Issue 358
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Exits & Outcomes Newsletter
Was this forwarded to you? Click this link for more info on how to become a subscriber. What a week for news. This issue is going to avoid some of the bigger stories you’ve likely already read enough about like:
- The new ChatGPT for Health from OpenAI, which isn’t protected by HIPAA, and some see as the fulfillment of the Google Health vision of the early 2000s.
- Not to be confused with the new OpenAI for Healthcare, which is HIPAA-protected, and intended for use by healthcare professionals. Big health systems like AdventHealth, Baylor Scott & White Health, Boston Children’s Hospital, Cedars-Sinai Medical Center, HCA Healthcare, Memorial Sloan Kettering Cancer Center, Stanford Medicine Children’s Health, and University of California, San Francisco (UCSF) have already begun to roll it out.
- And don’t forget Utah state’s Department of Commerce’s decision to let an AI company let its AI agent prescribe (a limited set of) medications to real live human patients (but only renewals, not new Rxs).
- For me, however, the biggest move this week was the FDA’s unilateral decision to tweak its guidance document for general wellness devices and clinical decision support software. (No public comment period?) This one is important, and I’m going to spend more time digging into it for a future newsletter.
- So, with that, hopefully some refreshingly different and (relatively) less reported news and analysis below…
Pomelo Care pricing, growth metrics, D2C plans, and more after it raised $92M and got a $1.7B val
There’s a new digital health unicorn this week: Pomelo Care just raised $92 million and is now valued at $1.7 billion. This is a bit rare for a tech-enabled health services business in 2026, so I wanted to dig into Pomelo a little more. Here are some quick notes, findings, estimates, and back of the envelope calculations to get you up to speed on Pomelo’s traction to date along with some hints about what’s next.
Quick background: Pomelo is mostly focused on Medicaid patients today, but as E&O reported a few years ago, the company has at least one big employer customer in Koch Industries. The company’s focus hasn’t deviated since 2021 when E&O first broke the news about its initial $8 million in funding. Back then it wrote:
“We plan to partner with employers and payers to address some of their highest priorities: improving maternal and infant outcomes and reducing disparities while lowering costs. We will do this by providing free, personalized, and evidence-based virtual care to mothers and infants through pregnancy and the baby’s first year.”
34 health plan partners now: Pomelo is up to 34 health plan partners as of the beginning of 2026, but that number has grown fast. Just a few months ago the company stated it had 25+ health plan partners. In the state of Virginia it partners with two Medicaid plans: Anthem Healthkeepers Plus and United. It has partnered with Elevance affiliated plans in Texas, Tennessee, Kentucky and Georgia.
Accelerated sales deals: It’s a bit dated now but Marta Bralic Kerns, Founder and CEO of Pomelo Care, said on the (always good) Vital Signs podcast back in 2023 that the company had accelerated its time to get a deal signed from nine months in its first year to just three months at the time of the interview. That was more than two years ago.
25 million covered lives now: As part of its funding announcement, Pomelo said it now has 25 million covered lives. That’s up from 15 million covered lives in 2025, 3 million in mid-2024 and 2 million at the end of 2023.
245,000 patients served in 2025? The most curious claim in Pomelo’s announcement, however, was that it “now supports nearly 7 percent of births in the US.” Wow. Assuming about 3.5 million births in the US last year, that suggests that Pomelo supported 245,000 of them.
Pomelo pricing is between $450 and $600 per pregnancy: Based on some deductive reasoning using a couple of Pomelo’s costs savings studies, which include gross savings and ROI numbers, the company’s fees appear to be between $450 and $600 per Medicaid pregnancy.
Estimated annual revenue for 2025: $450 * 245,000 = $110 million. Pomelo hasn’t disclosed its revenue, but this recent round’s lead investor told Forbes (sub. req.) that the company’s new valuation was warranted because it was “generating much more revenue” than prior years. So, maybe my rough estimate is about right? Or maybe it is impossibly high for a startup that was founded less than five years ago? Isn’t that what it takes for a tech-enabled health services company to get that kind of valuation in 2026?
Headcount: Last I heard, in mid-2025 the company’s headcount was up above 400, which suggests payroll costs about half of that annual revenue estimate. (Another signal that maybe that revenue estimate is too high? Otherwise, they’d have a bigger headcount.) That said, the headcount increase has been substantial — Pomelo had about 30 employees in 2023, and, as I said above, it launched in 2021.
What’s next: Pomelo said in its funding announcement that it will now expand beyond maternal care and midlife care, which it launched recently, into “evidence-based care for women and children across every stage”. So, it’s not just going to be competing with companies like Mae and Oula, it’s going to compete more directly with companies like Maven Clinic, Midi Health, and Summer Health now.
Direct-to-consumer? While Pomelo has started out with a focus on Medicaid patients, it’s always kept some big employer customers like Koch with an eye to expand more into commercial markets. At one time it counted Mount Sinai as one of its employer customers, but that relationship seemed to end in 2024. I suspect that as Pomelo moves into pediatric care it will also move into D2C models like Summer Health has done. There’s evidence of this too: Pomelo was hiring for a D2C expert to launch a new business venture for it a few months ago:
“Build and launch a new, market-defining virtual care service from the ground up for an underserved women’s health patient population. We’re looking for a seasoned, entrepreneurial product manager to be the founding PM for a new direct-to-consumer business line at Pomelo Care. This is a rare ‘0 to 1’ opportunity to build a new product and business within a mission-driven, scaling company.”
CMS set to create new HCPCS code for Freespira’s panic disorder, PTSD digital therapeutic, but prelim decision states it won’t reimburse biofeedback
Freespira received some good news, bad news from the CMS HCPCS Committee following last month’s meeting to establish new billing codes and reimbursement for new durable medical equipment devices. CMS set to establish new HCPCS code for Freespira device: As requested, CMS said it would create a new HCPCS code to describe Freespira.
Establish a new HCPCS Level II code AXXXX, “Capnometry-guided respiration system, including locked therapy software, all components and accessories, prescription only” to describe the Freespira System.
CMS argues Freespira isn’t DME like RelieVRx: While Freespira made the case that its device is similar to RelieVRx and should also be designated as DME, CMS does not believe Freespira is similar to RelieVRx and points out that Medicare doesn’t pay for biofeedback devices that treat psychosomatic conditions:
The applicant explained that “like the RelieVRx device, the Freespira System uses a combination of unique hardware and preprogramed software to guide the patient through a defined treatment program to create lasting physiological effects.” However, the two devices differ. For the RelieVRx, a cognitive behavioral therapy device, the medical software and the device on which it is housed are so integral to each other that CMS considers them to be one whole device, not software and a separate device. CMS considers RelieVRx to be one whole device for a few reasons, including because the software is locked to the device. In addition, the software cannot be used on any personal devices and no other non-medical software can be added to the device. Also, the software relies on the virtual reality/immersive features of the device to deliver the benefit to the individual, and the device in turn has features that drive the effectiveness of the software. In contrast, the Freespira System uses a treatment mechanism called “capnometry-guided respiratory intervention” and uses software on the Freespira device’s platform as well as on the individual’s personal smartphone once the initial fourweek treatment period ends. CMS determined that the Freespira System therapy is biofeedback therapy.
This is just a preliminary decision so we will have to wait a few more weeks to see if CMS was convinced to change its decision at the meeting in December.
HLTH acquisition price ($173M) and other details
Nearly 20 years ago when I first started writing about digital health full-time, it was fair to assume that every startup presenting at any bigger health tech conference had less annual revenue than the event company putting on the show. That’s not true anymore, of course. But even today an acquisition for nearly $200 million is a rare event in health tech. So even though it’s inside baseball, I thought it’d be worth taking a quick look back at the acquisition of health tech’s biggest conference, HLTH (and it’s other smaller events ViVE and HLTH Europe) back in September 2024. I don’t believe anyone has reported on the details of the transaction. If you find yourself sharing these numbers in line for coffee at JPM next week, please also mention where you saw them: Price breakdown:
On September 16, 2024, events company Hyve Group acquired 100 percent of HLTH and its subsidiaries for $144.2 million in cash along with possible future payments totaling another $29.2 million. $173 million. Not bad for show business. (The company had cash and cash equivalent holdings of just under $13 million when it was acquired.)
Here are a few other details on the deal: As is typical for events and media businesses, goodwill made up more than half the pricetag: $100 million. This included HLTH’s sector knowledge, customer loyalty and the “anticipated future profitability” that the new owner can bring to the business. Intangible assets like trademarks and licenses were valued at $89 million and HLTH’s customer relationships were assigned a value of nearly $11 million. As a refresher, here’s the original announcement from October 2024 — about six weeks after the deal took place. No financial details were disclosed at the time.
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