Public Heroes Taking a Company Public Invites All Sorts of Distractions, from Demanding Analysts to Hostile Investors
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MAY 2018 Public Heroes Taking a company public invites all sorts of distractions, from demanding analysts to hostile investors. Meet four founders who’ve made that leap while staying true to their mission. By Kate Rockwood and Zoë Henry A nerd-turned-MD is creating algorithms to deliver the overdue digital health care revolution. INOVALON IPO Feburary 2015 2017 REVENUE $449 million PROFIT $34.8 million ieth Dunleavy was in the that, though her previous refill of It wasn’t a straightforward ask, but middle of preparing the holiday the expensive drug normally would Dunleavy was struck by how much dinner last Thanksgiving when have lasted to the end of the month, more difficult the 25-minute call Khis 76-year-old mother realized that her doctor had tweaked the dosage. might have been if not for the powerful she was in dire need of a refill for She needed a new prescription much but intuitive platform he knew the her Parkinson’s medication. Thin- sooner. Like, today. A national pharmacist was using, a platform voiced and frail, she pulled out her holiday, with no doctors sitting by the that could pull up his mom’s previous smartphone, put the call on speaker, phone eager to answer pharmaceutical scripts, access data from previous and explained to the pharmacist questions. treatments, and do a real-time analysis of potential drug interactions or side follows us around so every provider the company public. Inovalon raised effects. Dunleavy could visualize has real-time access. Instead, issues just over $600 million in its IPO, exactly how the pharmacist was such as the inability of systems to and last year recorded $449 million navigating the platform. Because he exchange data have hindered progress. in revenue. In March, the com pany built it. Meanwhile, U.S. health care costs announced a $1.2 billion acquisition continue to climb--hitting $3.3 trillion of the clinician-focused Ability “I was watching care happen right in in 2016, a 4.3 percent bump over Network, with the goal of getting front of me, with the dog barking in 2015. The Inovalon One Platform, its One Platform into more provider the background and kids moving in as this combination of analytics and hands. and out of the kitchen,” he says, “and massive cloud computing muscle is it really brought to life this incredibly called, is transforming the tsunami Dunleavy never dreamed of being complex system that needs to work of big data into something actionable a doctor. “I was born an engineer,” together to take care of this woman.” and understandable. he says. As a geeky, code-all-night And because Dunleavy is almost teen, he was more obsessed with always in work mode, he couldn’t Today, a pharma manufacturer might robotics and computer science than help but note a few tweaks he wanted use the platform to track not just side with flesh-and-blood patients. He to make to the next upgrade so that effects and drug interactions, but studied neuroscience and engineering similar scenarios would be even easier also how compliant patients are in at Dartmouth, footing the tuition by in the future. taking their meds, as well as a drug’s taking on every programming gig that effectiveness compared with other came his way and, with a classmate, You don’t need to be the founder’s options on the market. Doctors can launching a small computer company mom to benefit from Inovalon’s look at a patient’s electronic health from his campus apartment. For analytics. If you’ve enrolled in a health care record--including trips to a his honors thesis, he developed a plan, visited a doctor, filled a script physician’s office, urgent care facility, system that could simulate the way at the pharmacy, or used a medical or local CVS for a flu shot, hospital the human brain works in order to, device, there’s a better than one in two stays, and notes from a pharmacist-- someday, power robotic limbs. chance that the Bowie, Maryland- and know that all systems are actually based company has run your health communicating. Hospitals can flag But when a professor mentioned that info through its real-time algorithms. patients who are juggling multiple if he stuck with computer neuro- Inovalon counts hundreds of insurance chronic conditions and most likely to enhancements and artificial limbs, it companies, provider systems, and wind up back in the emergency room would be a physician who would one pharma, device, and diagnostic after a procedure--which could cost day implant his design, Dunleavy companies as clients, includ ing 19 them Medicare penalties--so clinicians chose to go to med school. “I was of the top 25 health plans and 13 of can proactively adjust care plans. fascinated by the whole process, which the top 15 pharma and life sciences led to my saying I needed to do that companies. It pools data on more than Dunleavy cites research showing part also,” he says. 240 million patients. that with predictive analytics in play, the average hospital stay drops by That unflagging work ethic and While its clients are household names- nearly a day, the number of ER visits ambition carried through his time -Walgreens, Medtronic, Merck, declines by more than 20 percent, at Harvard Medical School, where Anthem, Aetna, Blue Cross Blue and complications from chronic he earned a degree while also Shield--none of them could do what conditions (such as infections and programming AI software for Merck. Inovalon has done, which is build amputations) plummet. “They were willing to pay for all the ways for massive data sets to talk to hours I was willing to work, and I one another and develop predictive For a brand that no one beyond the thought that was fantastic, because I analytics that can drive better patient health care industry has heard of, was willing to work around the clock,” outcomes and lower medical costs. Inovalon became a quiet behemoth he says. “I worked my heart out.” before stepping onto the public stage. For decades, our health care industry In 2015, looking to attract talent, to Even in a sea of cutthroat residents, has been dangling the prospect of reach a broader variety of health care Dunleavy stood out: At Johns a system in which each of us has an clients, and to access capital for big- Hopkins, he and other residents would electronic health care record that budget acquisitions, Dunleavy took track the number of patients admitted INC. MAY 2018 and discharged during each of their taking off in 2003, with the passage envisioned, as well as let early investors brutal, multiday shifts. Any resident of the Medicare Modernization Act-- and employees cash out. As Inovalon who could clear his or her entire the largest overhaul in the program’s grew, so did the data set, says Rizzo, docket would crow about “winning nearly 40-year history. which in turn made it easier to get new the game.” “It was very rewarding, and clients on board because they could I took it on as a challenge,” he says. Insurance companies saw that leverage richer insights with greater individual member data would confidence and anonymity. As he was besting other residents, be necessary not just for proving Dunleavy quickly saw how compliance but also as a key measure Undaunted by med school, many elements were beyond his of quality and reimbursement, he programming for Merck, or making control: setting up social services, says. Soon, Medicaid was looking at life-or-death decisions as a resident, coordinating in-home care, arrang- similar quality metrics. All of this has Dunleavy found the IPO process ing for translators. Once, frustrated been part of an industry shift away stressful. “When you go public, there that a bare foot patient’s discharge from volume-based health care-- are all these people you want to feel a was dragging, Dunleavy jogged down getting paid for services, such as how responsibility to, but you don’t even to a nearby store and bought him a many tests you perform--and toward know who they are. And they’re judging pair of shoes. “Winning the game!” value-based health care--getting paid whether they agree with what you’re Dunleavy says, grinning at the victory to proactively keep patients healthy. doing on a minute-by-minute basis,” two decades later. he says. “It’s a strange experience.” “Folks have always collected data, but Being a physician was rewarding, but with the move from volume-based to Inovalon’s first-year performance was when Dunleavy came to understand value-based outcomes, you have to ho-hum, and in mid-2016, some its limitations, he faced a decision: “I gather a lot more information from a class action law firms sued, because truly loved seeing patients. I ultimately lot more sources,” says Mark Lorence, that’s what they do. “Whenever the came to the conclusion, however, a health care analytics expert at PA stock goes down, the jackals come that I could impact more patients by Consult ing. “Instead of just collecting out,” says James Angel, an associate develop ing data-driven health care lagging data, like how many diabetes professor at the Georgetown University solutions for millions of patients than patients you saw last quarter, now McDonough School of Business. by seeing them personally one by one.” you need to bring together all sorts of By all accounts, Inovalon’s early years metrics and measures and use them to Inovalon has since reclaimed its stride. were a slog--crunching medical data, create predictive models.” For instance, In the last quarter of 2017, sales tracking compliance for insurance is a patient’s medical condition likely increased 19 percent year-over-year, companies and state health agencies.