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- Weekly Health Tech Reads | 1/26/25
Weekly Health Tech Reads | 1/26/25
Neko raises $260 million, HCA and Elevance report earnings, and more!
Kevin O'Leary
January 26, 2025
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News that caught my attention this week
PREVENTATIVE HEALTH
Preventive screening model Neko Health raises $260 million at a $1.8 billion valuation
Neko is the latest example of a preventive health startup driving massive investor interest on a big vision and very early traction. The core business is a preventive body scan business that launched in 2023 with a clinic in Stockholm. It has since expanded to a second clinic in London in September 2024. With this funding round, Neko intends to expand on its product capabilities and grow into the US market. You can see the vision for Neko articulated in this quote from its co-founder:
“The body scan today is kind of the iPod moment for Neko,” he said. “The iPod was an iconic product that people loved, and that was exciting. But no one today is using an iPod. It enabled Apple to invest in this incredible paradigm of handheld computational devices. So we very much see this as the beginning of a journey where we’re trying to contribute, you know, incredibly affordable, high-quality preventative diagnostics, and every year we’re going to be able to do more and more with less and less.”
Neko has some solid early traction — it has completed over 10,000 scans since it launched about two years ago, and it has a waiting list that has grown to over 100,000 people. 80% of people who complete a scan have prepaid for a follow-up scan the following year, indicating people are using it as a sort of annual wellness check.
That early traction has translated to fundraising success as Neko appears to be valued in the neighborhood of 666 times TTM revenue — I’d guess their revenue was around $2.7 million in the last year. Here’s my math to get to those numbers:
Per reporting, Neko has done ~10,000 scans since it launched two years ago.
The data from Neko’s first year (see chart below) indicated it did 2,707 screens, meaning Neko did ~7,300 screens last year (10k - 2.7k)
Screensing cost roughly $370 each
This means it did roughly $1.1 million of revenue in year one (2,707 × $370) and $2.7 million of revenue in year two (7,300 × $370)
At a $1.8 billion valuation, Neko is worth 666 times the revenue it generated in year two ($1,800,000,000 / $2,700,000)
Neko could already have some other revenue streams that I’m missing, i.e. from clinical trials or monetizing its data. It seems early for that, although I would imagine it’s on the roadmap for Neko. Either way, the current valuation seems to have very little to do with current financials and much more to do with its ability to grow into a much larger potential future state.
✍️ Going Deeper
It’s hard not to think of recent examples like Forward when looking at a model like this, particularly given the similar themes of massive funding and valuation at a very early stage. It seems like there is good reason to be cynical about a model like this succeeding, particularly if you’ve worked in the healthcare industry for some time. Nonetheless, I think it’s an interesting exercise to try to think about Neko both optimistically and cynically:
If I’m looking at Neko optimistically, I see a company with breakthrough technology that is attempting to solve one of the most complex challenges of our time with an enthusiastic early customer base that will only continue to grow. This is a good example.
If I’m looking at Neko cynically, I see a company that is implementing a fancy health screening tool that is not useful from a public health perspective. The end result will be increased utilization and costs, driven by increased false positives from the additional testing. This is a good example.
It is interesting to revisit the data Neko shared from its first year of operations, where it suggests that almost 78.5% of members didn’t need any follow-up, and 21.5% of members did need follow-up. Neko found that in 1% of its members, the follow-up was life saving, and 6.6% of the time it identified a significant condition. Yet also 6.3% of the time the member was cleared, and another 3.9% of the time the patient didn’t follow-up. Check out the flow chart below:
I imagine whether you’re generally optimistic or cynical about Neko will influence how you look at that data from its first year. It appears that 40 people had life-saving diagnoses, according to the Neko data. Yet also, 172 people were cleared of any issues after follow-up testing.
I tend to fall more in the cynical camp here. I’d love to be proven wrong. Maybe now is the time for a model like this, given the energy around longevity, AI and technology advancements, and the changing political landscape. Particularly when you combine those trends with the ever-present cost pressures in US healthcare. That said, I feel like I’ve seen this story one too many times to think it’ll play out any differently this time.
ONCOLOGY MARKET
A podcast dives into the evolving oncology landscape
This was an excellent Healthcare is Hard podcast episode with Dr. Stephen Schleicher discussing the state of the oncology market, both the clinical practice and business of delivering oncology care.
In particular, the dialogue around VBC in oncology is worth listening to. It provides some fascinating insight into the Oncology Care Model and the impact oncology drug costs have had on the model. Schleicher described how drugs were ~70% of spend in a practice at the beginning of the model and rose to 90% of spend by the end of the model. Given providers don’t have much control over the price of drugs, they’re reluctant to take risk on that portion of the spend, which makes it that much harder to figure out how to think about VBC contracts if you’re a payer looking to manage oncology spending.
If you’re interested in specialty VBC models or the changes happening in the oncology market, this is well worth a listen.
Other notable headlines from the week
HCA stock dropped ~3% on Friday after reporting Q4 2024 earnings. It was interesting in the earnings call Q&A to to hear them articulate their pushback on site-neutral payments. Essentially, HCA argued it costs more to operate a hospital than it does to operate an ASC, hospitals can do more complicated cases than ASCs, and therefore hospitals should be paid more for a surgery done in the hospital compared to an ASC. It’s reasonable logic, and is yet another example of why healthcare is so complicated. It seems like site-neutral payments should be such a straightforward idea — it seems very simple to say that a procedure should cost the same regardless of the location of that procedure. Yet, as you dig in, it inevitably gets significantly more complicated.
Elevance stock jumped ~3% this week after reporting Q4 2024 earnings on Thursday. Elevance seemed pleased in the earnings call with its growth in the Medicare Advantage market, noting it feels good about its 7% - 9% growth. It saw strong retention in the products it wanted, noting it saw strong HMO product growth and less PPO growth, and it gained a large group MA contract. Also worth noting is that they describe the Medicare Advantage Advance Notice as encouraging but still insufficient to cover the cost trend they observed. There were also a few questions about Elevance appearing to pull back on its 2027 target margins, which it noted was primarily due to the growth of the Carelon business — Carelon has grown at a 30% CAGR since 2022, well above Elevance’s target range of high teens to low twenties growth.
Stargate, the new $500 billion AI initiative announced this week by President Trump, will focus on early cancer detection, among other things.
The University of Minnesota and Essentia Health announced the framework for a new partnership to re-envision healthcare in Minnesota. The press release is light on specifics beyond noting the initiative would invest over $1 billion over the next five years. The University of Minnesota is still in a partnership with Fairview Health Services, which ends in 2026. The similarities and differences in the press releases seem to hint at the complexity here (see UofM and Essentia), with UofM inviting Fairview to the table, while Essentia mentions nothing about that.
Sword Health acquired Surgery Hero and will enter the UK market. As the press release notes, over one million people in the UK are currently waiting for MSK care. Sword will now work with 18 NHS trusts that serve 10 million people in the UK.
This Business Insider piece explored how Virta has seen significant growth in its weight loss offering, with employers interested in Virta’s offering as a “responsible prescriber” that can help manage the cost of GLP-1s. Virta expects to be profitable before the end of 2025, and once it is profitable it will explore an IPO.
This is an interesting read in Modern Healthcare, exploring how some payors are starting to charge providers for appeals of claims. This move simultaneously seems like a rational decision to make given the situation and also a tremendous waste for the system, something of a prisoner’s dilemma playing out between payors and providers in real time.
Business Insider reported that 23andMe is considering selling its telemedicine platform Lemonaid. Lemonaid was acquired by 23andMe in 2021 for $400 million, 25% of which was cash, with the remainder in stock.
VBC analytics platform Innovaccer acquired Humbi AI, a AI copilot for actuarial and contracting capabilities. This is Innovaccer’s third acquisition.
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Quote of the Week
“I listened to snippets of a 45-minute conversation where an AI tool called the patient after a hospitalization to follow up with them. The intent was to ask a couple of questions about clinical care and the follow up of how [they’re] doing clinically. But the patient wanted to talk and the tool talked to them for 45 minutes. In a normal structure where we’ve got nurses calling, they cannot not spend that time.”
My reaction: It was eye-opening to see Intermountain’s CEO discussing a future use case for Hippocratic AI nurse product in this way. I still have many questions about how far Intermountain is from implementing this type of use case and what roadblocks stand between here and there. Yet, at the same time, I can pretty clearly see the allure — for the patient who presumably feels heard, for Intermountain increasing capacity, and for the investors backing the company. It remains much less clear to me how this will bend the cost curve.
Funding Announcements
Eleos, an AI scribe for behavioral health providers, raised $60 million.
Lindus Health, a contract research organization, raised $55 million.
Allara, a telehealth model for PCOS and hormonal care, raised $26 million.
Percipio, an AI-powered population health platform, raised $20 million.
Spark Pediatrics, a care model for medically complex children, raised $15 million.
Other Insightful Reads from the Week
AI Clinician Copilots: Technology, Market Trends, and Key Differentiators by Patrick Wingo
A good read from Elion on the state of the AI scribe market, describing how AI scribes will move into clinical summaries next as they seek to become AI clinician copilots. It’s a helpful read, particularly if you’re trying to understand the bull case for investing in AI scribe models (i.e. that they continue to take on more and more of a providers’ workflow). Read more
Growth of Private Equity and Hospital Consolidation in Primary Care and Price Implications by Yashaswini Singh, Nandita Radhakrishnan, Loren Adler, and others
A JAMA Health Forum paper finds that hospital-affiliated PCPs have 11% higher prices and private-equity-affiliated PCPs have 8% higher prices than independent PCPs. Read more
The World Is Getting Riskier. Americans Don’t Want to Pay for It. by Greg Ip
A fascinating read in the WSJ on how the core concept of insurance, pooling risk, is breaking down. The article spends most of its time looking at the homeowners insurance market, but also touches on health insurance and other markets. Read more
Medicaid Section 1115 Waivers: The Basics by Elizabeth Hinton and Amaya Diana
An helpful overview in KFF on what 1115 waivers are and how they can provide states with flexibility to test new approaches. Read more
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