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the-axios-show

Welcome to October, Health Tech enthusiasts! 

⛈️ Situational awareness: Here's how you can support western North Carolina communities devastated by Helene. 

Data: Yahoo Finance; Chart: Axios Visuals

CVS Health is weighing various strategic options, including a possible breakup of the company, as first reported by Reuters.

Why it matters: CVS is America's largest pharmacy operator and one of its top health care companies, but it's being hammered by increased costs at its Aetna insurance unit.

State of play: Last month, the company slashed its financial forecast and announced $2 billion in cost cuts.

It also was scheduled yesterday to meet with hedge fund Glenview Capital, which owns around 1% of CVS outstanding stock and wants changes.

As of May, CVS was looking for a private equity partner to back new Medicare Advantage-focused Oak Street Health clinics.

Catch up quick: Aetna posted a medical loss ratio of 89.6% in Q2, up from 86.2% in the prior-year quarter amid elevated utilization. 

Last month, CVS announced its CEO Karen Lynch would take control over its health benefits segment, overseeing its day-to-day operations alongside CFO Tom Cowhey and bouncing Aetna president Brian Kane, who'd been in the role less than a year.  

The bottom line: CVS may be waiting to see how the Medicare Advantage market shakes out next year, which could be impacted by who controls the White House and Congress.

CVS Health weighing strategic options

StrataPT, a physician practice management software provider, raised $25 million in its first outside equity from Council Capital, CEO Paul Singh tells Axios exclusively.

Why it's the BFD: The complexity of patient billing and coding can lead to mistakes that delay reimbursement and impact revenue.

How it works: StrataPT is a software-as-a-service (SaaS) provider that combines electronic medical records, revenue cycle management, billing and collections help into one platform.

The Osprey, Florida-based company caters to physical, occupational and speech therapy practices.

Singh says StrataPT is profitable, but he declined to disclose revenue and customer details.

By the numbers: Shrinking profit margins pose a significant threat to private practice as physical therapy reimbursement rates continue to decline and operating costs rise.

Since 2016, physical therapy reimbursement rates have decreased by more than 10%.

StrataPT has helped practices collect $275 million to date, he says, adding, "There are at least 20,000 PT, OT and/or speech therapy practices within our current wheelhouse."

Zoom in: The company has been fully bootstrapped up until now, Singh says, and the deal gives Nashville-based Council Capital a minority stake.

What they're saying: As health care providers contend with point solution fatigue, "potential clients are tired of the same old stuff that the industry peddles on them," Singh says.

"It's like when four plumbers come to your house and all say they provide 'the best customer service,'" he says.

StrataPT's platform lets providers offload "a couple third party vendors and get better reimbursement," he adds.

State of play: Data is everything these days and EMR companies offer a profitable, digestible asset.

Warburg Pincus-backed WebPT might be due for an exit soon, as Warburg invested back in 2019.

Carlyle-backed Net Health Systems has been held by Carlyle since 2017 and is getting long in the tooth. 

Veradigm is receiving lots of interest from sponsors and will likely be taken private. 

StrataPT snags $25M minority investment

Illustration of a folder with a dollar bill sign cut out of it.  

Data: KFF analysis of Rand hospital data; Chart: Axios Visuals

Hospital mergers and acquisitions have left nearly half of the metropolitan areas in the U.S. with just one or two health systems controlling all inpatient care, according to a new KFF study.

Why it matters: Nearly a third of all health spending goes toward hospital care, and critics question whether the efficiencies from alliances and mergers are benefiting patients through higher-quality care or lower costs.

What they found: 67% of American hospitals were affiliated with health systems in 2022, up from 56% in 2010.

Almost all metropolitan areas in the U.S. (97%) have highly concentrated hospital markets as defined by federal competitiveness guidelines.

Hospital cost data from 2022, the most recent year available, shows that one or two health systems control the entire market for inpatient care in 47% of metropolitan areas in the country. 

Go deeper: Larger metro areas tend to have more health system competition, KFF found.

79% of Americans live in an area with four or more health systems, including Detroit, Miami and Phoenix.

Still, the two biggest health systems control at least half the market in most of those areas. In Austin, Texas, for example, HCA and Ascension capture 85% of the inpatient market, KFF said.

One or two hospitals control many metro markets

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

• Air Doctor, an Israeli travel health startup, raised a $20m Series B led by aMoon and joined by Tokio Marine Holdings, Samsung Ventures and insiders Lightspeed Venture Partners, Vintage Investment Partners, Phoenix Insurance and Munich Re Ventures. air-dr.com

• H.I.G. Capital completed its acquisition of SkinCure Oncology Intermediate, a Burr Ridge, Ill., provider of image-guided superficial radiation therapy previously backed by Seacoast Capital. Go deeper

• The Smilist Dental, a Great Neck, N.Y., dental services organization backed by Zenyth Partners, acquired Gibbsboro, N.J., dental network Lakeview Dental Care. Go deeper

• NorthEdge sold Helios Global Group, a U.K.-based health care communications group, to Telemos Capital, a European mid-market private equity firm backed by family capital. Go deeper

• Waud Capital Partners acquired Science Exchange, a Palo Alto provider of life sciences procurement and supplier management SaaS company. Go deeper

• Accel-KKR acquired VisiQuate, a Santa Rosa, Calif., provider of revenue cycle analytics and workflow automation software. Go deeper

Deals o' the day

• David Thornton, former SVP at IQVIA, joined Genomics plc as president. Go deeper

• Kevin Fahey, partner at Council Capital, joined StrataPT's board of directors. stratapt.com

• Jean de Pracomtal, former director of equity capital markets at Barclays, joined Bryan, Garnier & Co as director of ECM. bryangarnier.com

• Matthew Dubbioso, former managing director at New Mountain Capital, and Michael Nutting, former chief capital markets officer at Marlin Equity Partners, joined Revelstoke Capital Partners as partners. Go deeper

• Win Rawson, former partner at Lawrence & Russell, joined Intellivo as chief legal officer. Go deeper

It's Personnel

💵 Health care CEOs dialed back their pay in 2023 but still made $3.5 billion — STAT

🌊 Hurricane sends new shudders through health supply chain — Axios

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🎭 Claire saw a stage play of Paddy Chayefsky's 1976 satire film "Network" in Chicago this weekend and was stunned by how relevant it still is. 

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

October 01, 2024

1 big thing: CVS Health weighing strategic options