Transcarent, healthtech entrepreneur Glen Tullman’s latest venture, will acquire part of AI-powered primary care startup 98point6 in a deal worth up to $100 million.
Tullman tells Forbes the transaction includes 98point6’s physician group, self-insured employer business and an irrevocable software license. 98point6 has developed an AI chatbot that collects information via a text exchange with the patient and summarizes it for a human doctor who then takes over the chat. Tullman, who cofounded Palo Alto-based Transcarent in 2020, says the transaction is worth up to $100 million – contingent on hitting certain milestones. “We’re putting AI front and center,” he says.
This means Transcarent will now directly employ more than 150 doctors and clinical support staff. 98point6 CEO Jay Burell tells Forbes his Seattle-based startup will stop providing care directly to patients and pivot to a “pure play technology company” rebranded as 98point6 Technologies that will license its software to health systems. The deal is expected to close by March 31.
Transcarent is Tullman’s fourth round as a startup CEO. He’s taken three companies public: Enterprise Systems, Allscripts and Livongo. This is his big swing at the notoriously challenging self-insured employer market. Haven Health, an attempt to lower employer healthcare costs by a trio of corporate juggernauts – Amazon, J.P. Morgan and Berkshire Hathaway – disbanded within three years.
Aon estimates the average cost for employers paying for their employees’ healthcare will rise by 6.5 percent in 2023. “If you think about healthcare today, what’s the enemy?” asks Tullman. “Complexity is the enemy and what we provide is simplicity.”
The idea behind Transcarent is to reduce the bureaucratic nightmare of finding doctors and getting high quality care with a one-stop shop. It lets users talk to a primary care doctor and order prescriptions through an app. It helps them set up in-home care. It shepherds them through surgeries or complex care, such as cancer treatment.
Tullman says Transcarent already offers 24/7 access to a doctor within 60 seconds via its app, but the startup previously used third-party contractors. This acquisition brings things in-house: Transcarent will now be using 98point6’s software and physician group to offer near instantaneous text-based care to patients. “That’s what everybody wants,” says Tullman. “You want an instant response.”
98point6 Technologies CEO Jay Burrell.
98point6 Technologies/ Charles Cotugno
98point6 has raised around $270 million in funding from investors, including L Catterton and Activant Capital, since 2015, according to PitchBook. The Seattle-based startup has conducted over half a million patient visits, says Burrell, but he also confirms it is not yet profitable: “We’re now going to get the [software-as-a-service] type margins that were difficult for us to achieve when you’re providing care.” He says all of 98point6’s existing investors are staying with the company.
98point6 Technologies will license its software, which includes the AI chatbot and other patient engagement and administrative tools, without an associated clinic of virtual providers. This means its new hospital clients can use their own doctors and nurses to take over the virtual appointments on the back-end. The company’s first contract is with MultiCare Health System in Washington state.
The CEOs say the deal started to come together in the fourth quarter of 2022. Transcarent, which raised a $200 million Series C at a $1.6 billion valuation in January 2022, was evaluating different acquisitions to help expand in the self-insured employer market. Its existing customers include companies, such as UPS, Kemper and Rush University.
With 98point6’s self-insured employer business, Transcarent will double its total customer base to more than 200 employers, Tullman says. New customers include Boeing and Chipotle, as well as some insurers and health systems who offered 98point6’s text-based primary care to patients, such as Banner|Aetna. Those customers have a combined 4 million employees who will be offered the option to sign up with Transcarent – 1 million from existing customers and 3 million from 98point6, according to Tullman. He says around one-third of households activate Transcarent and 70% of those people are using it on a regular basis.
“Not only are healthcare costs increasing at a very rapid rate, but quality care options are difficult to access,” Ismat Duckson Aziz, chief human resources officer of Kemper Corporation said in a statement. The Chicago-based insurance company became a Transcarent customer in April 2022. The partnership, she said, helps employees reduce complexity with “direct connections to quality care through easy-to-use tools and resources.”
Some of Transcarent’s customers are fully at risk, meaning Transcarent only gets paid if it helps the employer lower its overall healthcare costs. Other customers pay monthly rates for its services. Tullman says he expects the company’s run rate to hit $100 million by the end of 2023.
In February, Transcarent announced former Merck CEO Ken Frazier would chair its board of directors. Last week, the company named former Cigna executive Tom Richards as its executive vice president of business development. When asked if Transcarent planned to make more acquisitions, Tullman replied: “We wouldn’t be investing in such a heavy hitter, if we were not going to continue to go out and do what we needed to do to build and control the care experience.”
