Issue 055

Welcome back to E&O Selling to Employers, the enrollment-focused digital health newsletter from Exits & Outcomes — for paying subscribers only. This newsletter digs into digital health companies that sell to self-insured employers, fully insured plans, and other payers. It’s digital health as an employee benefit.

E&O: Employers

This edition of E&O: Employers includes the fifty-somethingth BigCo digital health employee benefits stack analysis. If you would like a quick summary of what E&O found in its analysis of some of the first 50+ BigCo stacks, check out this searchable, sortable database right here. Was this forwarded to you? Increasingly, E&O is a covered benefit from many forward-looking digital health-focused employers. Why not yours? Consider a Business or Enterprise subscription today. Click this link to become a paying subscriber (there are personal plans available too).

Big Health brought in $24 million in 2022 revenue

In the E&O Big Health Report from May, I estimated that Big Health brought in just under $25 million in annual revenue last year. I got to that number based on a series of hints Big Health executives had made during the first few months of 2023.

2022 revenue: It turns out that estimate was right on. E&O has learned that Big Health brought in $24.3 million in revenue for 2022. That’s just $4 million more than what it brought in the year before.

Limited revenue impact from UK’s NICE so far: While one of Big Health’s major accomplishments in 2022 was landing a positive recommendation from the UK’s NICE, Big Health’s revenue in the United Kingdom only increased to $1.9 million in 2022. That’s up from $1.5 million the year before.

Expenses spiked too: While Big Health managed to grow annual revenues from $20 to $24 million year-over-year, it significantly upped its spending. For example, administrative expenses grew by about $23 million. It spent nearly $32 million on administrative costs in 2021 and nearly $55 million last year. About $13 million of that increase was attributed to staff costs. The company’s average headcount for 2022 was 173 — up from 139 the year before.

FDA clearance: As I wrote last week in E&O’s Prescription Digital Therapeutics newsletter, Big Health has decided to pursue FDA clearances for its products so that it can continue to make the same outcome claims that it has made since the start of the public health emergency (PHE). Big Health explained the risk of not pursuing FDA market authorization — and, subsequently, the risk of not being able to continue to make the treatment claims it made about Sleepio and Daylight during the PHE — like so:

“This may affect our ability to keep current employer partners and attract new employer partners, and to attract new individual users of our products.”

Big didn’t explicitly say FDA clearance would allow it to target new customer types — it’s more about retaining existing employer partners. Despite that, I’m curious to see how — and whether — FDA market authorization will shift Big Health’s go-to-market.

Update: Sword Health’s publicly shared revenue numbers were actually contracted annual recurring revenue (cARR)

Here’s another update about a recent E&O long-form report. In The Sword Health Report, which E&O published last month, I shared revenue numbers that longtime Sword investor Vinod Khosla shared on-stage during an on-stage interview with Sword CEO and Founder V Bento.

If you recall, the revenue numbers Khosla shared — which he referred to as “ARR” — included $93 million for 2022 and projected more than $200 million for 2023.

A couple of readers wrote me after reading the report and claimed that the revenue figures I cited were too high.

It turns out the revenue numbers that Khosla shared (and that Sword has posted publicly since) actually refer to contracted annual recurring revenue or cARR. I emailed Sword’s CEO V Bento and asked him to help me better understand the numbers. He wrote back:

“…the numbers denoted in the conversation with Vinod are related to cARR which is the expected contracted annual recurring revenue from our clients signed to date.”

Given the long sales cycles common to selling digital health programs to self-insured employers, cARR probably isn’t the best flavor of revenue to share externally. For these businesses, cARR makes sense as a key internal growth metric for motivating and compensating sales teams, but not as a way to demonstrate a company’s year-over-year growth.

Right?

In any case, that’s an important caveat for the annual revenue numbers in the Sword Health Report. And, assuming Sword goes public in the next year or two, I’ll be sure to revisit these numbers when their S-1 drops.

Omada Health CEO Sean Duffy talks evolution of company’s pricing strategy

This podcast interview that Vital Signs co-hosts Jacob Effron (an investor at Redpoint) and Nikhil Krishnan (thinkboi at Out of Pocket) did with Omada Health CEO Sean Duffy is worth a listen. It’s rare for a digital health CEO to talk about pricing strategy and its evolution, but Duffy dug into a bit during this conversation. I transcribed a few excerpts below. Duffy explained the fundamental problem with per-employee per-month (PEPM) pricing, which dominated employee benefits prior to Omada Health:

“Your pricing model should align with your value… and don’t have your pricing not be in line with your cost of revenue… It felt like, if you didn’t do that you’d have these longterm misalignment moments with your customer — and you did see that in the PEPM world. You see a world where the [benefits vendor] is incentivized to have enough uptake such that the [self-insured employer] doesn’t kick you out, but not too much because that compresses margins. That’s a fail that doesn’t optimize the best outcomes for the country. In order to do that you have to get creative because the blessing of PEPM is budget reliability.”

Duffy explained how Omada’s decision to contract as a provider helped it overcome the unpredictable budget objection:

“This is where Omada being a covered entity (contracting as a provider and billing through claims.. We were the first to do that at any meaningful scale in digital health. …Then, even if we were working with an employer we could file a claim. Medical expenditures and claims for employers are by definition variable because you don’t know how many of your employees, for example, are going to go have babies this year or need other services so that can accommodate more variability. It required a lot of maneuvering to rest on that pricing model but it’s become really common. I heard a Mercer consultant say last year that ‘We always say internally that Omada killed the PEPMs.’ I don’t know if that’s true or not but it’s interesting.”

How Omada’s pricing strategy evolved:

“We tried a bunch of stuff in the past. We tried milestones on either the curriculum or weight loss. We [charged based] on percent weight loss. What we settled on, which we are happy with today, is essentially a monthly fee but it includes our whole scope of services. And if someone stops using Omada, we stop charging. Then we will do population health performance guarantees. The biggest reason for that is it was just simpler. It was really hard to explain to buyers that ‘For this percent weight loss, we charge this and it’s on this time horizon.’ You know, you just kind of get caught up in confusion in the selling process… so [that’s how] we landed on our current model.”

Listen to the whole podcast episode here for more insights about Omada Health.

Big employer benefits stack: Revisiting Walmart

Digital health companies love to boast how many Fortune 500 customers they have, but they aren’t always able to share which big companies offer their programs. That’s where E&O comes in.

This recurring feature of E&O Wednesdays digs into a Fortune 500’s (or similarly-sized employer’s) digital health stack.

So far, in past issues, I’ve written about the digital health benefits stacks of dozens of big companies. This searchable, sortable database over at the E&O site sums up the benefits stacks of more than 40 BigCos. Or, click any of the BigCo names below to read the newsletter that featured a full write-up for each:

This week I revisited the benefits stack of Walmart, which was the very first benefits stack E&O dug into back in 2020. Here’s what changed and what has stayed the same.

New since 2021: Lyra is the new EAP replacing Aetna’s Resources for Living at some point in the past few years. This is the biggest change for Walmart’s employee benefits:

“Get confidential emotional wellness and support – how, where and when you need it. Through our mental health partner, Lyra, you and your eligible family members can access 20 free therapy or mental health coaching sessions per person, per year, along with digital wellness tools anytime, anywhere. Access confidential care for your emotional and mental health, tailored to your needs. It’s all at no cost to you and your family, even if you’re not enrolled in Walmart benefits.”

Kindbody. In 2023 Walmart added a new center of excellence for fertility:

“Walmart now offers Kindbody as your fertility and family-building benefit There are many different fertility and family-building journeys, whether you are looking to start your family today or preserve your options for the future. Kindbody is here to support you.”

In 2023 Walmart also tapped AiRCare to proactively call employees at risk for various behavioral health conditions. More:

“Walmart has partnered with AiRCare to offer confidential and personalized emotional and mental health support over the phone for associates and their families. If you’re enrolled in a Walmart medical plan, a licensed support clinician may reach out to you directly to help you find solutions that range from finding after-school programs to navigating a move—or even getting counseling for depression and anxiety. Whatever your need might be, each clinician knows your Walmart benefits and how to make them work for you.”

Walmart still offers these digital health benefits that E&O first spotted in 2020 and in 2021 Supportiv:

“Connect and chat confidentially and anonymously for mental health and emotional support from people in similar situations through Supportiv, an online small group chat. It’s available 24/7 at no cost to you even if you’re not enrolled in Walmart benefits.”

Included Health’s Doctor on Demand:

“Skip the waiting room and video chat with a doctor anytime, anywhere with Doctor On Demand by Included Health. It’s quick, simple, and at no cost to you with most medical plans.”

myAgileLife.

“When it comes to improving your health, a little extra support can make a world of difference. myAgileLife is a text messaging-based coaching program that’s like having a digital health coach in your pocket. It’s available to all associates and family members at no cost.”

Fresh Tri:

“Your mindset is your way of thinking, and it’s the secret to creating a healthier life. The Fresh Tri app can help you lose weight by changing the way you think about food.”

Thrive Global:

“The Thrive Challenge is all about inspiring you to make better choices. Download the app or grab a booklet from your breakroom and start making small changes. After 21 days, share your story for a chance to win a share of $1 million dollars.”

In 2022, Walmart started piloting Omada MSK and Vivante’s GIThrive program for digestive health. Both of those programs are still in place for employees working in a select number of states.

Omada MSK:

“You have access to Omada for Joint and Muscle Health, an app‑based approach to physical therapy. Whether you want to prevent an injury, recover from one, or manage pain, Omada provides personalized care, workout kits, and includes unlimited chat and video visits, making it easier for you to stick to your care plan. Omada is subject to your deductible and any copays or coinsurance.”

Vivante’s GiThrive:

“You have access to GIThrive, an app‑based program paired with a care team for gastrointestinal care. GIThrive offers a personalized digital health program for relief of digestive conditions and improvement of gut health. The GIThrive program can help provide relief for a wide range of digestive health symptoms, at no cost to you. GIThrive includes unlimited appointments with a registered dietitian and health coach, personalized action plans, an at-home gut microbiome test, and proven methods for coping with stress and anxiety affecting your gut health.”

Walmart still offers Included Health (although it used to be named Grand Rounds) for second opinions and to find a doctor, but it’s not available to every Walmart beneficiary:

“Find a doctor or get a second opinion. Get access to a directory of local providers with Included Health, or get help with a second opinion or figuring out a medical bill. If you work in IL, IN, MO, NC, SC, or VA and your plan administrator is BlueAdvantage or Aetna, call (redacted). If you work in one of these states and your plan administrator is UMR, call (redacted). Everywhere else, go to [customized IncludedHealth.com link] to find doctors and download a convenient mobile app, or call (redacted).”

Beginning in 2022, Walmart ended its relationship with Sharecare and Mind Sciences. Before Sharecare acquired Mind Sciences, Walmart offered its 21-day mindfulness-focused smoking cessation program to its employees. It seems like Agile’s program replaced it.

Walmart previously offered employees access to Talkspace via its relationship with Resources for Living, but Lyra has the account now.

Walmart previously pointed employees to text-based care provider 98point6 as an affordable way to seek care even though it wasn’t an actual benefit program. Walmart subsidiary Sam’s Club packaged in a subscription to 98point6 along with its own membership fee, but that partnership has since ended. (Likely ended around the time Walmart acquired virtual visits provider MeMD, which later rebranded to Walmart Health Virtual Care.) OK, that’s a wrap on Walmart’s rather substantial benefits stack. Which BigCo should E&O dig into next? Hit reply if you have a suggestion.

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And so ends Issue 055 of E&O: Employers. If you learned something from today’s issue, help me out and forward this newsletter to a friend or two.

Big Health’s 2022 revenue. Walmart’s employee benefits.