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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Equity is digital health's next act, according to a new Rock Health report.

Why it matters: Two rocky financial years have focused investor attention on the roughly $93 billion in excess care costs tied to health disparities, Axios' Claire Rychlewski writes.

The big picture: Those inequities have "created unique opportunities" in payment models, the Rock Health analysts note.

Zoom in: The analysts identify the following areas where investors, startup builders and other industry players can focus health equity efforts:

Facilitating adoption and trust among overlooked population groups by designing for the end-user.

Promoting responsible design practices by being mindful of digital fluency and tech barriers and considering the safety profile.

Expanding growth opportunities for digital health businesses that reach overlooked and underserved consumers.

Case in point: Given healthy food's role as a social determinant of health, food-as-medicine is one area where digital health and equity appear to be converging in investors' minds.

Telenutrition startup Nourish in March raised a $35 million Series A.

Foodsmart added $10 million to its Series C in January, bringing the round's total to about $40 million.

Season Health last December raised $7 million after acquiring the clinical assets of dietitian company Wellory.

Bitewell, a food-as-medicine marketplace for employers, last summer closed a $4 million seed.

Friction point: Investors have trouble agreeing on how health equity innovations are positioned in digital health, Rock Health analysts say.

Plus, they add, often "a blanket frame is applied to the myriad of innovations that serve overlooked and underserved populations" — an indiscriminate, one-size-fits-all approach that isn't helpful.

Populations that could benefit from tailored digital health innovation include older adults, rural populations, Black Americans and Latinos, they note.

Zoom out: Digital health as a whole raised $1.1 billion from venture capital across 57 deals in Q4 of last year — a 1.7% nudge up from the previous quarter, per PitchBook.

There were 499 VC digital health deals in 2023, up from 429 in 2022. But companies only raised $4.6 billion last year, against $8.3 billion the year prior, PitchBook found.

Telehealth, digital pharmacy and virtual behavioral health drew the most dollars in the sector.

The bottom line: Investors have struggled to contend with digital health after its pandemic bump faded and interest rates increased. A health equity business case could be one answer.

1 big thing: Digital health's equity era

Illustration of a health plus peeling back revealing a hundred dollar bill on the reverse side.

Sen. Ed Markey (D-Mass.) wants increased transparency around private equity investment in health care services businesses including hospitals, dialysis centers and physician groups.

Why it's the BFD: Markey also wants new federal abilities to stop those deals from ever happening, Axios' Dan Primack writes.

Driving the news: Markey yesterday released draft legislation called the "Health Over Wealth Act," aimed at private equity and other for-profit health services providers.

Zoom in: The bill would require both owner types to disclose a laundry list of financial and operational data, including information around debt, political spending, health worker wages and the use of non-care areas (e.g., hallways) for patient care.

They'd also need to create an escrow account to cover essential health services costs for five years in the event of a facility closure.

The biggest change would see the Department of Health and Human Services' powers vastly expanded. For example:

Private equity firms would need to "obtain a license" from HHS to invest, either directly or indirectly, in health care services firms.

HHS could prohibit any deal, even from licensees, while it conducts a study into PE's impact on health care.

HHS could also block any sale-leaseback transaction that it believes "would lead to a long-term weakened financial status of the health care entity," or one that would "place the public health at risk."

Zoom out: Markey unveiled this proposal during a subcommittee field hearing in Boston, which mostly focused on the Cerberus/Steward Health situation we discussed last month.

Cerberus, which both Markey and Sen. Elizabeth Warren (D-Mass.)  repeatedly mispronounced during the hearing as "Cer-e-bus," wasn't asked to testify. 

Steward's CEO did get an invite, but didn't show.

The hearing didn't uncover much new information, and may have sown further confusion when PE got seemingly blamed for changes at hospital giant HCA that came a decade after HCA went public.

Friction point: American Investment Council CEO Drew Maloney tells Axios: "Private equity has a long history of strengthening U.S. health care and improving the lives of millions of Americans, including in Massachusetts."

"Unfortunately, headline-seeking politicians continue to place misguided blame on our industry instead of pursuing sound policymaking to address systemic challenges head-on," Maloney adds.

What to watch: Warren, and to a lesser extent Markey, are gunning for DOJ or FTC to take a hard look at Steward's recent agreement to sell its nationwide physician network to UnitedHealth subsidiary Optum.

And Sen. Gary Peters (D-Mich.) is expressing concerns over PE's involvement with emergency rooms.

The bottom line: Markey's bill reads more aspirational than legislative, but it's part of growing Democratic pushback against private equity's involvement in health care.

2. The BFD: New bill eyes PE dollars in health care

Illustration of the US Capitol building with a caduceus on top. 

Want more health tech deals? Check out the Axios Pro Deals Tracker.

• Binx Health, a Boston-based diagnostic testing company, raised a $65m Series F led by Hildred Capital and joined by EQT Life Sciences. axios.link/4cFCtOl

• Biolinq, a San Diego-based developer of multi-analyte biosensors for metabolic health, raised $58m led by Alpha Wave Ventures and joined by Niterra, RiverVest Venture Partners, AXA IM Alts, Global Health Investment, Aphelion Capital, Senvest Management, Features Capital and Taisho Pharmaceutical. biolinq.com

• Manifold, a Newton, Mass.-based AI clinical research company, raised a $15m Series A led by TQ Ventures and joined by Calibrate Ventures, SK Ventures and TTCER Partners. manifold.ai

• Recare, a Berlin-based SaaS platform facilitating patient transfers, raised an unlabeled €3.2m. axios.link/3J21C8j

• Xund, an Austrian API-focused medical startup, raised a €2m extended seed round from Thieme Group. axios.link/3U3noPe

• SnapCare, an Atlanta-based health care staffing company, acquired Medecipher, a Denver-based predictive analytics staffing company. axios.link/4cFmiAG

• SK Capital Partners, a NYC PE life science firm, raised $2.95b for its sixth fund. skcapitalpartners.com

• 62 Ventures, a new health tech VC firm from Transcarent CEO Glen Tullman, launched with roughly $100m to invest in pre-seed through Series C companies in the U.S., India and the Middle East. 62-ventures.com

3. Deals o' the day

• Viraj Narayanan, former chief commercial officer at Ontada, joined Cornerstone AI as co-CEO. cornerstone.ai

• Murray Abramson, former SVP at Tempus Labs, joined Power as the company's first chief medical officer. withpower.com

• Dominic Brignola, former SVP of finance at Cloudmed, joined Surgical Notes as CFO. surgicalnotes.com

• Sean Slovenski, former CEO of Avesis, joined PatientPoint as president. axios.link/3vOAnep

• Ugo Gay, former managing director at DiaSorin, joined Stevanato Group as COO. stevanatogroup.com

• Erica Hayes, former senior director of care enablement at Headspace, joined Brightline as VP of care enablement. hellobrightline.com

4. It's Personnel

⚕️ DEI-serious companies should look at health care benefits — Fortune

🏷️ Opioid addiction DNA test should be pulled off market, critics say — STAT

5. Your daily dose

Illustration of a prescription with a handwritten note saying "daily dose."

⚾ Aaron is excited to check off another stadium on his list later today when he sees the Pittsburgh Pirates play the Nationals.

💞 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Egan Millard. Please ask your colleagues, friends and family to sign up.

April 04, 2024

1 big thing: Digital health's equity era