Late Notice: Apologies for the late publication. Spring Breaking makes for a few distractions.
Chart of the Week
Congress.
Nursing Home Deaths. Congress’ favorite whipping boy, private equity, reappeared at a Senate Finance Committee Hearing Wednesday. The headline moment centered on staffing levels and how they correlate to ownership.
Sen. Elizabeth Warren announced she would be investigating the relationship further. While horribly tragic, the COVID-19 related deaths in nursing homes has also become a political hot potato for Democrats as a leading member of the party, Governor Andrew Cuomo is taking fire from right and left over his handling of nursing home admissions after hospitalization for COVID-19.
Redirecting attention away from misguided decisions and toward malfeasance of ownership makes for some good politics but uncertain if it will work. Staffing levels and other requirements of participating in the Medicare and Medicaid programs are generally enforced by state inspectors. There are wide variations in how often and serious those inspections can be and hence, CMS developed the star rating system and subsequently required actual payroll data to document staff levels.
The undeniable reality for the long term care industry is that institutionalized nursing care is in secular decline, to be replaced by more technology enabled home care, among other things.
GEN also was called out for paying the CEO a bonus in the middle of a pandemic that ravaged the industry. A worth point perhaps.
After Reconciliation. The House Energy and Commerce Committee is contemplating its health care priorities. Topping the list are reversing Trump-era changes to the Affordable Care Act, including restoring marketing and outreach, reversing certain mechanisms for pricing ACA exchange plans and, most important, expansion of short-term insurance plans and Association Health Plans.
In so doing Congress continues to look the wrong way. The ACA’s fundamental flaw is the 3:1 age-band that has made qualified health plans sold on the exchange, unaffordable for young people and sent them in search of options.
Demographics will decide the outcome. In the meantime, dwelling on restoring a c. 2010 policy to its former glory takes precious time from other initiatives, leaving Congress as largely irrelevant to the changing landscape for health care. (MOH, CNC, UNH)
I guess we can scratch Sidecar Health off the SPAC list.
HHS Confirmation. Xavier Becerra was confirmed as Secretary of HHS after a bit of grumbling by Republicans who sudden became concerned that a very political person was taking the helm of the free world’s largest health insurer and regulator.
Almost everyone in Washington is political, except perhaps my brother’s Labrador retriever, Lily. So, the (barely) minority view was a bit silly. Certainly, Becerra led the fight by attorneys general to defend the ACA. His 12 years in Congress means he knows a lot of people and can navigate partisan minefields.
However, we do think it is fair to note that Republicans have generally appointed leadership in the health agencies that were less highly charged, politically. That may have more to do with the fact that health care has never been occupied the minds of the Republican Party quite like is does for Democrats.
Regardless, expect Becerra to be synced up nicely with the priorities of the House and Senate on reversing certain ACA-related Trump policies.
Rules Action.
Centers for Disease Control and Prevention Eviction Moratorium. Yesterday, the White House began review of a rule related to a moratorium on evictions. Using the pretext of a rise in homelessness due to COVID-19 evictions and the potential for disease spread in crowded shelter, the CDC place a moratorium on evictions in September. It was extended twice and is set to expire March 31.
The administration appears prepared to extend it again.
Cat & Mouse. The administration and public educators continue their cat and mouse game. The latest move is another attempt by the CDC to eliminate excuses that have delayed school re-openings. The CDC now recommends that maintaining 3 feet of distance is sufficient for social distancing in the classroom.
The distinction is an important one because the earlier guidance of 6 foot between desk significantly reduced class size, something most school districts were not prepared to do.
No word on whether the rest of us can get closer.
Other Stuff.
Testing Everywhere. The White House announced they would be sending to the states $10B to support additional testing, contact tracing and diagnostics. In total, Congress has appropriated $98B for this purpose so you can be assured the mother of all base-effect to be in place for another year or so.
The additional funds are meant to be directed at asymptomatic surveillance by state and local health departments and their private sector partners. The politicization of testing – which was formerly used for the diagnosis and treatment of disease – left governors and presidents in need of demonstrating widespread surveillance. While the disease recedes and vaccinations explode, the need political need remains. Good news for DGX, LH, and many more.
We have managed to model a persistent baseline that will be subject to seasonal . Note on that next week.
ESG Investing. As expected, the Securities and Exchange Commission is gearing up to require certain climate change related disclosures. Acting SEC Chair, Allison Herren Less released a request for comment this week on new requirements
This move comes on the heels of the SEC taking up enforcement of ESG-related claims asserted by funds and other investment vehicles
SPAC and S-1 Corner.
Filed S-1s This Week
Brigantine Acquisition Corp. (MS - $600M) Technology, including health care IT
aglion health (JPM - $100M) Another PCP Direct contracting play
Falcon Acquisition Corp. II (GS - $400M) Health/wellness
FirstMark Acquisition III (CS - $400M) Technology but FirstMark Ventures is a RO investor.
Healthcare Merger Corp. II (Cantor - $300) Health care generally, Magellan pedigree
H.I.G Acquisition Corp. II (Jefferies - $300M) Technology and health care
Mistico Acquisition Corp. (MS - $400M) General but included health care IT
ONS Acquisition Corp. (Ladenburg - $200M) ESG Focused
Quiet Plus I Acquisition Corp. (CS- $250M) Technology, including digitalization of health
Skydeck Acquisition Corp. (JPM - $250M) Digital Health
Spindletop Health Acquisition (Barclays - $200M) Health care, generally.
S-I Notice of Effectiveness
Golden Arrow Merger Corp. – GAMCU - Health care and health care related infrastructure (3/16/2021)
GX Acquisition Corp. II – GXII - General, including health care (3/17/2021)
Research Alliance Corp. II – RACB – Biotech (3/17/2021)
Revolution Healthcare Acquisition Corp. – “intersection of healthcare, life sciences and technology.” (3/17/2021)
Initial Business Combinations in Process
ARYA Sciences Acquisition Corp III – ARYA - Nautilus Biotechnology ($900)
Alpha Healthcare Acquisition Corp - AHAC – Humacyte
Big Rock Partners Acquisition Corp – BRPA NeuroRX
Our Take = NeuroRX is developing a drug regime for the treatment of bipolar disorder and Acute Suicidal Ideation/Behavior. Reported this week preliminary results from their Phase 2b/3 trial of ZYESAMI™ (aviptadil, previously RLF-100) performed in collaboration with Relief Therapeutics Holdings, AG (SIX:RLF; OTCQB:RLFTF) in patients with respiratory failure due to Critical COVID-19. The study showed that patients who were treated with the maximal standard of care plus ZYESAMI were discharged sooner from the hospital compared to those treated with placebo plus maximal standard of care (SOC)
Deerfield Healthcare Technology Acquisition – DFHT -CareMax/IMC Medical
Our Take = Caremax’s TAM is the Medicare Advantage market like $CLOV, $OSH and they appear to be establishing themselves as a risk bearing entity in partnership with health plans and providers. IMC Health is a primary care practice that paired with CareMax’s risk-bearing solutions might make a good combination. We will reiterate, the MA market is getting highly penetrated, especially in urban areas and the competition for patients will be fierce. Both companies are based in Florida. New: Preliminary Proxy statement
Falcon Capital Acquisition – FCAC Sharecare ($3.8B)
Our Take = We have been familiar with Sharecare for years and remain a little dubious. Sure, employers are getting more involved in managing their health care spend. Yes, digital therapeutics are a thing. Yet, we remain skeptical. Perhaps a deep dive into the Proxy statement will help. Yesterday, Sharecare completed its umpteenth acquisition, doc.ai, an enterprise artificial intelligence platform.
Fortress Value Acquisition Corp. – FAII ATI Physical Therapy ($2.5B) Link to press release.
Our Take = The company operates 900 physical therapy clinics in 25 states focused on MSK treatment. Their client base includes employers, sports teams and individuals. Policy is pushing MSK procedures out of the hospital setting and away from captive sports medicine departments.
GigCapital2– GIX Uphealth/Cloudbreak Health
Our Take = Uphealth is a digital platform designed to manage chronic and complex care, medications and behavioral health. Cloudbreak provides a telehealth solution that includes quarantined inpatients. One of Cloudbreak’s most interesting features is its multilingual capabilities which should be accretive for providers in communities with non-English speaking patients. Not sure Uphealth offers enough to get behavior to change or encourage adoption. New: Presentation.
GX Acquisition Corp – GXGX Celularity ($1.7B)
Our Take = We love anything that pushes cell-level therapies and diagnostics forward. The company has several cell therapies in clinical and pre-clinical development that deploy allogeneic placenta derived cells. New: Press Release.
Hudson Executive Investment Corp – HECCU Talkspace ($1.4B)
Our Take = Behavioral health via telemedicine will prove to be one of those COVID-19 trends that endures. It solves several problems for the incumbent system: availability of providers, cost and productivity. Behavioral/mental health services largely exist outside the health insurance system which eliminates a lot of regulatory risk
JAWS Acquisition Corp – JWS Cano Health
Our Take = Cano represents what we believe will be the most formidable Direct Contracting model in Medicare. Cano is participating in the implementation stage of the first two Direct Contracting Models. The primary care focus gives maximum insight into patient condition, needs and behaviors that can be influenced to avoid high cost care. One caveat since we still bear the scars of PhyCor: physicians drive patient flow and if you don’t keep them happy, they go elsewhere.
Longview Acquisition Corp – BFLY Butterfly Network
Our Take = Butterfly makes portable ultrasound devices for the human and animal health markets. Portable means greater efficiency which is going to continue to be important as the health care delivery system works through the backlog of cases created by COVID. The Teleguidance system could prove to be valuable in areas with limited access to advanced technology.
Motion Acquisition Corp – MOTN Ambulz (d.b.a DocGo)
Our Take = The company is working with Medicaid agencies to provide non-emergency transportation using modern app discharge tools. There is no doubt that NEMT in Medicaid is needed and the supply chain is decentralized, often undependable and frequently poorly trained. However, we need to see more as ambulance services had had a lot of reimbursement difficulties in years past.
VG Acquisition Corp. – VGAC 23andMe
Out Take = 23andMe plans on a future in drug development using their extensive library of genetic data. It seems like a reasonable plan, but privacy concerns are likely to be a feature of this company’s regulatory environment for some time to come.
Interesting tidbit on VGAC – In the year-end spending deal, Congress made the following request:
Sec. 321. Assessment by the Comptroller General of the United States on efforts of the intelligence community and the Department of Defense to identify and mitigate risks posed to the intelligence community and the Department by the use of direct-to-consumer genetic testing by the Government of the People's Republic of China.
I am sure it is nothing….
If you are investing in SPACs but not super familiar with health care, hit and we can help.
Upcoming Events.
Due to SPAC-madness, we have all become interested in venture funding. On April 7, Marcus Whitney of Jumpstart Nova Fund will join us in the Hedgeye Studio to about the VC investing process, why health care is a good place to hunt for deals and the many mistakes that get made (still). Look for invite soon.
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Emily Evans
Managing Director – Health Policy
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