UnitedHealth Group, my former employer, is a health care behemoth. It has pushed aggressively in to the actual delivery of medical care in the last decade and is currently the largest employer of physicians in the country. It now is moving into home health care by purchasing LHC Group for $5 billion. Supposedly these deals will reduce total costs, but I don't believe it, I think they protect profits and profit margins and I doubt they result in better quality either.
In what has to be one of the strangest deals yet, large dialysis provider Fresenius is merging with two over-hyped and over-valued "digital health" companies oriented to kidney care--Interwell, which has a network of specialists and Cricket Health which supposedly does patient engagement. This apparently will make the conglomeration more attractive to payers and patients. This mess is valued at $2.3 billion.
VillageMD is one of a series of focused primary care clinics which have gone public or gotten large investments at huge valuations. All these companies are struggling to maintain those valuations. Some do so by questionable acquistions. VillageMD is buying Healthy Interactions, which offers patient education services, at an undisclosed by undoubtedly excessive price, supposedly to provide the services to its members.
I have mentioned before the phenomenon in excessive capital times that scads of money goes to unproven companies, who then try to obscure their lack of coherent strategy by acquiring with other similar companies. Health care is rife with this tactic. Here we see Signify Health acquiring Caravan Health for $300 million, much of which is funny money stock. Both firms work in the commodity space of value-based purchasing and accountable care organization support. One plus one still equals zero.
More froth in the capital markets as R1 RCM pays $4.1 billion for CloudMed. R1 RCM helps health care providers with billing and other practice management software and services and CloudMed supposedly brings artificial intelligence to those activities.
The day's second incomprehensible deal involves Babylon Health babbling on about buying Higi Health, which offers kiosks for biometric screenings. Babylon is a digital and telehealth company. No price announced but whatever it was, it was too much.
This is why I don't invest in "digital" health BS. Castlight Health went public at a huge valuation. The hype caught up with it and the valuation plunged. It now has agreed to be bought by Vera Whole Health for $2 a share or a whopping $370 million. I doubt it is worth that much, but Vera is another hype-driven company, although in theoretically a more solid segment--primary care, desperate to find some way to make it look like it actually is adding value to the system. I always find it hilarious to see the rational for these deals. Castlight's tools will supposedly help Vera's providers. Right, sure, of course, anything you say, load of crap.
Large database firm Oracle is buying electronic medical records and administrative software vendor Cerner for $28.3 billion, a move that likely is aimed at further penetration in a heavy software use industry and at competitor Salesforce.
Athenahealth has done very well in the market for electronic medical records and other provider information systems. It is being sold by one set of investors to two private equity firms for $17 billion dollars. The company may be good, but that is far too high a price in a very competitive market. We are seeing the result of the fed pumping trillions of dollars into the economy. This will be a very leveraged deal which will eventually stress the company.
Best Buy is another large corporation trying to make a bet on health care, in this case largely by providing remote patient monitoring services. The company made yet another significant acquisition in the space, buying Current Health.
We are seeing a wave of acquisitions among health care companies hoping to show that they actually have a business that justifies high valuations. Symplr provides software to help health care companies with certain administrative tasks and is acquiring Halo Health, which offers clinical communication and collaboration software. No price disclosed but you can bet it was extremely high.
The health care M & A madness continues with genetic testing company Ivitae buying Citizens Health, which organizes medical records, for an astounding $325 million. This supposedly will allow for better integration of genetic information.
More health care company valuation insanity. Ginger, a mental telehealth company, spices up its offerings by merging with Headspace, which offers a meditation app. Ginger's management should have meditated on this deal a bit more. The merged company is supposedly valued at $3 billion, for a company that claims to have $300 million in bookings, whatever that means. The only reason people invest in this kind of garbage is they don't know what else to do with their capital and they believe in the greater fool theory--they can sell to someone else before people figure out what a dud they have.
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].