NextHealth raises $8.5M from Norwest to drive down medical costs


Image Credits:

One of the few remaining universal truths is that healthcare costs are too high. Insurance companies are bucking under the pressure from the Affordable Care Act (ACA), and they are willing to try almost anything if it means reducing costs.

With a shiny $8.5 million Series A from Norwest Venture Partners, NextHealth will be making that exact promise of reducing healthcare costs to U.S. insurance companies over the coming months.

NextHealth’s pitch to insurance companies is very similar to OPower’s pitch to utility companies. If you can target customers most likely to be overspending, you can generate efficiencies that make the entire ecosystem money. Whereas OPower’s rise was fueled by the regulatory environment, NextHealth is being supported by both the failings of the ACA and the innate properties of the insurance industry.

The company is using a mix of behavioral science and predictive analytics to project out specific customers, in a post-ACA world, that could save a lot on healthcare with just a few relatively simple lifestyle changes. While a dramatic drop has occurred in the number of uninsured Americans, a rush of new customers has broken many of the traditional predictive models in the industry.

“Insurers were very surprised by the staggering losses from new members because they were uninsured before,” said Casper de Clercq, General Partner at Norwest Venture Partners.

Fortunately, new patient behavior does still follow identifiable patterns. For example, a New England Healthcare Institute report estimated that U.S. patients waste nearly $38 billion dollars every year on unnecessary emergency room visits. That’s almost enough money to give one Chipotle burrito bowl to every man, woman, and child on the planet. NextHealth wants to nudge these people into more sustainable healthcare habits.

NHT Nudge Examples

To solve the problem, NextHealth has to combine effective targeting with smart applications of existing data-sets. The platform parses through membership data, demographic data, lifestyle data, and geospatial data to pick out specific individuals with a likelihood of a successful intervention. For example, a young mother might have little experience with the emergency room. She may have heard about long wait times, but feel that the ER is the only option for after hours support. A gentle informational nudge could save her and her insurance company money.

Once NextHealth decides to move forward, a case-specific campaign is developed that can involve a telephone call, email, letter, and even refrigerator magnet with information about location-specific healthcare options like telemedicine and urgent care clinics. To ensure intervention accuracy, NextHealth regularly performs statistical analysis against control groups. To date, 25 percent of patients targeted have accepted the nudge and abandoned the ER for all but critical needs.

“We can use machine learning to know what worked and easily turn off what isn’t working,” said Eric Grossman, CEO of NextHealth.

Common sense would tell us that every dollar of reduction in claims means a dollar of additional profit for insurers, but it doesn’t quite work like that. Insurers are required to spend 85 percent of revenue on claims and are limited to 15 percent to cover administrative overhead and generate profit. However, because NextHealth is classified as an operational expense, it is counted in the first 85 percent bucket for regulators. This is a big deal for cash-strapped insurers on the fence about trying the service.

Once a partnership starts, insurers have two options. They can use NextHealth as a standalone service, or they can turn over full access to member outreach with native branding to NextHealth.

NextHealth is currently working with eight insurance companies and half have opted to give the company marketing power in exchange for a promise to return fees at 2.5X. The company puts about half its fees at risk in the process and gains when insurers gain.

While the platform already monitors about 2 million members, Grossman is constantly brainstorming new use cases, like targeted outreach to remind people to get cancer screenings.

More TechCrunch

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

1 day ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo