Call9 was founded in 2015 by Peck, an emergency room physician who had practiced at Beth Israel Deaconess Medical Center in Boston; Celina Tenev, a postdoctoral radiology fellow at Stanford; and XiaoSong Mu, a computer scientist. The company germinated at Y Combinator, a Silicon Valley launchpad for early-stage tech startups, before moving to New York.
Its business model was to embed clinicians, such as paramedics and EMTs, at nursing homes so they could respond to emergencies. When a patient needed help, the paramedics could use Call9's software to connect by video-chat with a remote emergency-medicine physician. The doctor could then determine whether a patient needed to go to the hospital.
The model was designed to attract nursing homes aiming to avoid sending patients on unnecessary trips to the hospital—which could result in an empty bed and penalties from Medicare.
Its $24 million Series B round in 2017 attracted Redmile Group, a San Francisco–based investment firm that had previously focused on biotech companies.
ArchCare, which runs the Mary Manning Walsh Nursing Home on the Upper East Side, was one of Call9's early clients. Scott LaRue, ArchCare's CEO, said he was impressed with Peck and Call9's results. But the nursing home was able to get its patients' hospitalization rates low enough on its own that paying the startup no longer made sense.
"Their model wasn't able to move the needle sufficiently to justify the ongoing expense," LaRue explained.
Call9 made money through insurance contracts that would reward the company when patients had improved health outcomes and spending fell. At least that was how it was supposed to work.
Peck found that some insurance companies, including Aetna and UnitedHealthcare, didn't want to create value-based contracts with a small group of doctors like Call9's and preferred to reimburse in the traditional way by paying for each telemedicine visit provided.
To accommodate those insurers, Call9 needed to allocate some of its team to focus on billing in the more traditional fee-for-service way, pulling it further from its goal of managing the health of a population of patients and earning money for positive outcomes.
"We had to do services in a particular way that in no way brought value to our model," Peck said. "We had to check very specific boxes to make sure we got paid."
Redmile controlled a more than 50% interest in Call9 and could dictate its future direction. The investment firm encouraged the fee-for-service strategy.
Call9 was able to generate revenue, and the company grew to a network of 12 nursing homes around New York. But it ran low on money, thanks to increased spending on staff and other expenditures
In the spring the company's cash fell below what it owed Western Technology Investment, its Silicon Valley–based lender, and WTI exercised its right to put a lien on Call9 in what Peck called a "friendly foreclosure." Call9 never closed its potential Series C round.