Insurance startup Devoted Health has raised a massive $300 million Series B financing round led by Andreessen Horowitz as it opens up its Medicare Advantage product for enrollment in Florida.
The Waltham, Massachusetts-based company was founded in 2017 by brothers Ed and Todd Park, who serve as the company’s CEO and executive chairman, respectively. The duo had previously started healthcare IT company Athenahealth and Todd Park was also a co-founder of price transparency company Castlight Health and served as the U.S. chief technology officer under President Obama.
All told, the company has raised $369 million from investors including Venrock, Maverick Ventures, Premji Invest and StartUp Health. As part of the new funding round Andreessen Horowitz general partner Vijay Pande will be joining the company’s board.
Devoted Health is starting to enroll Medicare Advantage patients in Broward, Hillsborough, Miami-Dade, Osceola, Palm Beach, Pinellas, Polk and Seminole counties to begin providing service next year.
“The problem is the fact that the system itself is fundamentally not designed in a patient-centric way. People are stuck ping-ponging among an assortment of well-meaning primary care doctors, specialists, hospitals, and other facilities, resulting in a patient experience that is highly uncoordinated, fragmented, and reactive, compounded by administrative hassles that seem to emerge from every corner,” wrote CEO Ed Park in a blog post about the funding round.
The startup is touting itself as a patient-centric “payvidor” that is more closely coordinating and integrating the payer and provider sides of healthcare to provide better, more sensitive care at lower costs. Alongside its responsibilities as a health plan, Devoted Health is also employing clinicians with the capability to provide wraparound services like care guidance and doctor house calls.
If that pitch sounds familiar it’s because competitors like Clover Health and Bright Health have made similar claims about using data analysis and machine learning tools to make better and more efficient decisions about care.
According to Brandon Gee, a senior analyst at healthcare research firm Decision Resources Group, winning in the space will come down to execution and the strength and sophistication of their data operation.
“Paying providers a set fee for a set service is easy. Risk-scoring members, choosing quality metrics, gathering and reporting data on those metrics, and using all that to figure out what to pay a provider is incredibly complex and levels of success at it have varied widely,” Gee said.
What gives confidence to investors like StartUp Health co-founder and CEO Steven Krein is the pedigree of the company’s team, which besides the Park brothers includes Venrock’s Bob Kocher as chief medical officer and former U.S. Chief Data Scientist DJ Patil.
“They’re the ideal health transformers and they’re on a big health moonshot, a long-term mission with a 30-year vision that’s openly aligned with our beliefs and value systems,” Krein said. “They’re reinventing the entire experience of the patient with the prime directive of taking care of everyone just like you’d take care of your mother.”
Florida, which already has Medicare Advantage enrollment at levels well over the national average, is expected to increase membership in the program by more than 200,000 people between 2018 and 2020. About 43 percent of the Medicare Advantage enrollment growth DRG has predicted in Florida is in the eight urban counties Devoted Health is expanding to.
One potential geographic challenge, highlighted by Gee, is picking up the “snowbird” population who live in Florida seasonally and may need access to wider nationwide provider networks. Medicare Advantage upstarts like Devoted Health generally pursue a narrow-network strategy of partnering with a smaller group of select providers, which makes care and financial coordination easier and more efficient.
The Medicare Advantage industry continues to grow annually as a predictable avenue for insurers to grow their business, in contrast to the political instability in the Medicaid market.
“Heightened emphasis on Medicare Advantage is a common strategic theme across the U.S. managed care landscape, from large, national for-profits like UnitedHealth Group and Aetna to start-ups like Clover Health and DevotedHealth,” Gee said.
In fact, Devoted Health is one of more than dozen new insurance providers planning on servicing the Medicare Advantage starting in 2019.
The challenge for the company is rising above the fray, especially with well capitalized competitors in Medicare Advantage including Clover Health, Bright Health and soon Oscar Health, which announced it was entering MA after a $375 million cash infusion from Google.
Of course, there may be enough business to go around, with the US population continuing to age and Medicare Advantage enrollment expected to increase by 3.5 million members between 2018 and 2020.
Picture: Getty Images, asiseei