Octave nabs $52M, eyes expansion of in-network therapy services to all 50 states in 2024

High-quality therapy can be expensive for a lot of individuals and it's estimated that one-third of therapists don't accept insurance at all.

Former investor turned healthcare startup executive Sandeep Acharya noticed the large unmet need for in-network behavioral health services while heading strategy at primary care startup One Medical.

"One Medical is really focused on providing highly accessible, high-quality primary care through insurance and I was there for five years exploring the concept of how do we make good care accessible to more people by demonstrating that care outcomes could improve. Along the way, I realized that two out of the top five conditions that we saw most frequently were anxiety and depression. The primary care doctors would tell you it's approaching half of the disease burden," Acharya said in an interview with Fierce Healthcare.

He added, "When I left the company, I began to look around at the mental health space and felt like there was a need for a more thoughtful approach to the way mental health was delivered because frankly, we just didn't have a place to send all the people we were seeing who needed help."

In 2018, Acharya launched Octave as a modern behavioral health practice. Octave’s services include adult individual, couples and family therapy. It started as a clinic-based company but now operates hybrid care with virtual and in-person services. There are currently more than 1,000 Octave therapists, a mix of contractors and employed providers.

The company has grown rapidly and now serves 33 million covered lives with virtual care services across seven states—California, Connecticut, Florida, New Jersey, New York, Texas and Washington, D.C.

Octave also has physical clinics in California and New York.

The company also has inked partnerships with major national payers including Anthem Blue Cross of California, Aetna (in all 50 states), Health Net and Managed Health Network (in California) and United Healthcare UMR plan for Mount Sinai employees (in New York).

The demand for mental health services is higher than ever and there are many startups offering virtual behavioral health services that are helping to open up access to care.

Octave's business model is focused on making care both accessible and effective for patients and also sustainable for the mental health provider, said Acharya, who is both the co-founder and CEO.

"There's a tension there. If a therapist charges too much, it's not affordable for patients. But if you try to make it really accessible, then it's not sustainable for providers," he said. "We quickly realized that the route to more equitable effective care was the insurance system and saw that the insurance system was, quite frankly, under-compensating clinicians relative to their market worth. So began thinking about how do we allow payers to see the effectiveness of care, that care is actually working to get people better, and use that as a means to drive more sustainable wages for providers."

The startup recently banked $52 million in series C funding to drive the national expansion of its in-network therapy services. The round was led by Cigna Ventures, Novo Holdings and Avidity Partners, and joined by existing institutional investors, Health Velocity Capital, Greycroft Partners, Felicis Ventures, Company Ventures and Obvious Ventures.

This latest round of investment brings the company’s total funding to $86 million.

The new funding will accelerate Octave’s expansion to more regions later this year and all 50 states in 2024. The startup also plans to roll out new technology products to serve payer and provider partners.

Acharya said he turned to One Medical's playbook to develop processes to manage patient outcomes and access as well as patient and provider satisfaction.

"We got our first payer contract four years ago, in 2019. We got into contracts where we were at risk for the outcomes of the care. But in exchange, we're able to offer much higher wages than a therapist could contract on their own," he said.

Acharya contends that Octave's outcomes-focused approach leads to effective care for patients. The company reports that has seen a 37% reduction in depression symptoms over 12 weeks. Patient attrition at Octave, or patients who drop out of therapy, is less than half the industry standard, he said.

The company's provider attrition rate is less than 15%, he noted.

Octave's approach also differentiates it in the behavioral health market, he said, even as new startups jump into the space fueled by billions in venture capital dollars.

"After billions of dollars of capital investment, a patient based is no more likely to complete a course of treatment in therapy than they were five years ago, based on the data. So, what is all this capital doing? It's not necessarily driving more effective care. I think we're all focused on access, but we as an industry need to pivot and focus more on effectiveness. That is how Octave is thinking about our journey, where we are seeking not just to be a provider of care but increasingly we're trying to figure out ways to offer technology that will encourage care to be more effective," he said.

Behavioral health investments decreased 56% from a high of $4.8 billion in 2021 down to $2.1 billion in 2022, with the downward trend continuing in the first quarter of 2023, according to Rock Health. In the current economic climate, investors are looking for strong financial models and sustainable growth strategies to dictate success. 

“Cigna Ventures collaborates with innovative, forward-thinking companies who have the ability to solve healthcare’s biggest challenges and improve health outcomes for many,” said Craig Cimini, head of Cigna Ventures in a statement. “We’ve collaborated with Octave since 2021 and believe in what the company is doing to set a new standard for behavioral care delivery.”

There are also startups tackling the issue of making mental health services more affordable and accessible to patients. Headway is an online service that connects therapy seekers with mental health care providers who accept insurance. The company has raised about $100 million to date, including $70 million in a series B round in 2021 that propelled it to a $750 million valuation.

Startup Alma built a tech platform that helps mental health practitioners sustain their practices and gets more therapists into insurance networks. The company has raised $220 million backed by private equity firm Thoma Bravo, Cigna's venture arm and Optum Ventures.