Weekly Health Tech Reads | 3/14/21

Forward’s $225m Funding:

• Tech-forward primary care startup Forward announced it raised a $225 million round at a $1b+ valuation. I’ll be the first to admit I’m quite skeptical of this valuation. Forward looks a lot like a concierge medicine / direct primary care practice with some fancy bells and whistles with the promise of a tech platform that can change healthcare. Of course, the press release doesn’t include many details on how big the practice is today, so lets try to figure out what this valuation looks like based on their website. Forward currently lists 10 clinics open across seven major metro areas, with 24 PCPs operating in those clinics. They have four more clinics that are ‘opening soon’ in four new markets, and they list the same two doctors providing care at each of those locations. So for arguments sake, lets say they have 26 PCPs currently across those 10 clinics.If you google “average size of a direct primary care practice” it turns out the average panel size for such a primary care doc is 345, with a target panel size of 596. So, lets be super generous and assume Forward’s tech platform allows a primary care provider to scale to 1,000 patients per provider. This puts Forward at 26,000 patients currently. At 26,000 patients, Forward is at an annual revenue run rate of approximately $44 million (26k * $1,700 annual membership fee). In other words, this primary care practice is being valued at 22x revenue, or $38k per patient, or $38 million per provider. For a primary care practice, that seems quite high.In addition to the valuation question, I’m also not sure that attracting 26,000 patients over 4 years in some of the largest metro areas in the country demonstrates they have de-risked the model in any meaningful way. As I argued back in a 2017 debate with a friend, it’s a relatively straight forward task for a model like this to attract a few thousand people in the markets it enters. There are a small number of well-off early adopters who will pay for a cool experience here. But the bigger challenge facing Forward is that there are very few people beyond that initial target market willing to pay $1,700 out of pocket each year for a fancy primary care experience. The result is that you hit a membership plateau in a market after you hit a few thousand people in that market. At only 26k patients across 7 major metro areas, I don’t think Forward hasn’t shown it can get over this plateau yet. This was what One Medical went through - you start off with a concierge model, then flip to an employer model, and then finally go to health systems (and once you get the health systems involved you are finally able go public). Of course, I am sure that Forward’s backers will argue that Forward is building a brand new technology platform that can change the way healthcare is operated in this country. That the tech will allow it to scale in a way no other primary care practice has been able to scale. Perhaps that will come true and the technology will indeed be a game-changer. Again, I’m quite skeptical, although I would happily eat crow if I’m wrong on this one. Link.

Other News:

• Cedar raised $200 million from Tiger Global at a $3.2 billion valuation, a valuation jump over 4x from their funding round in 2020. Cedar’s opportunity here continues to be incredibly straightforward - walk into a health system exec conference room, lament about how much patients are struggling to pay their bills to the health system (the irony!), talk about how much better a digitally-enabled automated experience is, and that Cedar makes money when the health system makes more money. It’s a very straightforward value prop to health systems that is going to serve all parties quite well financially, even if it side steps some of the moral questions about being a digitally enabled debt collector for hospitals. Meanwhile Tiger continues to be on an absolute tear investing in a ton of interesting digital health companies. Look at this list of rounds from the last five months alone. It sure seems like this is going to work out well for them financially. Link.

• Emergency medical transport provider DocGo / Ambulnz is going public via a SPAC at a $1.1 billion valuation. Honestly there is so little detail in the investor presentation on this one I have no idea how the company is valued at $1 billion, but nobody really seems to care these days when it comes to SPACs on the public markets. This is somewhat intriguing as the medical transport space is one that would seem ripe for disruption. And, DocGo apparently has JVs with a handful of notable healthcare organizations - Fresenius, Jefferson, and UC Health - which I can imagine provide a solid recurring revenue stream to DocGo. So perhaps, they’ve found a route that works to building a company in this space, but I’m not sure how anyone could really evaluate that from what’s been shared. This article from last year suggesting they overwork and underpay EMTs is not a great look for the company. Link (news). Link. (investor presentation).

• Remote monitoring startup Health Recovery Solutions raised $70 million as revenue grew by 188%, hitting $23.5 million last year. HRS has been a player in this space for some time now, focusing on selling to hospitals to manage patients with chronic conditions like heart failure. COVID-19 has accelerated their growth massively as they now have deals with 220 health systems - 74 of which signed up during the pandemic. Note the implied average revenue per health system last year though - $106,818 per health system. These aren’t exactly massive contracts, at least yet. Link.

• A reincarnated 100Plus, now a remote monitoring startup, raised $25 million at a $150 million valuation. For those with access to Business Insider, the slide deck here is actually really interesting. 100Plus walks through their business model in significant detail (more detail than some recent SPAC announcements), which is quite helpful. Essentially they’re helping PCPs bill for remote monitoring services, increasing provider revenue by up to $1.5 million per year, and capturing ~$600k of that for themselves. Seems like a lot for remote monitoring, no? Link (press release). Link (Business Insider deck - paywalled).

• PatientPoint and Outcome Health, two entities providing patient engagement tools on screens in doctors offices, merged. The joint valuation is rumored to be $600 million. Link.

• Humana’s subsidiary Conviva acquired a group of 12 health centers in South Florida. Link.

• Truepill partnered with the Health Transformation Alliance to provide COVID-19 diagnostic tools to the employer market. Link.

• Medical device maker Abbott has launched a virtual clinic for it’s deep brain stimulation product. Link.

• Karuna, a startup building a care coordination platform, sold to Commure. Link.

Opinions:

• This is a good look at Optum and its plans to acquire 10,000 providers this year. The chart from the article included below is wild to me. At around 53,000 providers, it is the largest employer of physicians in the U.S., accounting for over 5% of all licensed physicians in the country. Will be curious to watch how high this number will go. Link.

• Here’s a paper from the American Association of Birth Centers arguing for better reimbursement of birth centers. It provides a very good overview of birth centers - how the model works, challenges it faces for broader adoption, and potential solutions to those challenges. Birth centers provide for a really good example of a type of clinical model that seems like it should be more widely utilized in American healthcare but yet remains under utilized. Link.

• On this note, here is a thought provoking read on the structural racism in our country that results in racial birthing disparities. It’s a good piece that puts into perspective how fertility treatments in this country are essentially a luxury good for the wealthy few who can afford it. No state Medicaid program covers IVF for patients, and even employer coverage is limited. Compare that to the United Kingdom, where three rounds of IVF are available to anyone under 40. Link.

Data:

• Healthcare Dive dove into the wild world of hospital prices and created some nice charts showing how widely prices vary for common procedures. For instance, see the chart below on the cost of a vaginal birth at five different hospitals. at one Sutter hospital, it can cost anywhere from $4k to $34k. Another helpful reminder that it will be hard for price transparency to be helpful when the underlying prices are pure nonsense. Link.