Asserta Health is raising capital via common stock at a $22.1 million valuation. With 2021 revenue greater than $2.1 million, the company’s revenue-to-valuation multiple sits at a little more than 10x. Multiples vary widely in the healthcare space. But for later stage health-tech companies in the traditional venture ecosystem, revenue-to-enterprise-value multiples (which are comparable to revenue-to-valuation multiples) were at 5.6x for the second half of 2021. For an early stage healthcare startup, Asserta Health’s 10x multiple is a bit high. However, the company has overcome technical challenges to get this far, and the highly valuable proprietary data it has collected (and continues to grow) is significant. Thus, it’s fairly priced in this funding round. 

Asserta Health operates in the very large US healthcare market. As the company makes its money transactionally, it’s best to look at how much is spent on healthcare in the US in order to gauge the company’s addressable market. A staggering $4.1 trillion — 19.7% of the nation’s gross domestic product — was spent on healthcare in 2020. That represents a 9.7% increase over the previous year. Annual growth projections until 2028 are at just 5.4%, though, suggesting expenditures are tapering off. 

Amazingly, nearly a quarter of that $4.1 trillion was spent on non-clinical administrative functions. A huge part of that is processing claims, which Asserta Health’s utility would eliminate. As such, it represents an absolutely massive opportunity for Asserta Health, even if the company only captures a tiny fraction of the market. 

The healthcare market isn’t expected to change anytime soon either, especially with how polarized the political system in the US is. As such, any improvement to the current healthcare payment model that improves affordability and reduces complexity can be a game changer. Additionally, the recent No Surprises Act will act as a further boon for Asserta Health, as it will enable and expand pre-service price transparency. 

Unfortunately, Asserta Health is attacking a broken and stagnant market. The healthcare market is firmly entrenched by big insurance companies. If the insurance companies feel threatened, obstructionist policies could become another mountain for Asserta Health to climb. At the same time, the company is targeting a population that has no idea there’s something much better out there. As such, Asserta Health not only has to watch its back but must also educate patients and employers of its technology and its benefits — a tall task indeed. But if Asserta Health does manage to successfully educate patients and onboard large employers, this funding round would represent a massive opportunity for investors to get in early at decent valuation.

Korb Matosich is the co-founder and CEO of Asserta Health. He has deep experience in the field of healthcare payments. Before founding Asserta Health, he was the chief financial officer and president at AAPC, an organization that certifies billers and coders in the healthcare payments space. He also spent a collective four years at Ingenix, which is a part of UnitedHealth Group. At Ingenix and UnitedHealth, Matosich oversaw revenue cycle management and payment integrity. Matosich graduated from Brigham Young University with a degree in accounting and received his Master of Business Administration from the Graduate School of Business at Stanford University. 

Lisa Behnke is the co-founder and chief medical officer at Asserta Health. Behnke has extensive experience in healthcare that spans more than 30 years. She was a medical director for more than 12 years at UnitedHealth, a director for more than two years in PwC’s healthcare practice, and has held high-level roles at numerous healthcare-focused organizations. 

Matosich and Behnke have a great deal of experience in healthcare and have done an admirable job building the company to its current point with very little funding. Notably, eight years is a long time to spend building a company, and they should have brought on a full-time sales-focused individual long before now. Overall, though, investors should be confident in the team’s ability to navigate the complexities of healthcare. 

Asserta Health has rare potential to upend the healthcare market. The company has shown that it can offer patients and employers numerous benefits in a more accessible, affordable, and less complex healthcare payment model. Since the company failed to divulge how its technology and platform work, it’s difficult to say how differentiated Asserta Health is. Through multiple calls with the team, my understanding is the company ingests large datasets that contain how much services cost in various geographies. Based on that data, the company is able to negotiate a pre-service price for health services rendered. 

The company’s closest competitors are cost containment companies, including SmartConnect and Medicor. But their approach is very different and suffers from flaws that Asserta Health has avoided. Cost containment companies can reduce healthcare expenditures by encouraging employers to offer high deductible health plans, shifting costs to employees, performing claims analysis, and making changes to coinsurance. None of these strategies may be in the best interests of patients and/or employees. Asserta Health, by contrast, attempts to help patients and put their interests at the forefront. As such, Asserta Health is truly unique with its offering. 

Korb Matosich and Lisa Behnke started Asserta Health in 2013. Through the last eight years, the company has served more than 30,000 patients and paid more than $40 million in healthcare transactions to date. It’s a decent amount of traction. But it’s a little less than investors might prefer to see for a healthcare company that old. 

The company grew revenue 59.7% year-over-year, going from $1.3 million in 2020 to $2.2 million in 2021. This is a healthy growth spurt. But as a whole, revenue numbers are still unimpressive for an eight-year-old company. On the plus side, Asserta Health is burning only $29,000 per month and has more than $1.2 million in cash on hand. The company can last 40 months without additional funding, which is a good sign of financial stability. 

Overall, Asserta Health has performed well over the past two years, but its revenue and customer traction seem a little behind in general. Perhaps it can be explained away with the complexity of the healthcare industry being resistant to change, the lack of easy access to needed data, and the fact that bootstrapping is rarely conducive to rapid growth or progress. Still, the company’s traction is lower and slower than ideal for a nearly nine-year-old company.

While Asserta Health could be a high-reward investment opportunity, it’s also a high risk investment. There are a three key issues to keep in mind when assessing Asserta Health’s risk: education, slow sales cycles, and the obstructionist policies of legacy insurance companies. 

In order for Asserta Health to grow further, it must educate employers and patients on the numerous benefits it provides to users. This task will likely not be straightforward as most people are not familiar with the structure and nuances of healthcare costs. Properly informing potential customers will involve scaling sales and marketing, which obviously requires ample labor and capital. 

The aforementioned points tie into the company’s long sales cycles, which are typically yearly (and fall in line with the annual open enrollment periods provided for healthcare users). Asserta Health needs a great deal of time and money just to approach closing a deal. During long sales cycles, there is a large window of opportunity for problems to arise. New competitors can enter the market, or prospective clients can lose interest in adopting Asserta Health’s product.

Insurance companies also pose a massive threat to Asserta Health. Large employers rely on large insurance companies to provide healthcare insurance to their employees. And while Asserta Health seems to have cracked the code with self-insured employers, the company’s ultimate goal would target large employers. And if Asserta Health makes inroads in that goal, health insurance companies will be highly motivated to undermine its plans. 

While an investment in Asserta Health can have high rewards, there are massive hurdles the company must overcome in order to reach its full potential. As such, Asserta Health is a risky investment.

Asserta Health is upending the current way healthcare payments are made in the US. Healthcare is a notoriously difficult market to bring innovation to as it is very large and relies on entrenched legacy systems. Furthermore, Asserta Health must educate a populace that has known only a specific way of paying for healthcare. Given the standard lack of transparency that exists in healthcare, teaching prospective clients about the alternative that Asserta is offering (and its benefits) will not be an easy task. On top of that, the company must also face off against powerful health insurance companies. While the educational aspect to its growth is less of an issue, health insurance companies are an existential threat that could very well prevent the company from realizing its vision. The risks that Asserta Health must overcome are sizable, and investors should carefully gauge their risk tolerance when considering this company as an investment.

Asserta Health could prove an extremely high-reward investment. The company is currently in the process of hiring a full-time sales executive. This individual might be able to supercharge the company’s growth by targeting small, self-insured employers. If they do, Asserta Health may be able to grow without pursuing the bigger employers and incurring the wrath of the insurance companies. 

Or the company’s growing user base and reputation could encourage it to take on the big insurers. Should the company grow enough and prove its benefits, health insurance companies could face an uproar if they move against Asserta Health. Additionally, at a larger size, Asserta Health would be better able to work with large employers, boosting growth even further. 

All in all, the company has potential. It needs to successfully educate prospective clients, fuel growth with a sales team, and expand while remaining under insurance companies’ radar. That’s no small order. But the investment potential — if Asserta Health can achieve its goals — is significant. 

Asserta Health offers a unique healthcare payment utility that upends the current method in the US by allowing immediate cash payments. Its platform offers employers and patients more accessibility, affordability, and simplicity in a market notorious for being none of those. 

Asserta Health is led by a strong and capable team with deep experience in healthcare and healthcare payments. As such, the team has been able to grow the company to a respectable size. Asserta Health has processed more than $40 million in payments and grew revenue 59.7% year-over-year, reaching $2.2 million in 2021. When it hires a new sales representative with deep experience in healthcare, the company may be able to grow even faster. Lastly, the healthcare market is absolutely massive, and any improvement to the current way of doing business is a good improvement. Trends in the market with the No Surprises Act may also accelerate growth and boost the company’s prospects. 

Unfortunately, Asserta Health faces a few main issues: educating a populace, long sales cycles, and health insurance carriers posing an existential threat. While the education issue is less of a threat and can be overcome with time, long sales cycles and obstructionist insurance carriers are notable threats. Health insurance carriers are extremely large and powerful. If they deem Asserta Health a threat, they can act as a huge obstacle to the company. As such, any massive upside the company may have as an investment is balanced out by the downside. For investors with high risk tolerance, this may be the startup for you. For others, Asserta Health may not be the best investment opportunity. Therefore, Asserta Health appears to be a risky but high-end Neutral Deal.

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Francis Vu, July 29, 2022.