Calling Shenanigans on Livongo

Investment Analysis Clubs Saul’s Investing Discussions
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And on top of that I don’t believe in behavior modification working at scale

It will have an impact on people when the insurance companies start adding a “non-compliant fee” onto their monthly premium.

I just recently retired, and our insurance carrier charged anyone that used a tobacco product an extra $100 per month for insurance. This would be refundable if they quit within the calendar year after signing up for one of their health programs.

Now all of us nonsmokers were indifferent to the tobacco fee until it was asked how long before they come after the people that are over weight, diabetic, have hypertension, etc. We could see a time in the future where they will expect you to be compliant in living a healthy lifestyle or pay an additional fee.

gcr

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remote monitoring is rapidly becoming the new standard in health and care. as an example a family member was fitted with a pacemaker that can be remotely monitored via the internet Before that it was a pulse monitor, constantly monitored, which notified my health care provider with ecg readings. That found the arrhythmia problem leading to the pacemaker install.
IOT at work
Other big prizes are obesity and mental health, rather obviously the present system is not dealing well with them. I have more doubts about utility of LVGO here

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Denny did not know that the insurance companies only pay for LVGO if the employee uses it. Thus avoiding that large group who will never help themselves.

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Hi GolfCaddy4PLynch,
From my reading of their papers the biggest short term cost savings is the number of ER visits. From my reading of diabetes papers the biggest long term cost savings stems from the number of ER visits saved, plus the number of complications that don’t need to be treated because they didn’t develop. The metrics relating blood sugar levels to care cost have been developed in several nations (relating blood sugar to care cost) including the British NIH and the American Diabetes Association. Both have big databases of patients.

Basically Livongo offers preventative maintenance (pay me now or pay me later stuff (from the old oil change commercial)). It’s cheaper to care for someone who stays healthy.

Chemfool2

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Hypertension is not always or even mostly driven by life style choices
According to the Mayo Clinic. “For most adults, there’s no identifiable cause of high blood pressure. This type of high blood pressure, called primary (essential) hypertension, tends to develop gradually over many years.”
As long as weight and diet is kept to a responsible level this can be controlled by medications taken only 2 or 3 times a day. Even then compliance can be spotty

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BD,

Feel free to email me any responses I think we all know where we stand here and don’t want to further clog the board.

Actually, as others have also posted, I think this thread has been extremely helpful for those invested in, or considering investing in LVGO. This is not clogging the board, this is great discussions going on (much better than the hundreds of Zoom anecdotes we got that my uncle’s girfriend’s son’s company is using Zoom for their calls), and also appreciate hearing both sides of the investing thesis to avoid group think and confirmation bias.

That said, I don’t agree with your position. Full disclosure: LVGO has grown into my largest holding and I couldn’t be happier/more confident in it’s future! I bought most of my position in the low $20’s in the first few months of this year to bring it to a mid-sized holding in my portfolio, it then did the rest to become my largest position.

ONE large client comes out and says it didn’t work to drive down costs so they dropped the service - and the stock collapses.

It’s funny you say this, then in the next sentence list Crowdstrike as an alternative company that indisputably works and therefore doesn’t have that risk (maybe putting words in your mouth, sorry if I am, but that’s the way it reads to me). What about Crowdstike having ONE large security breach to bring it crashing down and the stock collapses? Seems like just as valid a concern, right?

I know some here cite peer-reviewed studies that claim Livongo is lowering costs/improving health. I just think the possibility of these being skewed or the foundations of the studies being questionable are higher than in non healthcare tech.

I suppose that’s possible, but… I have some diabetes experience (not personally, but my Dad had it, and died from complications of it), and aren’t sure of what the typical costs are, but as Mauser pointed out in a previous post, they’re significant. Two years ago I had to make an emergency room visit for a kidney stone, some IV pain meds given, a couple xrays taken, and sent home in less than an hour and a half. I imagine this is much less than a diabetic would go through with a trip to the ER. My portion of that ER visit was $2800 (don’t remember how much my insurance also kicked in), I can EASILY see where Livongo has an incredible ROI for a WIN-WIN-WIN-WIN business model (enterprise, insurer, member, stockholder). And as others have pointed out, currently <1% of just the US diabetic population, not even considering the other conditions they’re now treating or the international expansion opportunity that exists, the greenfield TAM is staggering!

Keep the dissenting opinions coming!

Long LVGO.

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I don’t own Livongo because I don’t trust their engagement/ROI #s and at this point, I think the stock is acting like they’re going to sustain 100%+ growth which I don’t think will be the case.

Too many other good opportunities in my opinion and I’m willing to miss this one because of how unsettled I feel about it.

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Denny did not know that the insurance companies only pay for LVGO if the employee uses it.

Can you prove that I did not know?

I can prove that I did know.

Denny Schlesinger

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Actually, as others have also posted, I think this thread has been extremely helpful for those invested in, or considering investing in LVGO.

I want to second that. I know the board rules are pretty strict, and sometimes I feel they stifle discussions like this. As the previous poster was worried about “clogging the boards”. He’s afraid of having an on-topic discussion about a stock. I have no position in LVGO, and haven’t really looked at the company at all. However, it is just this sort of discussion that I (and I’m sure many others) would value. I would think this should be a must-read thread, along with some of the deep dives on the financials, if someone was considering investing in this company.

I realize this is bordering on OT per the rules, but I hope this will be left up on this board as an encouragement to engage in detailed discussions like this. IMO, this is what TMF was created for, and it’s why I’m here.

1poorguy

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Foodles,

Sorry about kidney stone. Ow.

CrowdStrike was not best example to use in that instance. But still it would have to be an absolutely catastrophic breach AND market would still need to believe another company could do better the next time. Longer distance to travel to get to devastation to company that could befall Livongo.

I totally get the story of how Livongo can win big. What I do not hear anyone saying is exactly how the company successfully modifies behavior to improve health and lower costs. And if they don’t really improve health, merely lower costs, then story is a bad joke. Founder and CEO talk a flowery game of their commitment to humanity.

So let’s say a worker, let’s call him Chubby Gilooly, is eating terribly, hates working out, is pulling double shifts at his computer terminal and keeps forgetting to take his meds causing him to return to doctor, need more expensive health care etc - exactly what does Livongo do? Send clips of Tony Robbins cheering him on? Do talk therapy for hours to address the emotional part of his whole person platform? Send alerts to his app to give him a Pavlovian shock as he salivates over the bacon wrapped chicken donut sandwiches his buddy brought to celebrate a birth?

I respect that Saul preaches let the money talk and trust that if the growth is there the product is almost certainly good so we don’t need to know intricacies of the tech. But I think that’s not way to go here. This is narrative investing gone wrong - a fantasy story of magical health care provided to a race of humans, Homo Reasonablus, that doesn’t exist.

I’m not commenting anymore as dad yelled at me once and I can’t take another beat down.

BD

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There is one other thing to consider about LVGO’s patient monitoring and reminder system. They collect data. Tons of it. That data will (should?) be fed to AI algorithms to “data-mine” new insights into diabetes and patient behaviors. AND, when something seems “wrong” to the observant little algo-puppies, they bark loud and tell the patient something that could save their life, like those dogs that bark when a person is about to have a seizure.

On human behavior: I hear you and agree somewhat. The Industrial Safety engineering community (people who design safety gadgets for machine shops and factories) will tell you that the LEAST reliable safety device protecting the life of a human IS THAT HUMAN. The human will disconnect a safety strap if it is uncomfortable, like refusing to wear a seatbelt in a car.

Nonetheless, the data can still be gathered, and many humans will do the right thing for themselves when reminded. And at some point, insurance companies will use the voluntary surveillance of the app to ding the human’s employer about non-compliance, just like how an automobile insurer might use their app that tracks the driver to ding them for speeding too much.

LVGO does have the potential to be overrun by some competitor. Their idea is easily duplicated and maybe improved. But it hasn’t happened yet. When it does, I hope we see it coming and get out before it has been commmoditized.

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Denny I meant that Idid not know, left out the"I"

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I respect that Saul preaches let the money talk and trust that if the growth is there the product is almost certainly good so we don’t need to know intricacies of the tech. But I think that’s not way to go here. This is narrative investing gone wrong - a fantasy story of magical health care provided to a race of humans, Homo Reasonablus, that doesn’t exist.

I had a longer post which disappeared into the ether.

I have been bullish on LVGO since it was at much lower prices. Being in medicine, I can tell you that this is not a “fantasy story of magical health care.” My longer term experience with patients gives me a window into the potential of LVGO. Your knock on LVGO for using a “whole human” approach seems wrong-headed. This is a strength since it is addressing multiple conditions and this increases its chance of success. All of these conditions are inter-related. And “behavioral health” is a legitimate part of medicine which addresses psychiatric issues, substance abuse and other disorders. It doesn’t have to produce earth-shattering benefits to be a huge winner. In addition, this pandemic has made LVGO’s telemonitoring indespensible and I believe this change in medicine will be long lasting. It won’t completely replace interactions with physicians but augment them.

I agree with your concern about the efficacy of LVGO’s approach. So I appreciate your bearish take even if some of your thoughts don’t seem perfectly founded and might be overly dramatic. The most successful companies all had their detractors - nobody thought SBUX could become a behemoth from making coffee!! - and their risks (our tech companies could be outflanked by better tech). But they all had one thing in common. They were top dogs in their niche - that describes all of our more successful companies. And they are each riding a huge wave. LVGO has risks and I always have doubts so it’s only 11% of my portfolio after its rise. But it has massive potential and its just getting started. It’s probably best to follow the money, ride the wave and not overthink things.

Dave

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Denny I meant that Idid not know, left out the"I"

The skinniest letter of the alphabet almost started a war, amazing! Thanks for clearing that up.

One of the articles I read before posting did mention it and I did a double take… “Is this material? If so, how?” Licensing software is not simple, charge too much and you price yourself out of the market, too little and you leave money on the table. Business wise it makes sense to charge per member.

There is a lot of value signaling in this thread (I don’t mean you) and, as far as I’m concerned it’s irrelevant. What matters is whether or not Livongo makes good on the promise to reduce the cost of healthcare. If it does it’s doing society a lot of good!

Denny Schlesinger

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So let’s say a worker, let’s call him Chubby Gilooly, is eating terribly, hates working out, is pulling double shifts at his computer terminal and keeps forgetting to take his meds causing him to return to doctor, need more expensive health care etc - exactly what does Livongo do?

Not the point. Probably not much to be done with Mr. Gilooly. But, there are lots of people who would like to do better than they manage to do on their own who are good candidates for help if the help is easy.

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LVGO does have the potential to be overrun by some competitor. Their idea is easily duplicated and maybe improved. But it hasn’t happened yet. When it does, I hope we see it coming and get out before it has been commmoditized.

But The idea may be duplicatable but I’m not certain about how easy that would be. You have got to build the database, garner the experience establish the AI framework and build the system and then market it. Surely that represents a few years of effort.??

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Surely that represents a few years of effort.??

During which Livongo is presumably improving on the quality and breadth of their offering. Catching up can be hard to do unless the leader relaxes or you have some “trick” that allows you to do something much faster than it was done before.

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Broadwaydan,
I am bullish on Livongo and have posted on it before. Several posts have covered many positive attributes of Livongo. Let me try to add a few points that may not have been discussed much.

  1. Whole-person approach - this is their moat. There are many 1 solution companies. Management has said that it is because of there whole-person approach where Livongo is looking at multiple chronic issues that helped them get Medicare approval. Livongo will continue to add more and more chronic conditions. Management has said that they plan to add cholesterol this year. Think of a feature where all your medical data goes into an AI database and you can actually predict the onset of a disease or a condition. Can AI, remote monitoring do that? That would be totally disruptive. But that is far into the future. It is not the thesis to own Livongo now of course. The thesis now is to manage chronic conditions slightly better so that we can save costs.
  2. Mental health - Management has said that it is the mental health feature that got 3x more use during the last 3 months.
  3. You say management is hyping. Both Glen Tullman and Zane Burke are veterans. They were running multi-billion $ health care companies. I find their knowledge of their business simply amazing. Look at all types of partnerships they have developed. It will be very hard to replicate by any new company.
  4. Behavioral modification - 35% of the members in a client sign up for Livongo as opposed to single digits for typical wellness plans. Think about that - it seems to me they are selling something that is wanted.

Best wishes

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Personal integrity of a company’s leadership is, along with vision, capability, and executive acumen, a sine qua non for me for holding a significant position. LVGO recently passed MSFT as my largest holding.

If i were asked to name 5 leaders in whom i have a high conviction in their honorable, shareholder friendly values, Glen Tullman would be on my list. He’s a recipient of the Ripple of Hope Award, an annual honor to those who make profound contributions to humanity. It’s run by Ethel Kennedy and named after Robert Kennedy’s “Ripple of Hope” speech. They carefully vet/scrutinize the character of recipients.

i have watched or read maybe 30 speeches, interviews, Q report transcripts by Tullman and believe i know him as well as any CEO among the large 100+ basket of stocks which i follow at varying levels of detail. He is brilliant and i think fully committed to living an honorable life. Without exception, the content of his public statements focus on larger issues than Livongo and i have never seen him hype the company in any way. It’s clear to me that his legacy as positive contributor to society is at the top of his life’s mission

Livongo is the last company i would have worried would overhype. To the contrary, Tullman especially is inculcated with modesty and that is reflected throughout the company, IMO.

As a disclaimer, i should add that i have been wrong about CEO integrity more than once. Most memorable to me was 2002 when i felt sure that Dennis Kozlowski was an capable, honorable executive who was getting a bad rap, and i lost a ton of money on TYCO.

I understand how to use the Internet better than i did then and make fewer mistakes. But that was not the only time i have wrong about CEO integrity. It is the most difficult element for me to be right about among my investment criteria. To be clear, leadership integrity is usually not a problem, IMO, most CEO’s try to fulfill their fiduciary responsibilities, and i am generally optimistic about people in that regard.

But integrity is critical. Buffett has said he looks for 3 qualities in hiring leadership: 1)intelligence or capability, 2)energy, and 3)integrity. “But if you don’t get the 3rd quality, the first 2 will kill you.” Buffett is right about that.

I’ve been ultra conservative about integrity the last 12 years or so, and have missed out on multiple opportunities due to doubts about leadership’s shareholder friendly values. While i could be wrong, Livongo would be the last on my list of integrity concerns among our hyper growth stocks. That’s not to say i am right in thinking LVGO will become a great company. That is a different question. But if i’m wrong about Tullman’s character, i’ll have to conclude that i simply don’t have the tools to assess that quality.

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