Startups, Health Tech, Health Services

New York telemedicine startup Call9 winding down operations

CEO Tim Peck confirmed the news to CNBC, saying the company ran out of the cash it needed to continue to scale the business and was laying off roughly 100 employees.

New York-based startup Call9, which aimed to use telemedicine technology to help patients in nursing homes avoid the hospital, is closing down.

CEO Tim Peck first confirmed the news to CNBC, saying the company ran out of the cash it needed to continue to scale the business and was laying off roughly 100 employees.

The company was founded in 2015 and was inspired by Peck’s background as an emergency room physician. In that role, he often saw elderly patients rushed to the hospital only to become even more distressed and ill once inside the clinic.

Call9 was started in an effort to help provide care to older patients in a cheaper, convenient and more comfortable setting.

Essentially, the startup placed trained specialists directly in nursing homes around-the-clock who attended to patients and could use the company’s technology to bring in a remote doctor for consultation, diagnosis and treatment often eliminating the need for an in-person visit.

In a phone interview, Peck laid out two avenues for the company’s future. One would be spinning out Call9’s assets and technology into a new company wit with a different operational model based on using on-site staff in a broadened role.

The other would be to join up with another company in an acqui-hire scenario. Peck said he’s seen a “surprising” amount of interest from potential purchasers who are aligned with the company’s value-based mission.

Over its history Call9 raised around $34 million from investors including Anne Wojcicki and Ashton Kutcher, conducted more than 142,000 telemedicine visits and treated more than 11,000 patients, according to the company’s website.

The company made money by partnering with health plans to drive cost savings for some of insurers’ highest risk patients and directly contracting with nursing homes for consulting and technology services.

“This company is one of many innovative startups that apparently find a new way to solve a problem but inevitably come up against a basic question: Who pays for the solution and how do they recover the investment?” said Damo Consulting’s Paddy Padmanabhan.

What sunk the company, according to Peck, was the still-nascent stage of the value-based contracts which made up a bulk of Call9’s business. While he underscored his belief in value-based contracting, he said that early stage companies are often pressured to go where the money is, which is still largely in fee-for-service models.

Peck said the company’s health plan customers like Anthem Blue Cross and Blue Shield bought into its business model, but Call9 struggled with the disconnect between its mission and investors hungry for returns.

“The cash flow of an early venture backed value-based company is not going to be as much as a fee-for-service company,” Peck said.

“With VCs under pressure to turn quick ROIs, you’re put in position where you have to abandon your mission, abandon what you know is right for the patients and abandon what you know is a much bigger opportunity in the future.”

As for what this experience has taught him? Peck said he’s learned an important lesson in choosing partners deeply aligned with the long-term vision of the company.

Picture: Mykyta Dolmatov, Getty Images