After years of speculation, Castlight Health is planning to go public, according to a report by Fortune over the weekend. The digital health company has made a mission of breaking down information silos in the murky world of healthcare prices to make healthcare consumers more informed and to help companies reduce employer plan costs.
The report says the company has “confidentially filed paperwork with the Securities and Exchange Commission” and is expected to seek a valuation “upwards of $2 billion,” with Goldman Sachs leading the offering.
Considering investors pumped almost that much ($1.97 billion) into the entire sector last year, that’s pretty amazing.
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The digital health company works with employer plans and offers services that give members a clearer breakdown of prices for medical procedures and medications, what their insurance covers and what they are obligated to pay. It also has a rewards program to engage members and encourage them to do more to manage their healthcare expenses. The rewards program gives points to members who select the lower cost, “high value” option. Those points can be reimbursed for things like lower premiums or gift cards, depending on what their employer plan offers.
Castlight first hinted at its IPO plans in 2012 after it raised $100 million. At that time, CEO Giovonni Colella told Forbes an IPO would be next.
But will investors agree? Price transparency has been a hot area for investment as a CB Insights report documented last year. Of the $400 million raised in this digital health segment since 2010, Castlight has netted $160 million in funding from investors including Venrock, Oak Investment Partners, Maverick Capital and Cleveland Clinic.
Todd Park co-founded the company in 2008 with Colella, who founded Relay Health, which was subsequently acquired by McKesson. Park later became chief technology officer for the U.S. Department of Health and Human Services and helped develop HealthCare.gov.
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Steve Brill’s article on the price transparency issue in Time magazine last year, as well as The New York Times story on colonoscopies, helped focus attention on just how much prices between hospitals for a single procedure, even in one city, can differ.
One of the biggest challenges to providing transparency has been obtaining claims data from health insurers. Although shining a light on price discrepancies is seen as critical to healthcare reform, it is also important that the factors driving these costs are better understood and fleshed out. In an interview with Huffington Post last year former U.S. Sen. David Durenberger, a senior health policy fellow at the University of St. Thomas in Minneapolis, pointed out that hospitals frequently increase charges to finance other needs such as education, research and technology as well as labor costs and other economic drivers.
[Photo from Flickr user John Lemieux
