Weekly Health Tech Reads | 3/16/25

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THE HINGE S-1

Hinge files its S-1 to go public

Chances are you’re already well aware that Hinge filed its S-1 on Monday, kicking off the IPO process. A lot has already been written this week on the S-1 document, and below you’ll see a roundup of links that I found helpful in thinking about the document, before a reflection on the valuation conversation. If you find yourself feeling like you’ve already read too much about Hinge this week, feel free to skip down to the next section.

Key links:

• Hinge’s S-1 & Key Sections: Prospectus Summary, Risk Factors, Management’s Discussion and Analysis, Letter from the CEO, Business Overview

• Brian Dolan’s Exits & Outcomes analysis. This does a nice job going beyond the S-1 document, looking at Hinge’s historical growth and the general narrative. Specifically, the shift in narrative from Hinge’s previously filed confidential S-1 to the current S-1 is worth paying attention to. Hinge moved away from language around being a vertically integrated model and toward using AI to automate and scale a new care delivery system. That shift says a lot about how public market sentiments have recently changed over the past several months.

• Blake Madden’s Hospitalogy analysis. A solid overview of the S-1 document Hinge’s business that dives into a bull / bear take.

• Chrissy Farr’s Second Opinion analysis. This does a nice job highlighting why so many in the industry are looking at this IPO, highlighting the two key growth questions I imagine many investors are also thinking about — 1. expanding beyond the employer customer base, and 2. expanding beyond an MSK-centric product offering.

• Brad Otto’s LinkedIn post. While S-1s are documents intended for investors, they also provide insightful strategic benchmarks for folks building similar businesses. Otto did a nice job here summarizing Hinge’s key financial, sales, and clinical / ops metrics as a benchmarking tool for builders here:

✍️ Going Deeper

The reaction to the much anticipated filing has felt tempered, seemingly driven by a combination of factors: poor health tech comp multiples/performance, general concerns over the durability of employers as a customer base, the high likelihood of a “down round” IPO, and the broader stock market seemingly moving toward bear market territory.

Those all seem like valid concerns for investors, but they are also things that are outside Hinge’s control at this point. Hinge isn’t going to change its customer base overnight, the Series E decision was made almost five years ago, and the public markets are what they are. Meanwhile, Hinge appears to be executing on the controllables of the business quite well—namely, rapidly driving the underlying business toward profitability in 2024 while still driving growth and solid outcomes for clients.

I imagine that 2024 was a particularly intense year internally for folks at Hinge as it made a hard shift toward profitability, which set it up to be in position for this IPO process. Among other things, Hinge underwent a restructuring in April that cut 10% of its workforce; it shifted its product offering, leading to a 10%+ improvement in gross margins (Hinge stopped sending tablets/sensors out to members and launched TrueMotion); and it made meaningful reductions across SG&A categories. Those changes were quite effective in moving the business towards profitability, as evidenced in Hinge’s operating margins: it went from a -45% operating margin in 2023 to a -7% margin in 2024. In Q4 2024, it generated an 18% positive operating margin.

It’s all a reminder that while the general expectation is that the IPO window will open in 2025, it is still a challenging environment with a lot of uncertainty around the appetite that public markets investors will have for the queue of digital health companies waiting to go public. These dynamics will make this process an interesting test case for other companies with similar narratives that are expected to test the public markets soon (Omada, Spring, Sword, etc).

Complicating all of this further is the “down round” dynamic at play here, with Hinge unlikely to hit its Series E valuation of $6.2 billion from 2021. For the investor community, the question will be where exactly the valuation lands. Morgan Stanley, which is leading Hinge’s IPO process, also represented Accolade in its recent sale to Transcarent. Given that, we can see how Morgan Stanley valued Accolade a few months ago. While Accolade isn’t a perfect comp given its recent struggles, it still provides a good indicator of how Morgan Stanley likely views the current market. This chart from the document showed its perspective of Accolade’s public health tech comps, which were trading at 2.2× 2025 revenue:

If you do the quick math using 2.2× 2025 revenue, it implies a valuation for Hinge just over $1 billion (assuming they grow revenue to ~$500 million in 2025). That seems like the absolute floor for a process like this, and I’d imagine Hinge wouldn’t be going public if that were a likely outcome. The question is what is the probable range. Going back further in time to Morgan Stanley’s 2021 Fairness Opinion for the Livongo acquisition, you can get a sense of the potential narrative justifying a higher multiple — i.e. Hinge’s comps should actually be SaaS businesses outside of healthcare because its really an AI/automation play that just happens to target the healthcare market. If you valued Hinge at ~10× 2026 revenue, that would imply a valuation around the $6.2 billion mark (assuming they grow 30% a year the next two years). That seems like the absolute ceiling, which seems equally unlikely as the floor outcome given we’re no longer in the frothy market environment of 2021. It seems more likely that Hinge will attempt to go out at a valuation in the $3 to $4 billion range, making the case it should trade at the very high end of healthcare comps, closer to 6x - 7× 2025 revenue.

The “down round” nature of the valuation discussion here is another reminder of the lingering effects of the ZIRP-era VC investment bubble that I would imagine is making for hard Board-level conversations across many of the late stage venture-backed companies at the moment. Hinge’s balance sheet indicates one of the significant benefits of raising back then — as of 12/31/2024, it was sitting on $465 million of cash on its balance sheet, up from $423 million the year before. So it’s not as though Hinge needs to be in a rush to go public — it has plenty of cash on its balance sheet and is free cash flow positive.

At the same time, managing the various conflicting VC interests driven by the ZIRP-era valuation bubble seems like a massive challenge. The early-stage VCs are set to do quite well financially on an IPO and are probably excited to send a check to their LPs who invested ten years ago. On the other hand, it appears that Tiger will take a bath on its $200 million Series E investment. I’d think that they are less excited about the outcome here and more inclined to try to wait out the market. Managing the stakeholder dynamics here seems like a complicated task for digital health founders who raised capital at high valuations in the ZIRP era. In the case of Hinge, this will has practical implications that will impact the business even on the public markets, as Tiger will be holding onto its $200 million of Series E shares with some protections that go along with that (this is why the phrase “Series E” is referenced 169 times in the S-1, while the other funding rounds are all only referenced ~11 times).

While the valuation conversation is central to the IPO process, it can tend to feel a bit removed from the entrepreneurial success story that leads to this conversation ad this moment in time. Setting aside the valuation conversation, if ten years ago we said that a health tech company selling an MSK solution to employers would go public at a valuation north of $1 billion, I think we’d all call that a huge win for the health tech industry. It’s impressive what Hinge has built over the last decade, and how it has responded to the challenges of changing market dynamics more recently. Hopefully, Hinge can get this IPO out the door successfully, and we’ll begin to see the log jam of later stage health tech companies waiting to exit begin to clear.

OZ CONFIRMATION HEARING

Dr. Oz’s Senate Finance Committee meeting goes relatively smoothly

The roughly two hours and 45 minutes of testimony at Dr. Oz’s confirmation hearing is quite interesting to listen to on several fronts: what various senators are concerned about, what Dr. Oz may choose to focus on, and the some moments of political theater. The hearing appears to have gone quite well, with this Stat reporting noting it likely cemented his nomination as CMS Administrator.

I came away from the session more impressed with Dr. Oz than I anticipated. He showed a strong command of the various programs that would be under his purview as CMS Administrator, and he seemed right at home speaking with senators on both sides of the aisle. The session covered a wide range of topics and provided some sense of what the priorities will be over the coming years — incentivizing healthier lifestyles; cracking down on fraud, waste and abuse; modernizing the system leveraging AI; communicating better externally; and partnering with the private sector to drive innovation and disrupt incumbents.

✍️ Going Deeper

Here are a few more specific takeaways from my listen:

• Oz’s three big ideas: Oz kicked off the session highlighting his three big ideas for the role: 1. empower beneficiaries with more tools and transparency to help people navigate their health, 2. incentivize providers to optimize care with real-time information and AI, 3. modernize fraud, waste and abuse capabilities.

• MAHA. It seems clear there will be a heavy focus on incentivizing better lifestyle choices for Americans, as Oz discussed in this quote: “I don’t think spending twice as much as every other country is enough if we are more than twice as sick as every other country. And so the real question is, what is our obligation, each and every one of us? I think it is our patriotic duty to be healthy. First of all, it feels a heck of a lot better, its the right thing for your family… But it also costs a lot of money to take care of sick people, who are sick because of lifestyle choices. It’s different if you’re born with a defect that requires an operation, often those are fixable issues.” Oz gave a practical example of a change he might make in Medicare Advantage, mentioning food allowances for enrollees and working with the private sector to provide better food and support with those dollars.

• MA upcoding and prior auths. It seems quite clear that Oz will go after upcoding in Medicare Advantage. He described it as something that will be “relatively enjoyable to go after” given the bipartisan support for addressing this issue. It seems equally as clear that Oz generally supports the Medicare Advantage program, but he will be making some changes as he seeks to address the challenges facing MA. Oz at one point described prior authorizations as “a pox on the system”, while noting that there are 15,000 procedures that go through prior authorization in MA. Oz thinks we should be able to reduce that to 1,000 procedures and that AI can accelerate the process.

• Fraud, waste and abuse. Everyone in the session seemed frustrated by fraud, waste, and abuse in healthcare. There is less clear agreement on where the fraud lies in the system and how to remove it, with various perspectives seemingly falling across party lines. Medicaid is the hot button topic here, with several Democrats expressing concerns over cutting Medicaid funding and asking Oz if he would oppose cuts to Medicaid.

• AI. The use of AI came up on a few different occasions. Senator Tina Smith (D-Minnesota) suggested that insurance companies should not be allowed to use AI for coverage decisions, and that it should be required that a real person needs to make those decisions. Oz agreed, but also mentioned that CMS should be using AI to monitor the use of AI by insurers. In response to another question from Senator Smith about the use of AI in care delivery, Oz mentioned that he thinks we are “months not years” away from using AI to converse with patients, suggesting that an internist will be able to see twice as many patients.

• CMMI. Senator Masha Blackburn (R-Tennessee) had this interesting quote: “there’s great frustration with Medicare and Medicaid, the fraud that exists. There’s frustration with entities like CMMI that can’t do their job, and they need to either get to work or they need to be shuttered and that money used elsewhere.” Oz mentioned in response that while CMMI has a history of failed projects, he believes it will do well, under strong leadership going forward. It was a good example of him subtly, but effectively, pushing back against different opinions from Senators.

• Private equity & engaging the private sector. Interestingly, when asked what he would do to curtail private equity greed in healthcare, Oz gently pushed back, suggesting that private equity is one of the ways that we can enable smaller players to disrupt incumbents. On a handful of other occasions, Oz mentioned his desire to better engage with the private sector, and in particular support smaller innovative players in attempting to disrupt incumbents. Oz mentioned his view that there are ~150 people who control healthcare in this country who don’t want healthcare to change. If I’m an incumbent, or one of those 150 people who Oz thinks controls healthcare, I’m leaving this session relatively uneasy.

Vice President, Corporate Actuarial at Oscar Health, a healthcare insurtech company. Learn more.
$255k — $334k | Remote

Manager, Strategy and Operations at Tomorrow Health, a home health technology platform. Learn more.
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Strategy & Operations - Population Health at Seen Health, a PACE provider for Asian and Pacific Islander communities. Learn more.
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Senior Associate, Healthtech at Primary Venture Partners, a seed-stage venture capital firm. Learn more.
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Director, Health Plan - Partner Operations at Firefly Health, a virtual primary care and clinically-driven health plan provider. Learn more.
Remote

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