Value-based analytics company Clarify Health has acquired Embedded Healthcare, a behavioral change platform company, for an undisclosed price, the companies announced Monday.
This is Clarify Health’s second major acquisition in the last six months as the company ramps up its value-based payments platform. In August, the company bought Apervita’s value-optimization business to digitize historical and future contracts. It also received a $115 million Series C funding round in June of last year as it ramps up analytics-driven, value-based payment platform.
Embedded Healthcare uses a behavioral science platform to incentivize clinicians to use more efficient, cost-effective care. The company’s founders are Dr. Ezekiel Emanuel, former health policy advisor to presidents Barack Obama and Joe Biden, Dr. Amol Navathe, a University of Pennsylvania medical schoo professor who sits on the Medicare Payment Advisory Commission and Dr. Simeon Schwartz, founding president and CEO of WESTMED, a 350-physician multispecialty practice based in Rye Brook, New York. All Embedded Healthcare employees will keep their jobs and Navathe, Emanuel and Schwartz remain as strategic advisors.
Clarify Health founder and CEO Dr. Jean Drouin spoke to Digital Health Business & Technology about the strategic imperative behind the acquisition, why the company’s buying spree may not be finished and more. Below are excerpts from the conversation.
What made Clarify Health want to acquire Embedded Healthcare?
From a vision point of view, we believe there are five key pillars to the technology required to accelerate the move to value-based care.
Pillar one is a trusted baseline to assess the performance of the care delivered by clinicians or health systems. I believe Clarify is strong in that area because of the “Moneyball” -tyle analytics we use to assess physician performance by adjusting for case mix, including the use of social determinants of health. Pillar two is we should digitally load the contracts so that we're not adjudicating them manually on spreadsheets. Pillar three is what Embedded brings as a capability, which is the contracts themselves need to be designed in a smart way to encourage people to do the things they're supposed to do. How are you going to present information in a way that will enable change? If you're trying to make a better referral, how do you incentivize a better referral? If you're trying to get somebody to deliver somebody's vaccine, how do you incentivize that? Pillar four is can you get that information in front of the eyeballs of doctors or clinicians before they make a decision? There's technology out there that makes it possible to deliver effective pop-ups on EMRs. Pillar five is instead of doctors having to wait nine to 12 months for their bonuses, use predictive analytics to pay them quicker.
Clarify already has pillar one with our core product. The acquisition of Apervita’s value-optimization business over the summer got us pillar two. Embedded Healthcare brings that third pillar of designing smart contracts with incentives for clinicians to do the right thing.
Will Clarify be acquiring more companies to address those additional pillars? Or will you build it in house?
For pillar four, there are a category of companies, which shall remain nameless, that have developed really interesting technology where you can essentially put an overlay on any EMR. The overlay can provide a pop-up that allows the doctor to easily document that certain [tasks] have been completed. We could either partner with or acquire a player in that space. For pillar five, which is paying folks ahead of time, that’s more akin to something like Costco or similar models. I don't know that anybody's doing that out there in healthcare. We’d probably have to bring an executive or a team from financial services and set up that capability.
What’s the benefit to acquiring a company like Embedded versus building the capability in-house?
When we look at acquisitions, we typically think of them in a couple of ways. One is acquisitions that are going to accelerate revenue growth. Usually, those acquisitions either bring an existing in-market product and or a set of customers you can cross-sell into. The second category, which is what Embedded represents at the moment, is an intellectual property and/or capability acquisition with some amount of existing customers. But it's really about accelerating our product capability. We look at what’s the relevance and quality of the existing IP, what is the quality and the excitement for the vision that we have of the team, and do the cultures of the two companies fit together in a way that the teams will be motivated to work together? That culture piece is far too often ignored. If the cultures clash, members of the incoming team will tend to leave within six to 12 months. There's an incredible amount of work that we do up front to understand the fit of the cultures.
How does behavioral science fit into the value-based platform that you’ve built at Clarify from a technical perspective?
It's about finding the right micro-incentives to drive behavior. Usually that starts with payments. In a value-based arrangement, do you incentivize and pay for higher quality referrals versus lower-quality referrals? Beyond payments, there are other ways to think about behavioral science here. How and when in their workflow does a clinician prefer to get advice? I heard an interesting story from the founder of primary care practice recently. They had a form that needed to be filled out and he paid the doctor just to open the form. And once the form was open, the doctor wanted fill it out. He wasn’t paid to fill out the form but to open it. What we’re really excited about with Embedded is that with [Emanuel, Navathe] and their team, we're bringing in people with deep expertise and understanding on how you package a set of micro-incentives to cause more of the right actions to happen.
