Raphael Stevens

In 2014, UnitedHealth acquired Audax Health at a time when there was considerable market buzz about digital health solutions giving the consumer more control over their wellness.
Audax has long since been absorbed by UnitedHealth’s vast technology business, Optum, and the health insurance field has shifted to a much broader focus on value-based provider care enabled by technology.
Audax founder Grant Verstandig served as UnitedHealth’s chief digital officer until the end of 2021, and now he is back at venture investing in disruptive ideas, including in health care, today.

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In this weekly series, CNBC takes a look at companies that made the inaugural Disruptor 50 list, 10 years later.
In 2010, Grant Verstandig founded Audax Health with a vision of putting more power in the hands of the health-care consumer and creating a digital interface to encourage and incentivize better health behaviors.

Like many entrepreneurs, Verstandig was inspired by personal experience, and frustration, with the health industry — a knee injury from his career as a college athlete had led to multiple surgeries. And he had some influential backers with deep experience in the health and consumer industries, including former Aetna CEO Jack Rowe and former Apple and PepsiCo president CEO Jack Sculley. Partnerships with big insurers, including Cigna, and consumer wearable companies, including Fitbit, spoke to the promise that a new era of digital health-care could result not only in better health outcomes, but lower costs for a national health-care sector that Warren Buffett has referred to as a “tapeworm” on the economy.
“All of health care has been built around the transaction model, but the reality is if we can find ways to engage people earlier, everyone can win from that,” Verstandig told CNBC in 2013.
Insurers were able to roll out digital tools through employers and Audax Health get paid for subscriptions on a per member basis in a business model that the founder told CNBC was, “threatening in some cases the same people we are working with.”
This disruptive theme led to Audax Health making the inaugural CNBC Disruptor 50 list in 2013.
The business was strong, and Verstandig believed an IPO was likely in the future for the company because being acquired by one of the existing stakeholders, in his view at that time, might compromise its level of trust among consumers. But a year later, the health-care industry had seen enough to decide it needed to lean into this idea and make it work within the existing business model: UnitedHealth acquired a majority stake in Audax Health in 2014, and Verstandig became chief digital officer at the major health insurance company, a position he only left in the fourth quarter of 2021. During his time at UnitedHealth, Audax was rolled up into a brand called Rally Health, a digital business wholly acquired by UnitedHealth in 2017.

Today, UnitedHealth has a major technology arm known as Optum, pushing all of its efforts forward at the intersection of technology and health, and while the Rally brand still exists, the evolution of digital health efforts has changed in important ways.
“The integration of Audax into Optum’s digital platform, which now serves more than 127 million people, continues to help us deliver new solutions that can make health care more precise, more effective and more equitable,” Phil McKoy, Optum’s chief information officer, said in an email statement to CNBC.
The field of digital health is consolidating, in moves that include other previous CNBC Disruptor 50 companies, and while consumer-facing technology like the original Audax model is still a key link within evolving health business, it isn’t as likely to stand alone as a solution. Incentivization or gamification is less a company or a business model in health care today than a feature integrated into treatment platforms, according to Megan Zweig, chief strategy officer at Rock Health, a health venture investor and consultant. Behavioral interfaces have a role to play in getting a patient to take a medication, and are being increasingly seen in software-based therapeutic plans, but Audax’s absorption by Rally and UnitedHealth speaks to a trend that has evolved over the past decade, with user interfaces having to be in the service of “something broader,” Zweig said.

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At United, the model is continuing to evolve.
Scott Fidel, a health-care analyst at Stephens who has covered UnitedHealth for two decades, remembers the Audax acquisition and wondering at the time whether tech investments could drive real improvements in the system. He says there are encouraging signs a decade later, such as a rate of health-care inflation that has come down in recent years relative to core inflation and could, at least partially, reflect the value of technology in achieving better health outcomes and lower costs.
And without a doubt, the use of technology on increasing scale has become key to a significant shift by the health-care incumbents to a valued-based care model rather than the fee-for-service model which dominated historically. Value-based care, a “pay for performance” model under which insurers and other payers provide more real-time data and analytics to providers, in turn requires providers to be more accountable for costs and patient outcomes. If they can deliver costs below a determined level, they may receive bonus payment, or financial penalties when the care falls short. Having access to real-time data is critical to making this model work, and United, through Optum and its Optum Care business, is one of the largest players in this shift, with over 2 million members covered fully through this type of arrangement. Meanwhile, Optum’s Insights database includes data from 270 million discreet individuals that can be run through machine learning and turned into actionable information for providers.
“The measurement of the data and having clinical metrics and outcomes data, is critical,” Fidel said, and the health-care industry has been investing billions in developing the measurement tools.
Fidel says there are signs from United’s financial performance that the investments in technology are having some positive impact. While the company’s overall spending level hasn’t grown that much — just from $2 billion in recent years to $2.5 billion — revenue has jumped from $157 billion in 2015 to $288 billion in 2021, while earnings per share has just about tripled. There are many factors that go into that, including M&A, and it is impossible to strip out the contribution from technology precisely (United does not report it as a line-item), but it is fair to assume that technology is a contributing factor.
That is even if the role of the consumer-facing tools are receiving less emphasis. Fidel said UnitedHealth management still talks about Rally any time they are discussing technology. “They still provide a moment to highlight Rally and other consumer engagement and behavioral engagement tools. It is still very much part of the strategy,” he said.
But the big realization in recent years has been that tools for the providers are essential to change behaviors in the health-care system. There is a need to push both patient and provider along together, and companies can’t lean too hard on one without the other.
“Rally is very still very prominently mentioned,” Fidel said, “consistently highlighted as a potential killer app in digital consumer tools.”
But those tools are peripheral relative to the broader theme of getting providers into the value-based care model and having the provider influencing the patient in conjunction with the tools.
UnitedHealth has been a leader among its peers in investing in entrepreneurial ideas, and its acquisitions have forced others to pay attention, but these start-up deals come in waves, and the buzz associated with certain ideas does fluctuate over time. A decade ago, the consumer was a big focus, and many start-ups emerged around this disruptive theme. That buzz has faded, and shifted to different ideas. But it doesn’t mean the tools go away or lack value today. “It’s just more of the established legacy architecture as the system continues to evolve,” Fidel said.
Ten years ago, wellness and population health start-ups were attracting high multiples. Right now, the mega theme and buzz has moved more to bigger ideas like value-based care, but the investments from those prior cycles support this shift, even if the Audaxes of the world are no longer “the tip of the spear,” Fidel said. 
Zweig said digital tools continue to find new uses in health care, and one that has seen a high level of funding in recent years is focused on supporting research and development and drug discovery, including digital tools for clinical trial recruitment and management. “There are lots of changes happening, transformation in clinical trials and virtual trials and lots of investments there,” she said. 
Indeed, when Verstandig left UnitedHealth at the end of 2021 and returned to venture investing in disruptive ideas full time as co-founder of Red Cell Partners, one of the companies his VC firm first invested in is Zephyr AI, a machine learning start-up focused on drug discovery. Former Aetna CEO Jack Rowe remains a key advisor to both Red Cell Partners and its portfolio companies. And Verstandig is still talking in terms of disrupting a a frustrating, costly health-care industry, and including the consumer in his vision, even if it’s through a different business model today.
“We live in a modern world, but very little about our current healthcare system is innovative,” Verstandig, now executive chairman of Zephyr AI’s board of directors, said in a release this week announcing a new CEO at the company. “Zephyr AI believes that machine learning is a necessary component for the future, offering an ability to improve our struggling system in significant ways, by driving down the cost of important trials, easing burdens for doctors, and quickly bringing personalized healthcare information directly to the patient. This disruption will effectively lead to better outcomes for the patient, the provider and the community.”

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The designation is further validation of Ford CEO Jim Farley’s belief the company can not only compete with Tesla but also beat Elon Musk when it comes to EVs.
Consumer Reports says reliability data it has collected shows the Mach-E has very few problems, so far. 
That data, along with owner reviews and testing conducted by the nonprofit group, prompted Consumer Reports to make the Mach-E its “Top Pick” for an electric vehicle.

Ford’s Mustang Mach-E, the automaker’s bold bet to lead its transformation into selling more electric vehicles, replaced the Tesla Model 3 as Consumer Reports’ “Top Pick” for an electric vehicle in 2022.  
The designation is further validation of CEO Jim Farley’s belief Ford can not only compete with Tesla but also beat Elon Musk when it comes to EVs.

Jake Fisher, senior director of automotive testing at Consumer Reports, says he was impressed with the Mach-E as soon as the nonprofit group bought it. “Not only is it a really fun vehicle to drive, it is sporty, but it is also extremely mature,” Fisher told CNBC. “When I say that it rides nice, it is very quiet. I mean it really feels well built.”

People visit Ford’s all-electric SUV Mustang Mach-E at the 2019 Los Angeles Auto Show in Los Angeles, the United States, Nov. 22, 2019.
Xinhua via Getty Images

Consumer Reports says reliability data it has collected shows the Mach-E has very few problems, so far.  That data, along with owner reviews and testing conducted by Consumer Reports, prompted it to make the Mach-E its 2022 “Top Pick” for an electric vehicle, replacing the Tesla Model 3.
Consumer Reports is still recommending the Model 3, but Fisher says the small electric car fails to match the Mach-E in certain areas, most notably when it comes to hands-free driving and alerting drivers who fail to pay attention. Ford’s BlueCruise system uses a camera to monitor and alert drivers when they are not paying attention. The Model 3 also has a camera watching the driver, but Consumer Reports says that camera could be more effective.
“In our tests we can cover up the camera, we could not look at the road and it really doesn’t give any alerts to the driver to make sure they are looking where they are going,” says Fisher.
Overall, Tesla fell seven spots to 23rd place in Consumer Reports ranking of 32 major auto brands. It’s the poorest showing in the seven years Tesla has been included in the “Top Picks” issue.

In addition to concerns about Tesla’s Autopilot system, Consumer Reports is critical of the automaker’s steering yoke, a change from the steering wheel in the Model S and Model X. Fisher says using the yoke is frustrating. “It is not just about making it harder to turn the wheel, but they also got rid of the turn signal stalk,” he said.
Fisher added that the quality of the “Top Picks” for 2022 are better than ever, with the brands once again dominated by Japanese automakers. Subaru was rated No. 1, followed by Mazda, BMW, Honda and Lexus. At the bottom of the list this year are Mitsubishi and GMC, just above Jeep which was the lowest-rated brand.
 CNBC’s Meghan Reeder contributed to this report.

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California’s plan aims to pick up rising viral transmission early and rapidly sequence new variants to determine whether vaccines and therapeutics are still effective.
The state also aims to rapidly deploy additional testing and hospital staff to regions impacted by an outbreak.
The state could reimpose mask mandates depending on the dominant variant and how much disruption it’s causing.

A COVID-19 testing location is shown set up on the sidewalk in downtown Los Angeles, California, November, 16, 2021.
Mike Blake | Reuters

California on Thursday laid out a plan that manages Covid as a permanent aspect of life, anticipating future surges and new variants that may require temporary public health measures such as facemasks depending on how much the virus is disrupting economic and social activity.
Gov. Gavin Newsom said California, the largest state economy in the U.S., is shifting out of the crisis mentality that has characterized the pandemic response for the past two years. Newsom said the Golden State must learn to live with the virus by preparing as much as possible for an uncertain future using the tools developed over the past two years.

“We have all come to understand what was not understood at the beginning of this crisis — that there is no end date, that there is not a moment where we declare victory,” Newsom said during a press conference Thursday.
California’s response plan aims to use wastewater surveillance to detect rising viral transmission early, so the state can rapidly identify new variants as they emerge and determine within 45 days if vaccines, tests and therapeutics are effective against the strain. The state would then quickly deploy additional testing and health-care staff to regions impacted by rising transmission, according to the plan
Health Secretary Dr. Mark Ghaly said the state’s response will depend on the dominant Covid variant circulating at any given time, how much disease the variant is causing, and how many people are hospitalized by the strain.
Ghaly did not provide specific triggers that would result in the imposition of public health measures. He said a more deadly variant might require California to focus on infection numbers, while a less virulent strain may demand a focus on hospitalization numbers.
Ghaly said California will probably experience seasonal Covid surges in the fall and winter, and the state will closely monitor whether those surges are caused by new variants of concern or familiar ones. The health secretary said the state could impose temporary, targeted measures such as masks if the particular Covid strain is causing serious disruptions to hospitals and businesses.

“There may need to be a time when we all wear masks to get through certain situations, so we don’t overwhelm our health-care delivery system or cripple our businesses,” Ghaly told reporters during a teleconference Thursday.
California plans to surge health-care staff by 3,000 within three weeks if needed during an outbreak. The state will also maintain the capacity to administer at least 500,000 Covid tests and 200,000 vaccines daily. California will stockpile 75 million high-quality masks, thousands of ventilators, and procure another 30 million over-the-counter Covid tests, according to Ghaly.
California will also focus on keeping people updated on their vaccines, particularly children who only recently became eligible as well as the elderly and those with compromised immune systems, Ghaly said.
The omicron variant caught the federal and state governments by surprise as it stormed the U.S. in December and January, causing an unprecedented level of infection due to the variant’s ability dodge immunity from vaccination and prior infection. Hospitals faced staffing shortages as waiting rooms flooded with new patients, and the public struggled to get tested as the sudden spike in demand left pharmacy shelves empty.

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As the omicron wave subsides, state governments are easing public health measures and looking for ways to provide the public with a semblance of normalcy while preparing for an uncertain future.
California let its universal indoor mask mandate expire on Tuesday. The vaccinated are no longer required to wear masks indoors, though state health officials strongly encourage them to do so. People who are unvaccinated, on the other hand, are still required to wear masks when they enter indoor public places such as shops, restaurants and theaters.
California’s mask mandate for schools remains in effect. State health officials will evaluate what the pandemic looks like in California at the end of the month and provide a timeframe for when the school mask mandate will shift to a recommendation, Ghaly said earlier this week.
California is reporting a seven-day average of about 13,800 new Covid cases per day, according to data compiled by Johns Hopkins University, down 61% over the past week. Average cases in the state hit a pandemic peak of more than 123,000 per day on Jan. 16.
Nearly 8,500 patients are currently in California hospitals with Covid, according to a seven-day average of data from the Department of Health and Human Services as of Thursday. That’s down 22% over the past week and about half of peak omicron levels seen in late January. The state’s pandemic high of more than 23,600 hospitalized Covid patients was set on Jan. 14 of 2021.
— CNBC’s Nate Rattner contributed to this report.

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The SEC’s oversight of Musk’s communications with shareholders is part of a 2018 agreement that settled civil securities charges against the billionaire.
Musk and Tesla thought settling the charges would end the agency’s “harassment” of Musk and allow the court, not the agency to monitor his compliance, Musk’s lawyer wrote in a new court filing Thursday.
“But the SEC has broken its promises,” he wrote.

Elon Musk, chief executive officer of Tesla Inc., waves while departing court during the SolarCity trial in Wilmington, Delaware, U.S., on Tuesday, July 13, 2021.
Al Drago | Bloomberg | Getty Images

Tesla CEO Elon Musk accused the Securities and Exchange Commission of harassment in a calculated effort to “chill” his right to free speech in its oversight of his communications with shareholders as part of a 2018 agreement that settled civil securities charges against the billionaire.
Musk and Tesla thought settling the charges would end the agency’s “harassment” of Musk and allow the court, not the agency to monitor his compliance, Musk’s lawyer wrote in a new court filing Thursday. “But the SEC has broken its promises,” he wrote, alleging that the agency has been “weaponizing the consent decree by using it to try to muzzle and harass Mr. Musk and Tesla.”

The agency also hasn’t yet distributed to shareholders the $40 million it fined Musk and the company as part of the 2018 settlement, according to the filing, which seeks a hearing on the matter.

“The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government,” Alex Spiro, a lawyer for Musk and Tesla, said in the new filing, seeking to bring the agency’s 2018 securities case against him to a close. “The SEC’s outsized efforts seem calculated to chill his exercise of First Amendment rights rather than to enforce generally applicable laws in evenhanded fashion.”
The letter comes more than a week after Tesla disclosed that the SEC issued a new subpoena to the automaker in November 2021.
The financial regulator is trying to determine whether Musk and Tesla complied with a revised settlement agreement that the SEC struck with them in 2019. According to Tesla’s filing, the agency is seeking information on the company’s “governance processes around compliance with the SEC settlement, as amended.”
The subpoena came shortly after the celebrity CEO polled his tens of millions of Twitter followers in asking if he should sell 10% of his stake in Tesla. They voted yes. But a major portion of the sales that followed the Twitter poll were part of a plan that Musk adopted in September 2021.

The SEC charged Musk in September 2018 with making “false and misleading” statements to investors when he announced that August via Twitter that he had secured enough funding for a massive private buyout of Tesla at $420 a share. The stock seesawed all month and the deal Musk alluded to never materialized.
Musk and Tesla had to each pay $20 million in fines and Musk was forced to step down as chairman for at least three years as part of the revised settlement agreement. Tesla also had to put in place a system for monitoring Musk’s statements to the public about the company, whether on Twitter, blog posts or any other medium.
Tesla also had to appoint two independent directors to its board. Under the terms of the agreement, Musk and Tesla neither admitted nor denied wrongdoing alleged by regulators, but they also could not claim innocence.
The Thursday filing came hours after Musk tweeted a meme comparing Canadian Prime Minister Justin Trudeau to Adolf Hitler. It was in response to an article about Canadian authorities investigating cryptocurrency donations supporting a weekslong protest against the country’s vaccine mandate.
Musk’s tweet caused a public backlash. The Auschwitz Museum wrote in a reply to him on Twitter: “Using the image of Adolf Hitler & therefore exploiting the tragedy of all people who suffered, were humiliated, tortured & murdered by the totalitarian regime of Nazi Germany created by him is sad & disturbing. It disrespects the memory of all victims & hurts many people.”
Musk eventually deleted the tweet.
The SEC declined to comment on Thursday. However, Judge Alison J. Nathan who presided over the case (United States Securities and Exchange Commission v. Musk) on Thursday ordered the SEC to respond to Musk’s allegations by Feb. 24.
 — CNBC’s Lora Kolodny contributed to this report.
Clarification: This story has been updated to clarify that the major portion of the sales that followed the Twitter poll were part of a plan that Musk adopted in September 2021.

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A U.S. Marine Corps Reservist from New York who previously was arrested on charges related to participating in the Jan. 6 Capitol riot has been charged in a new case of conspiring to sell fake Covid-19 vaccination cards to fellow reservists
The reservist, 26-year-old Queens resident Jia Liu, is accused of conspiring with a nurse named Steven Rodriguez, 27, to defraud the U.S. Department of Health and Human Services in the fake card distribution scheme, according to prosecutors in U.S. District Court in Brooklyn.
Liu was charged in October by federal prosecutors in Washington, D.C. for entering the Capitol grounds during the Jan. 6, 2021, riot, and other crimes connected to the invasion of the halls of Congress that day by a mob of supporters of former President Donald Trump.

Source: Department of Justice

A U.S. Marine Corps Reservist from New York who previously was arrested on charges related to participating in the Jan. 6 Capitol riot has been charged in a new case of conspiring to sell fake Covid-19 vaccination cards to fellow reservists, prosecutors said Thursday.
The reservist, 26-year-old Queens resident Jia Liu, is accused of conspiring with a nurse named Steven Rodriguez, 27, to defraud the U.S. Department of Health and Human Services in the fake card distribution scheme, according to prosecutors in U.S. District Court in Brooklyn.

Liu separately is charged with providing these cards to Marine Corps reservists, thus defrauding the Defense Department.
The Defense Department previously ordered that all active and reserve military service members be vaccinated against Covid from August to January.
Liu’s alleged distribution of the fake cards to other Marin reservists helped them evade this requirement, prosecutors noted.
“By deliberately distributing fraudulent COVID-19 vaccination cards to the unvaccinated, the defendants put military and other communities at risk of contracting a virus that has already claimed nearly one million lives in this country,” stated U.S. Attorney Breon Peace.
“This Office remains committed to rooting out and prosecuting those individuals who threaten our public health and safety for profit.”

Prosecutors said the scheme led to more than 300 stolen or false vaccine cards circulating and created more than 70 false entries in immunization databases.
That allowed “unvaccinated individuals to receive the Excelsior Pass, which displays a user’s vaccination status in a digital app,” the U.S. Attorney’s Office said in a press release.
The scheme allegedly ran from March 2021 through this month.
Prosecutors said Liu and Rodriguez, who worked in a Long Island clinic, “promoted their scheme through messages on encrypted messaging applications and on social media.”

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“They referred to COVID-19 Vaccination Cards using code names, such as “gift cards,” “Cardi Bs,” “Christmas cards” and “Pokemon cards.”
Court documents say Lin bought blank vaccine cards, from Rodriguez, and then forged and distributed them to buyers and other co-conspirators for a profit.
Liu also told buyers to meet Rodriguez in person at the clinic where he works to buy fraudulent cards, documents say.

Source: Department of Justice

“Rodriguez would meet the buyer, but instead of administering the vaccine he destroyed a vial of vaccine intended to be used to vaccinate a patient,” prosecutors said.
“He then provided a forged COVID-19 Vaccination Card to the buyer that he completed to make it falsely appear that the buyer had received a dose of vaccine. He further made entries in the Immunization Databases falsely indicating that the buyer had been vaccinated.”
Liu was charged in October by federal prosecutors in Washington, D.C. for entering the Capitol grounds during the Jan. 6, 2021, riot, and other crimes connected to the invasion of the halls of Congress that day by a mob of supporters of former President Donald Trump. The criminal complaint contains images of him in and around the Capitol that day.

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