Omada Health, a digital health company for chronic care management, has begun selling to health systems, starting with a partnership with Intermountain Health, the organizations said Monday.
Omada will work with Castell, the Salt Lake City-based value-based assisted subsidiary of Intermountain, to identify patients for the digital healthcare company’s virtual diabetes prevention program. Patients receiving primary care within Intermountain’s medical group will be contacted by Castell Care Coordinators if they are eligible for the program.
Patients enrolled in the program receive preconnected cellular scales, continuous blood glucose meters, and blood glucose meters that allow primary care physicians to track patient data in real time. Omada will track clinical metrics, such as reduction in A1C levels, as part of the program.
Financial terms of the deal were not disclosed.
Since its founding in 2011, Omada Health has grown by selling its diabetes care management programs to employers and health plans. CEO Sean Duffy said three trends prompted the company to start selling to healthcare systems. Healthcare systems are more open to virtual care due to the COVID-19 pandemic. They’re also taking on more risk-based contractual arrangements and addressing a manpower shortage among doctors, Duffy said.
“Manpower shortages are causing these health systems to find an alternative to support their primary care infrastructure and put more tools in their toolkit,” Duffy said. “We’re in a world where one in five primary care physicians will retire in the next few years, and there aren’t enough professionals to adjust to that.”
The company closed a $192 million Series E financing round in February and planned to go public later in the year before financial markets soured. While not commenting specifically on Omada’s plans, Duffy said the company is financially well capitalized and he doesn’t expect many digital health initial public offerings to unfold this year.
Duffy said the sale to healthcare systems doesn’t mean Omada will stop marketing its products to employers, but she did note that employers are starting to get tired of having too many digital healthcare solutions.
“Three or four years ago we realized that at some point benefits managers would start saying, ‘I’m deploying Omada for pre-diabetes, Livongo for diabetes, Hinge Health for musculoskeletal, Hello Heart for hypertension. I manage five different vendor contracts and five different implementations,’” said Duffy. “We’re seeing more RFPs where employers are saying, ‘I just need to solidify my point solutions.”
Leaders of other digital health companies have raised similar concerns. Don Trigg, CEO of Apree Health, a digital health company that also sells to employers, said in an interview that there has been a firestorm of targeted solutions introduced in recent years thanks to venture and private equity funding. .
“The consensus with buyers in this space is that we’re going to see a real shake-up, compared to many of the point solutions introduced before and during COVID,” Trigg said. “That Spend Line Review and Vendor Review process has already started happening in 2022.”
Healthcare systems have their challenges, which include longer sales cycles, inflationary pressures, and billions of dollars in losses. According to a recent analysis by Moody’s Investors Service, more and more healthcare organizations are at risk of credit downgrades and defaults. Duffy said he understands health systems will be hesitant to invest in new solutions amid financial challenges.
“You won’t find a healthcare system in today’s environment that isn’t under extraordinary cost pressures,” Duffy said. “You have to be very sharp in partnering with them to make sure the business model between your organizations works for you and works for them.”