Omada Health made its name with its technology. Now it’s luring insurers with operational innovation

Inside the Omada Health offices, staffers joke that the company is a "provendor." (Omada Health)

Inside the San Francisco offices of Omada Health, there’s a tongue-in-cheek term used to describe the company: provendor.

The mashup moniker has filtered all the way down from the company’s CEO to its clients as a way to describe a digital health company that’s equal parts chronic care provider and tech-savvy vendor.

It's an apt description. Omada has made its name with sophisticated analytics, IoT gadgetry (including a digital scale) and mobile solutions designed to prevent the onset of Type 2 diabetes and heart disease with a 16-week program focused on weight loss. But the company also has a national provider identifier, CPT codes, the blessing of the Centers for Disease Control and Prevention (CDC) and bills claims as if it were a hospital.

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"There are so many silos," Omada co-founder and CEO Sean Duffy told FierceHalthcare. "You almost have to figure out how to work in each."

It’s also a term that’s born out of sometimes painstaking, behind-the-scenes conversations with insurers that aren’t used to dealing with a digital therapeutics company that has fully embraced outcomes-based reimbursement. 

“Every single contract we’ve done with health plans, we’re the first time they’ve ever done this,” CEO Sean Duffy told FierceHealthcare. “They’re like, ‘So, you want to use the same paper we use to contract with Stanford Hospital?’ And we’re like, ‘Yes. We do.’”

There's been no shortage of headaches. Some insurers insist on using vendor contracts, which ends up splattered with red lines. But traditional provider contracts lack the language necessary for a virtual provider. So Omada has spent the last several years working with insurers to refine those contracts—an onerous process that has sometimes taken months to iron out.  

Duffy, who seems genuinely infatuated with the whole byzantine process of payer contracts, compares it to the scene from Apollo 13 where NASA has to figure out how to fit square CO2 cartridge into a round hole to save the astronauts from carbon dioxide poisoning. 

“Seven years of Omada—it’s that scene,” he says, laughing. “Nonstop, it’s that scene.”

Paving the way for digital health contracts

The behind-the-scenes operational growing pains Omada has encountered are emblematic of the digital health industry at large. For all the talk of disruption, new technology entrants into the healthcare industry are eventually forced to confront an entrenched claims and billing system, not to mention a substantial network of established players.

RELATED: Digital health companies are targeting obesity and diabetes, but will it work?

Insurers, in particular, are very risk-averse when it comes to digital health, according to Tom Kluz the head of healthcare investing at Qualcomm Ventures. They want proof that a solution works and that the juice is worth the typically high-dollar squeeze. 

“They won’t accept something into their value chain unless it's unbelievably vetted and the science totally works,” says Kluz, who previously worked at Providence Ventures, the venture capital arm of Providence St. Joseph Health and Cambia Health Solutions, the private equity sponsor for Regence Blue Cross Blue Shield.

Omada is one of just a handful of companies blazing the trail, particularly when it comes to building in outcomes-based payments. Cigna, which led a $50 million investment round last year, began partnering with Omada in 2015, beginning with a diabetes prevention program that showed participants were hitting a 4%-5% weight loss target with a medical cost savings of $500-$1,000 per member.

But Cigna’s investment was also due to Omada’s focus on “operational innovation” that focused on making the product consumer friendly and going the extra step to bill as a provider, according to Joan Harvey, Cigna’s vice president of consumer health engagement and behavioral health.

RELATED: mHealth shows promising effect on cost, outcomes for diabetes patients

“I don’t think other companies in this space have taken the time to figure out that level of complexity,” she said. “By doing that, Sean has differentiated his company. And he’s gotten the financing and the output of payment where the clients want it—which is in claims delivered to outcomes, not in adding on administration fees where they can’t see the value of the output.”

Impressed with Omada’s partnership to date, Cigna plans to announce an expanded partnership with the company later this month.

Another insurance partner, Blue Cross Blue Shield of Minnesota, has seen similar results and welcomed the value-based partnership, even it meant navigating the contractual hurdles associated with a company that straddles the provider-vendor line. 

“I think Omada was, in a lot of ways, ahead of their time,” Barb Haagenstad, the principal product manager of group markets at BCBS of Minnesota. “They had a basic idea of how to submit a claim. When we met with other digital solutions that have come up through the market, they aren’t quite as ready yet.”

RELATED: Digital health funding shows no signs of tapering off with $3.4B invested in first half of 2018

Venture capitalists point to other companies like Livongo, or telehealth vendors like Doctor on Demand that have learned to straddle a similar line while focusing on the industry's shift towards value. But Omada appears ahead of the curve. For his part, Duffy says he’s “equally, if not more proud” of Omada’s operational innovation and ability to slot itself into the healthcare ecosystem as he is of the technology itself.

“You can’t rewrite the health IT infrastructure that’s been in place for decades,” he said. “You have to figure out how to use the existing system."

That has paid dividends for other digital therapeutics companies entering the space. Duffy relayed on a story where the CEO at another digital health company approached him to say thank you. His company was contracting with Tufts Health Plan, another Omada Health client, and once Tufts realized the company fit into the "provendor" mold, they sent over Omada’s contract with most of the kinks already worked out.

“He said, 'That contract took like 2 months,” Duffy said, laughing. “We said, ‘Yeah, well, it took us a year.’”