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Skyrocketing demand for therapy and a dearth of insurance-covered options are propelling mental health startups to unicorn status — even in a market that is making unicorns increasingly rare, Erin writes.

Driving the news: Hybrid mental health therapy network operator Headway is in talks to raise $100 million in fresh funds at a $1 billion valuation, per Bloomberg.

Investors would include Spark Capital and insiders Thrive Capital, Andreessen Horowitz and Accel.

Headway last raised $70 million in a 2021 Series B round at a $750 million valuation.

Be smart: An estimated 45% of psychiatrists don't accept any form of insurance, and most that do take coverage from only a narrow set of plans.

How it works: Headway operates a network of covered therapists in 15 states.

Providers charge $20 to $50 for in-person and online sessions and accept insurance from payers including Aetna, Anthem, Cigna, Oxford, UnitedHealthcare and Oscar.

Erin's thought bubble: Headway's three-pronged strategy — tools for patients, providers and payers — could give it a leg up over startups offering just one component.

What remains to be seen is whether it can scale while generating positive outcomes for its three constituents.

🦄 1 big thing: Headway scores $1 billion valuation

Several startups are creating administrative automation tools and directories of in-network therapists to tackle the lack of insurance coverage for therapy.

Trek Health aims to help providers accept insurance with AI-powered claim, submission and enrollment tools. Last fall it raised $2.7 million in seed capital.

PsychHub, a directory of in-network therapists founded by former Rep. Patrick J. Kennedy (D-R.I.), last summer closed a $16 million Series A round.

Heard, which offers mental health providers automation tools for back-of-office tasks, last summer collected $10 million in Series A funding.

2. State of play: Mental health enablement tech

Illustration of sticky notes overlapping that say State of Play

Gentiva, a hospice operator backed by Clayton Dubilier & Rice, plans to acquire hospice and home care assets from ProMedica for $710 million, as reported by Bloomberg and confirmed by Axios. 

Why it's the BFD: Corporate carveouts are likely to be central to health care dealmaking this year, Axios' Claire Rychlewski writes. 

Details: The $710 million valuation includes debt, per Bloomberg.

Not-for-profit health system ProMedica worked with Houlihan Lokey.

A cadre of banks — Deutsche Bank, UBS, BNP Paribas, Citizens Financial Group, Truist Financial and Wells Fargo — advised CD&R and Humana-backed Gentiva.

Gentiva also received committed debt financing from Goldman Sachs Group. 

By the numbers: Gentiva CEO David Causby told Bloomberg the deal expands Atlanta-based Gentiva's reach to more than 500 locations, up from 380.

Following deal close, Gentiva will serve about 34,000 patients (up from about 25,000), while its employee count is expected to jump by about 4,000 from more than 30,000 currently.

Between the lines: Home health and hospice is not an easy industry to navigate amid margin pressures, Medicare rate cuts and staffing shortages.

Gentiva's a better-positioned buyer than most, with plenty of synergies that make the deal worthwhile, one banker says.

The intrigue: Sources tell Axios the ProMedica business was marketed on EBITDA of $80 million to $100 million, which would imply a single-digit sale multiple if ProMedica traded off that figure.

It would be a logical multiple, considering the apparent synergies and the headwinds surrounding home health.

Editor's note: This story's headline has been corrected to reflect Gentiva is acquiring ProMedica's home care and hospice assets, not the entire company of ProMedica.

3. The BFD: Gentiva buys ProMedica home care and hospice biz

Illustration of a house wearing a stethoscope

Egal, which is launching a bathroom in-stall period product solution, raised $1 million in angel funding. https://padsonaroll.com/ 

BetterNight, a San Diego-based developer of a virtual care platform for sleep, raised $33m led by NewSpring with participation from insiders HCAP Partners and Hamilton Lane (Nasdaq: HLNE). https://www.betternightsolutions.com/ 

Crescent Capital Partners is seeking a buyer for Healthcare Australia, a health worker recruitment company that could fetch at least A$700m, per Bloomberg. https://axios.link/3KHCKov

Southern Capital Group, a Singapore-based PE firm, is seeking a buyer for Qualitas Health, a Malaysia-based provider of dental and medical care that could fetch around US$300m, per Bloomberg. https://axios.link/41zOkYI

Syneos Health (Nasdaq: SYNH), a Morrisville, N.C.-based biopharma contract research org with a $4.2b market cap, is seeking a buyer, per Reuters. https://axios.link/3YcU0F3

Cano Health, a publicly traded primary care provider, closed a $150 million senior secured term loan from Diameter Capital Partners, Rubicon Founders and their respective affiliates and managed funds. https://canohealth.com/ 

4. Deals' o the day

Walmart promoted former chief financial officer for health and wellness Brian Setzer to EVP.

RevGenius named former Olive director of payer product Brian Gibson member and contributing writer.

Former Cityblock chief health officer Piyush Gupta announced he will serve as cofounder and CEO of Sevi Health.

5. It's Personnel

 60% Of Americans Would Be Uncomfortable With Provider Relying on AI in Their Own Healthcare — Pew Research Center

How Mindstrong's rush to roll out a ‘smoke alarm’ for mental illness led to its downfall — STAT

Albertson's Is Entering The Digital Health And Telehealth Space — Forbes

What's next for insulin — Axios Pro Health Policy

6. Your daily dose

Illustration of a Axios brand medicine bottle that says "your daily dose" next to a spoon.

⌚ Situational awareness: Continuing to follow Apple's well-trodden tracks, Google today launched fall detection on its Pixel Watch. (Erin wonders: But can you ski with it?)

☃️ Erin spent the morning helping neighbor friends dig themselves out of the blizzard, Tahoe's eighth since 2005.

💟 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Brad Bonhall. Please ask your friends, family and colleagues to sign up.

February 28, 2023

🦄 1 big thing: Headway scores $1 billion valuation