Health start-ups are finding profits in serving the poor and elderly

Key Points
  • In health care, people on Medicare and Medicaid are now getting access to the future of medicine.
  • That future is less about expensive tests and procedures but focused instead on keeping people healthy for longer.
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Patients at Iora Health's clinics get access to yoga studios and health coaches and can use video chat or text message to reach their doctor at any time.

Iora isn't offering this brand of concierge medicine to wealthy, young professionals from Silicon Valley and New York. Instead, its services are for the sickest and oldest Americans, often with low incomes, who suffer from serious health conditions like diabetes and heart disease.

"We focus on the people who actually need us," said Rushika Fernandopulle, a Harvard-trained doctor and former venture capitalist who started Iora in 2010.

Since its founding, the company has spread to seven states, including Arizona, Colorado and Washington, and raised more than $120 million in venture capital from firms such as Khosla Ventures.

When it started, Iora was one of just a handful of companies aiming to rethink health care for vulnerable populations. Health-tech venture capitalists at that time were more interested in wearable technologies and health-tracking apps.

Shifting incentives 

But that's starting to change.

Venture dollars are shifting away from health and wellness products that serve urban professionals to a new crop of start-ups that are focused on low-income populations and seniors through government insurance programs like Medicare and Medicaid.

That's because the Centers for Medicaid and Medicare Services has, over the past decade, been introducing new ways to reward companies that are keeping these underserved populations healthy, including after they leave the clinic. Most big hospitals, by contrast, make money through seeing a lot of patients with complex conditions and charging for tests and procedures. The so-called "fee for service" model they employ doesn't encourage innovation.

Start-up insurance plans Bright Health, Clover Health and Devoted Health have emerged in the past few years to serve Americans over age 65, and have lured venture capitalists who now see an opportunity to make money. Alphabet spun out and invested in a start-up called CityBlock Health that aims to bring basic health services to the homeless and elderly.

Big companies are getting in the game too. Lyft and Uber are starting to pick up patients who can't drive — due to age or financial constraints — and take them to their medical appointments, with Medicaid and Medicare typically footing the bill. And Verily, Alphabet's life sciences arm, recently considered bidding for a state Medicaid contract.

Some health experts now believe that the poorest Americans might well get access to innovation before their wealthier counterparts, because of how the government is providing new incentives and rewarding companies for delivering better health outcomes.

Cyft, started by Leonard D'Avolio, builds technology to predict when a patient will suffer a fall at home or is likely to feel depressed and need counseling. In other words, it aims to figure out who needs help sooner, before ending up in the emergency room.

D'Avolio initially assumed that he'd work with large, academic hospitals with big budgets. But those institutions were mostly interested in using the tools to alleviate the high costs of no-show visits rather than determining who really needs support. So he shifted his focus to partnering with insurers that serve Medicaid patients.

"Innovation in health care proceeds when there are true incentives," said D'Avolio. "And Medicaid is where you're seeing those incentives."