4. Start-ups develop a “high risk” appetite and target “node” conditions in high risk populations such as Medicare Advantage and Dual Eligibles
Some would consider that the "First Act" of Digital Health innovation (2011 – 2015) was heavy on hype and light on substance. Quantified self was the battle cry with a focus on the “worried well” population who have relatively low average annual healthcare expenses of $4,400. Many entrepreneurs and investors bought in, with decidedly mixed results. Veterans from this era have learned that tech in healthcare requires a more utilitarian approach: there must be a valuable “use case” or core costly problem being solved to generate a willingness to pay (WTP). A great example of this WTP is care management in the high cost populations of Medicare Advantage and Dual Eligibles. By the sheer number of medical conditions in these populations, management is problematic with average total medical expense ranging from $10,000 to $30,000 per year. I predict that 2017 and the “Second Act” of digital health will see a continued trend of entrepreneurs gravitating towards the sickest and highest cost members of our population, delivering valuable tech enabled solutions for “node” conditions that drive costs for individual patients.
An interesting phenomenon that is emerging amongst many successful start-ups targeting high-risk populations is the focus on what I’m calling a “node” condition. These “node” conditions (e.g. a terminal illness, end stage renal disease, chronic pain, behavioral health, and frailty) are the most advanced in a patient’s medical history and serve as the cost driver condition for a patient. Because of this centrality, the specialty care team responsible for the “node” condition can best manage the total cost of care for the patient. This is the concept behind the “specialty medical home,” a model being piloted across the country. Many spectators have doubts as to whether specialist physicians can truly manage the total cost of care of patients, and entrepreneurs are rushing in. Early stage companies are designing full stack, tech-enabled services to manage these “node” conditions, and then inking contracts with payers/providers that allow start-ups to “go at risk” and participate on the upside of potential savings realized.
Two notable early stage companies managing care in patients with terminal illness are Landmark Health (Francisco Partners) led by former Accretive Investor Adam Boehler, and Nashville based Aspire Health (GV, Oak, Sandbox), co-founded by Senator Bill Frist. With the end of life period being the costliest period of all, these companies are providing palliative care services that dramatically lower costs as they aid patients and families transition from chronic illness to palliation.
An interesting early stage company attacking the high cost node condition of end stage kidney disease is Cricket Health (First Round, Boxgroup). Co-founded by former LinkedIn exec Arvind Rajan and Aberdare Partner Vince Kim, the company’s HOPE platform identifies patients at risk for advanced kidney disease and delivers a navigation service that educates and attempts to lower the cost of care for these patients.
Two additional node conditions that are often connected and have a high prevalence in these high-risk populations are chronic pain and mental illness. It’s well documented that patients with chronic pain have healthcare costs that are two to three times that of the general population. Two companies that are focused on delivering tech enabled management solutions to this population are MOBE and Axial. MOBE provides a unique solution for payers that identifies patients with chronic pain and delivers comprehensive CBT and coaching to improve health outcomes. Venture-backed Axial Healthcare (Oak, Sandbox, 406) is developing comprehensive analytic solutions that monitor prescriber and patient behavior to help navigate high-risk patients to receive care at centers of pain excellence (COPE). I’ve written extensively about behavioral health tech companies that are delivering much needed, cost saving solutions to these high-risk populations.
A final special mention is in the emerging awareness of the node condition of frailty. Although seen as a natural progression of aging, there is a medical diagnosis that corresponds to frailty known as failure to thrive. Many start-ups are now rushing into the frailty space to provide services to delay this gradual decline and in turn, preventing high cost complications. Two special early stage mentions in this category are Welbe Health and Attuned Care. Bay Area based Welbe (F-Prime) is implementing the much-acclaimed PACE program which provides Medicare reimbursement for delivering common activities of daily living such as meals, transportation, and home care assistance. Chicago-based Attuned Care is providing comprehensive care services for the high needs populations of Assisted Living communities.
I predict start-ups in 2017 will continue to hone in on node conditions, and will be rewarded as payers and at-risk providers look to the market to deliver best in breed solutions to their populations.