6 takeaways from Evolent Health $100M IPO registration

Fresh on the heels of telemedicine provider Teladoc chucking its hat in the IPO pool, Evolent Health‘s move to register a $100 million IPO casts a wider spotlight on population health. The population health IT provider and management consultancy, formed by University of Pittsburgh Medical Center and the Advisory Board Co., wants to help health […]

Fresh on the heels of telemedicine provider Teladoc chucking its hat in the IPO pool, Evolent Health‘s move to register a $100 million IPO casts a wider spotlight on population health. The population health IT provider and management consultancy, formed by University of Pittsburgh Medical Center and the Advisory Board Co., wants to help health systems shift from fee-for-service to outcomes-based care business models and help them change the way they deliver healthcare.

The company will be listed on the New York Stock Exchange under the symbol EVH. It had previously raised a $100 million Series B round in 2013.

Here are six of the most interesting takeaways from its S-1 document on the U.S. Securities and Exchange Commission’s website.

It has yet to make a profit. Its net losses have climbed from $19.3 million in fiscal year 2012 to $52.3 million in FY 2014 after its operating expenses doubled from 2013 to 2014. Evolent has rapidly grown its staff numbers from six full-time employees when the company started in 2011 to 836 as of the end of April. Net losses are not likely to go down anytime soon either. In fact it expects them to “increase substantially in the foreseeable future” as it grows its business with partners, develops its platform, new solutions and fulfills the requirements of being a public company, according to the filing.

Its customer base So far, it has a total of 10 long-term contractual relationships. These four partners account for 76 percent of its revenue: Indiana University Health (25 percent), WakeMed Health and Hospitals (21 percent), Piedmont WellStar Health Plan (16 percent) and Premier Health Partners (14 percent).

Salaries. CEO Frank Williams earned $371,000 and a $259,700 bonus in 2014, but his total compensation including options and benefits added up to $935,724. Seth Blackley, the president, earned $291,500 with a $191,000 bonus in 2014. His total compensation for the year was $693,316. Steve Wigginton, chief development officer, earned $255,000 with a $275,000 bonus the same year. His total compensation in 2014 added up to $719,472.

Concern over privacy laws. Although plenty of healthcare and non-healthcare companies go out of their way to note that they only share deidentified patient information, it continues to be a source of concern. It merited a mention among the company’s risk factors:

“…there are ongoing public policy discussions regarding whether the standards for deidentified, anonymous or pseudonomized health information are sufficient, and the risk of re-identification sufficiently small, to adequately protect patient privacy. These discussions may lead to further restrictions on the use of such information. There can be no assurance that these initiatives or future initiatives will not adversely affect our ability to access and use data or to develop or market current or future services.”

Fee structure risk. The amount it earns from fees could vary widely depending on the numbers of members covered by partners’ health plans each month. “The number of members covered by a partner’s healthcare plan is often impacted by factors outside of our control, such as the actions of our partner or third parties. Accordingly, revenue under these agreements is uncertain and unpredictable.”

Is Wall Street ready for population health?  Although there’s a lot at stake for making the transition from fee-for-service to outcomes-based business models succeed, it is far from clear how long that transition will take and whether Evolent Health will continue to thrive after the dust settles from healthcare reform. It’s far from certain how the fickle public market will respond to a health IT company championing population health when it has yet to profit from doing just that. The larger the partners it can add, the better. But there are many unknown quantities with population health. No matter how well thought out its approach, the company’s fate is still subject to the twists and turns of healthcare reform’s evolution. Although biotech companies carry a significant amount of risk when they go public, their investors either are convinced by its clinical trials or not, think it will be reimbursed or not or believe there’s a sufficient need for the treatment. Evolent Health could be in for quite a long roller coaster ride. But if the company gets the timing right, it could pave the way for other players offering complementary technology. 

[Photo credit: IPO photo from Flickr user Simon Cunningham]