Home-based care for chronically ill older adults is a sweet spot for venture capital investment, with WellBe Senior Medical becoming the latest beneficiary of the trend.
The Chicago-based company on Wednesday announced an undisclosed, "significant" investment by Excellus Blue Cross Blue Shield of upstate New York and Intermountain Ventures, the venture capital unit of Salt Lake City-based Intermountain Health.
Venture capital firms invested nearly $15 billion in young healthcare companies in the second quarter, an increase of about 35% from the same period last year, according to Silicon Valley Bank. While companies that provide home-based care to older adults comprise a small portion of that money, they have become a sweet spot for investment because of demographic trends. Future funding could hinge on operators' ability to scale and generate bigger profits.
WellBe Senior Medical is among a growing number of companies, including HarmonyCares and Patina Health, that offer home-based care to chronically ill older adults through value-based care arrangements with Medicare Advantage plans. The goal is to manage patients’ illnesses and keep them at home instead of sending them to the hospital. That makes the companies attractive to both insurers and investors, according to analysts.
“It’s a win-win because you’re reducing the cost of healthcare, you’re alleviating the burden of these members being at those facilities for potentially preventable needs,” said Rick Kes, a healthcare senior analyst at accounting firm RSM.
WellBe will use the funds to expand beyond the eight states it operates in and should increase the number of patients it serves to 160,000, from 135,000, by year's end, said CEO Dr. Jeff Kang.
WellBe Senior Medical partnered with Excellus in March to provide home-based care to the insurer's 30,000 most vulnerable Medicare Advantage members. The company received an undisclosed investment from the venture capital unit of CVS Health in January.
Earlier this month, Troy, Michigan-based HarmonyCares received $200 million in funding from venture capital firms General Catalyst, McKesson Ventures, K2 Ventures and others. The company plans to use the money to upgrade its electronic records system, invest in technology to help with logistics and expand into new markets, said CEO Matthew Chance. HarmonyCare offers services in 15 mostly Midwest states.
Venture capital funding of young healthcare companies began to heat up this year after falling to $45 billion last year, from $97 billion in 2021, according to Silicon Valley Bank. Funding declined the past few years in part because young healthcare companies were still working through capital they raised in 2020 and 2021, said Julie Ebert, managing director of the bank's healthtech practice.
Valuations of healthcare firms also declined, and investors wanted to see improvement before committing additional capital, meaning there are funds available to home-based primary care targeting older adults, Ebert said. As companies mature though, investors are looking beyond their ability to expand to new markets and sign contracts with Medicare Advantage plans and more to their profitability.
“There is more focus on unit economics,” Ebert said. “How much money are you making or losing on a per patient basis?”
Providers of home-based care for older adults said they have been able to reduce medical spending on patients by about 20%. That could be a big selling point for Patina Health when it seeks another round of funding in about a year, said CEO Jack Stoddard.
The Bala Cynwyd, Pennsylvania-based company offers in-home and virtual care to older adults with complex conditions in five Pennsylvania counties and 10 North Carolina counties. The company raised $57 million in 2020 and 2021 from venture capital firms including Andreesen Horowitz and GV, formerly Google Ventures. Stoddard said Patina will probably spend that money by the end of this year and he is confident the company can raise more to expand.
“I am very bullish on where we sit based on alternative care models, bringing care into the home, value-based care and Medicare Advantage growth.” Stoddard said.