J.P. Morgan Day 3: 'Tricky year ahead' says digital health investors

The 41st annual J.P. Morgan Healthcare Conference moves into its third day at the Westin St. Francis hotel in San Francisco, where a veritable who’s who of the healthcare industry is gathered to talk pricing, patients, public policy and much more. Modern Healthcare will be providing live updates throughout the four-day event.

A panel of health tech investors shared advice with a familiar refrain: Digital health buyers are looking for a return on investment and more comprehensive solutions.

“If you're selling to health systems, they're struggling. They don’t have enough budget,” said Hemant Taneja, CEO of General Catalyst. “If you're selling to employers…many of them are struggling. They're trying to figure out the impact of inflation on their businesses. In these cases, the emphasis on ROI becomes far greater.”

The importance of ROI amid economic uncertainty has been a common theme across multiple sessions at the conference, shared by health system, health insurance, digital health and investors alike. Another widely shared thought: that companies offering tech services and products that only focus on only area of medical care may need to find acquisition or merger targets.

“There is consolidation that needs to be thought about,” Taneja said.

Amy Raimundo, managing director of Kaiser Permanente Ventures, said having too many single software solutions is expensive for systems and requires too much change management.

“There have been a lot of narrow [tech solutions] that have proliferated where the juice isn’t worth the squeeze,” Raimundo said. “We can’t justify the cost of putting those into place.”

Dr. Cheryl Pegus, managing director of Morgan Health Ventures, part of J.P. Morgan’s employer-focused health company, said the market will create opportunities for digital health companies, health systems, employers and health insurance companies to collaborate.

“Survival and ROI requires data-sharing. I think that we will see a lot more of that and we're already seeing it occur,” Pegus said.

Taneja said it will be a “tricky year ahead” for digital health companies. The focus has shifted from revenue growth at all costs to generating a profit, he said. There were also a lot of wildly inflated valuations where healthcare services startups were getting valued at around 20 times their funding total, compared with the current rate of three times their total.

“Startups have to be creative in how they navigate these next couple of years in terms of figuring out how to grow into their valuations at normalized multiples,” Taneja said.

—Gabriel Perna

Clover Health aims to generate $150 million this year by providing home care services to its Medicare Advantage members, CEO Andrew Toy said.

The insurtech currently offers in-home primary care services to 3,300 Medicare enrollees in New Jersey. Clover Health reports its clinical services revenue as part of its corporate segment’s financial reports, which earned a profit of $127.2 million through Sept. 30. Overall, Clover Health reported $75.3 million net loss during the first three quarters of 2022.

“Home care is strategically where healthcare will be moving toward in the next few years,” said Toy, who became CEO at the start of 2023.

Like the company’s Medicare Advantage plans and Accountable Care Organization REACH program, Clover Health’s home care business is powered by Clover Assistant, its technology platform. The tool combines artificial intelligence with data sources to prompt clinicians about conditions patients may have.

Clover Health pays physicians to use the assistant, and likewise pays patients to visit clinicians that do. The tool is “widely deployed” among doctors and integrates with all major electronic health record systems, Toy said.

By helping clinicians diagnose and treat conditions such as diabetes or chronic kidney disease earlier, Clover Assistant drives better outcomes and likely reduces costs, Toy said. “I’m sure down the line I’ll have actuarial studies that ties all this together,” he said.

Clover Assistant’s ability to accept feedback from clinicians helps drive uptake, he said.

As an example, the technology was programmed to prompt clinicians who prescribed a specific inhaler to diagnose patients with chronic obstructive pulmonary disease. Most doctors rejected the suggested diagnosis and Clover Health asked why. Many clinicians were prescribing the inhaler off-label to manage allergies so the company modified the tool, he said. "I think that earns a lot of credibility with folks,” Toy said.

—Nona Tepper

All updates from the third day of the conference can be found here.

In case you missed Day 2, here's more on what Tuesday's presenters told investors:

• Northwell Health plans to grow its ambulatory network 5% this year to nearly 900 facilities.
• Clover Health expects to start the year with the same number of Medicare Advantage members as last year, the company disclosed ahead of its conference presentation.
• Fresenius Medical Care plans to close some of its U.S.-based dialysis clinics in 2023 as its patient volumes continue to decline.
• CVS Health CEO Karen Lynch said the company was in the market for a primary-care asset, but she steered clear of directly addressing speculation the company was exploring an acquisition of Oak Street Health.
• Drug developers, researchers and regulators can do better when it comes to clinical trials, Food and Drug Administration Commissioner Dr. Robert Califf said.

The conference kicked off Monday with plenty to report. Here's a rundown from Day 1:

• Humana added at least 625,000 Medicare Advantage members during open enrollment this year, representing 13.6% year-over-year growth and far outpacing competitors, Chief Financial Officer Susan Diamond said.
• CommonSpirit Health is making progress on its performance improvement goals, pursuing $500 million in cost savings for fiscal year 2023.
• Oak Street Health, the Chicago-based primary-care provider for Medicare-aged patients, has big plans to open new clinics in 2023.
• Teladoc Health's CEO said the company is better prepared than rival telehealth providers to weather economic headwinds.
• Centene’s exchange business is surging while its Medicare Advantage sign-ups slowed during open enrollment for 2023, CEO Sarah London said.