NeueHealth, Inc.

NeueHealth quickly raised money after saying in a Securities and Exchange Commission filing it needed capital to stay afloat. Just days after issuing executive bonuses for hitting performance measures, NeueHealth increased its loan commitment on its amended credit facility by $30 million. NeueHealth will have access to $20 million immediately and the final $10 million after 180 days. The company, then known as Bright Health, released a similarly worded announcement in August when it first entered into an agreement with investment partner and majority shareholder New Enterprise Associates in August for $60 million. That agreement was to support capital requirements to close the sale of its Medicare Advantage business to Molina Healthcare. Despite the influx of cash, a loan increase in October from the California State Teachers Retirement System (CalSTRS) pension fund for $6.4 million, and virtually no mention of needing capital during its most recent earnings call, NeueHealth said in its recent 10-K filing that it need would need capital to continue operations. Less than two weeks later, NEA agreed to invest once again, as healthcare strategist Ari Gottlieb predicted it would. NEA now owns more than 60% of NeueHealth, a 10% increase, he said. "I'm surprised they didn't go to a payday lender," Gottlieb chirped. "They'd have gotten better terms." It's anyone's guess why NeueHealth settled for wanting $30 million or what the funds will be used for. The company said in its most recent news release the money would be put toward "general corporate purposes." NeueHealth also announced it would issue penny warrants of 1.11 million shares of the company's stock, up to a total of more than 2.76 million shares since it first entered the credit agreement. Utilizing a New York Stock Exchange exception typically reserved for companies in dire trouble, the company's audit committee on the board of directors waived the requirement requiring shareholder approval, warning it would "jeopardize" the financial viability of NeueHealth to wait. Identical language was used by the company in August. Gottlieb wondered why the cash is needed so urgently and how cash is getting depleted so rapidly. A new clause (PDF) was also hidden within Wednesday's 8-K Securities and Exchange Commission filing that was not present within the company's filing in August. It allows NEA to appoint one of its own members to the NeueHealth board, increasing the board's size to 11 members. Responding to a request for comment regarding the willingness of NEA and CalSTRS to continuously invest in NeueHealth, a Centers for Medicare & Medicaid Services spokesperson said this week it "does not take a position" on corporate governance matters, instead deferring to state insolvency processes and corporate law. "CMS uses all debt collection processes available to the federal government to enforce the collection of these debts," said the spokesperson in an email. "Under HHS risk adjustment’s budget-neutral framework, the amount of payments paid out to issuers in a state market risk pool cannot exceed the total amount of charges collected."

Bright Health CEO Mike Mikan received a larger cash bonus last year than in 2022. Despite being compelled to pay $380 million in risk adjustment payments to health plans, selling its Medicare Advantage business for less than expected, being put into receivership in Texas, finalizing a reverse stock split to avoid delisting from the New York Stock Exchange, posting a net loss of $1.3 billion last year and laying off staff, the insurtech formerly known as Bright Health gave out a $1.95 million cash bonus to CEO Mike Mikan in 2023. The bonus was an increase over the $1.69 million bonus he earned in 2022. "It's just sort of outrageous," said Ari Gottlieb, a healthcare strategist for A2 Strategy Corp. Once factoring in the base salary of $1.3 million and all other compensation, the CEO earned nearly $10 million in total compensation last year. That is virtually the same amount as 2022. "We provide our executive officers with a mix of pay that reflects our belief that executive compensation should be tied to an appropriate balance of both short and long-term performance," the company said in a recent proxy filing. Chief Financial Officer Jay Matushak and Executive Vice President of Consumer Care Tomas Orozco received approximately $873,000 collectively in cash bonuses last year. Yet the long-term prospects of NeueHealth are questionable. "Although we raised capital in 2023, based on our projected cash flows and absent any other action, we will require additional capital, which might not be available on acceptable terms, if at all," NeueHealth's latest 10-K filing said. "We believe that the existing cash on hand and investments will not be sufficient to satisfy our anticipated cash requirements for the next twelve months." Under a relatively new executive pay table designed to track change in pay over time, as required by the Securities and Exchange Commission, the compensation actually paid to Mikan was a loss of $633,000 after factoring in equity value, whereas average compensation for other executive officers was a gain of $83,000. Mikan was once named the top paid U.S. fintech CEO in 2021 by SP Global when his total compensation surged to $181 million in 2021, largely from stock incentives and option awards as part of the company's $924 million initial public offering. His total compensation decreased to nearly $10 million in 2022, though the compensation actually paid figure declined to a loss of $35 million. His cash bonuses, however, have increased each year from 2021 to 2023. NeueHealth execs received scrutiny for bonus payouts last year when the management team was awarded more than $4 million in bonuses. The company has been littered with reports of layoffs since its IPO, most recently 68 employees at its Bloomington, Minnesota, headquarters, the Star Tribune reports. "If you're able to perform, you should get paid," said Gottlieb, noting that better-performing companies in the space do not give such large bonuses. "I have no problem with that. This is just offensive. One of my clients [a nonprofit health plan] is still waiting on money from Bright that they owe them from risk adjustment payments." NEA and CalSTRS involvement   The bonuses were approved by the company's compensation committee. It includes Chair Jeff Immelt and members Mohamad Makhzoumi and Manuel Kadre. Immelt, a self-described math nerd, is the former CEO of General Electric from 2001 to 2017 and board chair of athenahealth from 2018 to 2019. Both Immelt and Makhzoumi are tied in various roles to New Enterprise Associates (NEA), a venture capital firm and majority shareholder of NeueHealth. The California State Teachers Retirement System (CalSTRS), a large investor in NEA and a pension fund with a large portfolio, has co-invested alongside NEA in NeueHealth over the years. CalSTRS loaned NeueHealth $6.4 million in October at 15% interest, just months after NeueHealth entered into a $60 million agreement with NEA. It's unclear the full scope of CalSTRS' involvement in NeueHealth. NEA and CalSTRS did not immediately reply for a request to comment. Given NeueHealth's need for additional capital to stay afloat, the company said it is engaged with the board of directors and outside advisors to find more financing routes. "The suspicion is when Bright says they are actively engaged in raising money, it means they're talking to NEA," said Gottlieb. "They're the only ones foolish enough to give them more money. They're choosing to give dollars to management, for some reason. I can't even begin to speculate as to why." NeueHealth has paid $1.5 billion of its 2022 risk adjustment obligations in September 2023, though it still is engaged in repayment agreement with the Centers for Medicare & Medicaid Services (CMS) to the tune of $380 million at a 11.5% interest rate. The Texas side of the insurance business was put into liquidation, leaving $291 million of the risk obligation due by March 2025. Gottlieb estimates the company is approximately $1.4 billion in debt after accounting for risk adjustment payments and money outstanding to investors like NEA, CalSTRS and other investors like Cigna Ventures. He also wonders why CMS, when it agreed to the interest-only payment agreement, would not include protections against cash bonuses. And if NeueHealth goes bankrupt, only CMS has to gain from the repayment agreement, since the feds collect the interest but no money goes to the health plans wrapped up in NeueHealth's mess. Former CMS Acting Administrator Andy Slavitt sits on the board of NeueHealth. He is not on the three-person compensation committee. CMS did not immediately return a request for comment. The state of Texas has a FAQ page dedicated to Bright Health claims, while Florida put Bright Health under administrative supervision in September 2022. That supervision was extended (PDF) until June. "My theory has always been that the best case scenario for Bright is that they get to March 2025, the day before these payments are due to the federal government, and they file for bankruptcy protections," said Gottlieb.

None Below is a round-up of payer-centric news for the week of Jan. 15., 2024 Humana announces 'limited' workforce reductions Humana laid off members of its workforce, the Louisville Courier Journal first reported earlier this week. The reductions occurred last week. In 2023, more than 1,000 employees were laid off and SeniorBridge home care facilities were closed permanently, according to reports at the time. "The impacted positions represented a small percentage of our total workforce and were geographically dispersed across multiple locations," said Mark Taylor, director of corporate communications, in a statement shared with Fierce Healthcare. Link found between Medicaid expansion and reduced lung cancer mortality Medicaid expansion may be associated with higher rates of survival for non-small cell lung cancer after surgery. Of almost 15,000 adults aged 45 to 64 in the National Cancer Database from March 2021 to September 2023, a "significant reduction" in 30-day and 90-day mortality was found, according to a JAMA Network Open study. In Medicaid expansion states, 30-day mortality decreased from 0.97% to 0.26% and 90-day mortality decreased from 32.63% to 1.32%. The difference in non-Medicaid expansion states was not considered statistically significant. So far, 41 states including Washington D.C. have expanded Medicaid coverage to all adults, as KFF tracks. Bright Health rebrands to NeueHealth Bright Health, an insurtech that recently sold off its Medicare Advantage business to Molina Healthcare, is relocating its corporate headquarters from Minneapolis to Florida and changing its name to NeueHealth. It will trade under NEUE on the New York Stock Exchange, effective Jan. 29. NeueHealth serves more than 500,000 consumers with more than 3,000 providers across the country. The company said the transition would occur over the coming months. Contraceptive use higher among MA enrollees A recent study in Health Affairs found that contraceptive use was higher among Medicare Advantage enrollees than traditional fee-for-service members, according to Medicare and Optum data. In Medicaid, 25% of enrollees had a contraceptive claim in 2018, compared to 16.3% of MA enrollees and 14.3% of traditional Medicare members. The authors inferred that Medicare claims are lower because coverage is not mandated and people could be paying out-of-pocket. "Relative to traditional Medicare, the probability of long-acting reversible contraception was more than three times higher in Medicare Advantage, and the probability of tubal sterilization was more than ten times higher," the authors said. The study noted that contraceptives can be used for pregnancy prevention, menstrual regulation, menorrhagia and endometriosis, and added that removing cost-sharing would relieve financial pressure on members. From 2017 to 2019, 65% of women in the U.S. used contraceptives, according to data from the CDC.