Startups see opportunity in silver tsunami
New companies are looking to get into the growing market to treat the elderly. A critical question over their success is whether they can provide value that's scalable to multiple locations.
The silver tsunami is here, and with it comes a business opportunity.
More than 10,000 Americans are aging into Medicare each day. By 2030, the Census Bureau projects the percentage of Americans 65 years and older will outweigh those under the age of 18, a first in the country's history.
At the same time, more healthcare spending is going to government programs treating the elderly, and incumbent health systems and hospitals are specialized on high-profit services as opposed to a volume only approach. It's all created an opening for upstarts zeroing in on home health, chronic illness and end of life care.
"Startups are rightly identifying gaps in care, gaps in service, huge swaths of unmet needs and being able to put together networks ... [who are] able to expand themselves," Rita Numerof, president and co-founder of the consultant group Numerof & Associates, told Healthcare Dive.
A spectrum of companies are seeking a piece — from insurers to hospitals to physician services. The business strategies may vary, but the objectives of grabbing market share are just the same.
Startups investing in the aging population
The aging population makes Medicare Advantage, long popular among seniors with disposable income, an even hotter ticket.
Roughly a third of Medicare beneficiaries, some 19 million, have chosen these private plans, up from 18% in 1999. The percentage of payments flowing to Medicare Advantage has increased to 30% of all Medicare spend, up from 15% in 2006.
Insurers like UnitedHealthcare and Humana have boosted membership via the plans. Other upstart insurers like Bright Health, Devoted Health and Clover Health are cutting into the market. Some hospitals have been able to grab onto the revenue opportunities that MA plans offer, but most have yet to capitalize on providing care options directly marketed to seniors.
The approaches startups are using differ, but most rely on reducing re-admissions to drive down costs. Many have focused on tech and home health approaches, and some are backed by venture funding.
If you frequently see patients on a regular basis, "you can understand what their needs are," Paul Martino, co-founder and chief strategy officer of VillageMD, told Healthcare Dive in an interview. VillageMD focuses on the high acuity and chronic care patient populations.
"These new companies represent innovation, which is very important to changing the business model in healthcare," Numerof said. "They clearly fill an important gap."
Landmark Health, for example, created an in-home, risked-based medical group focused on the chronically ill and elderly population. Earlier this year, the Huntington Beach, California-based company received strategic investment funds from General Atlantic, a growth equity firm company.
The company currently boasts about 75,000 patients with an aim to serve 20 markets across 13 states by the end of this year.
Landmark President Chris Goldsmith told Healthcare Dive in an interview it enters into shared-savings risk arrangements with health plans to create mutually beneficial and profitable relationships over time. If Landmark can keep patients out of more expensive care settings, that helps align incentives for insurers, Landmark and potentially patients alike.
The physician team that goes into the home is supported by an interdisciplinary team of social workers, dietitians and pharmacists to meet the patient's need. "It becomes a very personal relationship," Goldsmith said.
Chicago-based Oak Street Health, also included in General Atlantic's portfolio, operates primary care clinics focused on the Medicare population, targeting medically underserved urban areas. It operates 25 clinics across three Midwestern states.
The model allows physicians to see fewer patients so they are able to spend more time with each patient while developing their care plans. It also provides door-to-door transportation and virtual visits, hoping to reduce hospitalizations by getting patients access to care before an adverse health event.
"One of the reasons you see health disparities and challenges is people don't necessarily know how to navigate the healthcare system," Mike Pykosz, CEO of Oak Street Health, told Healthcare Dive in an interview.
Pykosz said the education and access assistance has helped reduce hospitalizations 44% for its 42,000 patients. It has its sights set on expanding into more markets, like Philadelphia.
Alignment Healthcare, a payer and risk-bearing managed services organization, believes technology will be critical to manage chronically ill populations. The key, its senior medical officer Arta Bakshandeh told Healthcare Dive in an interview, is to use data to quickly identify patients in need and proactively deploy a care plan strategy.
"A lot of healthcare is going to move to digital medicine through the home platform," Bakshandeh said. "Payers and providers need to be ready [as] the aging population is becoming more tech savvy."
As competition rises, scalability becomes critical question for sustainability
It's not just startups staking a claim in the space. April saw two multi-billion dollar deals in the home health and long-term care arena. Real estate company Welltower and nonprofit health system ProMedica Health entered into a joint venture to acquire HCR ManorCare, a large provider of post-acute care and long-term care, and nursing home chain Arden Courts to create a $7 billion system.
Humana, along with private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe, announced about two weeks ago an acquisition of hospice operator Curo for $1.4 billion.
Annie Lamont, managing partner at Oak HC/FT, during a panel at Health Datapalooza, said the Humana deal was spurred by the insurer's interest in keeping costs down by proactively managing patients in the home.
Goldsmith expects competition to dramatically increase in the next five to 10 years.
This new wave of healthcare companies, at heart, are providing disparate tools for niche patient populations. A unifying theme is dealing with the varying aspects of the failings of the current U.S. healthcare system.
A question for these new companies critical to their success is whether they provide Band-Aids for the current system or offer a new business model that can scale to combat the fragmented approach that exists today. "If it's the latter, their success will set the stage for other innovators," Numerof said.
A challenge is that healthcare is local, and what may work for one population may not work for another. Companies must have a clear business model that's designed to plug into different locales or cohorts as they grow.
But scalability is just one part of the equation. If a business doesn't possess the ability to influence a patient's behavior to change, it's not going to be effective, Gordon Chen, CMO at ChenMed, a primary and specialty care practice focused on Medicare-eligible seniors, told Healthcare Dive in an interview. ChenMed's physicians spend about 180 minutes face-to-face with patients per year and the company says it has been able to reduce ER visits by 33% compared to the average among similar Medicare populations.
Chen said the company now serves 55,000 patients, a 30% growth year-over-year, and the company will expand into the Philadelphia and Jacksonville, Florida, markets this year. He said it takes two to three years on average to break even in new markets.
It's unclear how many of these startups will survive. The latest Bureau of Labor Statistics data show 45% of businesses fail within five years. "If groups aren't confident in their abilities to improve outcomes, then it could be a messy road forward for them," he said.
Ultimately, these new companies are showing pockets of need in the healthcare delivery system. Success or no, Numerof believes this activity should spark innovation and serve as a wake-up call among traditional organizations. "Those that opt not to move in this direction will find a challenging future," she said.
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