In a digital health market with an endless number of emerging companies and a constant flow of funding deals, Innovaccer has a unique story.
For one, the company’s workforce is primarily based in India. But many of its health system customers are in America, along with members of its executive team and a couple hundred employees.
Moreover, in reaching unicorn status in six years, Innovaccer has attracted a wide variety of investors, including the venture capital arm of the government of Abu Dhabi along with a venture arm of Microsoft. Its most recent round was in December, where it more than doubled its valuation to $3.2 billion.
The software as a service data aggregation company also has attracted attention by sprucing up its leadership team with the addition to its executive team of Dr. Anil Jain, a long-time Cleveland Clinic informatics executive and clinician who was most recently at IBM’s Watson Health. Jain joined Innovaccer as the company’s chief innovation officer, along with a former CareFirst executive, Dr. Brian Silverstein, as chief population health officer.
CEO Abhinav Shashank spoke with Digital Health Business & Technology about a variety of topics, including whether the company has plans to go public, if the digital transformation of healthcare can continue at its current pace, and industry consolidation. This interview has been edited for length and clarity.
How is Innovaccer using the funds from its latest round?
We opened a lot of data in the EHR and claims data for health systems. Now our customers are wanting to do multiple things. They want to understand how they can drive more standardization of care. How do I engage the patient in more meaningful ways? How do I create digital journey for my patients? How do I basically think about revenue cycle optimization and automation? So, a large part of using the proceeds for us is to basically build out these solutions. We just launched our patient relationship management solution. We’re launching revenue cycle automation at the end of the year, as well as an AI framework on top of it. And the other thing we’re doing is driving the concept of an innovation accelerator, where we’re bringing startups and innovative companies into the ecosystem and developing solutions for health systems onto of our platform. We have a standard API layer and framework, which people can build on top of it. We started working with DocSpera, Jvion and other startups who are developing solutions on top of our platform. We want to have third-party solutions to help health systems transform with a data-driven approach.
What is your status with a potential initial public offering (IPO)?
We’re not looking at it in the near term. We are in the build phase right now. We are working with 60 health systems across the country and over the course of the next year or two, we want to get to 100-200 health systems, payers and life sciences customers. At some point there will be an IPO, probably in the middle of that journey, but we haven't given it like a lot of thought and what the timeline might look like.
Do you have any concerns after seeing a number of digital health companies struggle on the public market?
We are a pure-play software subscription company. There are very few companies in healthcare that have a pure-play software subscription model. I think there’s really an opportunity to build a large company out of that model. Veeva Systems has become this in life sciences. They layered on solution after solution and they’re basically a $30 billion company. I think there is a large company that will be created in the health cloud space with an underlying platform and solutions on top of it. That’s how we think about it. We’re trying to build a long-term growth model. We want to make sure we’ve built the company up to a few $100 million in annual recurring revenue before we go public.
With hospitals and health systems having taken a hit financially from COVID and workforce challenges, do you expect increased investment from them in digital transformation?
The train has left the station. No one is going back on their journey. People are investing in cloud. We’ve been working with every health system customer of ours where they’re taking the first steps of their transformation. They are trying to see how they can use their data to be more efficient. How can I provide more support to providers who are burned out? How do I understand my patients better? There is definitely financial pressure coming out of COVID from a health system perspective. But the only way to solve for these challenges is more value-based adoption and creating more data-driven processes. More and more chief data officers and chief information officers want to push in that direction.
What do digital health companies starting down the road now have to learn about growing fast and getting unicorn status?
It’s clear to us that healthcare is going to go through a massive digital transformation over the next 5-7 years. If you’re starting a digital health company, there has never been a better time than right now. Companies like Epic, Cerner, athenahealth have put in a lot of effort and energy in creating a digital infrastructure on which you can build. Healthcare is a hard space to build a tech company, but as hard as it is, the ability to drive change is incredible. As a software engineer like myself, the things that you're able to create an impact on is just incredible. Livongo and Glen Tullman basically set the path for like a lot of us, along with Jonathan Bush at athenahealth and Judy Faulkner at Epic. They set the path for a lot of companies in the digital health space, and I think there are going to be very large companies that get created in this marketplace.
American healthcare is a $4 trillion industry. It’s a large industry. You really must pick a lane and focus. We want to create a data platform. We’re not best in breed. We don’t have the skill to create, for instance, a diabetes management company. We are a tech company focused on creating a data platform. Focus creates scale. Far too many companies try to do this, that and the other thing. If you focus on one thing, you can create a large company over time. That’s what Livongo did well by focusing on diabetes. That’s what athenahealth did well by focusing on ambulatory. That’s what Epic did. The companies that have focused on a particular area have become very large companies. And then you don’t have to focus on everything.
Yes, but with a huge amount of point solutions out there in the digital health world, many people expect there to be a good deal of consolidation. What is your view?
Oh yes, it’s already starting to happen. In telehealth, Livongo merged with Teladoc, creating a large virtual care entity. I think we're going to see a lot of consolidation over the next few years.
Are you looking at any potential merger and acquisition activity?
My focus is basically building out things internally. We are basically looking at it opportunistically from an acquisition perspective. There’s a lot of market movement on the M&A side of things but our focus is adding value for our customers.
