Town Hall Ventures invests in entrepreneurs passionate about improving care delivery for vulnerable and underserved populations. The Pulse sat down with co-founder and partner Andy Slavitt to learn more about the motivation behind Town Hall, the companies they’ve invested in, and how they support them.
The Pulse: Can you please provide an overview of your background and how you got to Town Hall Ventures?
AS: Well the most important moment of my life was being an undergrad at Wharton, and everything else is just trying to live up to that! After school, I went to Goldman, then Harvard Business School, and then McKinsey. In the 90s, I started my own healthcare company which I sold to UnitedHealth Group. We then started a business called Optum which I oversaw for about a decade and grew to a $40 billion business. I left when the ACA was launched and eventually joined the Obama Administration as the Chief of Medicare and Medicaid. I’ve spent the last few years launching a number of initiatives aimed at determining how we can transform healthcare in the U.S. within the next decade. Some of this has been through an organization I launched called the United States of Care and some of it through Town Hall Ventures.
The Pulse: Can you elaborate on your role at Town Hall?
AS: We founded Town Hall Ventures because we believe the healthcare system puts most of its focus on the “Peloton” crowd instead of the “take the bus” crowd. We believe people in the “take the bus” crowd have the exact same clinical conditions as everybody else but have much more inferior outcomes. This is not because they are more medically complex but because their lives are different from what we are familiar with. People with safety nets, higher incomes, and homes in the right places have a much easier time accessing healthcare. We need to be directing capital – financial, idea, and talent capital – to serving vulnerable and underserved populations. Along with two partners, I founded Town Hall Ventures to invest in entrepreneurs who had big, bold ideas for transforming care delivery in vulnerable communities.
The Pulse: Why has there historically been a gap in funding for companies serving these populations? As an investor, why do you see opportunity there?
AS: The easiest explanation is that the people with money are white and upper middle class and can’t relate. We build things we think we need, like ways to count our steps, but have historically shown little interest in understanding how other people live. Also, many people don’t want to serve a government market, and a lot of underserved people are on Medicare, Medicaid, or other state programs. The flaw in that thinking is that in healthcare everyone at some level is a government contractor, whether they know it or not. By shying away, they are ignoring 130 million Americans and a $1.3 trillion market. When we break it down into subsegments, there are over 25 markets in this population that have market caps of $25-100 billion. These are huge markets of high cost, high per-member-per-month populations. We think entrepreneurs and investors have been missing the biggest opportunity in healthcare.
The Pulse: We often hear that Medicare and Medicaid populations tend to be extremely complex patients with multiple chronic diseases. Is that true?
AS: Everybody becomes a complex patient. The great advances in medicine have meant that chronic diseases are no longer things that are just to be avoided; they are things you accumulate in life because more things are survivable today than ever before. The question is why are some people able to maintain themselves when other people with the same conditions are having far inferior outcomes? Why is it that a mother who is black is 4 times more likely to die in childbirth than a mother who is white? Why is someone with mental health conditions who is lower income 4-6 times more expensive than someone with a mental health condition who is not on Medicaid? Those are not because of clinical reasons; they are because of social reasons – their income, zip code, race. Those are the things that need addressing and can be addressed.
The Pulse: As an investor, how do you think about balancing your return on investment with supporting mission driven companies?
AS: It’s not a balance at all, actually. We are out to demonstrate – and are demonstrating – that these are the highest return areas to invest in. We are not doing this to feel good about ourselves; we are doing this to transform the way care works. That will only happen if billions of dollars a year that were otherwise going to be invested in things that are not as productive for our country start being invested in these communities. We do not feel that we need to trade off return in order to do the right thing. We expect to be a top quartile or top decile fund.
Now, we do have a lot of people who root for us to succeed because these are important issues for our country. From investors, to entrepreneurs, to CEOs, there’s an amazing camaraderie, team spirit, and extra effort people are willing to put in for companies that matter. I actually think it makes it more likely that these companies deliver high returns.
The Pulse: Can you elaborate on some of your recent investments or companies you’ve built, and illustrate the types of companies you like to work with?
AS: The best conversations are the ones where people come to us and say, “We’ve identified a massive problem and have a potential clinical solution we want to make work.” Whether it’s hard or easy, whether they’ve done a lot of work on it, or whether its on a napkin, it doesn’t matter. We invest across stages. For example, we invested in Cityblock Health at the founding. They spun out of Google and are building high-tech clinics with community health workers in low-income, densely populated areas. Ready Responders is an on-demand app for people on Medicaid to summon someone with EMT training and telemedicine capability. They come to your house and help take care of you, so you don’t have to go to the ER and get admitted.
Then there are specialty areas like kidney care. We’ve invested in a company called Somatus which is taking care of the most expensive population in the country – people with kidney disease. When these patients go on dialysis, they are effectively agreeing to a slow end to their life. These are largely low-income people, and we are allowing them to take care of themselves at home, get transplants, and get much better outcomes. We are just launching a company in maternal and infant health focused on the Medicaid population. There are things we call maternity deserts where there are no birthing centers, OBGYNs, or midwives, for miles. We are also invested in a company that does all-inclusive care for the elderly and allows them to stay at home instead of go to a nursing home.
I’ve just told you about roughly half of the investments we’ve made. We’ve made a total of 15 investments, and all of them are companies that matter. They may not all succeed, but if a few of them do, they will become massive, multi-billion dollar businesses while also transforming the way care is delivered. What they are doing is often done in small pockets but not in a scalable way. No one has ever put the capital and talent and resources behind them, so that’s what we are doing.
The Pulse: What are some of the biggest challenges your portfolio companies face?
AS: Any company that is trying to transform care is going to face an array of challenges, including taking on some large incumbents. In the kidney care space, they are taking on DaVita and Fresenius, which have been around for a long time. Sometimes we have to convince people that payment models need to be changed. If I say, “We can afford to invest in prenatal health for every pregnant mom in the country, but the only way to do that is by spending less in the NICU on premature babies,” that sounds good, but there is somebody that’s making a lot of money on the NICU who doesn’t want that change. Also, you have to recognize we live in a country that’s multi-local, not national. Anybody who thinks you can do things in one place and then replicate across the country without local focus and local partnerships doesn’t understand healthcare. There is no McDonald’s of healthcare. You have to do the hard work of making something happen locally and finding what’s transferable.
The Pulse: For earlier stage companies that come to you, what is the relationship you tend to have and how do you support them in their launch?
AS: The earliest stage we do is starting companies ourselves. We’ve started 3 companies from scratch including the maternal health company we talked about and a whole-person recovery business that we just started in North Carolina. With every company we take a slightly different view than a lot of investors. We don’t wait and hope they work; we invest in companies we really believe in and then effectively adopt them. We get on the phone with our CEOs, and we take away to-dos to help them de-risk and accelerate their businesses. Whether it’s on the regulatory side, the business side, or the talent side, we pride ourselves in helping accelerate the growth of these businesses. My two partners and I are all former entrepreneurs, so we know what it’s like to be a CEO. We probably know 90% of the CEOs of healthcare companies in the country. So, calling up a CEO and asking them to meet with a startup that is doing something great is something we do all the time. I think if you ask most of the CEOs who work with us, they would say we are actively involved as assets to their team. That’s why we can get into all the best deals.
The Pulse: What are your thoughts on addressing social determinants of health, and is that something you invest in or work on?
AS: We invested in a company called Unite Us, which is the only tech-first company we have invested in. They build networks of social service organizations and connect them to clinical organizations. Every company we work with is about opening the aperture beyond just our view of people as clinical beings and really seeing the rest of their lives. For example, lower income people have much higher no-show rates. Why is that? Maybe it’s because they don’t have child care or maybe they get paid by the hour and can’t take time off.
Social determinants of health are all the things that make someone a person and allow us to take care of better. They include topics that people don’t like to talk about like race and poverty. There are people out there who are adding some capabilities around clinical healthcare to make it work better like transportation, etc. but that’s not the applecart. The whole applecart is how do you bring healthcare to people when their lives are so complex that it’s hard for them to access the healthcare system. I think many efforts undershoot what that really means. We try to do it differently with the companies we invest in.
The Pulse: Do you think there is a party that should be held accountable for thinking about social determinants of health
AS: People want to be able to afford to take care of themselves and their families. They are not looking for someone else to be accountable, whether its government or the private sector. In the business sense, I do think there are people who can be the center of communities and deliver value. Often times those are healthcare entities. If they can get paid to keep communities healthier on a population basis, then they can take that accountability and invest in those resources.
The biggest issue besides the two I mentioned of racism and poverty is affordable housing. That is a journey that no one can take on alone. There is an 8-year waitlist for affordable housing in New York City, for example. We know people can’t improve their health unless they have a safe, affordable place to live. There are places where health systems, government, and others are starting to realize they need to put real capital behind affordable housing. It’s not one entity that’s responsible it’s the community at large.
Interviewed by Poorwa Godbole on December 11, 2019