This interview is the third in a series of conversations with leading digital health platform CEOs and investors. An abridged version of each interview was originally featured in Summit Health Advisors’ 2024 State of Healthcare Platforms Report. 

Teresa Lee, Managing Director at OMERS Growth Equity, spoke with Seth Joseph, Managing Director at Summit Health Advisors, about the power of platforms in healthcare and shared insights into her healthcare investment strategy for 2024. Teresa is an ardent digital health platform investor and board member, helping to scale some of today’s most formidable platform companies, such as Aledade, Evidation Health, Carrum Health and Innovaccer.

A Conversation with Teresa Lee

Seth Joseph: What is it about network effects in healthcare that is compelling to you? 

Teresa Lee: We view the active engagement of multiple stakeholder groups as a key indicator of a true value proposition. In healthcare, there are often conflicting and unintended incentives and challenges between constituents, but if there is engagement with momentum by various parties in a solution offering, there is a value proposition there, to foster and scale, that can be very compelling.

Seth Joseph: With digital health funding falling again last year, have your investment priorities changed at all? What are the main signs you’re looking for in a digital health platform company this year, that you might not have considered so highly in past years?

Teresa Lee: The overarching themes of focus for us in 2024 are consistent with prior years as we see these as persistent challenges that there is opportunity to address with technology. These include: the ongoing shift to value-based care, data and analytics to support insights that lead to behavioral change, clinician labor shortage, activation of patients in their own health and those dependent on them, easing of administrative burden and equitable access to quality care. 

While there are many companies doing good work, that doesn’t always translate to a good investment. By our observation, the valuation hangover has continued through 2023. We are staying disciplined and will continue to look for opportunities where the investment attractiveness and company attractiveness are in sync. The pitfalls of raising capital at valuations too far ahead of the business are apparent.

We’re looking for teams that know how to responsibly grow, with an ability to triage opportunities and allocate resources with due consideration for the cost of capital. That may be for organic growth opportunities or M&A opportunities. Teams that are clear on their mission and the challenge they’re focused on addressing and have demonstrated they can navigate through noise and distractions to do the right things for their primary stakeholders will have the best shot at success. This is healthcare – it’s high stakes and a firm compass on principles is very valuable.

We will continue to have an aversion to what we view as investor subsidized unsustainable dynamics. Examples of this would be deep-pocketed stakeholders with, for example, imbalanced risk reward structures of capitation and shared savings, per member per month usage conflicts, or a market that gained customer adoption at unsustainably low prices that will take time to unravel and right itself, if that’s even possible.

We invest directly on behalf of 600,000+ pension members that include first responders and civil servants, and we feel the privilege and responsibility of investing to magnify the positive impact their pension dollars can have. Aligned values are important.

Seth Joseph: What do you think is most misunderstood about building multi-sided platforms in healthcare? What is one myth you’d like to bust?

Teresa Lee: There is often a mindset of being a zero-sum game, where for one to ‘win’, someone else inherently needs to ‘lose’. It’s limiting to assume that. Take Carrum Health for example – if self-insured employers are saving money on employee surgeries, the natural assumption may be that the physicians must make less money or that patients are getting subpar care. But the part of the equation that’s missing is the piece that is of significantly less value – the administrative waste. Redistributing that piece of the spend pie ends up being win-win for what we care about in healthcare, rather than win-lose.

Not so much a myth, but the preconceived notion that ‘it will never work’, ‘there’s not enough to go around’ or ‘someone will get squeezed’ are mindsets to bust. There is certainly plenty of truth to the complexity. I have a healthy respect for how hard it is to budge the status quo. That said, with a listening mindset and deep understanding of the layers of natural, and sometimes unnatural, motivations that leave healthcare in its current state, there are ways to approach challenges that can work.

Seth Joseph: Can you talk specifically about a few of your recent platform company investments? What stood out about them and the problem they’re solving?

Teresa Lee: Our investment in Carrum Health came after assessing a host of value-based care models and solutions for self-insured employers, and then superimposing a tougher macroeconomic environment on the horizon, to understand which employee benefits would be of greatest value to employees and generate directly attributable, immediate value for payers. Carrum is that and more. Employees who need surgery or cancer care have access to the highest quality physicians, no out-of-pocket fees and a dedicated care navigator. Employers save with surgical bundles that are 45% less than fee-for-service, and cancer bundles that are up to 20% lower. Providers are paid without undue administrative burden and are supported by Carrum to transition their patients back to primary care. This wasn’t easy to get to. Carrum had to break through their chicken-or-the-egg conundrum – a big enough network of the highest quality physicians is needed to serve employers’ member populations, but physicians won’t come on board without volume to justify changes to their workflows, to accommodate a new model. Carrum has gotten the gears on this model going now and has gained momentum.

We first invested in Aledade in 2020 and have continued to invest behind what they’re building through every raise since. We have deep conviction in what they’ve built and continue to foster, which is to empower independent primary care physicians to better care for their patients by providing the tools necessary to actively quarterback patient care and be appropriately compensated for the value they create. They do this without owning clinics and employing physicians – physicians maintain their autonomy. We believe that providing integrated information that can be acted upon to physicians and protecting their autonomy enables them to focus on what they’re trained to do best – proactively and responsively care for their patients. It helps to alleviate administrative and moral burden and reduces burnout. It’s realigning incentives – in most other professions, people are given the environment and tools to do what they’re trained to do and are rewarded for doing their work well. This shifts physician compensation towards merit-based compensation and links to what the merit is – quality, appropriate patient care and not volume of procedures.

The platform that the team at Innovaccer has built makes a lot of sense – pulling in health data that historically was housed in disparate systems to effectively increase the resolution of information that historically generated a much more pixelated patient and patient population picture. With unification and cleansing, the tools that can be built off that dataset for various use cases are vast, including but not limited to, population health, value-based arrangements, and relationship management.

The power of the Evidation platform is its ability to harness a direct, ongoing connection with individuals and their permissioned health data. Evidation allows individuals to engage with their health, opt-in to sharing their everyday health data, and participate in research, while making it possible for healthcare and life sciences partners to measure and deeply understand lived health experiences, rapidly and at scale. Evidation's individual-centric approach and platform, and the speed and depth of insights they can generate for their customers, sets them apart in the market.

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If you’re interested in other interviews in this conversation series with platform founders and investors, check out our recent conversation with GoodRx’s Doug Hirsch and Sempre Health’s Anurati Mathur.