hgp platform high flyers v4

Healthcare Growth Partners, LLC 2014 All Rights Reserved

CONFIDENTIAL

Health IT – “High Flyer” Investment Trends

May 2014

CONFIDENTIAL 2HEALTHCARE GROWTH PARTNERS

WHERE ARE WE?

HITECH (2011-2017)

(HITECH): Install and ensure the usage of electronic medical records and basic communications infrastructure with the capability of collecting and aggregating data across care settings

ACA (2012-2020)

(ACA Implementation): Lay the foundation for reform with pilot risk-based reimbursement models that are dependent on outcomes, quality and efficiency rather than the volume of service

Value-Based (2015+)

(ACO/Bundled Payment): Execute on a streamlined system of robust care coordination and population health to maximize quality as well as efficiency with the goal of delivering higher value

Personalized 20??

(Personalized Medicine): Using big data, quality reporting, and genetic analytics, optimize care and medicine based on individualized characteristics and genomics


HEALTHCARE STAKEHOLDERS REACT TO COST, ACCESS, AND QUALITY INITIATIVES

Providers

• Direct Impact• Risk-based

pilots• Readmission

penalties• Fraud scrutiny• Quality

reporting• ICD-10 (non-

ACA)

• Indirect• Resource

constraints• Consolidation• Focus on care

continuum

Payers

• Direct Impact• Public HIX• Private HIX• Rate hike caps• MLR caps• Medicaid

expansion• Coverage

requirements

• Indirect• Expanding

capabilities

Employers

• Direct Impact• Insurance

requirements (min employees/ hours)

• Indirect• Defined

benefits• Private HIX• Wellness

initiatives

Med-Pharm

• Direct Impact• Higher taxes• Comparative

effectiveness• Sunshine Act

• Indirect• Care

management• Big data• Genomics• Personalized

medicine

Patients

• Direct Impact• Greater

protections (pre-existing conditions, denials, caps)

• Greater coverage

• More choice• Non-

discrimination

• Indirect• Greater

Responsibility

Information Technology – Quality & Cost (aka, Value)


Volume to Value Driving the Trend

• Payer• Disease• Care-setting

• Treatment

• Today, 10% of Patients


Volume to Value Key Stats

Shift reflects the introduction of a series of accountable care pilots developed by CMS over the last few years—specifically, the Medicare Shared Savings Program (MSSP) and the Bundled Payments for Care Improvement (BPCI) initiative.

It’s important to note that the # of providers does not represent the # of patients – only a fraction of patients at the risk-contracted facilities will be risk-based.

Around two-thirds of providers report generating more than 80% of their revenue from standard fee-for-service contracts, and about half are still receiving more than 90% of payments for patient care from such contracts.

65% of providers are contracting with commercial payers on new payment models, in many cases in conjunction with Medicare’s risk-based payment initiatives.

(Source: The Advisory Board Company)


Volume to Value Transition

1. Payers: Orientation toward value (eg, risk) has been core to payers for years, in the form of utilization management, disease management, and cost containment.

2. Employers: As the cost burden explodes and with their place secured as a stakeholder in healthcare, employers are expanding the role in care management. This trend is coupled with built-in incentives from the ACA. Further, employers can be more nimble in navigating FDA vs non-FDA regulated mobile monitoring (eg, games, wellness platforms, etc).

3. Providers: As discussed, value is limited to narrow patient populations based on payer, disease, and care program. IT and services that complement value-based reimbursement must be consistent with incentives.

4. Patients: The out-of-pocket financial burden is expanding (now 25%+ of provider revenue and share is growing). For now, true patient care decisions tend to be managed by the stakeholders above.


CHANGING INCENTIVES = CHANGING BUSINESS MODELS

The Spreading Cost Burden

• Risk-based payment• Readmission programs• Higher patient pay• De-centralized care

Phase 1 Technologies Phase 2 Technologies Phase 3 Technologies

The Marketplace Response

• Provider-focused• EMR/RCM• HIE• Establishes the

“infrastructure”• Data collection and sharing

• Employer Focusand

• Population Health• Care Coordination• Data Analytics• Risk Stratification

Providers

• Patient/Individual Focus• Mobile apps• Tele/Monitoring• Personalized Medicine• Predictive Analytics• Data Optimization

Payers Employers Consumers

• MLR caps• Premium caps• HIX = “Consumer”• Coverage expansion

• Comprise 40%+ of healthcare spend

• ACA secured their stakeholder status

• Higher patient pay (25% is out-of-pocket)

• More (and less) choice• Patient Engagement


PHASE 3 TECHNOLOGIES DEVELOPMENTS AND CHALLENGES

There have been tailwinds in the emergence of consumer-facing HIT technologies• Proliferation of mobile technologies driven by advent of smart phones serve as a critical hub,

and accessibility of sensor innovation which provide real-time data insights• Employers, payers, and even providers are subsidizing the cost of mobile technologies, either

directly (by purchasing on behalf of patients) or indirectly (by monetizing data or through ads)

…However, there remain some obstacles• Reimbursement for Tele-Health and Remote Monitoring remains vague• FDA and licensing ambiguity will stall growth and already lagging payer reimbursement trends• Physicians and other care providers are often resistant to the disruption of remote or tele-

health• Today, the market is responsive to very target reimbursement programs (eg, Readmission

Reduction Program), but these programs and risk-based payment models are expanding


Keys to Success

Valuation-Centric

1. Cloud technology (multi-tenant that enables scale and analytics)

2. For apps, developing a platform rather than an app

3. Open, accessible APIs

4. Recurring revenue model

Customer-Centric

5. Hard ROI

6. Pricing that aligns with Hard ROI (increase revenue or drive down cost)

7. Policy/Political alignment with Business Model (government, associations, reimbursement, etc)

8. Non-disruptive or even enabler of clinical/admin/patient workflow


Reasons for Failure

1. Innovating too far ahead of the adoption curve

2. Misalignment with the healthcare incentive model

3. Lack of clinical/workflow understanding

4. Inappropriate revenue model

5. Inefficient distribution model (go-to-market plan)

6. Data/architecture “closed” (note, this used to be a key to success)

7. Ramping up too quickly – going too deep into the red Lack of readiness for long sales cycle

8. Losing focus on customer happiness/retention


TRENDING INVESTMENT VERTICALS

Employer Health

Benefits Management

Health Consumers

Patient Engagement

Big DataPM & EMR

Remote Care

ACO Tools

ACO-Oriented RCM

Guiding Theses• Transparency

• Cost & Quality• Big data• Value-based payment• Patient vs Consumer Engagement

• Informed, connected patient• Utilization Management

• Real-time CDS• Care Coordination

• Non-Acute care focus


HIGH FLYER #1: ONE MEDICAL GROUP (HTTP://VIMEO.COM/62750513)

Series E: $20mm (9/11)Series F: $30mm (3/13)

Growth Fund: $40 mm (4/14)

Business Model:Membership based ($149/year), high touch, hi tech physician practice management serving multiple and an expanding list of US cities.

Macro Thesis:A significant care experience and quality gap exists at most physician practices due to the underutilization of technology. Payers, patients, and providers all stand to benefit from IT-enabled care models.

Opportunities:1. Strong value prop to payers and patients2. Savvy physicians may prefer hi-tech practice3. Risk-based models that align with payers and

employers may be viable once the value proposition is clearly defined

4. Last valuation 8x revenue!

Threats:5. Continued acquisition of physician practices

by hospitals and health systems: model may need to find a way to serve health systems

6. Need to navigate any sensitivity with standard practices of the AMA

http://vimeo.com/62750513



HIGH FLYER #2: FLATIRON HEALTH

Series A: $8mm (10/12)Series B: $130mm (5/14)

Business Model:Consolidate disparate structured and unstructured clinical data into a central EDW for purpose of driving best practices, cancer targeting and planning, and drug/treatment development and optimization.

Macro Thesis:A specialized analytics play focused exclusively on cancer that addresses a high cost, high need segment of healthcare that should align with stakeholders across cancer care continuum, including providers, payers, consumers, drug development and hardware.

Opportunities:1. Acquired Altos – a cancer-specific EMR, to

streamline the integration with regards to the data collection process

Threats:2. Need to overcome aggregation of data from

disparate data sources (EMR, lab, pathology, imaging, etc) in order to create a longitudinal care record

3. Unstructured data requires NLP to make it actionable

4. Data “rights”5. Can they be EMR-agnostic with Altos?


HIGH FLYER #3: HEALTH CATALYST (HTTP://VIMEO.COM/67330845)

Series A: $Undisclosed (9/11)Series B: $41mm (1/13)Series C: $41mm (1/14)

Business Model:Aggregate structured and unstructured data from disparate data sources and centralize into a data warehouse that drives actionable and predictive analytics. (Mostly) Subscription pricing mitigates upfront cost.

Macro Thesis:Develop “content-driven clinical applications” that enable the management of quality measures and identification of care gaps with an eye toward value-based reimbursement and a sensitivity toward physician engagement.

Opportunities:1. EHR vendors (Epic) leave significant

functionality gaps2. Coupling EDW w/ quality improvement3. Value-based pricing lends to ROI proposition4. Very low penetration of EDW and large

market opportunity – increasing digital data enhances value-prop

5. Estimated $100mm+ revenue in NTM

Threats:6. EHR vendors expand (Epic Cogito)7. Increasingly structured data decreases value

of data aggregation




HIGH FLYER #4: NANTHEALTH (HTTP://VIMEO.COM/75977508)

First Round: $25mm (10/12)Second Round: $100mm (4/14)

Business Model:Backed by billionaire Patrick Soon-Shiong, NantHealth aims advance diagnostics to better identify and target specific disease characteristics; transform clinical delivery with clinical data and promoting wellness for a healthier, happier world by building an integrated, evidence-based, genomically-informed, personalized approach to the delivery of care and the development of next generation healthcare solutions.

Macro Thesis:The business model says it all…

Opportunities:1. Patrick Soon-Shiong has a large brain and

large bank account – having sold two cancer therapeutic companies (American Pharmaceutical Partners and Abraxis BioScience) for an aggregate ~$10B

Threats:2. Data can only be aggregated and analyzed to

the extent that it can be digitized, and a finite amount of digital information exists

3. Predicated on the cost curve continuing its downward trend in sequencing and personalized medicine




HIGH FLYER #5: ALIGNMENT HEALTHCARE

“Seed”: $125mm (4/14)

Business Model:A de-novo pop health “start up” (similar to Evolent) that aims to create alignment between provider and payer organizations to smooth the transition to value/risk-based payment models.

Macro Thesis:Provide technology and integrated care coordination models to improve quality outcomes, while lowering cost and eliminating waste in the care system by focusing on the highest-cost, most complex patient groups in Medicare Advantage, Medicaid, and commercial HMO populations.

Opportunities:1. Value-based care delivery is the future of

health and healthcare2. Providers have historically not been in the

business of managing risk, thus are in short of expertise to make this transition

3. Combo of risk-based, project-based and subscription pricing model may prove lucrative

Threats:4. Large MCO’s are increasingly “owning” the

technology offered by Alignment Healthcare5. Competitors are coming from all directions


HIGH FLYER #6: OMADA HEALTH (HTTP://VIMEO.COM/85544572)

Seed: $0.8mm (12/11)Series A: $4.7mm (3/13)Series B: $23mm (4/14)

Business Model:Based on the landmark NIH-sponsored Diabetes Prevention Program, Prevent provides digital tracking tools, personalized coaching, and social support to inspire and sustain healthy behaviors for consumers, employers, and payers with a focus on pre-diabetes and the intent to expand into other treatment programs.

Macro Thesis:Links the trend toward consumer engagement, chronic care prevention in high risk populations, and alignment of stakeholders who

Opportunities:1. If high-risk populations can be identified and

enrolled, the value proposition is extremely high across all stakeholders (except those who earn profits from diabetics)

2. Focus on behavioral change is notoriously challenging but, once proven hugely impactful

3. Expansion into other treatment programs

Threats:4. Requires earning clinical trust5. Requires payment incentives to align with

outcomes




Other Start-up Videos

1. Healthcare Blue Book: http://youtu.be/IWjanH2ifyg

2. Glooko: http://vimeo.com/53724549

3. Fitmob: http://vimeo.com/89156907

4. MyHealthTeams: https://www.youtube.com/watch?v=Xh1wFwf8PwA

5. Jawbone: https://vimeo.com/53768086

6. MindBody https://vimeo.com/30442715

7. MD Revolution: https://www.youtube.com/watch?v=srzArQD2SX8

8. Peloton: https://vimeo.com/84235357

9. Better: https://www.youtube.com/watch?v=OBSfE28g3EY

10. MD Live: https://www.youtube.com/watch?v=-CoZAIwikh4

http://youtu.be/IWjanH2ifyg





https://www.youtube.com/watch?v=Xh1wFwf8PwA

https://www.youtube.com/watch?v=Xh1wFwf8PwA

https://vimeo.com/53768086




https://www.youtube.com/watch?v=srzArQD2SX8

https://www.youtube.com/watch?v=srzArQD2SX8



https://www.youtube.com/watch?v=OBSfE28g3EY



https://www.youtube.com/watch?v=-CoZAIwikh4



11. TigerText: https://vimeo.com/90250710

12. Voalte: https://vimeo.com/31567227

13. Specialists on Call: https://www.youtube.com/watch?v=plN2OWmXsrg

14. Tyto Care: https://www.youtube.com/watch?v=0UB51753X8k

15. Reflexion Health: https://www.youtube.com/watch?v=mv3emE8gkOQ

16. Liaison: https://www.youtube.com/watch?v=Av1v6HXSk34

17. InfoBionic: http://infobionic.com/mome-system

18. Wellcentive: https://vimeo.com/42380446

19. Doximity: https://www.youtube.com/watch?v=Nb3FKtaLpBc

20. PlanSource: https://vimeo.com/86025810





https://www.youtube.com/watch?v=plN2OWmXsrg

https://www.youtube.com/watch?v=plN2OWmXsrg

https://www.youtube.com/watch?v=0UB51753X8k

https://www.youtube.com/watch?v=mv3emE8gkOQ

https://www.youtube.com/watch?v=Av1v6HXSk34

http://infobionic.com/mome-system


https://www.youtube.com/watch?v=Nb3FKtaLpBc




21. Zenefits: https://www.youtube.com/watch?v=4cIR86F_210

22. bswift: https://vimeo.com/77795920

23. hCentive: https://www.youtube.com/watch?v=TdWjbP5s66s&list=UUFmjDGgFRvq-aqYkn3YjN1g

https://www.youtube.com/watch?v=4cIR86F_210

https://www.youtube.com/watch?v=4cIR86F_210


https://www.youtube.com/watch?v=TdWjbP5s66s&list=UUFmjDGgFRvq-aqYkn3YjN1g




OTHER HIGH FLYERS – CONSUMER DEALS

Quality and Pricing

$7.0mmThe Martin Cos

Operates a Website that provides users with the knowledge and tools they need to shop for and receive a fair price for their healthcare products and services.

Monitoring

$7.0mmSamsung Venture Investment Corporation and The Social+Capital Partnership

Offers blood glucose monitoring meters .

Fitness

$9.8mmMayfield Fund, Silicon Valley Bank

Owns and operates an online community for fitness enthusiasts.

Social

$3.4mmAdams Street Partners, 500 Startups, HealthTech Capital, Sand Hill Angels, The Westly Group

Creators of social networks specifically for people with chronic health conditions.

Fitness

$250.0mmRizvi Traverse Management

Develops noise eliminating Bluetooth headsets and accessories. App

$2.3mmCowboy Ventures; FLOODGATE; Google Ventures; Greylock Partners

A mobile app for dieting and health.


OTHER HIGH FLYERS – CONSUMER DEALS

App

$7.0mmIndividual Investors

Offers RevUp, a subscription-based online health monitoring platform for population health management.

Fitness

$50.0mmBessemer Venture Partners, Institutional Venture Partners, Catalyst Investors, Montreux Equity Partners and W Capital Partners

Serves fitness, yoga, Pilates, salons, spas, and martial arts businesses, a software company, provides business management software for personal service businesses in the health, wellness, and beauty industries.

Adherence

$1.5mmJonathan Bush, Tim Draper, Sabaratnam Arulkumaran, Russ Nash, Carl Byers, James Nahirny

Owns and operates an online community for fitness enthusiasts.

Fitness

$10.5mmTiger Global Management

Provides at-home fitness solution for live and on-demand indoor cycling classes.

App

$5.0mmMayo Clinic, The Social+Capital Partnership

A personalized health assistant app.


OTHER HIGH FLYERS – PROVIDER DEALS

Risk

UndisclosedHealth Enterprise Partners, Heritage Group

Operates a care management company that focuses on the needs of patients with chronic and complex medical conditions.

Analytics geared toward value

$41.0mmCHV Capital, Kaiser Permanente Ventures, Norwest Venture Partners, Partners Innovation Fund, Sequoia Capital, Sorenson Capital

Provider of healthcare data warehousing and clinical process analytics.

Outcomes

UndisclosedSterling Partners

Outsourced healthcare outcomes-data provider focused exclusively on serving the quality departments of acute care hospitals.

Telehealth

$23.6mmHeritage Group, Kayne Anderson Capital Advisors, Sentara Healthcare, Sutter Health Corporation

A network of Board certified physicians and licensed therapists, provides online and on-demand healthcare delivery services and software that benefit patients, hospitals, employers, payers, physician practice groups, and care organizations.



Referral management

$21.0mmEaston Capital Investment Group, New Leaf Venture Partners, New Science Ventures, OrbiMed Advisors, Reed Elsevier Ventures, Shasta Ventures, TELUS Ventures

Providing secure mobile messaging services for healthcare companies. Telehealth

$32.0mmWarburg Pincus

Provides specialist neurologists’ access to urban, suburban, and critical access hospitals through a consolidated infrastructure of people and videoconferencing technology.

Referral management

$35.9mmBedford Funding

Offers point-of-care communications solutions, including an iPhone solution for caregivers that connects with the EMR.

Decision support

$12.8mmGrayhawk Capital, Kansas Bioscience Authority

Focuses on translating the advances in clinical research into decision-support products and services for physicians and their patients, healthcare organizations, and other medical software developers.



Telehealth

$4.0mmLionBird (Ventures), OrbiMed Advisors

Develops a handheld device to perform self-examinations for remote diagnosis. Adherence

$7.5mmThe West Health Investment Fund

Offers a rehab measurement tool to track patient adherence for the prescribed rehab plan.

Analytics geared toward value

$15.0mmAccenture (NYSE: ACN)

Provider of cloud-based integration and data management services and solutions with funding to significantly accelerate its growth in the life sciences, healthcare and health information exchange (HIE) markets.

Telehealth

$17.0mmBeta Fund, Broadview Ventures, Launchpad Venture Group, Mass Medical Angels, Safeguard Scientifics Inc. (NYSE:SFE)

A cloud-based SaaS service and wireless remote patient monitoring platform.

Decision support

$5.5mmDraper Triangle, Hopen Life Science Ventures, TriStar Technology Ventures

Provides automated workflow, real-time decision support, and behavior change software solutions that consumers and businesses use to change outcomes and lives.

Chronic management

$23.0mmAndreessen Horowitz, Kaiser Permanente Venturesm, The Vertical Group, U.S. Venture Partners

Provides group-based programs for chronic disease prevention.



Population health

$22.5mmGreat Point Partners

Offers healthcare solutions, including clinical and medical cost management, practice and office management, risk and financial management, and population health management solutions

Engagement

$28.7mmBpifrance Financement, Cap Décisif Management SAS, CM-CIC Capital Innovation, Innovation Capital SAS, QUALCOMM Ventures, Societe Hospitaliere D'assurances Mutuelles, Vesalius Biocapital Partners

Voluntis SA provides software and services to enable health care organizations build and manage patient relationship management programs

Population health

$12.0mmHarbert Venture Partners, Noro-Moseley Partners, Summit Partners

Provides preventive care, chronic disease management, and health information exchange systems

IT-enabled care

$40.0mmBenchmark Capital; Oak Investment Partners; Maverick Capital, DAG Ventures, Google Ventures, Redmile Group

Operator of primary-care physician offices that allow patients to book same-day visits onlineProvides technology enabled physician practices



Population health

$125.0mmGeneral Atlantic

Provides healthcare services which include offering care coordination solution for population health management.

Data driven clinical support & drug optimization

$100.0mmKuwait Investment Authority

Provides fiber-optic, cloud-based data infrastructure to deliver multimedia healthcare information to mobile devices.

Referral management

$54.0mmDraper Fisher Jurvetson, Emergence Capital Partners, InterWest Partners, Morgan Stanley Investment Management, Morgenthaler, T. Rowe Price (NasdaqGS:TROW)

Operates a physician network platform that links medical professionals over the mobile and Web.


OTHER HIGH FLYERS – EMPLOYER DEALS

$12.0mmLemhi Ventures, Timucan Asset Management

Helps employees discover and review benefit options with ease, as well as offer tools to help make complex benefit concepts and terminology simple.

$17.1mmAndreessen Horowitz, Maverick Capital, Ltd., Venrock

Provides payroll and benefits management, human resource, and insurance brokerage services.

Benefits and HIX

$51.0mmGreat Hill Partners

Offers software and services that streamline benefits, HR, and payroll administration for employers, brokers, and public and private exchanges.


OTHER HIGH FLYERS – LIFE SCIENCES DEALS

Big data

$15.0mmJAFCO Ventures, Kleiner Perkins Caufield & Byers

Develops cloud based ingestion platform for drug developers and researchers. Big data

$4.0mmKhosla Ventures

Provider of predictive analytics for medical science and patient data.


OTHER HIGH FLYERS – PAYER DEALS

Payer Analytics

$15.0mmUndisclosed

Provides business process optimization and intelligence management technology solutions for health insurers’, commercial, Medicare, and Medicaid lines of business.

Chronic care management

$40.0mmWarburg Pincus

Provider of face-to-face solutions for frail, special needs and complex populations, offering short-term and long-term care management and assessment services designed to improve quality outcomes, optimize revenue, and lower costs.

Benefits Mgmt

UndisclosedGeneral Atlantic

Provides evidence-based healthcare management programs. HIX

$35.0mmUndisclosed

Offers solutions that enable consumers and businesses to connect, communicate, and engage with health plans for acquiring health insurance.

HIX

$10.5mmAberdare Ventures, FirstMark Capital

An online health insurance marketplace.


TECHNOLOGY-ENABLED HEALTHCARE DELIVERY – WHO TO WATCH?

Humedica (2013), Connextions (2011), Ventures Group

Coventry (2012), Healthagen (2011), Prodigy (2011), Medicity (2010)

Linkwell (2013), Amerigroup (2012), SoloHealth (2012), Bloom (2011), CareMore (2011), HealthyCare Solutions

Certify Data (2012), Anvita (2011), Concentra (2010)

PureWellness (2013), Clairvia (2011), Resource Systems (2011), IMC Health (2009)

Medical Referral (2013), 360Fresh (2012), Pivot Health & Cielo Med (2011), Southwind (2010), Crimson (2008)

Array (2013), $11mm Carnegie Mellon Partnership, $100mm Medical Mall

Data warehouse initiative, UPMC Health Plan CardioCom (2013)

Health Catalyst, Telcare, AssureRx, Airstrip

Navihealth, Hello Health, Patientco, change:healthcare, Essence Group, Bloom Health, Phreesia

Quantros, Navihealth, Vivify, GetWellNetwork, BodyMedia, Phreesia

Aviacode, Vivify, Awarepoint, Shareable Ink

Transparent Insurance ($40mm investment in July ‘13)

35mm member “transparent” PBM

Competitive Dynamics

Oscar Health

hgp platform high flyers v4

Economy & Finance

disparate

based payment

improve quality

population

maverick capital

google ventures

based reimbursement

health catalyst