Glen Tullman, CEO of digital healthcare startup Transcarent, wasn’t looking to raise more capital. The former Livongo CEO was busy enough preparing the company, which came out of stealth just months before, for new growth opportunities. But some offers came and the board said why not sample the market?
“We sampled the market, and we had four other term sheets in less than a week,” says Tullman. “There was just tremendous demand and interest in what we’re doing.”
As a result, the company announced Tuesday that it has raised a $200 million series C round. The round gives Transcarent a valuation of $1.6 billion, according to sources familiar with the deal, making this another digital health unicorn where Tullman, 62, has served as CEO.
The round was led by Kinnevik and Human Capital, and all previous investors participated in this round, including General Catalyst, GreatPoint Ventures, Threshold Ventures, Alta Partners, Jove Equity Partners, 7wireVentures (where Tullman is founder and managing partner), and Merck Global Health Innovation Fund. Joining this round are investors Ally Bridge Group and several healthcare systems, including Rush University Medical Center, Northwell Health, Providence Health, Intermountain Healthcare and AdventHealth.
Christian Scherrer, an investment associate at Kinnevik, whose firm had also invested in Livongo, says one thing compelling them to invest in this round was the desire to work with Tullman again. “We think Glenn is an exceptional founder,” he adds. “It’s a rare breed of people in healthcare who can really move mountains and do that in a short period of time.”
Tullman’s experience in building Livongo helped pave the way for Transcarent. That company, which was acquired by Teladoc in a deal valuing it at $18.5 billion, offers a digital experience that helped patients manage chronic disease with the aid of real-time data and human coaching. The combination both saves healthcare costs and shows clinically demonstrated improvements in people’s health.
Transcarent takes this concept and moves it to the next level. Its customers, which are large-scale employers that self-insure for health coverage, are provided with a concierge medicine-like experience through its digital app, which enables users to connect with a doctor either through text or video call 24 hours a day. For more serious issues, the company will arrange a second opinion and then determine the best doctor and/or hospital to treat the patient. What’s more, those employees who use the service never have to pay premiums, co-pays or other bills.
“Whether you’re a truck driver, whether you’re stocking shelves, or whether you’re the CEO, if you need back surgery or knee surgery, you get exactly the same choices and exactly the same options,” says Tullman. “And it’s all paid for.”
So how is the company actually making money? By aligning its incentives with its employer customers, says Tullman. Transcarent takes a pre-negotiated cut of the money it saves its customers after delivering a healthcare service. For example, explains Tullman, if a patient is paying $200 a month for a medication, but Transcarent can, using one of its pharmacy partners like Walmart, deliver that medication for $69, the company gets a percentage of the difference.
That’s a big change from other healthcare delivery services, which typically charge customers a fee per employee per month. “But that makes no sense,” argues Tullman. “There’s no alignment. Because the best thing when I do ‘per employee per month’ is if you never use it. That’s how I make the most money. But that’s not being aligned … That’s not fair.”
Hemant Taneja, managing partner at General Catalyst who co-led earlier Transcarent funding round, said in a statement that one of the company’s major aims to make the oft-discussed idea of value-based care a reality. “From the first days we began to white board the ideas behind Transcarent, we realized that there was an opportunity to fundamentally change the dynamics of the industry, empower consumers with information, intelligence, and access in a way that had never before been done in healthcare.”
In just a little over a year since its founding, Transcarent’s customers have given over a million employees access to its services (in part thanks to a strategic acquisition of BridgeHealth, which offers employers access to pre-negotiated rates on hundreds of surgeries) and so far has seen over 20% of those employees utilize the service.
With the new infusion of capital, Tullman says Transcarent will expand its team (which now has over 200 employees and is expected to double by the end of the year). It also plans to spend more on research and development, looking for ways to deliver better care at lower costs, and to move into new markets such as government employers, unions and Medicare Advantage.
“This really gives us years of runway that we need to invest in and develop this market,” says Tullman.