Venture capitalists have begun seeking opportunities in an unlikely place: health care companies that focus on low-income and senior populations through government insurance programs like Medicare and Medicaid.
The trend is highlighting a change in business investment from health products that serve urban, professional populations to those that serve segments of the population that have been historically underserved by the health care industry.
The shift is due to the way the federal government now rewards health care companies. The Centers for Medicaid and Medicare Services has incentivized companies to keep underserved populations healthy, with a focus on wellness, even after leaving clinics.
Most big hospitals and medical centers make money by volume, serving the largest number of patients possible with an emphasis on treating illness rather than preventing it from occurring in the first place. The “fee for service” model rewards complex surgeries and procedures, along with scads of expensive – and oftentimes unnecessary – testing.
But start-ups in the health care industry have emerged catering to older and poorer Americans and attracted major investments from venture capitalists who see an opportunity to realize profits.
Alphabet, Google’s parent company, recently invested in CityBlock Health, a company that provides health care to the homeless, as well as the elderly. It’s recently even considered bidding for a state Medicaid contract.
It’s not alone. Lyft and Uber, the car-ride-hailing services, have begun transporting patients, unable to pay for their own transportation due to costs, to their medical appointments. The companies are usually reimbursed by Medicaid and Medicare.
Leonard D’Avolio started Cyft, a technology company that predicts when someone will suffer an emergency, such as a fall at home, or even when someone feels depressed or needs counseling. He has catered his business to insurers that serve Medicaid patients.
“Innovation in health care proceeds when there are true incentives,” D’Avolio said. “And Medicaid is where you’re seeing those incentives.”
Photo by DarkoStojanovic via Pixabay