Issue 076
Welcome back to E&O’s 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
In this issue of E&O: Employers… a deep dive into Hinge Health’s S-1 filing, which recently became public after months of confidential drafts of the document sat for months at the SEC in secrecy. While you’ve likely read other dissections of the S-1, I haven’t seen anyone else mash it up with everything else we know about Hinge.
- So, instead of just focusing on the two years of growth metrics Hinge offered up in its S-1, I’ve compiled eight years.
- I’ve also spent some time comparing the earlier drafts of the S-1 with the current (final?) version to unearth some insights into Hinge’s thinking about its positioning as it makes its debut on the public market.
- While there are lots of areas of the S-1 I could have dug into, this newsletter really focuses on Hinge Health’s growth metrics and compares them to the numbers I’ve been tracking for Hinge over the years. There are some curious inconsistencies.
- There’s a lot I didn’t get to but this issue is already too long. I may revisit Hinge Health’s S-1 next week (for at least part of the issue).
- Finally, just a — hopefully obvious — disclaimer that this isn’t investment advice. This newsletter isn’t written with that audience in mind.
- Read on below!
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How Hinge Health’s positioning and vision changed in the past four months
Hinge Health’s vision for its company dramatically changed between November, when it first confidentially filed a draft of its S-1, and March when the official document was finally revealed. Here’s how the opening line of the overview section of the S-1 changed:
“Our vision is to create a vertically integrated healthcare system powered by innovative technology – and we are starting with MSK care.” – November 2024 original confidential draft filing of Hinge’s S-1
vs.
“Our vision is to build a new health system that transforms outcomes, experience and costs by using technology to scale and automate the delivery of care.” – March 2025 excerpt from the official S-1 filing
Three important changes: These are the three themes I see Hinge trying to emphasize in this new statement and throughout its final S-1:
- Hinge clearly wants to make the case it is not just an MSK company anymore.
- It is also now building a new health system — not just vertically integrating parts of the old one.
- Finally, and this is a theme Hinge really beefed up in its final S-1, it is using technology (yes, AI) to automate care delivery.
AI: To raise a round recently digital health companies have had to emphasize their AI capabilities. It’s clear from this S-1 that Hinge believes leading with AI will help it find some enthusiasm from Wall Street. Hinge mentions AI (“AI-powered”, “AI-supported”, “AI-driven”) about 170 times in its S-1 filing. More interestingly, it added about a dozen new mentions of the term “automated” or “automation” in its S-1 vs its original draft filing. Here’s how Hinge Health quantified how automated its care delivery is One illuminating footnote in Hinge’s S-1 filing explained this claim about reducing human care team hours by 95 percent:
“Our AI-powered motion tracking technology, TrueMotion, allows us to deliver scalable and largely automated care. According to our estimates based on data from 2024, our platform reduced the number of human care team hours associated with traditional physical therapy by approximately 95%.”
The footnote explained the methodology Hinge used to get to the 95 percent claim:
“We estimate the reduction in human care team hours enabled by our platform by assuming an average of 11 outpatient orthopedic patients are treated with in-person physical therapy per eight-hour day. Assuming in-person physical therapy is delivered eight hours a day, five days a week and 48 weeks a year, each physical therapist can deliver approximately 2,640 sessions per year. Our platform delivered approximately 25 million activity sessions in 2024, which were facilitated by 438 care team employees on staff for an average of approximately 57,750 activity sessions per year per care team employee.”
That footnote sums up how far along Hinge is toward the vision it outlined above. It just needs to move beyond MSK. Before we dig into Hinge’s future anymore, let’s take a look at the company’s past. The S-1 filing is mostly focused on the past two years, but E&O readers should have a longer memory.
Beyond Hinge Health’s S-1: Estimating annual revenues, calculated billings, and members from 2017-2024
Under the JOBS Act, Hinge Health is considered an “Emerging Growth Company” because it has less than $1.235 billion in annual gross revenues and meets various other criteria for the designation. One of the upshots for Hinge is that EGC designation means it only needs to provide two years’ worth of financial data in its S-1.
E&O readers deserve more.
Over the years Hinge Health has actually divulged quite a bit of data about its growth. E&O’s truffle pig snarfed up all those digital breadcrumbs to piece together a longer term view of Hinge Health’s growth over the past eight years. Keep in mind, most of the numbers below are estimated grounded in numbers disclosed by the company at various times. I’ll explain each of the estimates as we go along and also make clear which numbers are directly pulled from the Hinge Health S-1.
Not actually revenue: Hinge Health’s LTM Calculated Billings Growth
In its S-1 Hinge Health introduced me to new accounting jargon — Last Twelve Months Calculated Billings. This is the metric that I typically put together in E&O’s reports (but never had a precise phrase for) and it is one that Hinge favors when thinking about its business. Hinge also shared its actual revenue numbers, which I’ll get into more below, but here’s how Hinge defines LTM Calculated Billings:
“We believe calculated billings on a last 12-month basis helps investors better understand our performance for a particular period given the seasonality in our model that creates quarterly fluctuations based on the timing of new client launches and number of intra-year launches… LTM calculated billings are defined as total revenue, plus the change in deferred revenue, less the change in contract assets for a given 12-month period.”
Hinge shared two LTM calculated billings numbers in its S-1: $328,827,000 for the twelve months of 2023 and $467,504,000 for the twelve months ending in December 2024. Since Hinge also shared the actual number of members for each of those years, I was able to estimate an average billings per member (ABPM) figure of $882.84 (a bit lower than the typical annual price point of Hinge’s main program $995).
So, assuming that ABPM number was consistent for the years 2017-2022, I was able to estimate calculated billings for each of those years as long as I had an estimated number of members for each:
While the above graph is a different flavor of revenue, one of the guardrails for Hinge Health’s historical revenue is that the company’s executives have previously shared that it was at around $100 million in annual recurring revenue (again, not the same number as depicted in the chart above) just before Jim Pursley joined in early 2021. So, that lines up.
Here are the estimated (and actual) numbers I used for Hinge Health’s number of members over the years:
2017 — 2,200 (E&O estimate)
2018 — 6,700 (E&O estimate)
2019 — 20,000 (E&O estimate)
2020 — 80,000 (E&O estimate)
2021 — 180,000 (E&O estimate)
2022 — 245,000 (S-1 actual) 2023 — 370,526 (S-1 actual)
2024 — 532,326 (S-1 actual)
While it didn’t have to disclose its number of members for 2022, Hinge Health noted it hit 245,000 members in 2022 in a graphic found on page 104 of the S-1. The actual language was that Hinge had “surpassed” 1,000 clients that year and 245,000 members, but I think that has to be close to the actual number, otherwise Hinge would have said 250,000, right?
E&O’s estimated for number of members from 2017 through 2021 are based on a number of sources, but always rooted in information found in the company’s marketing materials over the years or public statements made by the company’s executives. The number of members in a given year hews closely to the company’s annual revenue because Hinge Health charges per participant. Hinge Health executives have said in the past that the company’s revenue tripled in its early years, including 2017-2019. It was also widely reported that Hinge quadrupled its revenue in 2020 — the first year of the COVID pandemic. Hinge Health also often shared how many cumulative participants it had had in its programs in its enrollment materials around this time, so those primary sources all helped support the estimates above.
Hinge Health’s actual (and E&O estimated) revenues (2017-2024)
In its S-1 Hinge reported the following two annual revenues:
2023: $292.7 million (actual)
2024: $390.4 million (actual)
Since it was easier for me to estimate annual billings based on my member metrics, one back of the napkin way to estimate actual annual revenue might be to take the average percent difference of the two numbers above when compared to their LTM Calculated Billings counterparts. So, actual revenue for 2024 was $390.4 million vs $467.5 million in LTM Calculated Billings. The calculated billings number is about 20 percent higher than actual revenue for 2024. In 2023, it was about 12 percent higher. Taking an average of those two: We get 16 percent.
So, if we assume the LTM Calculated Billing numbers above are each 16 percent higher than actual revenues, we get the following estimated annual revenue numbers along with the two actual revenue numbers from Hinge’s S-1:
2017: $1,679,073 (E&O estimate)
2018: $5,037,220 (E&O estimate)
2019: $15,111,660 (E&O estimate)
2020: $58,767,565 (E&O estimate)
2021: $134,325,863 (E&O estimate)
2022: $181,589,149 (E&O estimate)
2023: $292.7 million (actual)
2024: $390.4 million (actual)
Hinge Health’s customer growth
Hinge makes a distinction between its clients and its partners. Self-insured employers make up the vast majority of its clients. Here is how Hinge defines a “client” in its S-1:
“Clients are defined as businesses or organizations, which we call entities, that have at least one active agreement with us at the end of a particular period. Entities that procure our platform through our partners are counted as individual clients. We do not count our partners as clients, unless they also separately have at least one active client agreement with us. When a partner has an agreement with us for their fully-insured population, that partner is deemed to be one client, despite there being multiple fully-insured employers within that entity that have access to our platform.”
In the S-1, Hinge shared the following three numbers for its growing number of clients in recent years:
2022: 1,000+ clients
2023: 1,657 clients
2024: 2,256 clients
If we combined those numbers with a few others that Hinge has shared over the years, we can put together a longer term view of Hinge Health’s customer growth:
2019: 100 clients (E&O estimate)
2020: 300 clients (E&O estimate)
2021: 575 clients (E&O estimate)
2022: 1,000+ clients (S-1)
2023: 1,657 clients (S-1)
2024: 2,256 clients (S-1)
The S-1 had some other interesting details about Hinge Health’s clients. One of the customer-related details that has been shared widely since the S-1 came out was the percentage of Hinge’s revenue attributed to three of its big health plan partners in 2024:
Health Care Service Corporation (“HCSC”): 17.1 percent (about $67M)
Elevance Health, formerly known as Anthem: 14.0 percent (about $55M)
Aetna Life Insurance Company (“Aetna”): 11.6 percent (about $45M)
Those numbers were a little different in 2023:
Health Care Service Corporation (“HCSC”): 20.3 percent (about $59M)
Elevance Health, formerly known as Anthem: 10.5 percent (about $31M)
Aetna Life Insurance Company (“Aetna”): 12.6 percent (about $37M)
Is 12-month retention rate helpful? One of the less helpful bits of data from Hinge in its S-1 was this line:
“Our 12-month client retention rate was 98% as of December 31, 2024.”
Hinge notes elsewhere in the document that the average length of its contracts with clients is three years. The contracts then typically auto-renew yearly after that. I’d be very curious what Hinge Health’s four-year client retention rate is on an ongoing basis — 12 months might be a standard metric, but it doesn’t really fit with Hinge’s model.
“We had active client agreements with 49% of the Fortune 100 companies and 42% of the Fortune 500 companies, as of December 31, 2024.”
Interestingly, Hinge had active agreements with just 48 percent of the Fortune 100 in September 2024. So, the company inked a deal with a Fortune 100 during the fourth quarter of 2024.
Similarly, Hinge’s S-1 noted a big customer win in early 2025:
“As of December 31, 2024, we had over 50 partners, including four out of the five largest national health plans based on self-insured lives, and the top three PBMs by market share. As of February 1, 2025, our partners increased to include the five largest national health plans based on self-insured lives.”
33 non-self-insured employer contracts: I’ll write a bit more about Hinge’s customers below, but here are a few other interesting numbers from the S-1: Hinge has 33 contracts with health plans focused on fully-insured, Medicare Advantage, federal workers, or Medicaid populations. Almost all of those partners started out as a self-insured employer relationship. Only 1 million contracted lives for non-self-insured employers? It’s hard for me to square this with the 33 contracts mentioned above, but two numbers in the S-1 imply that Hinge Health only has access to 1 million contracted lives via those 33 contracts with health plans for fully insured, MA, federal workers, or Medicaid populations. Could it be that low?
Here are the two numbers in context from the S-1:
“Our core client base is self-insured employers. We believe the addressable market for self-insured employers in the United States is approximately 120 million lives, according to our analysis of data from AIS Health, of which approximately 19 million were contracted in our existing client base as of December 31, 2024.”
That 19 million is contracted lives for Hinge Health’s self-insured employer clients.
“We are a leading digital MSK platform in the United States, with over 2,250 clients and approximately 20 million contracted lives as of December 31, 2024.”
That is Hinge Health’s number for total contracted lives as of the end of 2024. The difference is about 1 million. So, is 95 percent of Hinge Health’s business self-insured employers as of the end of 2024? I knew that was their core customer base, but I was under the impression that Hinge was further along with fully insured contracts than that number suggests.
Enrollment rate (or as Hinge Health calls it now: Member Yield or Annual Yield)
Hinge Health shared that it has managed to increase its enrollment rate year-over-year from 2022 through 2024. Weirdly, the company swapped out the industry standard metric “enrollment rate” for a pair of interchangeable terms I’ve never heard before — “member yield” or “annual yield” — when it updated its original, confidential draft filing to the official S-1 filing earlier this week.
“Annual yield is calculated as the number of members at the end of a given twelve-month period divided by LTM average eligible lives. Our annual yield was 2.9%, 3.0%, and 3.4% for the years ended December 31, 2022, December 31, 2023, and December 31, 2024, respectively, demonstrating our ability to increase our penetration of our clients’ eligible lives over time.”
Wait a minute: Why did Hinge Health’s covered lives drop from its all-time high in Q1 2023?
One growth metric I didn’t dig into too much above is Hinge Health’s covered lives. That’s because something funny is going on with this metric if you look beyond the company’s S-1 filing.
The most surprising thing in Hinge Health’s S-1 to me was its claim that it had “approximately 20 million contracted lives” as of the end of 2024. Here’s how Hinge defines contracted lives in its S-1:
“Individuals within our contracted clients who have, or will have, the ability to enroll in our programs, typically employees and their adult dependents. Contracted lives include individuals within contracted clients that have not yet launched our platform, and thus such individuals are not yet eligible to be billed. Contracted lives include eligible lives.”
Hinge makes a distinction between contracted and eligible lives in its S-1’s list of definitions for key terms:
“Individuals within our clients that have launched our platform, and thus such individuals have the ability to enroll in our programs and are eligible to be billed. Eligible lives are a subgroup of our contracted lives.”
The term “covered lives” does not appear anywhere in the S-1. It’s also important to note here that Hinge stated in its S-1 that it had 16 million contracted lives at the end of 2023. Weirdly, at the beginning of 2023, when Hinge Health had almost half as many customers as it does now, the company announced in multiple (seven by my count) press releases that its services were available to 25 million members:
“Accessible to 25 million members across 1,250 customers, Hinge Health is the #1 digital clinic for joint and muscle pain, delivering superior member outcomes and proven claims reductions.”
My first thought was that the 25 million number included children in the total number of covered lives for Hinge’s clients, but the company specifically uses the word “accessible” here. Hinge is not accessible to children — you have to by 18+ to use it so only adult dependents of employees have access. Three months earlier, in October 2022, Hinge put out press release announcing it had surpassed 1,000 enterprise customers. It said it was now accessible to 21 million lives:
“Including fully-insured groups and other risk pools, over 21 million lives across tens of thousands of employers from every major private and public sector now have access to Hinge Health.”
Fast forward to October 2024. Hinge Health announced that 10 years since its founding it had now served a cumulative 1 million members and as of this anniversary the company’s services were available to more than 18 million people:
“We’ve had the privilege of collaborating with around 2,000 enterprise clients, health plans and ecosystem partners, giving more than 18 million people access to Hinge Health.”
That’s notable because it shows the company revised its covered lives number prior to filing the first draft of its S-1. It marked the top-line number down to 18 million in late 2024 after touting its 25 million figure throughout the first quarter of 2023. So, to recap, here are the collected numbers for the millions of people that Hinge Health has been “available” or “accessible” to over the years — unless noted as sourced from the S-1 these numbers come from Hinge’s own press releases or other marketing materials:
December 2021: 11 million
January 2022: 14 million
April 2022: 15 million
October 2022: 21 million
January 2023: 25 million
February 2023: 25 million
March 2023: 25 million
December 2023: 16 million (S-1)
October 2024: 18 million
December 2024: 18 million
December 2024: 20 million (S-1)
Because Hinge Health is classified as an Emerging Growth Company, it is not required to disclose financial information beyond the two years it already disclosed in its S-1. So, it may never have to explain the discrepancy here.
Mix-up? It’s possible this was just a long-running mix-up on Hinge’s part. They said those millions had access to its services but maybe they were counting kids who didn’t actually have access. It could be a lot of things.
Big customer losses? The worst case scenario is that this sudden and dramatic drop in covered lives during Q1 2023 meant Hinge lost some seriously big clients around that time.
Natural end for its early three-year contracts? If that is the case, the timing makes sense. The three-year contracts for Hinge Health’s earliest big cohort of clients were starting to come up for renewal around year-end 2022. And Hinge’s fiercest competitor, Sword Health, was ascendant — so maybe it was poaching some of Hinge’s more pioneering customers who were most likely to want to try a new program (they were willing to try Hinge Health early on after all, right?) Still, dipping from 25 million in March 2023 to 16 million by December 2023 is almost too large of a drop to be believed. What do you think happened here?
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