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HLTH: New venture, investors see supply chain change in health's future

In the midst of HLTH conference panels on big data and healthcare unicorns — companies valued at $1 billion or more — three industry veterans launched an investment fund, while others put expiration dates on sections of an ever-consolidating supply chain.

Health services-focused Town Hall Ventures launched at the Las Vegas conference with four initial investments, including an Alphabet Inc.-partnered care provider and an analytics company tracking medicines' real-world impact.

The new group is not looking for new science as much as ways to improve quality of care for Medicare, Medicaid and other services for at-risk populations, its trio of leaders said in an interview on the sidelines of the conference.

Andy Slavitt, an Obama administration head of the Center for Medicaid and Medicare Services, or CMS, is joined in the venture by Trevor Price, founder of investment group Oxeon Holdings, and David Whelan, managing general partner of its predecessor firm, Oxeon Ventures.

"There's a whole bunch of people in this country who are relatively healthy, and we're spending a lot of money trying to help them become a little bit healthier," Price said. "Town Hall is much more focused on the people that the system has left behind."

Nearly 120 million Americans fall into that range, representing $1.2 trillion in annual health care spending, the group said.

Town Hall — which references a series of such meeting that Slavitt held across the U.S. in 2017 to discuss the Affordable Care Act and states' progress toward voting on expanding Medicaid programs — will also have a diversity focus, according to comments he made in an HLTH session about breaking down the "30-year-old white guy" investing model.

"We're calling ourselves out as much as anyone else," Slavitt told S&P Global Market Intelligence. "It's a big challenge for a bunch of smart people to come together at events like this, to talk about how to build great businesses, unless they've somehow figured out how to walk in the shoes of people that we serve."

Health tech timestamps

The conference's halls were filled with health information technology companies looking to better understand the patient population, among them point solution firms that analyze specific data sets such as providers' electronic medical records. Yet those companies are not built to last, according to Michael Serbinis, an entrepreneur and investor who led internet and publishing companies before entering the healthcare sector three years ago with an employee benefits platform, League Inc.

"A lot of these companies won't be here in five years, maybe not even three," Serbinis said. "We're at the tail end of a crazy bull market, and things are going to turn."

Healthcare IT needs a wider lens, particularly as industry outsiders such as Inc. loom, he said, adding that the tech giant's potential entry has traditional players moving faster to innovate.

Still, "it's hard for a UnitedHealth Group Inc. or Aetna Inc. to pivot," he said. "That's the thing that I would be more concerned about as an incumbent: the relentless pursuit of viability and being competitive. The new players have it."

Health technology companies are an important step in the chain, but offline abilities distinguish the key players, said Varsha Rao, COO of the Medicare Advantage-focused insurer Clover Health.

"There's definitely a lot of conversations about tech and data," Rao said in an interview. "Tech is great, but at the end of the day you want to drive impact and outcomes. Ultimately the tech and data are a means to an end."

Clover is partnered with CVS Health Corp., the pharmacy supply chain company currently acquiring Aetna in a $69 billion deal.

CVS estimates that $38 billion is wasted in unnecessary emergency room visits annually, Troy Brennan, executive vice president and chief medical officer, said in an HLTH general session where he discussed plans to expand CVS' MinuteClinics to provide "70% to 80% of the care that's necessary."

Town Hall's leaders said they will invest in a good idea at any stage, but are also taking the longer view.

"Solving problems in healthcare is not a matter of just developing an app or a widget and pointing it at the particular problem," said David Whelan, previously CFO of private equity firm Accretive LLC. "Usually it requires a tech-enabled service to be able to wrap your arms around the patient and deliver change in behavior and care the whole way through the journey."