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Digital Health

Rock Health Q1 2024 Funding Recap

If Rock Health’s Q1 2024 Digital Health Funding Report makes one thing clear, it’s that the times of transition are behind us, and we’re now fully entrenched in a new digital health funding cycle.

The first quarter saw $2.7B in digital health venture funding across 133 rounds, marking the lowest quarterly total seen since 2019. It’s not as bad as it sounds.

• Although total funding wasn’t trending in the right direction, the pace of the funding was actually healthy, and the 133 rounds was the highest in the last six quarters.

The average transaction size of $20.3M mostly tells the tale of growth-stage companies having to justify their valuations based on clinical outcomes rather than fancy storytelling.

• Crowded markets are pushing enterprise customers to seek out outcomes data as a way to differentiate players and evaluate value-for-investment.

• As outcomes data becomes a moat and a customer draw-in, investors are seeking out companies that can demonstrate efficacy early – making outcomes data more central to fundraising conversations… and at earlier stages.

AI drove a record share of funding. While not exactly too surprising, AI-enabled companies captured 40% of Q1’s funding total ($1.1B across 45 deals), compared to 33% of 2023’s funding pot and 29% of 2022’s.

• As AI energizes the sector, it isn’t too hard to follow the funding to the areas with the most perceived promise: scribing, precision medicine, and care enablement.

• Abridge raised a colossal $150M Series C, AI precision health company Zephyr AI landed a $111M Series A, and a suite of high flying startups landed huge rounds, including Ambience Healthcare ($70M), Fabric ($60M), and Codametrix ($40M).

The last theme is familiar: creative fundraising continues to be a crowd favorite, especially as public market delistings cause investors to rethink their exit potential.

• Nearly half (48%) of Q1’s funding rounds were unlabeled, compared to 44% of all transactions in 2023.

• Founders are going above and beyond to entice investors with more upside in the event of an exit, as seen with Transcarent structuring its $125M Series D to offer funders 2.5x their investment should the company M&A or IPO. 

The Takeaway

Expectations have been reset for digital health startups, causing them to evolve their strategies and reorient around different metrics of success (strong outcomes / margins vs. high projected growth). These expectations are undoubtedly higher than they were during the pandemic era of loose capital, but that’s probably not a bad thing for a sector that’s still striving for maturity.

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The Wire

• Portal Message Language Processing: A research letter from Kaiser Permanente showed how using natural language processing to assign category labels to portal messages can help direct them toward an optimal respondent. KP’s approach allowed 31.9% of the 4.7 million messages received over a five month span to be resolved by a “regional team” of service reps and medical assistants before reaching the inbox of a specific physician. This chart also gave a peek behind the curtain of the content in KP’s messages, with the Medication label stealing the show.

• Cedars-Sinai Connect Updates: A pair of major updates to the Cedars-Sinai Connect virtual primary care app greatly expanded its functionality for both pediatrics and Spanish speakers. Parents of children 3 to 17 years old can now access on-demand visits for issues such as cold, flu, or rash, while Spanish-speaking adults can now choose a Spanish-language app experience and integrated virtual care. The updates build on Cedars-Sinai’s success harnessing K Health’s clinical AI to help patients manage their care needs while cutting down on admin burdens for providers.

• Innovaccer eCQM Launch: Innovaccer announced the launch of its enhanced quality management solution to help accountable care organizations meet eCQM (electronic Clinical Quality Measures) guidelines for quality reporting requirements. The launch arrives as CMS is pushing to move to completely digital quality measurement by 2025, a tall order for ACOs that often work with a wide variety of EHRs across different providers and care sites.

• COVID Impact on Rural Hospitals: The American Hospital Association just published a thorough assessment of the pandemic’s impact on rural hospitals, highlighting how “COVID-19 provider relief funds masked long-standing financial challenges.” Researchers found that 48% of rural hospitals consistently experienced negative operating margins during the pandemic, while just 12% consistently experienced positive margins. The biggest performance indicator? System affiliation. Only 37% of hospitals in the negative margin group were system members, versus 83% in the positive margin group.

• Grow Therapy Series C: Grow Therapy added another $88M in Series C funding to help independent therapists launch their own practices by equipping them with a purpose-built EHR, virtual support for administrative tasks, help with payor coverage, and tools for patient-provider matching, telehealth, and care navigation. The Series C comes almost exactly 18 months after Grow Therapy raised its $75M Series B, with the bulk of the new funding going towards advancing the capabilities of its EHR.

• Intermountain + Sensorum: Intermountain Health is expanding remote patient monitoring to older adults with chronic illnesses through a new partnership with Sensorum Health. Patients enrolled in the “House Calls” program at Castell (Intermountain’s population health arm), which are primarily homebound with conditions such as CHF and COPD, will now have access to Sensorum’s passive sensor technology to catch signs of emerging health issues and enable earlier clinical intervention. We should also see whitepapers with the program results published later this year.

• Screening Doesn’t Catch Most Cancers: Results shared at AACR 2024 found that most cancer deaths occur outside guideline-based cancer screening programs. Researchers estimated that 600k US cancer deaths (31%) are from colorectal, female breast, cervical, and lung cancers in smokers. However, given the low adherence of lung cancer screening, 83% of cancer deaths aren’t addressed by commonly utilized cancer screening tests, which sounds like a clearly addressable need for new screening technologies like blood biomarker-based testing.

• AvaSure Analytics Enhancements: On the heels of launching its AvaSure Episodic solution that allows care teams to seamlessly collaborate regardless of location, AvaSure is enhancing its analytics portal to help providers benchmark their virtual care program performance. The AvaSure Analytics portal has been revamped with Microsoft PowerBI tools for conducting analysis of critical metrics across a comparative database of more than 800 hospitals nationwide, allowing them to track performance against highly relevant targets.

• Augmedix Integrates With Andor: Ambient AI company Augmedix announced a new integration with Andor Health’s cloud-based communication and collaboration platform for virtual care. The duo will integrate physician clinical note creation directly within ThinkAndor Virtual Visits, allowing for AI-generated notes to be available seconds after the virtual session, a capability made possible by leveraging Google Cloud’s MedLM models fine-tuned for healthcare use cases.

• Simultaneous Remote Care: Mass General Brigham researchers showed that remote care that “simultaneously and immediately” combines education and treatment improves medication adherence. The researchers randomized 200 patients with type 2 diabetes and higher cardiovascular and kidney disease risks to either simultaneously receive diabetes medications and virtual education, or to receive two months of virtual education followed by medication prescription. Far more patients in the “simultaneous” group received a new diabetes medication than the education-first group after two months (53.4% vs. 8.3%) and after six months (69.8% vs. 56%).

• Costco & Sesame Expand to Weight Loss: Six months after Costco teamed up with digital health marketplace Sesame to offer its members same-day virtual primary care, the companies expanded their alliance to include Sesame’s virtual weight loss services. Costco members can score a three-month subscription to Sesame’s weight loss program for $179, which gives them video consultations with weight loss specialists, payor coordination for prescription authorization, and nutrition and exercise guidance. However, it doesn’t cover lab costs or the actual costs of weight loss meds.

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