Health Dialog
Empowering the Patient
Getting healthcare right is one of the largest problems in the world economy. Medicare alone has projected unfunded liabilities of $36 trillion.1 By solving an important part of this problem, Health Dialog Services Corporation is transforming healthcare.
The problem is a result of several paradoxes. Unlike most industries where supply drives down prices, healthcare supply creates its own demand. The more available doctors, the more visits to see these doctors; the greater the patient monitoring, the higher the use of therapeutic procedures. However, such increases often show no statistical change in outcomes. Another anomaly in U.S. healthcare is the wide geographic variation in treatment patterns. This problem is the result of a system that delegates health decision-making to doctors.
Health Dialog turns this system upside down. Building on the richest healthcare database in the world, Health Dialog empowers the patient, increasing healthcare quality while cutting costs. With its just-in-time patient coaching, Health Dialog provides personalized support. By giving patients insight into the trade-offs of various treatment options, Health Dialog helps people make decisions based on their own values and preferences. That decision is often a lifestyle call. It is always deeply personal. Well coached, the take-charge patient receives the “right amount of healthcare” – that amount that the fully informed patient decides is right for them. Quality increases, costs decrease, patient satisfaction rises. This win-win-win solution is the essence of a revolution sweeping America: Shared Decision-Making.
The basis of this solution is an unparalleled database developed over thirty years by Dr. John Wennberg at Dartmouth University. Upon studying this data, Dr. Wennberg reported his conclusions in the March 2004 Annals of Internal Medicine, “The financial implications are clear: Savings of up to 30% of Medicare spending might be possible and the Medicare Trust Fund would remain solvent into the indefinite future.” We believe this report to be Nobel Prize material.
Spencer Trask Creates Value
Spencer Trask stepped up to the challenge of deploying Dr. Wennberg’s conclusions in the real world.
Spencer Trask started the relationship by financing the launch of Health Dialog as it acquired the assets and obligations of a predecessor company. The biggest asset was an exclusive right to Dr. Wennberg’s data. The challenge was turning this into a sustainable business that would change the world.
Health Dialog’s first round investors included the American Hospital Association, the British United Provident Association, Fidelity’s Johnson family and Spencer Trask investors. With $10 million in the bank, the company built its team, created a scalable information infrastructure and developed a learning/teaching culture. This culture had one mission: provide objective healthcare information to patients at the time of decision.
Since perception is critical, Spencer Trask shaped the positioning of the company. The Spencer Trask team explained its complex and rapidly changing strategy to multiple constituencies including investors, Wall Street, and customers. To satisfy certain early customers, Spencer Trask structured a unique performance guarantee backed by escrowed securities to minimize dilution required for customer guarantees.
The company grew rapidly and became one of Inc Magazine’s 500 fastest growing private companies.
In face of multiple acquisition offers, Spencer Trask selected Morgan Stanley’s investment banking team to explore the interest. Meanwhile, Spencer Trask encouraged management to keep the company closely held. Our advice was simple, “You are the missionaries. No one else will have the dedication and passion to your mission. The best way to ensure the purity of mission is to remain autonomous.” These acquisition overtures turned several potential competitors into partners and customers, strategically preempting future threats to Health Dialog’s growing market dominance.
Health Dialog continued to set new standards for healthcare and was awarded contracts by Blue Cross, Medicare and others as Health Dialog's whole person Shared Decision-Making gathered success in the market. By 2007, 20 million individuals were accessing Health Dialog services through major health plans, large employers, provider groups, and government programs. The company was named one of Inc. magazine's fastest growing private companies for three years running, with sales growth of 327%.
Late in 2007 British United Provident Association (BUPA) agreed to purchase Health Dialog for $775 million, returning a 15-fold return to Spencer Trask investors over and 8-year period. Commenting on Spencer Trask's long-standing role in Health Dialog's success, George Bennett, Chairman and CEO said "Spencer Trask was among the first to understand what we were trying to do. They got it quickly and they stayed with us." Health Dialog remains an important division of BUPA.
(1) "How to Balance a $43 Trillion Checkbook”, Wall Street Journal, July 17, 2003
