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  "docSlug": "747988e81365",
  "documentTitle": "Hims & Hers Health, Inc. (HIMS)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Spruce Point Capital Management",
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  "presentationDate": "2023-07-13 00:00:00",
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  "notes": "The slide uses a series of bullet points to build a case for regulatory non-compliance and structural obfuscation.",
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      "text": "We believe HIMS' “Friendly Professional Corporation” structure used to operate its physician network may not adequately comply with corporate practice of medicine (CPoM) regulations.",
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      "text": "However, we believe the Friendly PC structure used by HIMS is on shaky ground because it may violate two tenets of the CPoM.",
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      "text": "Second, we find clear evidence that HIMS exercises control over medical practice by the AMGs. Not only do HIMS' own accounting disclosures conflict with its regulatory obligations, but a past Business Insider investigation of HIMS and our discussions with former HIMS employees and physicians confirm that HIMS management plays a direct role in structuring, tracking, and evaluating physician decision-making and patient / prescription volumes and making medical personnel decisions.",
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      "text": "HIMS originally registered AMGs in various states under the Bailey Health name. However, the Company dissolved all Bailey Health entities and replaced them with new You Health entities from 2021 to 2022. Why? Based on our analysis of corporate filings, we believe HIMS may have done this to address previous mistakes that violate CPoM provisions.",
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      "text": "We find that only nine different physicians have owned HIMS AMGs, but that just two own all AMG entities, highlighting the dubious reality of HIMS' structure. Furthermore, our investigation into the backgrounds of several of these physicians yields some concerning findings... one doctor graduated from a Caribbean medical school with highly questionable accreditation... another currently lists three other current jobs but NOT his role at HIMS on his LinkedIn profile.",
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      "text": "Somewhat comically, we find that even HIMS struggles to describe the financial flows that result from the Friendly PC structure. HIMS treats the AMGs as variable interest entities and consolidates their financial results, which we believe obfuscates numerous key revenue and expense items that would provide investors great insight if the AMGs were really as separate as CPoM provisions require.",
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      "text": "First, physicians do NOT own the AMGs. While a single physician appears on entity registration documents, they have no equity ownership, voting rights, or financial claims. In fact, we believe they are “figureheads” who can be replaced at the whim of HIMS management. And other practicing physicians are not owners either, as they are contractors.",
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      "text": "CPoM provisions prohibit corporations from practicing medicine in order to avoid conflicts of interest. While CPoM provisions vary by state, HIMS seeks to operate within compliance by adopting the Friendly PC model, which is meant to (1) ensure physician “ownership” of the “affiliated medical groups” (AMGs) that provide care and (2) bifurcate business and medical activities so that the AMGs retain “exclusive authority” over treatment decisions.",
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      "text": "We believe HIMS' “Friendly Professional Corporation” structure used to operate its physician network may not adequately comply with corporate practice of medicine (CPoM) regulations. HIMS acknowledges in its SEC filings that a finding of CPoM violations would have a material adverse effect on its business.",
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      "kind": "title",
      "text": "We Believe HIMS' Operating Structure Is On Shaky Ground In Relation To Corporate Practice of Medicine Provisions",
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