The Brave New Healthcare Strategic Venture World

By Clive Riddle, May 8, 2020

Strategic investing has escalated as a “thing” with health systems and health plans, and you’ll find the fingerprints of their various venture funds on an increasing number of important healthcare startup and acquisition transactions. Given our new COVID CoronaWorld will is leaving many providers and startups undercapitalized, the potential is there for stakeholders that manage to maintain a healthy venture fund to have an even greater strategic impact in the coming years.

BDC Advisors' Steve Weylandt, Dudley E. Morris, and Alan Trimakas published this April 27th article with HFMA:  8 hallmarks of a successful healthcare venture capital program that begins with "Developing innovative venture capital projects is rapidly becoming an essential element of the U.S. health system’s strategy to ensure long-term financial viability. In the past five years, healthcare venture capital programs and innovation labs have become essential tools for health systems."

Here are the "eight core principles and lessons learned from organizations that have achieved success with value-added venture capital management" that they elaborate on in the article:

1. Make venture capital a health system strategic priority

2. Clearly align corporate and venture capital investment goals

3. Make collaboration and coinvesting key parts of the strategy

4. Separate venture investing from operations

5. Build a culture that is reasonably tolerant of failure

6. Make sure to groom 'venture champions'

7. Focus on scale and implementation from the start

8. Engage health system leadership

A couple of weeks ago, Becker’s Health IT published an article on 15 digital health, telehealth startups that raised millions in the past 3 months that in addition to mentioning typical high-profile VC firms involved in the transactions, also noted involvement of Cigna Ventures and MemorialCare Innovation Fund funding a new round for AristaMD, the e-consult company; and MemorialCare Innovation Fund, LRVHealth, OSF Ventures and UnityPoint Health Ventures funding a new round for SilverCloud Health, a digital mental health platform.

Cigna Ventures in January announced strategic investment with two digital health innovation companies - Buoy Health and RecoveryOne. Buoy Health "brings an unparalleled depth and breadth of experience in leveraging artificial intelligence to facilitate real-time, high-quality and personalized care recommendations based on an individual's symptoms. RecoveryOne "combines the power of digital with the human touch by connecting individuals to one of 180 evidence-based care programs for musculoskeletal conditions ..With this approach, RecoveryOne addresses the significant gap between actual and desired outcomes achieved through traditional care."

Blue Shield of California funded the launch of Altais in August last year, at that time stating “The company, named after a star, has been in discussions with potential partners to launch services and tools to help physicians and their practices reduce administrative burden and spend more time with patients. Altais is also in discussions to eventually provide primary and specialty care services.” Given the strategic objective of many health plans to expand clinical integration, it should come as no surprise that last month Altais and Brown & Toland Physicians announced they have signed a definitive agreement that paves the way for Brown & Toland and its network of more than 2,700 physicians to join Altais Clinical Services, a subsidiary of Altais.

And Commonwealth Care Alliance this week announced their “Winter Street Ventures investment arm has led a $5 million funding round in LifePod® Solutions, Inc. (LifePod). CCA will also distribute approximately 10,000 of LifePod proactive voice units to its members across Massachusetts as part of a broader virtual care program the organization is deploying during the COVID-19 crisis. LifePod’s unique proactive voice capability enables providers and caregivers to check in with and create reminders for individuals with significant health issues, including older adults aging in place and chronically ill patients. Through this expanded relationship with LifePod, CCA will greatly enhance its ability to stay in contact with its members, and to check in on their medical, behavioral health and social needs at a time when home visits are severely reduced to protect public health and safety.”