NEIL PATEL (00:00):
There's no shortage of problems to solve in healthcare. The question is the when and the how, as opposed to if you should do it.
DR. DANIEL KRAFT (00:07):
Welcome to Healthy Conversations, an original podcast from CVS Health. I'm Dr. Daniel Kraft. Innovative technology is everywhere, but the healthcare industry is challenging, with complex regulations and long-established bureaucracies. A company called Redesign Health is working to transform the industry from within. In just five years of existence, they've helped launch more than 50 tech-enabled healthcare businesses. And last fall, CVS Health Ventures was amongst a handful of enterprises that provided Redesign Health with fresh funding to jump-start even more healthcare startups.
So today, I'm pleased to be in healthy conversation with two people at the heart of this effort, Andrea Messina, who's the executive director and partner at CVS Health Ventures, and we're also lucky to have the head of new ventures for Redesign Health with us today, Neil Patel. Welcome to both of you. Let me start it off with Andrea. Can you first explain what CVS Health Ventures is, when it was organized, and what you're looking to achieve?
ANDREA MESSINA (01:01):
It was actually founded in April 2021. We invest in early and growth stage companies, as well as other funds. We focus on digital health investments, tech-enabled services. We also serve as a strategic investor. That means we're certainly looking for opportunities that give us conviction around financial return, but we're also looking at opportunities that deliver the highest value, whether it's through our employee base, whether it's through Aetna, Caremark members, or clients, importantly, for how this can make a difference and how these companies can make a difference at CVS Health.
DR. DANIEL KRAFT (01:36):
What kind of range and stage of investments do you tend to make?
ANDREA MESSINA (01:39):
We started as early stage, which, it typically means series A, series B, or later. It was a $100,000,000 fund and has since grown to 150 million, which is exciting. We focus typically on companies that are around 2 million in annual revenue. We have a point of view on the market, where it's going, where we think there's opportunities and need, and we look for companies that fit... We have access to a lot of SMEs that we bring in to help us diligence and really kick the tires and answer really important questions that are going to help drive that conviction around investments. So, to date, we have 18 companies we've invested in, 10 on the venture side, eight on the growth equity side.
DR. DANIEL KRAFT (02:21):
I can imagine you being a very attractive investor for many companies, because you can leverage the CVS Health platform as a potential customer. When you invested in Redesign Health, what stood out?
ANDREA MESSINA (02:31):
Redesign for us was a bit of a non-traditional investment, meaning it's a launching pad for other startups. It has this multiplier effect in the digital health ecosystem. By supporting that platform, there's indirect opportunity for us to then sustain and build companies through Redesign. Very exciting investment, they take a lot of the most, as we see it, difficult elements of starting a new company out of the equation for prospective founders. We have a great cadence with the team. We meet on a very frequent and ad hoc basis, and we're really excited and enthusiastic for all they've been able to build.
DR. DANIEL KRAFT (03:05):
So, Neil, Andrea gave us her take on Redesign Health. Can you expand a bit more about your model, how it was started, and what's the overall goal of Redesign Health?
NEIL PATEL (03:14):
So, the company that was founded in 2018 by our CEO, Brett Shaheen, a pretty rapid pace here. We've launched over 50 companies to date. The goal of the company is to, as the name suggests, redesign healthcare. A company is the intersection of ideas, talent, and capital, and our goal here is to provide all of those things plus an enabling platform that de-risks a lot of the things that makes building companies in healthcare in general honestly hard. And we believe via scale, you can invest in a lot of those things that one-off companies don't have access to or wouldn't have the ability to invest in.
DR. DANIEL KRAFT (03:48):
So yeah, healthcare is hard, and doing a startup in healthcare is even harder. If I'm an entrepreneur, do I knock on your door with my idea, or do you find a need and solve it and build from there?
NEIL PATEL (03:57):
Everything starts with an idea. The source of that idea could be a number of different things. With our partners, we're talking to them. We're talking to their SMEs. We're understanding what problems are unsolved or not well solved by existing solutions in the market. And so that can be one source of ideas.
Another is a very thematic-driven approach where we're looking at areas of healthcare that we think are ripe for new solutions, so things like movements to value-based care, data-driven medicine, managing of chronic diseases, move of care away from central sites of care to the ambulatory home setting. So those are kind of persistent themes that we're looking at in general.
CVS is an interesting one in that both they're an industry player as well as a investor, but we have regular cadences with investors as well. And then, we have a quantitative approach in which we're screening companies that are in market getting traction, looking at what problems are they solving, how does that tap into or align with research that we've already done or, kick off any research that we could do in problem spaces, because there's no shortage of problems to solve in healthcare. The question is the when and the how, as opposed to if you should do it.
DR. DANIEL KRAFT (04:59):
And so, with Redesign Health, you have a bit of how process that kind of smooths out and accelerates the process?
NEIL PATEL (05:05):
I mean, we spend about six to nine months before we even launch a business or before we actually even capitalize a business doing research on the idea itself, who the buyers, the stakeholders, competitors are, talking to both our external experts, our advisory boards and industry partners that we have. And then, at that point in time, we're starting to source the founding team, who is the right type of CEO to be able to actually bring this idea on paper to life, right?
We're learning from all the rapid cycles of other companies that we've launched in market around how do you contract with certain types of payers, how do you engage with health system stakeholders, what are the best growth marketing techniques that can help lower your CACs? We're very much of a founder enablement model, but at the same time, we're providing scaffolding and support in both fundraising as it goes forward, enterprise partnerships, and then, operating guidance from a venture chair team of experienced operators, former CEOs, business leaders to be able to be a mentor, a guide to the CEO, as well as the connective tissue back to Redesign.
DR. DANIEL KRAFT (06:03):
Obviously, healthcare's quite broad. Can you give me a little example of the scope in terms of the startups that you've been building and maybe a story or a couple of successes that are on your favorites list?
NEIL PATEL (06:12):
It's easier to describe what we don't do, and we have not and likely won't take FDA risk in businesses that we are looking to build. We're mostly taking execution, product market fit risk, so we're a cross-payer provider, employers, pharma, med-tech, consumer, all cross-industry. We're US-focused in terms of where the companies need to have a predominant initial go-to-market. The company could scale globally, but as we think about our underwriting and what business we're building, it's predominantly US-focused. We're trying to build companies that, while they could exist across multiple archetypes, we want to make sure that we're putting enough depth in each sector that we're actually not scattershotting and being able to bring those learnings back into new four-wall businesses and build advisor bases across each as well as industry partners across each, hopefully de-risk the path from inception to series A and then beyond.
One of the earliest companies that we launched was a company called Lively. It's now called Jabra. It's in the tele-audiology space. We actually launched it with GN Hearing. The devices they had, the hearing aids, they were trying to figure out the best path to actually build a consumer-facing business that could actually get these in the hands of people that need them. They were so excited about the early success of this business that they actually ended up acquiring it in 2021.
Another one that we launched with UPMC called Pip Care, you need surgery, there's prep that your physician is asking you to do, whether it be smoking cessation or weight loss or take certain medications or what have you. Patients are not always adherent, despite their best efforts or intentions. And so that leads to suboptimal outcomes in surgery, or even delaying or cancelling the surgery altogether, which is not the outcome that anyone wants. And we're already starting to see patients on this digital platform to help make those instructions both evidence-based as well as actionable and something that patients can engage in. I'm excited by that, because as we think about Redesign's evolution, we're starting to go deeper into different nuances of healthcare that we think can have immediate impacts on outcomes and cost and quality.
DR. DANIEL KRAFT (08:10):
Yeah, and I love that your name is Redesign Health, because often, you can have the right solution to a problem, but it has to fit within the healthcare systems, fit into the workflow and reimbursement models, and that takes design thinking as well as solution thinking.
Andrea, are there any kind of companies or categories of companies that you and CVS Health find particularly interesting from the investment and expansion realm?
ANDREA MESSINA (08:33):
We've been focused on chronic conditions, as an example. So, how do we really think about watching the market dynamics? So we think about the move into the home. We think about digital health infrastructure. And really, the adoption of that, that's changed over the past couple of years. What can that do for some of our neediest patient populations?
We're very focused on specialty care. We've made some investments in cardiovascular care, so we have an investment in Biofourmis. We have a company that's focused on virtual-first GI care and behavioral health. We've also made investments in CKD, thinking about patients that are CKD, let's call it 3B, stage 4, stage 5, and stage renal that quite honestly could be advantaged outside of traditional bricks-and-mortar. So thinking about riding that wave into the home, how do we support them? How do we monitor them? How does that actually translate and flow into lower costs?
And we're really pushing into care delivery in a big way, thinking about opportunities around VBC enablement, provider enablement. And what can that do for a patient? How can that better manage their care? How can that better help them navigate and coordinate that next step? So, certainly, specialty care, new care delivery models, particularly things that can augment and support primary care, these are big focus areas for us.
DR. DANIEL KRAFT (09:50):
A lot of clinicians are listening to this. They think, "Ah, these technologies, these digital solutions are great, but they don't fit into my workflow or incentives." Andrea, any perspectives on blending workflow and new technologies that they actually get to market and are impactful?
ANDREA MESSINA (10:03):
So I worked for many, many years on the health system provider side. You can have the best solution, the best, brightest, smartest team. If you can't get into the workflow, you can't get providers to take that next action. You can't get to your patient, then even the best solutions are going to fail. A common gut check for us is thinking about how do you get into the middle of that workflow so you're actually utilizing the tool as intended.
I think an early use case is around what I would say, not the delivery of healthcare, but the business of healthcare, opportunities to optimize around much more the administrative... We have access to a lot of subject matter experts across the ecosystem. It's part of my role leading market development for our ventures team. That's how we learn about pain points.
Another piece of the work I do for market development is managing where we're invested in other funds, meaning tapping into our VC ecosystem. We're putting together sort of very thoughtful investment thesis, and I would say anything analytics focus, predictive focus, and all the way through the more sophisticated tools, like ChatGPT are going to be a big area of focus for us this year.
DR. DANIEL KRAFT (11:16):
They can certainly help lower the friction of care and what providers and clinicians of all sorts need to do, whether it's EMR, recordkeeping, or connecting with their patients in a more remote way.
So, Neil, any perspectives there? And also, have you seen any common problems with startups that fail that you're able to solve for with Redesign Health?
NEIL PATEL (11:35):
Making sure that you build something that appeals to the actual user as well as the buyer is something that we always take into account as we're building new products, new solutions, new companies. In terms of what you've learned, as we think about, from the founding team, who are the best types of individuals? What's the founder archetype that is best suited to succeed? And a lot of that is market-dependent.
So, right now, capital is hard to come by. You want to make sure that CEOs that have prior experience engaging with investors, those that know and have built in times where capital is not necessarily abundant. They're scrappy. They're builders. They're not just managers. They need grit and understand how to build in a lean way. And then, we want to enable those teams with tools, playbooks, and things that basically accelerate and shortcut learnings. The more cycles you remove, the more time you create, which then allows you to get that elusive product-market fit with less capital. Those kinds of things become more important in different times of the market, and this is certainly one of those.
DR. DANIEL KRAFT (12:34):
Can you talk a bit about your relationship with CVS Health ventures and how they help you drive innovation and maybe even help discover some of the pain points you want to solve for?
NEIL PATEL (12:43):
We have a great cadence. It's definitely a very collaborative, constructive relationship, not only getting feedback on things that we might build, but also things that we already have built in market.
DR. DANIEL KRAFT (12:51):
Andrea, anything you want to add there?
ANDREA MESSINA (12:53):
It's been a fantastic collaboration with the Redesign team. Once the deal closes, we continue to stay very plugged-in, making sure we can make those really valuable connections. As a ventures team across the CVS ecosystem, what's nice is we can really prep and have these curated conversations where we can bring the Redesign team together with folks that are actually looking for new opportunities to incubate ideas, companies to solve business need at CVS.
DR. DANIEL KRAFT (13:22):
So, Neil, in this year of exponential data, we don't often want the data. We want the insights and the actionability at bedside or website. And, as I understand it, you're particularly focused on how to also use data in the realm of social determinants to improve outcomes. Can you share some insights about the work in startups in that space?
NEIL PATEL (13:39):
Okay. You have member populations within Medicare Advantage plans that have social needs that the plan isn't necessarily aware of and therefore, doesn't necessarily know which benefits they might be able to actually surface to those individual members to be able to drive some of these social things that are root causes that exacerbate chronic conditions they might have.
And so, CMS created a pathway to be able to tailor benefits for specific chronic conditions that allow you to pay MLR dollars to be able to actually invest in social things. So, trying to figure out how do we actually enable the plans to be able to understand their populations in a way that they could actually tailor these benefits, that was the gap that we saw.
Part of this is building a two-sided network inside of a market, getting the data, the analytics, surveying the member populations, pulling publicly available information as well as specific personal information to be able to then surface that in a way to the plan, which allows them to do the benefit design. Launching it this year, really excited about it.
DR. DANIEL KRAFT (14:36):
There's certainly a lot of opportunity to match not just the social determinants, but the age, culture, language, incentives, and across the many different spectrums that we have across the US and different healthcare systems. And I certainly know, Andrea, that CVS Health is focused on social determinants, and you have so many touch points.
ANDREA MESSINA (14:51):
The care team's a much broader definition. It's your clinicians. It's your social workers. It's the underlying data that actually can help you learn and understand where is the highest need for this member or this patient. We certainly stay connected with the Redesign team. The SDOH, all of those other factors for the care and the patient journey, are really just as important as some of those medical and clinical interventions that we can deploy.
DR. DANIEL KRAFT (15:15):
Another area that's certainly not new, but is always moving, hopefully, towards, is value-based care. And there's a lot of shift from the old fee-for-service, but not yet full value-based models that reward better outcomes. But often, the incentives and infrastructure don't really support that shift. Neil, have you seen any solutions that really help enable better adoption for value-based models, both for clinicians and healthcare systems?
NEIL PATEL (15:41):
Yeah, there's a company called Syntax we've launched, really asking ourselves a question. If, largely, everyone believes that this is the path that we need to be on as a health system in the United States, what are the frictions that are slowing this progress down? And it was actually around contracting. Without a contract, you're not going to deliver the care, because there's no good way to measure to get paid for it. And so, what was really driving that friction, actually, was the lack of understanding or framework through which to have those conversations which a provider and a payer can actually negotiate and set terms and understand what they're walking into, because this is a relative unknown.
Andrea mentioned that getting into the provider workflow of what you do with that information actually drive care at the patient level. But, upstream from that, more at the admin level, there's a whole system and hierarchy that overlays that. And so, Syntax is a company that we have built, have an amazing founding team in place that could have a monumental impact in how care is measured and outcomes can improve.
DR. DANIEL KRAFT (16:40):
I always like to say, we don't practice evidence-based medicine, we practice reimbursement-based medicine, and hopefully, that shifts to more value-based care models. Speaking of next steps, we've seen a lot of accelerated steps in the setting of the pandemic, and that often has shifted where care happened. Obviously, a lot of virtual care.
NEIL PATEL (16:56):
I think it's a broader theme as you think about what's the best site of care, best medium of care, and the best individual or care team that can deliver that care to the right patient, right? What's interesting about this is, when you do it right, it not only optimizes the total cost of care for that patient or member's journey, whether it's an acute episode or something chronic and also, when done well, can and should lead to a better experience for that patient, a win-win there.
Now, obviously, a lot of forward-thinking systems have started to move and understand they need to meet patients where they are, whether it be ambulatory settings or in home-based settings or virtual settings. And some of this actually goes back to social determinants of health as well. Do they have access to stable broadband and Wi-Fi in the home? Do they have a stable home environment which they actually can receive care? Are they digitally literate? Can they engage with a cell phone and the content? So, so much of this is understanding the patient on a much more deep level so that you don't create just a one-size-fits-all care delivery model that we think works, but actually does work in the market.
And we have a number of companies. MedArrive is one of our earlier companies that's been around for a few years now, understanding that not all emergency calls or EMS calls that end up turning into admissions almost reflexively because the person shows up in the emergency department, but if you can divert that at the site of care, you can actually create a better experience and treat the person in the home with latent capacity of EMS resources.
DR. DANIEL KRAFT (18:22):
It's sort of hybrid care. There's hospital to home. There's hospital to phone. So, Andrea, CVS Health Ventures is certainly catalyzing a lot of this. You have minute clinics and virtual and home care. I think you're calling it omnichannel care. What is your perspective on this shifting landscape, and where do you think it might be going in the next five and 10 years?
ANDREA MESSINA (18:40):
I think as an organization, care is delivered locally, and that's where CVS operates. We are in communities. We are across the US. Nothing is more local than the home, and that's certainly part of our strategy outside of what's probably more traditional bricks-and-mortar. One of our investments, Monogram Health, one of the compelling reasons we invested there was they are in the home, thinking about, how do you support patients on their journey so they're not, for example, crashing into dialysis? How do you actually think about supporting them where they're at for patients that are needy and might not be able to travel in the way you need them to? It's the whole idea of equitable care. We often think about rural care and those communities that might not have the same access. How do you support them in the home? Which, quite honestly, might not be the most sophisticated tools. There's a lot you can do telephonically.
DR. DANIEL KRAFT (19:30):
We've talked about social determinants, but I also like to think about the digital determinants of health. Do you have high speed internet? Which many parts of rural US still do not have, and the digital literacy to make some of these new tools work, whether it's remote patient monitoring or even getting your meds fulfilled. CVS Health's recent health trends report noted that about three out of five people over 65 are managing multiple chronic diseases. And of course caring for those with chronic conditions is expensive. And NIH estimates about 85 or 86% of our overall health costs are attributable to chronic disease. Neil, maybe I'll start with you. What would you see as needed next?
NEIL PATEL (20:07):
Most of these polychronic patients are still generally managed by their primary care physicians if they have a good relationship with them, right? So, a company we launched recently, still in stealth, that's focused on the neurodegenerative disease space. If you think about patients in that situation, the diseases get diagnosed late, typically require a neurologist to do the diagnosis. There's a shortage of that, so access becomes a problem. But not every patient needs to be under the care of a neurologist. So, that's an example of a type of a wraparound model that we've built getting these services into the community where care is delivered by PCPs, but they don't have the capabilities or the bandwidth to be able to manage these patients well.
DR. DANIEL KRAFT (20:45):
It's definitely an exciting time to go from data insights, the idea of the digital twin, to be much more proactive and preventative and drive a much more integrated and personalized healthcare system that's more equitable for all.
ANDREA MESSINA (20:57):
NEIL PATEL (20:58):
I think we'll look back on this time and say that tons of tremendous and transformative companies were built. If we look back in history, some of the most impactful and value-generative companies are built during times like this one.
DR. DANIEL KRAFT (21:11):
As you have in your name, redesign the solutions to fit, and then have a partner like CVS Health implement them and scale them.
Well, thank you so much, Andrea Messina, executive director and partner at CVS Health Ventures and NEIL PATEL, head of new ventures at Redesign Health for joining us here on Healthy Conversations.
If you're interested in hearing more about innovation in the healthcare space, check out our two-part episode with Dr. Tony Young, national clinical director for innovation for England's National Health Service. And be sure to subscribe so you don't miss our upcoming episodes.