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.
AllyAlign offers Medicare Advantage health plans, which is a pretty competitive business. Nonetheless, it secures $300 million in new financing to expand its geographic footprint.
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.
Gastro Health is a rollup of gastroenterology practices across the country by a private equity group. This is a common practice which contributes to consolidation, high prices, high utilization and no improvement in quality. These private equity groups then sell the entity to another PE group to provide a lucrative exit and on we go. In this case the Ontario Employees pension plan is the buyer. I am sure they care a lot about health care in the US.
And here is why I don't buy the telehealth or any other subsegment hype. American Well went public last fall at a very high price and shot up even higher, but now it is trading at 70% lower than the IPO price. Bullshit that doesn't have substance behind it gets caught sooner or later. Despite being in existence for years and having all the tailwinds of the epidemic behind it, this company is losing a pile of money. It is in a commodity business with no differentiation and lots of competition. Most of these high-flying health care IPOs will end up in the same place.
https://www.cnbc.com/quotes/amwl?qsearchterm=amwl
About this Blog
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 khroche@healthy-skeptic.com.
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 khroche@healthy-skeptic.com.