Health Catalyst looks ahead to 2017 IPO, more risk-sharing contracts (mobihealthnews)

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[Posted Oct 6, 2015 by Jonah Comstock]

Utah-based data warehouse company Health Catalyst is frequently mentioned as a candidate for the next digital health IPO, and CEO Dan Burton coyly addressed that chatter from the stage at Health 2.0 in Santa Clara.

“Hard to be a fortune teller there, but we’re trying to think of 2016 as our last year as a private company,” he said.

Part of the reason Health Catalyst is such a favorite to IPO is that the company has been very transparent about its unwillingess to sell. Burton told Michelle Noteboom, a writer for The Health Care Blog, that the decision to be so transparent cost them some investors, but it was worth it because it allowed them to fully commit to planning for the long term.

“It’s tempting to sell out quickly and it can be personally rewarding financially,” he said. “But we’ve seen over and over the long term effect of that decision. So early on we decided that wasn’t the path we were on. We also felt like, if we’re going to ask customers to choose us as a long term partner and we’re open to selling out in the short term, I just couldn’t look customers in the eye and say ‘choose us’.”

Burton quite literally put his money where his mouth was on that long term commitment to customers in January, when Health Catalyst inked its first risk-sharing contract, a 10-year deal with Minnesota-based health system Allina Health. The deal made 20 percent of the contract value depended on Allina improving outcomes and lowering costs.

“Our CFO was quite nervous,” Burton said. “But Allina Health was our first customer eight years ago and we had deep relationships there, we trusted each other, and we ultimately said ‘We exist to help health systems improve outcomes. If we’re not willing to stand behind that while our health system customers are taking on more risk and they’re being required to improve outcomes in order to survive those risk-based contracts, why wouldn’t we be willing to [do the same]?’”

It’s worked out well, he said, leading to both an expansion of the Allina contract and several new risk-sharing contracts in the pipeline for the company.

Burton said the secret to Health Catalyst’s success is a virtue some tech CEOs might not think to espouse: humility.

“One of the things we noted early on was we were assuming we knew a little bit more than we actually knew,” he said. “About the market, about what patients wanted. There was a bit of arrogance that was a problem for us. One thing we talked about was ‘Is there a way to scale an attribute like humility and build it into the fabric of the organization, so we don’t keep making the same mistakes?’ … It’s hard to scale and systematize an attribute but it’s been worth the effort. Even if we fall short, just the focus on being good learners, good listeners, has been really helpful for our company.”

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