JPM23: Carbon Health nabs $100M, CVS Health partnership to pilot primary care in retail stores

SAN FRANCISCO—Startup Carbon Health is partnering with CVS Health to pilot its primary and urgent care clinic model in the drugstore giant's retail stores.

CVS' corporate venture arm also led a $100 million investment to accelerate Carbon Health's expansion into new markets. The series D round will fuel Carbon Health's investment in technology and ramp up new value-based care arrangements, executives said in a press release.

The announcement of the partnership and three-figure funding round comes just days after Carbon Health executives announced a second round of layoffs. The company is reducing its head count by more than 200 employees and plans to narrow its focus on its core primary care and urgent care service, CEO Eren Bali said on social media Friday.

In a tweet, Bali said the company plans to unwind major initiatives like public health, remote patient monitoring, hardware and chronic care programs.

Carbon Health operates more than 125 brick-and-mortar clinics in 13 states along with virtual care services. The company says it provides care for more than a million patients across the U.S.

The company developed its "Connective Care" model to blend software and expert care with the aim to help patients establish relationships with their own integrated team, monitor and manage their health on the go, and access in-person care when and where they need it, executives said.

“While healthcare has evolved tremendously over the past few years, there are still many ways in which care delivery and quality have not. We're focusing on everyday touchpoints with an integrated care team to help patients achieve better health outcomes – because healthcare is not just what happens during a visit but also what happens in between,” said Eren Bali, CEO and co-founder of Carbon Health, in a statement. “Now, with the support of CVS Health, we can further accelerate our goal of designing healthcare as it should be—simple, flexible, and personal.”

The digital health startup also raised a whopping $350 million in 2021, boosting its valuation to a reported $3.3 billion. Carbon Health has raised $622 million to date.

Since the pandemic started in early 2020, the company doubled its full-time staff to 1,600 employees as it opened over 80 clinics in 12 states and expanded its virtual clinics to 23 states.

In 2021, Carbon Heath was on a growth spree with several acquisitions including virtual diabetes management startup Steady Health, representing its first push into remote, device-driven management of chronic conditions. In October 2021, it picked up Alertive Healthcare, a remote patient monitoring company, to flesh out at-home monitoring.

CVS, which operates 9,900 locations across the country, has been laser-focused on expanding its footprint in primary care. The company wants to enhance its health services in primary care, provider enablement and home health, CVS CEO Karen Lynch said during the company's second-quarter earnings call in August.

CVS Health plans to leverage the Carbon Health model and software in its retail locations to help power the patient experience for its consumers, the drugstore giant said.

“Our investment in Carbon Health is another important step toward our vision of becoming the leading health solutions company for consumers,” said Vijay Patel, managing partner and co-founder of CVS Health Ventures. “This pilot will allow us to explore Carbon Health’s potential to advance the retail health experience, connecting consumers to care where and when they need it with a simple and engaging user-driven experience that can be adapted and delivered across our platform.”

However, Lynch said during the August earnings call that M&A will be a key part of CVS' primary care strategy.

"We are being very disciplined, both strategically and financially, as we pursue kind of our M&A strategy," Lynch said.

CVS is looking for providers with a strong management team and a robust tech stack. "Obviously, the ability to scale, given the size of the company that we are and a pathway to profitability," she said.

Lynch noted, "And we are very encouraged and confident that we'll take the next step on this journey by the end of this year."

Beyond its drugstores, CVS has a deep reach in healthcare as it owns health insurer Aetna and pharmacy benefits manager Caremark.

CVS made a big move in September to grow its reach into healthcare services with its acquisition of home health and technology company Signify Health. The potential deal is valued at about $8 billion in cash. The Department of Justice is taking a closer look at the transaction.