$100M+ financing. Pharma funding. New Oscar Health strategy.
Providers Of Capital
When it comes to digital health, one of the crucial Catch-22s: no one wants to be the guinea pig to pilot untested technology, but you can’t test or prove your technology without studies. Not to mention, providers can leave companies out to dry if incentives don’t remain aligned. I’m reminded of this quote from Kyle Hill about HomeHero shutting down:
“One danger working with large health systems on pilots is being dragged out in the middle of an ocean and abandoned…It became evident that most of our pilots were being constructed solely for case studies and had slim chances of turning into sustainable contracts.”
One of the ways to theoretically correct this misalignment is the hospitals actually investing and taking an equity stake in a company – therefore benefiting if it succeeds. We analyzed where some of the top hospitals/providers are investing in private markets. See the full research here.
A few takeaways:
Since 2012 hospitals were involved in 167 investment or M&A deals. Most investments are focused at the Series B and C stages.
Hospitals are investing across the spectrum including digital health, med devices, CRISPR companies, and diagnostics. Some hospitals, like Community Health Systems, are focused entirely on consolidation, buying up other practices and care networks.
A few providers have their own dedicated VC arms, and we’re starting to see the formation of new ones, including NYP Ventures recently.
And the Oscar goes to…
Investing and acquiring startups is one way hospitals can get involved with healthcare startups, but the Cleveland Clinic is trying something new. They’re partnering with Oscar to offer a co-branded insurance plan both on and off the health insurance exchanges next year. This is important because 1) several insurers just left the Ohio exchange and 2) it could be a new approach to “verticalization” in the healthcare space.
Oscar has been dabbling in getting involved in primary care through its clinic and telemedicine offering, and simultaneously more hospitals have started offering their own health plans with mixed success. This new partnership sits at the convergence of those trends, with Oscar potentially handling population health management and care outside of the hospital while also having the resources and teams of the Cleveland Clinic. Whether this approach will be successful is yet to be seen.
While Oscar is expanding into new markets and trying new strategies, they also haven’t raised in about a year and a half. It’s possible that they may have to raise a new round of financing before next year’s enrollment period to sustain their expansion.