Carry: The policy changes have overtaken many health care PSPCs, but that won’t stop many telegenic advocates; something will surely go wrong.

Politics. Something is wrong.

More than 400 PSPCs have formed and approximately 100 business combinations have been announced. At least when it comes to healthcare, excluding biotechnology and pharmaceuticals, the quality of business combinations has so far not been attractive.

Deerfield’s CareMax / IMC Medical and Jaws’ Cano Health are focused on the very crowded Medicare Advantage market, just as demographic realities require special attention for young people. ShareCare by Falcon, Uphealth / Cloudbreak by GigCapital2, Talkspace by Hudson are even more digital platforms for managing care. VG’s 23andMe wants to monetize all the genetic data he has collected through drug development.

In the absence of sustainable business models that address key healthcare challenges such as price, efficiency and quality, PSPCs seem to rely on charismatic personalities to convince investors, large and small, regardless of who. either their experience or their credibility. So much so that the Twitter pleas from Chamath Palihapitiya’s fan base took on the tone of religious followers. “@Chamath give @Clover_Health a little love on Valentine’s Day what is your position are you optimistic, enthusiastic, optimistic about their future? We would love to hear from you… ”

The VG / 23andMe combination will certainly produce the most telegenic fundraising team ever, but investors should be wondering what aviation and genetic testing have in common. Other SPAC teams lean heavily towards technological experience. The working relationship between Silicon Valley and healthcare is troubled to say the least and likely will remain so, as $ CLOV has demonstrated.

There are few targets on Capitol Hill more enticing than the rich and famous. If something goes wrong, inevitable given the low standard of disclosure of a proxy statement, Elizabeth Warren, newly appointed to the Senate Finance Committee, will wait with a few questions.

Politics. It’s forgotten now, lost in the maelstrom of repeal calls, constitutional challenges and AstroTurf’d campaigns, but one of the legacies of the Affordable Care Act has been the launch of a thousand new business models. . Tested only on paper in the towers of Dartmouth and the University of Pennsylvania, the ACA was to herald an era of “folding the cost curve” especially in Medicare thanks to innovative payment models.

Equipped only with old Medicare data, health economists – an ironic title if there is one – concluded that federally funded programs like pooled payments, responsible care organizations, and models of coordinated care would improve outcomes and save taxpayers money by limiting inappropriate use.

Understanding this approach, known as “value-based buying”, would leave them on the wrong side of extracting value, a few hundred health systems like $ THC, CHI, Presbyterian Health in New Mexico and, Relevant to our goals, CareHealth (now known as $ CLOV) in New Jersey has launched provider-based insurers.

Unfortunately for these provider-sponsored plans, we’ve known since about 2015 that, except in a few areas like post-acute and primary care, value-based purchasing has had little impact on the cost of care curve. health. In fact, the costs have accelerated.

Provider-based insurers have struggled to scale in the face of rising costs and a significant institutional bias in favor of higher prices. By 2016, CHI, $ THC and others had closed their plans.

Since the policy evolved. While it is impossible for many health buffs to give up altogether the faith that the ACA has become, even the most dedicated quietly recognize that America’s health problems have everything to do with the price, maybe a little. to do with overuse and nothing to do with who runs the insurance company.

The focus over the next few years, accelerated by COVID, will be on improving productivity, controlling prices and, for the next generation of healthcare consumers, improving the experience.

That leaves us with many midsize companies hoping the ACA-led BCV will return in triumph as their investors look to take the next step.

Power. Like Clark Stanley, who moved from town to town at the end of the 19e century of selling Stanley’s Snake Oil and ultimately provided the inspiration for founding the well-known FDA, all you need to sell the unsaleable was a good story, a charismatic spokesperson and a willing audience.

When it comes to healthcare PSPCs, at least so far, the formula is the same. Last week, the Falcon acquisition from Alan Mnuchin announced a business combination with Sharecare, led by articulate and very compelling Jeff Arnold, and complimented by Dr. Mehmet Oz as a board member.

Atlanta-based ShareCare has been a curiosity for healthcare professionals for years. It supports employer-based insurance through wellness programs and other tools, but it’s hard to see what else there is to justify a multibillion dollar valuation.

We must conclude that PSPCs in the health field can be the mother of all exit strategies. What better way to escape an ugly business model with little political backing than to allow it to pose alongside an attractive lawyer, speak to the uninformed, and promise a bright future?

This should work long enough to move on to the next city, or at the end of the lockdown, whichever comes first.

Emily Evans is the Managing Director of Hedgeye Risk Management.

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