Momentum makes magic, and few startups have more of it than AI medical scribe Abridge after landing $30M in Series B funding from Spark Capital and high-profile strategics like CVS Health, Kaiser Permanente, and Mayo Clinic.
Abridge’s generative AI platform converts patient-provider conversations into structured note drafts in real-time, slashing hours from administrative burdens by generating summaries that rarely require further input (clinicians edit less than 9%).
The Series B is one of this year’s largest raises for pure play healthcare AI, an area that now accounts for about a quarter of all capital flowing into health IT.
One of the reasons why investors are taking such a keen interest in Abridge is its partnership hot streak, which includes Epic bringing them on as the first startup in its new Partners and Pals program – a move that will make Abridge available directly within Epic’s EHR.
- It also probably doesn’t hurt that Abridge isn’t shy about sharing its performance data and machine learning research, giving it one of the deepest publication libraries of any company we’ve ever covered.
- On top of that, Abridge has been racking up a lengthy list of deployments at health systems such as UPMC, Emory Healthcare, and University of Kansas Health System.
The competition is fierce in the AI scribe arena, which is packed with hungry startups like Suki and Nabla, as well as a thousand-pound gorilla named Nuance Communications.
- Half a million doctors use Nuance’s DAX dictation software, with “thousands” more already up-and-running on its new fully-automated DAX Copilot.
Some key differentiators give Abridge and its user base of 5,000 clinicians a solid shot at closing the distance, including “linkages” that map everything in the note to its source in both the transcript and audio (Nuance provides the transcript but not the recording).
- Abridge also developed its own ASR stack (automatic speech recognition), enabling it to do things like account for new medication names and excel at multilingual documentation, meaning it can generate an English note from a Spanish conversation.
Abridge is emerging as a standout in the clinical documentation race, with DNA that’s as healthcare-native as it is AI-native. The executive team is lined with practicing physicians and machine learning experts, giving Abridge an advantageous understanding of not only the technology, but also the hurdles it will take for that technology to take hold in healthcare.
Teladoc Health’s third quarter numbers are in, kicking off the earnings season with results that were “mixed” enough to weigh down the broader digital health sector despite an 8% increase to top line revenue.
Here’s Teladoc’s Q3 at a glance:
- Total revenue up 8% to $660.2M
- Net loss of $57.1M (an improvement over -$73.5M in Q3 2022)
- Integrated Care segment revenue of $374.4M (up 9%)
- BetterHelp segment revenue of $285.8M (up 8%)
Everything seemed to be trending in the right direction, especially considering that US Integrated Care membership reached 90.2M (up 10% YoY), driven in part by Chronic Care Complete enrollment hitting 1.1M (up 13% YoY).
So why did TDOC stock continue its multi-year dive despite the positive metrics? Without wading too far into the Wall Street weeds, the headline grabber from the investor call was that CEO Jason Gorevic is “disappointed” with Teladoc’s current valuation, and is initiating a “comprehensive operational review” to boost its bottom line.
- The first component of the two-step overhaul involves a portfolio assessment geared toward sharpening Teladoc’s focus around solutions “prioritized in the direction of our integrated whole-person care strategy.”
- Second, Teladoc is pursuing a comprehensive review of its cost structure, meaning that it’s tightening its purse strings and prioritizing profitability over revenue growth.
While margin improvement and focused offerings seem like they would be music to investors’ ears, more cuts are clearly on the way, especially for service lines outside of “whole-person care.”
One of Teladoc’s biggest advantages over point solution providers is its “whole-person care” bundling capabilities, and two-thirds of last year’s chronic care growth included bundles for multiple products like diabetes, hypertension, or weight management. That approach gives Teladoc a distinct edge with clients looking for an integrated platform, but right-sizing its offerings to fit the strategy means that some investors would rather avoid the short-term revenue pain even with long-term margin gain.
At a time when new healthcare AI solutions are getting unveiled every week, a study in Nature Machine Intelligence found that the way people are introduced to these models can have a major effect on their perceived effectiveness.
Researchers from MIT and ASU had 310 participants interact with a conversational AI mental health companion for 30 minutes before reviewing their experience and determining whether they would recommend it to a friend.
Participants were divided into three groups, which were each given a different priming statement about the AI’s motives:
- No motives: A neutral view of the AI as a tool
- Caring motives: A positive view where the AI cares about the user’s well-being
- Manipulative motives: A negative view where the AI has malicious intentions
The results revealed that priming statements certainly influence user perceptions, and the majority of participants in all three groups reported experiences in line with expectations.
- 88% of the “caring” group and 79% of the “no motive” group believed the AI was empathetic or neutral – despite the fact that they were engaging with identical agents.
- Only 44% of the “manipulative” group agreed with the primer. As the authors put it, “If you tell someone to be suspicious of something, then they might just be more suspicious in general.”
- As might be expected, participants who believed the model was caring also gave it higher effectiveness scores and were more likely to recommend it to a friend. That’s obviously relevant for those developing similar mental health chatbots, but a key insight for presenting any AI agent to new users.
An interesting feedback loop was also found between the priming and the conversation’s tone. People who believed the AI was caring tended to interact with it in a more positive way, making the agent’s responses drift positively over time. The opposite was true for those who believed it was manipulative.
The placebo effect is a well documented cornerstone of medical literature, but this might be the first study to bridge the phenomenon from sugar pill to AI chatbot. Although AI is often thought of as primarily an engineering problem, this research does a great job highlighting how human factors and the power of belief play a huge role in the perceived effectiveness of the technology.
Rock Health’s industry analysis is a frequent feature in our top stories, but it’s tough to stay away with reports as consistently solid as last week’s 2023 Digital Health Startup Benchmarking Survey.
The survey broke down responses from 87 early-stage digital health startups to provide performance benchmarks for customer acquisition cost, lifetime value, expenses, and more [Chart: Company Breakdown by Stage / Segment].
Series B is a tipping point for growth, but not (yet) margins.
- [Chart: Revenue by Funding Stage] While Series A startups are generally building an MVP and testing product-market fit, no Series B respondents were still pre-revenue (vs. 25% of Series A). That revenue is going straight to growth, with just 12% of Series B startups reporting positive margins (a small increase from 9% of Series A).
CAC and LTV calculations are challenging for early-stage startups.
- [Chart: CAC by Customer Segment][Chart: LTV by Customer Segment] Both CAC and LTV vary widely by customer type, but both charts illustrate that “you get out what you put in.” It cost respondents an average of $58k to sign a payor, but the average lifetime value was $5.1M. That compares to a CAC of $170 and an LTV of $1.7k for consumers.
Engagement metrics are the first step to robust outcomes.
- On average, each company reported tracking two engagement outcome metrics, two clinical outcome metrics, and one economic outcome metric. “For startups balancing speed-to-outcomes and quality-of-outcomes, an ‘engagement first, clinical/economic later’ approach might help to toe the line.”
Navigating product versus marketing costs is a balancing act.
- [Chart: Company Product vs. Marketing Costs] The amount of revenue the startups devote to product versus business development and marketing evolves alongside scale. Pre-seed respondents allocated 75% of revenue to product and 11% to marketing, while Series B respondents allocated 36% of revenue to product and 22% to marketing.
We’re lucky to be in a golden age of startup transparency, and between this Rock Health survey and the latest State of CareOps report, there’s no shortage of great information out there for founders to use as guideposts in their pursuit of scale.
Last week’s action-packed news cycle brought plenty of headlines, but General Catalyst might have stolen the show with the announcement that its new company HATCo is on the hunt to acquire a health system that’ll serve as a proving ground for tech-enabled care.
While the blog post unveiling the Health Assurance Transformation Corporation left plenty to the imagination, it got the point across that “HATCo’s charter is not to disrupt healthcare systems,” but to be a blueprint for a better care experience guided by five foundational principles:
- Stakeholder alignment between providers, payors, and patients
- More ‘patient’ capital with a decades-long time horizon
- Reorientation around platform innovations as opposed to cost reductions
- “Radical collaboration” centered on an open platform and transparent best practices
- Decisive pivot to a value-based care model that’s better for patients and business
Sitting at the helm of the new company is former Intermountain Health CEO Marc Harrison, a seasoned leader who promptly laid out HATCo’s three strategic priorities:
- Work with GC’s 15+ health system partners to help execute their transformation journey
- Build an interoperability model where digital solutions can scale across the enterprise
- Acquire and operate a health system to demonstrate a successful transformation
Investment firms are no strangers to hospital acquisitions and restructurings, but their ambitions have always stopped short of direct ownership and care delivery.
- VCs are typically searching for outsized returns from their top performers to offset their misses, and hospital margins don’t exactly offer much room for a 10x outcome.
- That said, the industry’s response seems to be cautious optimism, or at least a healthy appreciation for the fresh approach mixed with skepticism that VCs can put patient care ahead of shareholder value.
General Catalyst is flipping the standard approach to digital health on its head, acquiring a health system to serve as a sandbox for its portfolio companies as opposed to working with traditional providers to test new solutions. HATCo is the vehicle for a potentially seismic strategy, and its long-term focus might fill the holes in the Silicon Valley mantra of “move fast and break things.” The company’s real impact will ultimately be shaped by the acquisition target it lands on, but apparently we won’t have to wait more than a few months for that detail.
Another HLTH is in the rearview mirror, and this week’s exhibit hall chatter was a testament to how much things can change in a single year.
It’s hard to believe that this intro for last November’s show didn’t include a single mention of generative AI. In a few short months, nearly every exhibitor has not only thought about incorporating LLMs, but has implemented new features and shipped entire solutions centered around the technology.
It was also refreshing to see the amount of good ol’ fashioned innovation happening outside of the AI-focused spotlight. To help keep it all straight, here’s our recap of the major announcements, launches, and partnerships from HLTH23:
- b.well Connected Health is integrating with Samsung Health to give millions users control of their longitudinal health record plus proactive insights from a growing network of providers, including Walgreens, ThedaCare, Lee Health, and Rise Health.
- CirrusMD showcased its Physician-first Care & Guidance model that streamlines care journeys by building around the physician, allowing them to overcome traditional limitations of one-to-one encounters through collaborative virtual environments.
- Darena Solutions took the lid off its new MeldRx platform-as-a-service that enables the rapid creation of FHIR-compatible healthcare apps, taking much of the guesswork out of app development while ensuring that new tools integrate seamlessly with EHRs.
- DrFirst unveiled its Fuzion platform that uses “clinical-grade AI” to streamline clinical workflows such as medication reconciliation, eliminating the need for manual data entry while offering analytics on drug fills, patient engagement, and improvement areas.
- Google Cloud announced healthcare-focused search capabilities that connect clinical data to the Vertex AI algorithm development platform, functionality that can be combined with Med-PaLM 2 to let providers surface answers to specific medical questions.
- HATCo – AKA the Health Assurance Transformation Company – is on the M&A hunt after General Catalyst unveiled the company with the intention of acquiring a health system to serve as a proving ground for tech-enabled care. We’ll unpack this one more on Monday.
- Health Gorilla announced that 17 healthcare organizations have committed to its QHIN once designated (on track to be before the end of the year), a list that included heavy hitters such as Evernorth and Virta Health.
- MDLIVE, the telehealth arm of Cigna’s Evernorth, acquired the technology behind Bright.md to begin offering asynchronous options for virtual care in 2024, with plans to expand to chronic condition management and wellness visits at a later time.
- Nuance shared some impressive results from Atrium Health’s roll out of DAX Copilot, which included 92% of clinicians saying the automatic documentation solution was “easy to use” and 84% reporting an overall improved documentation experience.
- PEP Health put out a stellar report using AI-powered natural language processing on over 25M patient comments across 8.5M unique web pages to create what might be the first national index on experience scores that doesn’t rely on survey data.
- Solera Health launched its HALO unified benefits platform that allows payors and employers to manage all Solera and non-Solera point solutions within a single interface, including a consolidated dashboard to assess program effectiveness side by side.
- SteadyMD is rolling out an all-in-one virtual care solution that combines 98point6’s tech backend with SteadyMD’s 50-state clinician network to help short staffed healthcare organizations lower operational costs while handling additional patient volume.
- Talkiatry debuted its new Mindshare partner program that lets providers easily refer their patients for telepsychiatric care from Talkiatry’s network of 300 psychiatrists across 44 states, with NYU Langone, NOCD, and Transact Campus signed-on at launch.
- Walgreens is throwing its hat into the virtual care ring as it continues its strategic pivot to healthcare services, with virtual consultations for common medical needs and prescriptions slated to begin later this month.
- Withings Health Solutions is partnering with Validic to integrate its suite of cellular devices with the IoT platform, providing seamless access devices such as the Withings Body Pro smart scale and the Withings BPM Connect Pro blood pressure monitor.
Special thanks to everyone at HLTH who caught us up on the latest and greatest, and welcome to all of our new readers we met at the show! Stay tuned for deeper dives into many of these announcements in next week’s Digital Health Wire.
Andreessen Horowitz partner Julie Yoo and Bassett Healthcare CDO Paul Uhrig recently shared their playbook for entrepreneurs looking to partner with health systems, which included plenty of insider tips to stand out in a crowded field.
Getting in the (right) door is the first step to any pitch, but an academic medical center with a healthy mix of payor contracts will have a different lens than a rural hospital serving mostly Medicaid patients.
- Advice: Research target health systems and make sure they align with your product’s value proposition. Make sure you’re reaching the right person, which usually involves multiple stakeholders across clinical, operational, and financial leadership. The value proposition needs to hold up to each.
Making the pitch will vary by health system (an asterisk that could probably be added to every tip), so it’s important to tailor all information and supporting data to individual priorities. This section stresses that it’s “imperative” to illustrate a positive financial impact.
- Advice: Don’t be afraid to ask about budget and clarify your revenue model. Even if stakeholders like the solution, it’s moot if they aren’t able to find the funds for it.
The evaluation process can run the gamut from informal discussion to formalized diligence, but health systems aren’t usually opposed to giving visibility into the evaluation checklist.
- Advice: Upfront qualification work is intended to de-risk the implementation process and identify potential blockers early. Be prepared with case studies and references from other customers to support the evaluation process.
Pilot programs are a health system favorite, but clearly defined success criteria and a commitment to move forward if those are met are two key ways to avoid “death by pilots.”
- Advice: Try not to get hung up on IT integration, and if possible steer toward an implementation scope that requires minimal integration before phasing into a full-blown integration to ramp up to your product’s full value.
As Yoo and Uhrig describe it, partnering with providers is a bit like “making an emulsion from oil and water,” especially at a time when many of them are grappling with rising labor costs and slim margins. Health systems see a daily flurry of startups offering to solve these problems, and if this playbook makes one thing crystal clear, it’s that the only way to get a pitch to land is to make it hit squarely in the center of their individual needs.
Another quarter’s gone in a blink, which means our friends over at Rock Health are already on deck with another recap of the biggest digital health funding trends of Q3.
Here’s Q3 by the numbers:
- US digital health funding totaled $2.5B across 119 rounds ($21M average)
- 4 of the past 5 quarters saw funding in the $2B range (establishing new normal)
- Capital shifting to digital support for disease treatment (notably kidney & heart)
Although the $2.5B raised in Q3 was the second-lowest total since 2019, it was also the fourth of the past five quarters to log funding in the $2B range – a far cry from the volatility we’ve seen since the start of the pandemic. (Chart: Funding Trend)
- On top of that, every quarter for the last year has notched an investment count in the low hundreds, maxing out at 131 rounds in Q1 2023.
- New norms have been established, meaning we’re finally past the shakeout and onto a fresh investment cycle.
The other major story from Q3 was that capital is shifting away from COVID-era favorites like life science R&D catalysts (a top investment in both 2021 and 2022) toward digital health solutions that support disease treatment. (Chart: Top Value Propositions)
- Disease treatment is now the most-funded value proposition of the year ($1.6B YTD), including recent raises from Vivante Health (virtual digestive care) and Healthmap Solutions (value-based kidney care).
Value-based care enablement was another obvious standout last quarter, and Rock Health predicts that VBC will become an increasingly important component of commercial roadmaps and enterprise partnerships.
- This will likely be particularly true in high-cost areas like mental health, cardiology, and oncology, not-so-coincidentally three of the top clinical indications in Q3 funding.
The headline for the third quarter has a familiar ring to it – overall digital health funding is slowing, but bringing more stability along with it. That predictability is much needed after years of wild market swings, and the new investment cycle is also equipping founders with a clear playbook: find a high-cost area, focus on outcomes, and build a sustainable business.
Atropos Health is a tough company to pin down with a short intro. It’s one part physician consult service, one part real-world data network, mixed together to close “evidence gaps” wherever they might be.
Over 70% of care decisions lack sufficient personalized evidence, in large part due to clinical trials excluding the same share of the population. This is the evidence gap that Atropos exists to bridge, and it just raised an undisclosed amount of fresh financing to support that mission.
The Green Button is the interface that allows physicians to surface answers to their clinical questions by quickly producing retroactive observational studies called Prognostograms.
- Prognostograms deliver the experience of a second opinion, but backed by real-world evidence tailored to a specific patient.
- As a result, physicians can incorporate more real-world evidence into their day-to-day practice, while ideally also cutting down on out-of-network referrals.
The Atropos Evidence Platform enables the magic on the front end, serving as a foundation of insights from over 160M de-identified patient records and a partner network that includes big names like Mayo Clinic and Clarify.
- Data Scoring Solutions guide users toward the most appropriate data source for their question, side stepping the “garbage in, garbage out” problem that challenges some of the LLMs taking the industry by storm.
- Publication-grade studies and transparency is a versatile value proposition, and seems to be resonating with both providers (Ex. point-of-care support, quality improvement programs) and life science orgs (Ex. clinical trial emulations, unmet need analysis).
Atropos is now setting its sights on the global market, with the recent financing tagged for international expansion and channel partnerships. The round was led by strategic investments from Samsung and Presidio, who will help kick off the expansion in Japan and Brazil.
Health data is more available than ever and growing every day, yet we’re only scratching the surface of retrieving actionable insights from that complexity. Atropos is helping healthcare organizations realize the benefits made possible by years of infrastructure investments, not with a language model spitting out silver-tongued guesses, but with transparent evidence-based research at the point-of-care.