When it comes to taking bets on what’s next in healthcare, investors are often the ones calling the shots. Hemant Taneja, managing director of General Catalyst, has sat in the driver’s seat on some of the biggest digital health deals. His firm has invested in a number of digital health companies, from behavioral health company Mindstrong to fitness startup Tempo. But perhaps Taneja’s is best known for his investing in chronic care startup Livongo.
Over the summer, the digital health world was abuzz with news that Livongo was scooped up by Teladoc in a historic $18.5 million merger. As lead investor, Taneja had a front-row seat to the evolution of the company. In fact, he and Livongo founder Glen Tullman sat down together and developed a business plan.
“I had invited [Tullman] to come to the Valley and I introduced him to a lot of entrepreneurs, and in his polite Midwesterner way, at the end of those speed-dating meetings, if you will, he said, ‘I hate to tell you this, but these are not companies that are going to make it.’ His vantage point is he understands the complexities and nuances of healthcare ecosystem. I said, ‘Exactly. How about we partner up and build a company that truly understands technology and healthcare where we can provide the technology perspective? You have tremendous track record in healthcare, and we can build a business that is truly, foundationally at the intersection.’”
The problem that Tullman surfaced years ago is still a common issue in the digital health space, where the health providers and the technologists often live in different silos, which can create barriers in innovation.
“I think this is a bidirectional issue. The most common architect of companies we used to see in this sector a few years ago was it would either be a couple of great engineers that maybe came out of one of the major tech companies, that had done well [and] want to make a difference, pick healthcare as a sector and have a very product- and technology-centric approach to it – thinking that if they write the right piece of code, they are going to go create disruption in the space,” Taneja said.
“Then there’s the opposite of that, which is generally some physician that, seeing a pain point, will often come and present to us, having hired some software contractor to build some kludgey little product, saying, ‘Hey, this will change the world.’ As you know those are both incomplete perspectives.”
Healthcare is unlike other industries, which means insider expertise is key. Taneja said that understanding both perspectives is a move in the right direction.
“What you need is to try to build a business that understands that healthcare is not a free market. So, your go-to market has to be thought through with those complexities that line the sector. At the same time, you also have to recognize that the consumer expectations of experiences, including in healthcare, have shot up, and they want to see the modern design and the modern experiences in that sector. I often find that companies might be naive about one or the other in this space.”
Looking to the future, Taneja said he sees the “Teladongo” deal – which merged more traditional telehealth company, Teladoc, with a chronic care company focused on data collection and insights – as a potential model for other digital health companies.
“Look, leave aside that we’re involved in it. The most exciting thing for me is you will have a $35, $40 billion market cap virtual health system that’s taking care of millions of people in this country that looks and feels like a high-margin software company that is going very fast. I think that’s a good thing for this space, but also for society as a whole.
“You want to see vibrant healthcare services companies that can then pour resources into bending the cost curve, investing in the right consumer experiences. To me, hopefully, this is a blueprint of what’s to come. When you think about the fact this is 20% of GDP, you should have dozens of companies of this size and scale and growth, and compounding in the space.”
This integrated model of care can extend beyond the chronic care management space. Taneja said that other sectors including health for the transgender population, women’s health, elderly care, pediatric care and cardiometabolic health are ripe for a similar “virtual hospital” model.
U.S. regulatory rules are also helping to propel innovation, data sharing in particular.
“The ONC rulings on interoperability are important, and I say that because, at the end of the day, it doesn’t matter if it is a diabetes coach that works for Livongo, or a care provider at Stanford hospital here, or a mental health provider who operates on Sonder Mind, or some other marketplace like that. If there is data that exists in the system anywhere about the consumer that any of them is about to touch, that whole data should … seamlessly come together to provide the best possible care,” he said.
“In order to do that, you do need seamless infrastructure, much like advertising, where we have cookies, and you go from website to website to website and everyone knows what your preferences are.
“I think interoperability work is quite essential and treading in the right directions, always slower than you’d like, but it’s moving.”
The other regulatory piece that Taneja notes will have impact on the industry is telehealth reimbursement rates. Specifically, he noted that this change is important for keeping people healthy preemptively.
As for what’s next, Taneja acknowledge that COVID-19 has given a boost to the digital industry, but he said the technology is here to stay.
“I think COVID has accelerated a lot of good innovation but most of the ideas that have accelerated, you think about things like telehealth or concepts around home hospital, or sense of urgency around thinking about how to take care of the elderly population,
“I don’t think those are ideas that are going to come and go. There is a persistence to those,” he said. “If not for any other fact than pandemics aren’t black swans anymore. There was H1N1, we’re having COVID-19. So, you can rest assured there is going to be another occurrence like this within the next few years.”