WHAT CAN WE LEARN FROM FORWARD HEALTH??

Last week the health-tech world was shocked by the abrupt news that health-tech unicorn Forward Health was shutting down:

Forward Health, a former darling in the primary care space, raised over $650M from very notable investors (including $100M less than 12 months ago), with an ambitious vision of high-end primary care via subscription.

The idea was that patients would be willing to spend a flat monthly fee of $149 for access to tech-enabled primary care services. Important to note: Forward was purposely “off-grid” – meaning this was out of pocket payments on top of whatever insurance. The thought was that enough people would be willing to pay an extra monthly fee for the sake of convenience and access.

Forward’s recent ambitions were automated “CarePods” that claimed to use AI to do automated primary care services – this was the goal of the recent $100M raise.

I have been reading the post-mortems on Forward from people much smarter than me - trying to understand what happened.

(I recommend the following: Christina Farr 's assessment here, Jared Dashevsky, MD, MEng 's assessment here, and the Business Insider article by Rebecca Torrence and Rob Price ).

The opinions run the full gamut. There are many who think the AI in the care pods was simply not good. There are those who think the company pushed growth over actual care. There are many who believe that throwing so much tech into primary care is too disruptive and counterintuitive. There are many who cite the poor healthcare economics of primary care in the US, which did not align with Forward’s business model.

All of these options are plausible, and the confluence of all of these things probably led to Forward’s closure.

I do not want to write another post-mortem...

I want to give a different perspective on this, from my own personal experience, specifically with a nod toward what founders (and investors) in the primary care space can learn from the Forward experience.

Some brief relevant background.

A while back I did a project with Clalit – the biggest HMO in Israel with 4.5M members – to bring remote care to citizens in the south of Israel.

Israel’s healthcare system is a nationalized, fully capitated, regulated market system. Every single citizen, of every color/religion/shape/income/background has access to the exact same basket of services. Care is administered by 4 HMOs.

The south of Israel is a massive desert, with a few larger cities and dozens of scattered smaller towns. This is also where 250K Bedouin Israelis live in dispersed communities. Care to these remote areas is very challenging.

Clalit has a number of small clinics dispersed throughout the south, so they launched their own version of a CareBox – called “ClalitBox”.

I visited one a few months.

And here’s the thing – It works.

So what can we learn from Clalit’s positive experience – juxtaposed with Forward’s negative experience? There are a number of things, but I want to focus on one specific thing: Utilization.

By Utilization I mean – How often is the healthcare service used, who is using it, and why. ?

How Often?

Israelis visit their doctors quite a lot. Much more so than Americans or Europeans. Part of this is because of the robust infrastructure of the Israeli healthcare system. Part of this is because Israel is a nationalized system. And part of it is probably cultural as well.

For example, according to the CDC, there are about 350 office visits per 100 people per year for adults aged 45-64. So the average adult will see a doctor about 3.5 times a year.

In Israel that same cohort – 45-64 – see the doctor 2.5X more frequently, nearly nine times a year.

For adults aged 65-74 Israelis see their doctor 1.7X more than Americans.

The biggest gap is with children. Americans notoriously stop seeing the doctor between the ages of 5-15. Israeli kids see the doctor about 6X more than Americans in this age group, with some estimates as high as 10X (another reason why Pediatric innovation is one of the biggest missed opportunities in Israel…)

I personally think the Israeli utilization rates are significantly higher because of the high prevalence of "unofficial" interactions with doctors. As a personal anecdote of what I mean - according to my WhatsApp I can see that I contacted my GP 5 times since Sept 1st for health related matters, including last week to ask how to make an at-home splint for my kid's finger.

Already here we can see a mismatch between Forward's offering and Clalit's. Israelis simply touch the healthcare system much more than Americans do.

Who?

The demographic aspects of care are critical to understand. So much emphasis (and healthcare spend) is dedicated to elderly care, which clearly drives a bunch of startups to develop solutions for that space.

But primary care is different.

According to the CDC, American's aged 25-44 see the doctor maybe once or twice a year.

And American's aged 15 - 24 pretty much never see the doctor...

Forward's CareBox was aimed at this demographic, but this demographic fundamentally doesn't go to the doctor. More than that, the few CareBox locations that did pop up were in areas of relative prosperity, which does not align with who actually needs more primary care services in the US.

We can see here another mismatch in utilization. Forward was asking Americans who utilize primary care the least to spend an addition $149 per month on top of their insurance for primary care services they actually don't use.

Why?

Why do people utilize primary care services at all?

We all know the answer to this - but let's back it up with some numbers.

According to the 2019 National Ambulatory Medical Care Survey, 75% of all ambulatory services fall under the category of "Progress Visit", "General Examination", or "All other".

Colds, Flu, strep, ear infections, sinus infections, dermatitis, hives, Chicken Pox, and on and on.

This should come as no surprise at all.

These things do not necessarily require what the CareBox offered. Full body scans and blood work are outputs of primary care visits, not the reason for primary care visits.

This is where the Clalit Box succeeds.

Clalit's box is 1/10th the size Forward's. It is effectively a tablet duct-taped to a carpeted wall that offers remote consultation with a doctor for the most primary of primary care needs. Clalit partnered with Tyto Care - a promising Israeli startup - to give the doctor on the other end of the screen the ability to guide the patient through the basic checks. And patients get the benefit of an actual interaction with a care provider - even if over a screen.

Ultimately Forward was not aligned with the Utilization of primary care in the US, and this is before we even get in to the healthcare economics of their plan.

But I promised this would not be another post-mortem.

So what can we learn from Forward?

We have all sat through endless hours of people at conferences saying: "Know your Customer" and "Understand your Business", and Forward's experience is a prime example of this.

So many founders in the health-tech space are pursuing interesting ideas, but these ideas must be grounded into utilization - especially when patients are involved.

Who is really using the service, how frequently, and primarily WHY.

More than that, strong founders need to think about the future of utilization: How will utilization shift or change in the coming 5 years.

For example, there is a slew of new CMS billing codes for Behavioral Health that come into play in 2025. These codes may have significant impact on founders offering mental health solutions, and is important for founders to understand how to maximize the potential of these codes. How they will play out in the coming years? Under what conditions can these codes be used? What patients are most likely to be impacted by these new codes and why?

An estimated 37,000 American's were Forward members. 37,000 people is an ARR of about $65M per year for Forward. That is an incredible achievement in the health-tech space and the Forward team should be rightfully proud of their achievements.

I also commend Forward's ambition and vision. They wanted to "Move the Needle" in the primary care space.

I do believe that needles can be moved in healthcare, but they move slowly and iteratively, especially in primary care.

I keep thinking of how many additional users could have been on their platform had they aligned their vision with utilization.

There is a big learning here for founders regarding utilization. And there is a big learning here for investors as well...

In a weird way - I do see a way that a "less-is-more" version of Forward, like Clalit, can be successful - both regarding care and economics - specifically when looped in to Medicaid in areas like New Mexico, West Virginia, or Kentucky

( Jared Dashevsky, MD, MEng - hit me up - I'm looking for a cofounder for this).

Till next time!