Pearl Health clinches $75M backed by a16z to scale up value-based care tech

Technology company Pearl Health has seen rapid growth as more physicians shift to value-based care arrangements and federal policies push alternative payment models.

The startup, which launched in November 2020, provides technology to help independent physician practices participate in value-based care models. The company has seen 10x year-over-year growth and expanded from 10 to 29 states. In 2022, the company worked with 75 physicians from 25 practices covering 4,000 Medicare lives. Pearl Health now has 804 physicians from 120 practices across 29 states on its platform. These physicians care for about 43,000 Medicare-covered lives, according to co-founder and CEO Michael Kopko.

Pearl Health's growth reflects a powerful trend in healthcare toward physician enablement technology and programs that help providers perform in new value-based care payment models, Kopko said.

The startup banked $55 million in fresh funding in an oversubscribed series B funding round to help further expand its network and build out new technologies.

The funding round was led by Andreessen Horowitz’s Growth Fund and Viking Global Investors with participation by AlleyCorp, SV Angel’s Growth Fund and other leading investors. Pearl Health also anticipates receiving a $20 million line of credit outside of the equity raise. The series B round brings Pearl’s total funding to date to more than $100 million.

Pearl Health's technology uses data science to help primary care providers focus their attention on the patients who are most likely to need it. Pearl Health's platform was purpose-built to provide primary care physicians and clinical staff with insights that help them proactively manage Medicare patient panels with less work, deliver higher-quality care at a lower cost and drive continuous improvement.

"The core of our model really starts with data and integrating data in a way that can be well understood and synthesized for a physician," Kopko said. 

The company's platform equips providers and clinical staff with timely admit, discharge and transfer alerts, so they have the information they need to effectively coordinate care following acute or post-acute events and prevent costly, avoidable hospital readmissions. Providers also get a summary of patient health over time, including events, medications and diagnoses from both inside and outside of the primary care office.

“Pearl Health arms providers with data insights and superpowers to help them manage the health of an entire patient panel," said Vineeta Agarwala, M.D., Ph.D., Andreessen Horowitz general partner, Bio + Health, and board director for Pearl Health. "We believe this technology should enable providers across the country to be at the forefront of our healthcare industry's transformation towards value, achieving improved outcomes and lower total cost of care.”

"Another core data element is we're basically seeing what works through our derived data and that's what are physicians doing inside the platform, what data do they ask for and what helps them take an action. We're learning and repeating on that so we can get very good and very supportive of what physicians want to see when they want to manage a population in value-based care," Kopko said.

The company primarily works with PCPs participating in Medicare's Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH) Model. 

Last year, the Centers for Medicare & Medicaid Services announced that the professional and global Direct Contracting Model would transition in 2023 to the ACO REACH Model. The model, which includes new requirements to tackle health equity, began this year with 132 participants.

Looking ahead, the company aims to expand its footprint to forward-thinking Medicare Advantage plans.

Pearl Health plans to use the fresh funding to grow its network of physicians, and Kopko projects the company will expand to 1,500 to 2,500 physicians by early 2024.

"We want to double down on our technology, and that really enables physicians to know who in their panel needs attention, for what reason and what needs to be done. It's a recommended next-action in value and so we want to get excellent at that," he said. "And then the third is we just need to have good capital availability and a solid balance sheet as we participate in risk-based models. It's a prerequisite and it also enables us to support more physicians because they often cannot provide the financial backdrop or balance sheets to participate in these models on their own. Pearl helps them participate without them having to change their financial structure.

There are many startups in the market focused on supporting the shift to value-based care. Kopko says Pearl Health offers a point of differentiation as a "pure play on tech enablement."

"We are not buying physicians. We're not seeking to employ them. We're not trying to take over their practice. We are working with them to make the shift as independent provider groups, and we're starting in traditional Medicare," he said in an interview.

He added, "Having independent practices is an important thing for healthcare and for our Medicare members. We identified an opportunity to basically deliver technology that helps independent groups make that transition, and we've been quite successful doing it. We're kind of working our way up, ironically, to some of the larger groups and even some big hospital systems. Everybody's got value on their mind and thinking through how do they participate in it, and, frankly, the dollars are just going that way, so you need to have a value-based strategy, regardless of your size." 

Other companies in the value-based care space that provide physician enablement technologies include Aledade, Agilon and Privia Health, among others.

Agilon is focused on pooling patient lives across practices and providing better negotiation for Medicare Advantage and other contracts, according to Kopko. Aledade has historically been focused on the Medicare Shared Savings Program. "We think that model needs to be innovated and transitioned on," he noted.

Pearl is different from Privia Health, he said, because historically the company has required practices and physicians to integrate its electronic health records system.

Kopko, who spent seven years as an executive at Oscar Health, sees the shift to value-based care accelerating.

"Five to seven years ago, most value was in name only, not in function. I think the real shift has been data availability and our willingness to use new technologies. When you look at a physician today, their openness to new platforms and the ability to ingest data has moved value from this concept and frankly, gambling, to it can be done," he said.

The COVID-19 pandemic brought unprecedented challenges to physician practices but also served as a tailwind for Pearl Health's business model, Kopko said.

"Prior to these models, practices were almost 100% exposed to who walks in the door from a pure revenue standpoint. Even a basic investor knows to have 100% of risk on a single thing is not good. These value-based models offer diversity and, frankly, protection for practices in moments like a COVID where a certain way of providing services is disrupted. I think there's going to be a huge acceleration toward value," he noted.

As major drugstore retailers like CVS and Walgreens and e-commerce giant Amazon move deeper into healthcare and big payers like UnitedHealth make big investments, Kopko says he sees a "renaissance" in primary care.

"I think that is a long time coming. But one of the concerns we have is whether it's viable to have independent, individually supported primary care practices without this kind of complete vertical integration or M&A," he said. "Primary care has historically been left out of healthcare delivery in terms of being fully integrated. We just like that it's in the conversation as a holistic approach. Our bet is that the tables may flip and you could see a world where primary care versus purely the hospital is starting to lead on the delivery of good healthcare. That transition would enable more attentive, more cost-effective care."