Sean Duffy, Omada, on scaling virtual specialty care

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Sean Duffy, CEO & Co-Founder, Omada Health

Our guest on this episode is Sean Duffy. Sean is the co-founder and CEO of Omada Health, a virtual integrated care solution that helps people manage a range of conditions, including pre-diabetes, diabetes, hypertension, and musculoskeletal conditions. Founded in 2011, Omada works with over 1500 employers, health plans and benefit consultants to deliver integrated care pathways for over half a million members. Earlier this year Omada raised a $192M Series E round of funding led by Fidelity.

In this episode, I spoke with Sean about:

• His journey to starting Omada and launching one of the earliest virtual specialty care models
• Turning Omada into a one-stop-shop for employers and health plans in a sea of point solutions
• A new survey of healthcare buyers’ perspectives on virtual care offerings

Beginning to 7:26: Sean’s journey to starting Omada

What are the areas where digital could make not just an incremental difference, but a transformational difference?

• After working at Google out of undergrad and then entering Harvard’s MD/MBA dual degree program, an internship at IDEO gave Sean the space to think through an opportunity to digitize an impactful part of the healthcare delivery system.
• Just prior to Omada’s founding in 2011, the early wave of wearables, such as FitBit, was expanding the expectations for potential tech disruption in the healthcare space.
• Sean decided to drop out of his academic program to start Omada Health, deciding that he would have a greater impact as a health tech founder than he would as a physician.

7:27 to 16:09: Omada’s product, strategy and population

The goal is to have it feel like you’ve had the paratroopers drop in to help you.

• Omada is a virtual care provider, initially focusing on pre-diabetes and since expanding to treat diabetes, hypertension, and most recently musculoskeletal disease through their 2020 acquisition of Physera. These conditions are the focus because patients benefit from consistent (i.e. daily) touchpoints, and the diseases account for significant cost to the healthcare system.
• Omada initially mails new members necessary remote monitoring equipment, such as blood pressure cuffs, glucometers or continuous glucose monitor and connects them with a dedicated health coach.
• To ensure the product was initially covered for patients, Omada targeted self-insured employers. This remains the target market, in addition to health plan partners.

If you’re spinning up a dermatology clinic, you don’t need to run peer reviewed studies on your capabilities as a dermatologist….but in digital, when you’re doing something different, you will face a lot of skepticism….we recognized that [an evidence base] would be a need and got started very, very early.

• As new virtual specialty care solutions continue to emerge, Omada has aimed to separate themselves in the market by instilling customer trust through building a strong evidence base and integrating care across conditions.
• Omada’s evidence base is a long-standing focus for the company. They have a number of studies, including over 20 peer reviewed studies, available for review on their website evaluating the efficacy of their services.
• By covering multiple, often comorbid, conditions, Omada streamlines the care delivery experience for patients and eases the buying experience for employer benefits managers.

16:10 to 22:46: Digital partner to in-person primary care

We’ve made a commitment to the primary care community…that we are not here to compete in any way. We are a complement.

• Omada, in partnership with Komodo Health, conducted an analysis of all 9,523 Category 1 CPT codes, published in OMERS investor Christina Farr’s Second Opinion newsletter. They found that “for the average individual, 28% of the services they receive in a given year are feasible via virtual first care.”
• For the remainder of care that must be delivered in-person, Omada works to integrate with primary care systems and ensure patient summaries are delivered. This also requires marketing to primary care providers to ensure that Omada is seen as a complement, not competition.
• Sean sees Omada as a key partner for risk-bearing primary care entities, layering in to provide more frequent touchpoints between visits. This is especially true as the healthcare workforce shortage continues.

22:47 to 27:02: Employer’s role as healthcare purchasers and newly released survey data

There’s recognition that virtual care is here to stay, but also that it’s not enough to just replace…an in-person visit with virtual…You have to rethink how digital experiences [such as] hardware, communities, devices, software, all the things that you can do digitally, can create different care models.

• Employers and employer-sponsored insurance is a major component of our healthcare system, covering roughly half of the total population, and the self-insured employer market covers a significant portion of this population. With this influence, many in the healthcare sector have hoped that employers would wield more significant power as purchasers to drive change in the space.
• A newly released survey conducted by Omada, in partnership with the Digital Medicine Society (DiME) and with insights from Rock Health, assessed healthcare buyers (employers, payers and benefit consultants) views on virtual care. They found:

1. Most buyers are optimistic about virtual care — over two-thirds said that virtual care was an extremely/very high priority, and over half said that virtual care was an opportunity to address social determinants of health. Over half believe virtual care will persist beyond the COVID-19 pandemic.
2. However, only one-third of respondents believe that virtual care will revolutionize how healthcare is provided and outcomes are achieved. The analysis suggests this may be due to the respondents limited experience with sensors and devices — less than half report experience with these technologies.
3. For the ⅙ of buyers who report a “deep understanding” of virtual care beyond telemedicine, 81% believe virtual care will revolutionize care and outcomes. Interestingly, these “Visionary Buyers” are also more likely to believe that short-term ROI is not the most important factor.

27:03 to 39:09: Key decisions, new funding and future investment

You will, as an entrepreneur, always make a whole host of mistakes. You’ll also do a lot of things right…you just want to do more right than wrong on balance.

• Sean calls out two key decisions that shaped Omada’s future success:

1. Omada avoided a PEPM (per-employee per-month) pricing strategy, in which a healthcare partner gets paid a set rate for all employees, regardless of who utilizes the service. This model creates stability, but adding new members to the service reduces profit margins, creating conflicting incentives.
2. Omada, with the American Medical Association, established the first digital CPT codes to enable claims billing and payment. This enabled employers to pay for Omada via their typical medical expenses, rather than a separate benefits or “wellness” budget.

The plan is to use [the capital] in a measured way to continue to fulfill our mission bit by bit. We’ve been improving operating leverage, doing all the things that we need to ensure, when the time is right, Omada will live reliably in the public markets.

• Earlier this year Omada raised a $192M Series E round of funding led by Fidelity. This funding represents a conscious decision to delay an IPO until the market is more stable. They plan to utilize this capital to continue executing on the core business until that time, as well as introducing a behavioral health offering alongside its existing care pathways.
• A recent article from Health Tech Nerds, again in partnership with OMERS investor Christina Farr, surveyed 150 startup operators, finding that growth stage companies were pivoting strategy to drive profitability (compared to top line revenue growth), but early stage companies are staying the course.
• While investors are more likely to be increasing, rather than decreasing investment, there is the acknowledgement that this is coming with increased pressure on valuation and other investor-friendly deal terms.
• At the same time, founders are being encouraged to raise larger rounds to extend runway, accounting for the fact that capital may be harder to raise in the future.
• Omada’s ability to raise private capital and determine the right time to enter the public markets is an advantage, especially in the wake of health tech stocks (some of which went public via the frenzy of SPACs) declining with the market at large.
• The company has the capital (and ability to raise capital) to make additional acquisitions, but Omada will continue to be opportunistic and wait for the right combination of strategic alignment and product and cultural integration. Difficulties for smaller health tech firms that most recently raised capital at very high valuations (which may create challenges for future fundraising) may create M&A opportunities for larger digital health companies like Omada.

39:10 to 42:28: Advice for MBAs and career opportunities at Omada

You learn so much being at a startup, your career development can progress so quickly and I’ve experienced a version of that myself.

• There’s a lot to be gained from operating experience, either by starting a company or joining an early stage startup. For those thinking about starting their own business, consider testing out the skillset with a side project to see if you can gain traction and build any revenue. Consider it “practicing” entrepreneurship. For MBAs and other potential hires, Omada is looking to see that you have (or can) meaningfully progressed a business.
• Sean’s own experience building Omada has specifically influenced this perspective — as a first-time founder, he quickly built many of the skills that are now key for new hires to be successful at Omada.

To see all of the roles Omada is hiring for, check out their careers site.

We are so appreciative to Sean for joining us on this episode of The Pulse Podcast! Subscribe for our new releases on Twitter, Spotify or Apple podcasts.