News 12/29/23

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Apple restarts sales of the advanced models of its Watch Thursday after an appeals court temporarily pauses an import ban. The halt was related to Apple’s ongoing pulse oximetry patent dispute with Masimo and AliveCor.

Apple also says that it has submitted design changes to the Watch to the US International Trade Commission that could make the ban unnecessary.

Reader Comments

From Upshot: “Re: Harris / Constellation acquisition of Medhost. What is Constellation’s business model and what health technology company will be next?” Company founder and billionaire Mark Leonard is like Warren Buffett, with a simple, steady, and ingenious formula that has worked consistently. Constellation has acquired several hundred companies and has sold only one (Leonard still kicks himself for that one exception). A $10,000 investment in CNSWF five years ago would be worth $40,000 today as the company’s market cap has reached $53 billion. Leonard – who is 6’5” tall and sports a ZZ Top-like gray beard — is either “intensely private” or “bizarrely reclusive,” depending on who you ask. He took a rare step into the public eye with a podcast interview in 2020 that I may transcribe and post here for posterity. The company’s acquisition strategy is based on these ideas:

• Focus on companies that sell mission-critical software to a vertical market whose customers will keep paying recurring fees to avoid replacing the incumbent software. These are often in the public sector.
• Choose from potential acquisitions using the First Chicago Method of valuation: set scenarios for best, worst, and average cases; set a valuation for each scenario using the net present value of future cash flows; and weight the likelihood of each scenario to arrive at a hurdle number.
• Acquire companies that are profitable and that have consistent earnings and growth.
• Acquire 100% of the company rather than a partial share.
• Do not use hostile takeovers or unsolicited bids. Companies will often volunteer to be considered for acquisition for a variety of reasons.
• Look for acquisitions that have a lower growth rate and thus command a modest price, reportedly 1 to 1.5 times revenue.
• Leave the acquired company’s management and employees in place and let them run the business.
• Improve the acquired company through coaching, sharing best practices with Constellation’s other companies, and management training and mentoring.
• Use the cash flow to fund more acquisitions instead of trying to fuel growth.
• Minimize corporate involvement except for data analysis.
• Incent business unit leaders based on return on invested capital and organic revenue growth and treat them as owners.

Aledade CEO and former National Coordinator Farzad Mostashari, MD, MSc observes that Constellation had a rare (and large) misfire in paying $700 million in 2022 for the hospital and large practice business of Allscripts that it renamed Altera, only to have its biggest customer Northwell announce soon afterward that it was moving to Epic. Constellation highlighted Altera’s dramatic revenue slide in its most recent quarterly report. Mostashari adds that healthcare software is a good fit for Constellation and the total addressable market is huge – he notes that the Allscripts business that they didn’t buy, which is ambulatory and Veradigm, is worth just $1.1 billion but will generate $100 million of free cash flow this year – but EHRs require more product development to keep up with regulatory changes.

He also added an insightful HIStalk comment from a reader and Altera customer who expressed disbelief at another reader’s report that Altera declined to renew their health system’s maintenance contract (click the image to enlarge).

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Acquisitions, Funding, Business, and Stock

Stat reports that UnitedHealth Group has denied rehabilitation care for Medicare Advantage patients who live in nursing homes or have cognitive impairment by changing its guidelines for clinicians.

Walgreens needs to rebuild its IT department to support the company’s business plan, The Wall Street Journal reports, following CIO and IT management turnover, cutbacks on the use of contractors, low employee morale, and the company’s plan to make big cuts in operating and capital expense. Walgreens is dealing with legacy systems and technologies used by its acquired companies even as it plans to implement AI and supply chain technology.

Best Buy Health recaps its 2023 accomplishments that include partnering with providers, enhancing its cell phones and alerts for seniors, and launching its sale of continuous glucose monitoring systems.

Sales of over-the-counter hearing aids are lower than expected, given that one in five US adults struggle with hearing and those problems often precede cognitive decline. Possible reasons for the lagging sales include physician inattention to adult hearing issues, lack of insurance coverage, and the stigma of wearing hearing aids. Experts also note that unlike vision problems, people who have hearing deficiencies often aren’t aware of their diminished hearing. FDA approved direct-to-consumer sales of hearing aids last year for mild to moderate hearing loss. Johns Hopkins researchers have developed a standard at-home hearing test for consumers that may spur awareness.

Sales

• HSS Sports Medicine Institute will implement Kemtai’s computer vision exercise guidance technology for home training of athletes to avoid ACL injuries.

Announcements and Implementations

Preventable, serious medical complications increased significantly among Medicare patients after hospitals were acquired by private equity firms, a JAMA-published study finds. Staffing cutbacks, which have been anecdotally blamed for clinical quality issues, were not reviewed in the study.

Government and Politics

A chiropractic clinic wins a lawsuit that it brought against McKesson for faxing unsolicited ads for medical billing software to the practice. The court rejected McKesson’s defense that the clinic consented to receiving ads by listing its fax number on licensing forms, ruling that providing a fax number doesn’t imply consent to receive ads. The court denied class action status, however, citing a precedent that sending faxes through an online fax service falls outside the Telephone Consumer Protection Act.

Privacy and Security

Corewell Health (MI) reports its second patient data breach in a month to patients, both involving its vendors (HealthEC and Welltok).

Poland’s data protection agency fines the health ministry for disclosing a doctor’s medical information on social media. The former health minister looked up the records of a doctor who had publicly criticized new regulations that limit doctors to issuing 300 electronic prescriptions each day, then posted on social media that the doctor had prescribed psychotropic drugs for himself. That health minister resigned in August after his actions came to light.

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