Health IT, Startups

NextHealth raises $8.5M to expand analytics and behavior change services to control healthcare costs

Norwest Venture Partners led the Series A round.

NextHealth Technologies dashboard

NextHealth Technologies dashboard

 

A health IT startup that works with payers to reduce avoidable healthcare costs has closed an $8.5 million Series A round, according to a news release. In a phone interview, NextHealth Technologies CEO Eric Grossman said it would use the new funding primarily for product development and boosting staff numbers.

Norwest Venture Partners led the Series A. Other investors in the business include Point B Capital, according to data from CrunchBase. To date, the company has raised $10.5 million.

Grossman said the company works with health plans to educate patients with “carefully crafted nudges” to encourage plan members to do things like avoid using out-of-network physicians and directing them to a telemedicine service or urgent care facility instead of making a trip to the emergency room, among other cost-saving options. The company claims to have reduced avoidable ER visits by more than 25 percent in a targeted Medicaid population. At a time when health insurers are raising their rates in the double digits, NextHealth claims it can reduce avoidable healthcare costs to the tune of $12 per member per month. What impact NextHealth can have on premiums health plan members pay remains to be seen.

Although the company touts itself as a prescriptive analytics business, Grossman said it is a medical cost-saving company first.

“If we were a pyramid, the majority would be engagement and the top part would be in analytics.”

Although he declined to break down the numbers, Grossman said half of staff hires would be for engineers and data scientists. Another 30 percent will be in client delivery and the remaining 20 percent would be used for “general leadership positions.” He identified diabetes prevention and management as the next big priority for its product platform.

The company counts several health plans among its customers, including UnitedHealthcare, BlueCross BlueShield of Tennessee, and Florida Blue. Another client, Colorado Access, is a nonprofit with more than 1 million Medicaid and Child Health Plan Plus members. Grossman said the state of Colorado is one of the biggest customers for the Denver-based business through the state’s Medicaid program.

There are many digital health companies that have taken different approaches to helping payers reduce healthcare costs and attempt to make a dent in behavior change, such as AbilTo, Allazo Health, and mPulse Mobile.

Photo: Bigstock Photo

CORRECTION: An earlier version of the story mistakenly identified YCombinator as an investor in NextHealth. It is not.

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