Gastrointestinal virtual care company Oshi Health announced a $60 million series C round led by Oak HC/FT.
Existing investors Bessemer Venture Partners, Flare Capital Partners, Frist Cressey Ventures, CVS Health Ventures, and Takeda Digital Ventures also participated in the round. Oak HC/FT was the only new investor.
To date, Oshi has raised $119.5 million to deliver its wraparound, value-based care for gut health. Oshi serves all 50 states and is an in-network benefit for 40 million Americans.
CEO of Oshi Health Sam Holliday said the round began when an investor “proactively approached us and kicked the process off unprompted.” That investor was not Oak HC/FT.
Oshi plans to use the Series C money to gain contracts with more health plans and providers. Oshi also hopes to expand into Medicare Advantage and the Department of Veterans Affairs medical system.
“The health plan coverage is really important,” Holliday said. “It then makes it easier for their employer customers to help integrate that care into their broader set of benefits. And you know, employers do a lot to make sure their employees are aware of the benefits that they have access to. So it also will fuel us building these relationships with employers that they make their people where they have access to Oshi care. And then as we get more and more payer coverage, it becomes easier for local providers.”
The round should propel them to profitability, which is projected in 2027, Holliday said.
Oshi is working against the grain of fee for service GI care. Oshi provides psychology and dietetics to its patients, which it believes are an important part of GI care.
“The interesting sort of misunderstood thing about GI conditions that a lot of the symptoms can be caused by the connection between your gut and your brain, and so if you have experienced any form of trauma, could be emotional, physical, mental, medical trauma can start the onset of GI symptoms, and it can actually be corrected through cognitive behavioral, behavioral therapy, gut-directed hypnotherapy,” Holliday explained.
Oak HC/FT told Fierce Healthcare that it invested in Oshi because of its disruption of GI care.
GI has been a focus for Oak, and Nancy Brown, General Partner, has managed GI practices. She explained to Fierce that brick-and-mortar GI practices excel at testing and procedures for GI care, but they don’t have the bandwidth to provide the level of care Oshi is providing.
Oak also took interest in Oshi because it had an extra edge: In 2022 Oshi did a clinical study of its solution in conjunction with a payer to prove the efficacy and cost savings of their approach.
The study found that Oshi saved $10,292 per patient per year in avoidable testing, procedures, ER visits, and medication utilization. Additionally, 92% of patients reported symptom improvement and 98% of patients were satisfied with the care they received.
With the study, Oshi can demonstrate its efficacy to payers, which Holliday said has helped dramatically with health plan, employer and provider uptake.
“Without that clinical trial and that cost savings proof, I don't know that we would have been able to convince health plans to cover our care the way they are,” Holliday said.
He continued: “It took two years to do that. Not focusing on the traditional growth, but really proving out that our care model worked and saved money and got great outcomes, and it was a great experience for our patients,” Holliday said.
Holliday also said that because of the leadership of early investors like Bessemer, the company was encouraged to focus on the ultimate profitability of the company.
“We grew up with a group of investors that were really focused on this core unit economic story from the early days. And I think that's an advantage for companies that had that happen as we go into this next phase in the market,” he said.
Holliday defined that “next phase in the market” as investors’ increasing focus on a company’s plan to profitability over sheer growth or its top line revenue. Brown concurred.
Brown said that investing in Oshi was an easy decision. She advised other healthcare startups to understand the total addressable market and know how to scale the solution. Brown also said it’s important to ensure the solution creates a win-win-win situation for providers, patients and payers.