth, froth, froth.
Paceline raises a fresh $29.5 million in financing to support the 400th company supposedly helping consumers get more engaged in their health and wellness. Great return coming for those investors, not.
More indications of M & A froth. Health Catalyst, a database and analytics firm, is buying Twistle, which offers patient engagement software, for $104 million. Health Catalyst, which has generally floundered since going public, and still loses lots of money, clearly is trying to find some way to add sizzle to its business.
In a sign that perhaps the capital markets for health care payers and services may return to some semblance of sanity, Bright Health, an insurer and manager of provider networks, went public at around $18 a share, well below the pricing range it was seeking, and in a truly bad sign, declined in price by the end of the day. Similar experience to Oscar Health, which went public earlier this year. These new insurers have to compete with monsters like UnitedHealth, Aetna, Cigna and Anthem, and they will struggle to ever make money that justifies their share price.
Large health insurers have increasingly become providers of care as well, in another sign of consolidation in the health care system that should concern everyone, as the quality and cost implications are usually not good. Humana furthered its march into home care by buying onehome (isn't that cute, no capitals in its name) to add to its CenterWell division.
Primary care has been all the rage for several years, with a slight interruption by the epidemic. We are beginning to see more deals for primary care businesses, as Cano Health, which offers care to Medicare patients and recently went public, says it is buying University Health, a primary care network in South Florida, for $600 million.
Another example of unmoored valuations. This company is founded by someone who has previously had success with health care startups, so the assumption is he will be again. Not necessarily a good investment approach. $58 million in new capital, valuing the company at $500 million, for helping employer health plans provide health "navigation" services.
Now this merger makes a little more sense. One Medical, which offers primary care services through clinics and contract arrangements, is buying Iora Health which operates primary clinics for commercial and Medicare patients. The transaction is all stock, $2.1 billion worth, so no cash to Iora owners, which is interesting. The primary care market is getting competitive.
Remember what I said about these times when too much capital is floating around and valuations get absurd, so you see a lot of companies who know they can't grow into their valuation starting to all merge together. Here is an example. Carbon Health, which offers in-person and virtual primary care, is buying Steady Health, a vendor of disease management services.
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].