U.S. healthcare faces a massive and expensive problem that has become a big pain in the neck (pun intended) for workers and employers alike.
One in two Americans experiences back, neck, shoulder or other musculoskeletal (MSK) pain in any given year. MSK remains one of the top three cost drivers in the U.S. health system—consuming 1 in 6 healthcare dollars for large employers and $600 billion for the U.S. economy overall, according to a report that sources data from the Centers for Disease Control and Prevention as well as the National Health Interview Survey.
In response to demand, the digital MSK market is booming, and employers are doubling down on solutions to address employees' chronic pain issues. Only 10% of employers currently have a MSK solution, according to a 2020 Business Group on Health employer survey, but 70% of employers plan to adopt a digital MSK solution in the next two years.
Launched just seven years ago, Hinge Health has capitalized on soaring demand for virtual MSK and physical therapy services. More than $1 billion has been invested in the company, including a $400 million financing round in October backed by investors Coatue and Tiger Global. At a valuation of $6.2 billion, Hinge Health is now one of the most valuable startups in digital health.
The San Francisco-based startup is on track to sign up more customers for its digital MSK clinic in 2022 than in the past seven years combined, co-founder and CEO Daniel Perez told Fierce Healthcare in an exclusive interview about the company's growth.
As Americans accelerated digital healthcare adoption during the pandemic in 2020, Hinge Health’s customer base tripled and revenue quadrupled, the company reported.
In an interview with Fierce Healthcare in January 2021, co-founder Gabriel Mecklenburg confirmed Hinge Health was eyeing a potential initial public offering in 2022.
"It’s one of the options on the table," Mecklenburg said. "We have enough cash on the table not to need additional funding. Three hundred million dollars is larger than the average IPO, and having access to that capital in the private market gives us a lot of agility. That being said, we're evaluating different options: direct listing, SPAC (special purpose acquisition company) and an IPO. There will be a time when we will want to go public."
Perez declined to discuss any IPO plans, acknowledging that the current market is challenging for technology companies.
"We're just focused on building the business right now. We think it's a great opportunity to keep our heads down and build the business," he said.
The company is not yet profitable but has a "clear path" to profitability, he noted.
Booming demand for MSK solutions
The current challenging economic conditions actually have been fueling Hinge Health's employer-based business as companies look to tackle employee healthcare costs with greater urgency, he said.
"A lot of business leaders are facing a twin problem. On one side, there's obviously inflation and uncertain economic climates but there still remains pretty darn intense competition for talent. That's caused a lot of companies to turn to Hinge because we're able to both help them reduce their costs, which is quite relevant in a period of austerity, and also help them attract and retain talent by improving the health of their existing employees," he said.
MSK pain has a widespread impact across job types and nearly every industry—with prolonged standing at work, sedentary working, repetitive tasks and manual labor all significant risk factors.
Large, self-insured employees are paying for every dollar of their employees' healthcare costs. "Many business executives are starting to look at, in these periods of austerity, do we have a lot of avoidable healthcare costs? What they are seeing is, overwhelmingly, their musculoskeletal costs are being driven by elective surgeries that can be avoidable," he said.
Hinge Health now works with more than 750 employers and is on track to add more later this year. Major new customers include industry leaders across the e-commerce, home improvement, technology and automotive sectors as well as many retirement and state health systems. Hinge Health continues to be the choice of 4 in 5 employers and nearly 9 in 10 health plans, Perez said.
Investing in tech
Co-founders Mecklenburg and Perez both have a personal history of MSK injuries and started Hinge Health to improve outcomes for MSK disorders.
Perez broke several bones in a biking accident when he was younger and underwent 12 months of rehab. Mecklenburg also suffered an MSK injury, tearing his ACL during a judo sparring session. They both saw firsthand the inefficiencies in accessing care in the traditional way. Perez met Mecklenburg in the U.K. when he was pursuing his Ph.D. in biochemistry.
"We both realized that when it comes to MSK issues there is a really good evidence base for what nonsurgical, non-opioid care is but that it's very inefficient and difficult to deliver. We thought we could use technology to simply better deliver the evidence base and eventually use technology to go beyond the evidence base," Perez said.
Research has shown conservative management care that combines physical therapy, patient education and lifestyle modifications can help avoid two out of three elective surgeries, he said. Often, financial incentives in the healthcare system drive more invasive procedures, he noted.
Hinge Health sees itself as going beyond digital physical therapy, which itself is a growing market.
"We have taken best practice guidelines, nonsurgical and non-opioid care for back and joint pain, and use technology to better deliver it for exercise therapy, education and behavioral health support," he said.
Hinge Health developed a digital MSK clinic that offers a complete clinical care model for back and joint pain with dedicated programs for different patients' needs from early-stage prevention, acute pain, chronic pain or surgical rehabilitation.
The company's solution pairs advanced wearable sensors and computer vision technology with a comprehensive clinical care team of physical therapists, physicians and board-certified health coaches. The company's computer vision and motion sensors aid patients with exercise therapy and motion assessments.
Hinge has made big investments in technology both through internal R&D to bolster its artificial intelligence, machine learning and computer vision capabilities and through acquisitions.
"We now have the world's most sophisticated computer vision models to where now we can use just the camera on somebody's phone or the camera on their laptop to be able to capture their movement in space with higher fidelity than the human eye in capturing about nearly 90 different points on the human body. It's accurate as Hollywood motion picture labs to be able to capture people in their own home," Perez said.
The company picked up medical device maker Enso to expand its musculoskeletal therapy solutions. Enso's device works by delivering a patented electrical stimulation treatment that relaxes the muscles and calms the nerves and is controlled via an app on smartphones.
Focusing on ROI and expanding solutions
According to Perez, the company pioneered using sensor technology combined with physical therapy and health coaches to drive strong clinical outcomes.
In a large-scale study published in 2020, researchers at Stanford, UCSF and Vanderbilt found that patients who used Hinge Health's program had an average pain reduction of 69%, reduced depression and anxiety of 58% and decreased surgery likelihood of 67%. Participants had a 73% completion rate with the program.
In the industry’s largest study to date, an analysis across 136 employers found $2,387 cost savings per participant for employers who provided the company’s digital MSK Clinic.
A study published this year demonstrated financial benefits of Hinge Health's digital MSK care for older adults. The study, based on medical claims analysis using Medicare enrollment and claims data under Medicare Parts A and B, showed a 2.7x return on investment for Medicare driven by statistically significant reductions in medical-service use and annual healthcare savings of $2,655 per participant compared to a control group.
"We look at MSK a bit more nuanced than I think other folks do. There's low risk, medium risk and high risk, and I think we're the only digital musculoskeletal solution that comes with a full comprehensive care team to also address employers' high-risk members," Perez said.
About 1% of members drive 55% to 60% of MSK cost, he said. "If you don't actually address the high-risk members, you won't actually reduce costs."
The company has significantly invested in bridging the gap between digital and in-person care to make it seamless for the end user. Its HingeConnect technology integrates with electronic medical records systems across nearly 1 million providers over 100,000 care sites. "This allows us to know in near real time if a member were to be seen by a surgeon or about to go to surgery or be prescribed opiates, and we can proactively offer them nonsurgical alternatives for their back pain or knee pain," Perez said.
The company also recently launched a women's pelvic health program to help address the 1 in 4 women with a pelvic floor disorder.
"We're continuing to invest in differentiation. In any sort of market pullback, the market leader, which Hinge Health is, needs to be appropriately cautious, but also appropriately aggressive. We're hopeful that we're striking the right balance between the two," Perez said.