Volume 20

#1 A U.S. Bank Fails Focused On Health Tech Investments

On Friday, federal financial regulators shut down Silicon Valley Bank (SVB) and the bank’s deposits were taken over by FDIC. This is the biggest bank failure in the United States since the global financial crisis more than a decade ago. As a significant participant in the tech and venture capital industry, the downfall of SVB has left individuals and businesses uncertain about the fate of their funds and the sector.

So What’s The Big Deal? SVB targeted venture capital funds and startups particularly in health and health tech. In fact, the bank reported half of all U.S. VC-backed tech and life science companies are SVB clients and 44 percent of U.S. VC-backed companies with an IPO were SVB clients. While the extent of the fallout is still unknown, this could stall or decelerate future innovation.

#2 The President's Budget

President Joe Biden has unveiled his proposed fiscal year 2024 budget, which calls for significant alterations to Medicare Advantage (MA), including fresh limitations on extra benefits and the inclusion of mental healthcare service cost-sharing.

So What’s The Big Deal? While this document does not have the force of law–and Congress (particularly Republicans) are unlikely to use it even as a guidepost for federal spending–the outline offers a window into how Democrats want to shape the future of healthcare and it reveals how much affinity the president has for Medicare Advantage. The budget plan, which was outlined Thursday, also includes $150 billion for Medicaid home- and community-based services, $20 billion for pandemic preparedness, almost $20 billion for mental health, and $10.9 billion for global health. It also calls on Congress to address workforce shortages, improving long-term care, maternal health, telehealth, family planning, and health centers.

#3 Geek Squad to the Home-Health Rescue?

Best Buy has made significant investments in the healthcare sector by collaborating with some of the country's biggest hospital networks. The company has joined forces with Advocate Health, Geisinger Health, Atrium, and Mount Sinai Health System to enhance its home care technology platform, Current Health, which it bought for $400 million at the end of 2021.

So What’s The Big Deal? Once again, “big box” retailers are stepping into the healthcare access and delivery void, leveraging their scale, skillset, and name recognition to grow digital health access. As a retailer and technical support vendor (Geek Squad), Best Buy can not only sell digital health products, but also service them. On the company’s own, however, Best Buy offerings (products and services) are really just two legs of a stool. By partnering with hospitals, the company gains access to the patient market. And by partnering with Best Buy, hospitals can grow their “hospital at home” and in-home patient monitoring services.

#4 Georgia Lawmakers Challenge Nonprofit Status of Wellstar

A group of local officials and legislators from different states have requested the federal government examine the closure of Atlanta Medical Center and Atlanta Medical Center South hospital by Wellstar Health System. Wellstar claimed it was shutting down the healthcare facilities due to $100 million in financial losses in 2022.

So What’s The Big Deal? The closure of a trauma center in metro Atlanta alone is a “big deal,” particularly for patients. But there’s something bigger here: the nonprofit status of hospitals. The lawmakers have asked the U.S. Department of Health and Human Services and the Office of Civil Rights to investigate if the closure was driven by discrimination, and also asking the Internal Revenue Service to investigate whether Wellstar actually qualifies for its tax-exempt status as a nonprofit organization. To maintain this status, hospitals must fulfill various obligations such as evaluating the health needs of their community and devising a plan to address those needs. Hospitals should watch this investigation closely since it could portend heavier oversight.

#5 Public Comment Period Extended for Non-Compete Ban

The Federal Trade Commission (FTC) announced it will extend by 30 days the deadline for public comments on a proposed regulation that would prohibit companies from enforcing non-compete agreements with their employees. The FTC said some stakeholders had requested the extension, but others opposed it. The new deadline for submitting comments is April 19.

So What’s The Big Deal? The proposed rule is based on the assertion that non-competes are unjust, impede competition, and contravene Section 5 of the Federal Trade Commission Act. For hospitals and physicians, the new rule could have significant implications (especially for for-profit entities), giving physicians and other workers even greater negotiating leverage in employment disputes.

#6 Investments in Outpatient Entities Continue to Grow

According to a report by the Private Equity Stakeholder Project (PESP), more than 400 private equity firms made investments in the healthcare industry in 2022. The report also reveals that the most active deals were in the outpatient care sector.

So What’s The Big Deal? As Medicare Advantage, Accountable Care Organizations, and other value-based care reimbursement schemes grow, investors see a growth opportunity in outpatient care delivery. For hospitals with poor outpatient strategies, that means the future could continue to remain challenging.

#7 WeightWatchers Buys Telehealth Platform

WeightWatchers has expanded its services to include telehealth and medication-based obesity treatment by acquiring Sequence, a digital health company. Sequence provides a weight loss program that includes telehealth consultations with clinicians, fitness coaching, access to dietitians, and prescription drugs like Ozempic and Wegovy, which are commonly used for diabetes and obesity treatment. Their monthly subscribers can avail these services.

So What’s The Big Deal? Obesity is a multifaceted, long-lasting condition that encompasses both biological and behavioral aspects. Recent scientific research suggests certain prescription medications used for chronic weight management can target the biological components of obesity. It is crucial to consider both the biological and behavioral elements when addressing obesity. Telehealth may be a growing space for traditional behavioral weight loss platforms, but read the next story for an important caveat. While some federal telehealth flexibilities are slated to continue into 2024, the Biden administration and legislatures around the country may begin to restrict more activities to in-person evaluations, limiting the sector's growth opportunity.

#8 Telehealth Flexibilities Tighten

The U.S. Drug Enforcement Administration recently proposed a new regulation that would put an end to most pandemic-related flexibility given to healthcare providers in prescribing controlled substances without an in-person appointment. If the new rule is finalized, Schedule II drugs like Vicodin, OxyContin, Adderall, and Ritalin will require an in-person visit before being prescribed virtually. Similarly, Schedule III-V drugs, including codeine, Xanax, and Ambien, and buprenorphine for opioid addiction could only be prescribed via telehealth for a maximum of 30 days, after which patients would need to see a doctor in person for a refill.

So What’s The Big Deal? A few things here:

Telehealth prescribing has significantly expanded access to critical medications and this option provided real help to patients.
Still, some companies have allegedly abused the telehealth flexibilities (see Cerebral), prescribing controlled substances, like Adderall, to patients who do not have an underlying disease or to those posing as multiple patients.
Financial incentives without regulatory controls created another unfortunate dynamic: targeting undiagnosed populations with suggestive conditions like ADHD. Consumers flocked to these platforms and were rarely turned away.

Expect more regulatory and reimbursement controls for telehealth.

#9 More Focus by the Senate on the Healthcare Workforce

U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee Chair Bernie Sanders (I-VT) and Ranking Member Bill Cassidy (R-LA) have requested feedback and suggestions from healthcare providers and stakeholders on the underlying reasons for the current shortage of healthcare workers and possible solutions. The senators will use the feedback to develop bipartisan strategies that can be turned into legislation.

So What’s The Big Deal? Readers of this newsletter understand the significant strains healthcare workers and hospitals have faced before and during the pandemic. With shortages of physician and nursing providers expected over the next five years, Congress is exploring all available options. Unfortunately, many of the solutions will take years to decades to fix. Hospitals should continue to “bake-in” staffing shortages, adjusting available capacities, and expenses.

#10 The DOJ Comes After Antitrust Activities in Healthcare

The Department of Justice has retracted three policy statements related to antitrust enforcement in the healthcare sector. Those policies are: a 1993 statement that outlines conditions under which certain hospital mergers and healthcare joint ventures will not be challenged by the DOJ and the Federal Trade Commission; a 1996 statement on healthcare provider networks; and a 2011 statement on accountable care organizations participating in the Medicare Shared Savings Program. These policies were deemed too lenient in their approach toward certain issues (including information sharing) that could hamper evaluations of healthcare mergers and competition.The DOJ believes that a case-by-case approach to enforcement will be more effective in assessing healthcare mergers and competition.

So What’s The Big Deal? This withdrawal could have major implications to hospital mergers and healthcare tech joint ventures. It also demonstrates that Biden administration's approach to antitrust enforcement and compliance is swiftly changing. Healthcare providers are still struggling financially and are frequently considering strategic options that may raise antitrust concerns. Since there are no official guidelines from the DOJ, parties should be extra cautious when proceeding with a transaction to avoid any possible antitrust repercussions.

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Adam Brown