Cityblock restructures operations, cuts 12% of workforce as it plots plans for growth, profitability

Six-year-old Cityblock Health, a startup that has raised nearly $900 million to date, has restructured its business as it focuses on ramping up payer partnerships and accelerating its path to profitability.

As part of the restructuring plans, the company is laying off 155 employees, or 12% of its workforce.

Toyin Ajayi, M.D., CEO and co-founder, said the workforce reduction is necessary to "right-size" the business as the company enters its next phase of growth. The restructuring plans were developed through a thorough and detailed process as management looked holistically at Cityblock's organizational design, Ajayi wrote in a blog post published Thursday morning.

Staff were notified of the job cuts this morning, according to the blog post. Impacted employees will be provided information on severance packages, extended medical insurance through COBRA and mental health support as well as job transition and outplacement support.

Spun out of Alphabet subsidiary Sidewalk Labs at the end of 2017, Cityblock is a tech-driven, value-based care provider of medical care, behavioral care and social services to Medicaid and lower-income Medicare beneficiaries. The company has set its sights on serving 10 million members by 2030, which means scaling its operations, technology and care services.

Cityblock is focused on transforming the healthcare experience and outcomes for populations that the system has historically left behind, and that raises the bar to build a sustainable business model, Ajayi said in an exclusive interview with Fierce Healthcare.

"Although it is always difficult to say goodbye to people who have been so important to the history and to the progress that the company has made, knowing that we're doing so from a position of strength as a business, from a balance sheet perspective, from a mission perspective, from an outcomes and performance perspective, and this enables us to continue to grow and that is really rewarding," said Ajayi, who was tapped to serve as CEO back in March.

"My hope is that we continue to prove to the ecosystem as a whole that there is a space and a place for companies that are solving really hard problems for people who are so often not the beneficiaries of technology and innovation," she noted.

Many digital health companies have laid off employees in the past year as global economic headwinds make it more difficult to raise capital or grow revenues.

But Ajayi makes it clear that's not the case for Cityblock, as the startup is in a "place of financial strength."

The startup raised $160 million in December 2020, followed by $192 million in a series C extension in March 2021 and then a reported $400 million late-stage funding round in 2021.

The majority of that capital "remains unspent," Ajayi said. Cityblock is backed by investors SoftBank, Tiger Global, Maverick Ventures, General Catalyst, Thrive Capital and 8VC, among others.

Over the past three years, Cityblock's revenue has grown 8x, according to Ajayi. The company is reportedly valued at $5.7 billion based on its last funding round.

"We have the capital, we have clear market fit, traction and runway, and we're seeing outcomes that are really exciting to us as we scale the business," she told Fierce Healthcare in an interview.

Cityblock has made significant internal investments including technology to enable its care model as well as developing robust processes and workflows and building scalable data products and tools, she noted.

"As we've made those investments, we've been able to recognize that we can be more efficient in the way that we deliver care, as well as in the way that we leverage technology to reduce layers within our central services organizations," she said.

As the company continues to grow, it's proving out the financial sustainability of its economic model.

"When you reach a point where you see that there's actually an opportunity to be more efficient and still continue to raise the bar in the care that you deliver, you're obligated to take that on," Ajayi said.

The company's new restructuring plan consolidates resources around its core capabilities. Those changes include standardizing care team staffing ratios as fewer people are needed to do work that is supported by technology, Ajayi noted. The company also is reducing layers within its central services organizations to create clearer reporting structures while continuing to hire and invest in critical areas such as its advanced behavioral health program.

Cityblock plans to scale this program as 47% of its members have a high-risk behavioral health need, many of whom also have disproportionately high emergency room visits and hospitalizations, according to the company. Early results from this program point to a 15% decrease in emergency room visits, Ajayi noted in the blog post.

"We're continuing to double down in care delivery for our members, particularly around members with serious mental illness and substance abuse challenges. We're continuing to invest in our technology infrastructure, including our data to ensure that we're taking our proprietary insights on our members and applying that to driving better outcomes for them," she said during the interview.

Cityblock also has new national payer partnerships on track to roll out later this year to serve tens of thousands more members.

Cityblock now has roughly 1,100 employees and serves about 100,000 members across six markets. Last year, the company expanded its primary care model into Indiana, marking the seventh state where the company operates. Cityblock teamed up with MDwise, the second-largest Medicaid managed care organization in Indiana.

"We've now reached a really exciting stage in our maturity as a business where we have a very well codified, very structured care model tied to a member's needs and tied to the best evidence that we have across our markets about who we need to serve and in what capacities. That has allowed us to launch and scale more efficiently and more rapidly as we launch new partnerships because we have a very clear sense of how to model out the requirements to serve our members in specific markets," Ajayi said.

Ajayi noted that the early days of building a company are often inefficient and sometimes messy. Cityblock has evolved from that stage to a more mature company that's putting systems, processes and technologies in place to plot a path for long-term growth, she said.

"It's not particularly sexy work talking about care model staffing ratios," she noted. "But this is what enables us to grow and scale and to deliver consistent, high-quality results as a company that's really striving for, and in particular with these actions that we're taking now even further, accelerating our path towards profitability and sustainability."