Despite the United States’ status as one of the wealthiest countries in the world, the U.S. healthcare system lags far behind other wealthy countries. Americans have a lower life expectancy than citizens in countries like Switzerland and Japan. And they are far more likely to experience health conditions like diabetes, heart disease, lung disease, and disability. In fact, the U.S. healthcare system costs more money to produce worse outcomes than almost any other healthcare system in the world. 

Healthcare access and affordability is particularly difficult for low-income or otherwise vulnerable Americans. Those individuals are predominantly covered by Medicare or Medicaid, the federal government’s nationwide public health care programs. While Medicare is focused on elderly Americans, Medicaid provides health coverage for low-income adults. 

Medicaid expansion — additional funding to provide health care to more low-income individuals — was a central feature of President Obama’s Affordable Care Act (ACA). Although it remains a controversial political issue, studies have shown that states that expanded Medicaid access saw better health outcomes. Medicaid has long been associated with better health and provides care of similar quality to private insurance plans. 

However, Medicaid is less effective for enrollees that suffer from disability or chronic illness. That population represents roughly a third of Medicaid participants nationwide. Yet the cost of their more specialized care totals 70 percent of total Medicaid spending. Healthcare for disabled Medicaid participants is uniquely complex, and patients struggle to locate doctors and maintain treatment schedules. Over 10 million Americans qualify for Medicaid coverage based on disability, and the U.S. healthcare system has a long way to go in ensuring their access to quality care.

HealtheMed is a telemedicine company partnering with state Medicaid providers to install telemedicine systems (hardware plus software) in the homes of disabled or chronically-ill Medicaid patients. HealtheMed patients receive a smart TV and other Bluetooth-enabled medical devices that connect to a care network with the patient’s doctor. These devices then allow doctors to perform day-to-day treatment and preventative care within the patient’s home. 

This convenient access to care increases the likelihood that patients stick to treatment plans and avoid needless health complications. In HealtheMed’s pilot studies, patients’ medication adherence increased from 43% to 92%. At-home care is timely for these patients, as they are the most at risk of serious complications or death if infected by COVID-19. Doctors in the HealtheMed system can monitor patients for potential symptoms of COVID-19 from afar, without the patients risking a trip to the clinic. 

While many telemedicine and healthcare startups partner with existing healthcare giants like insurance companies to deliver care through a middleman, HealtheMed partners directly with government Medicaid providers. These direct relationships make HealtheMed a cost effective solution for healthcare providers. They also net the company larger margins. 

HealtheMed’s first paying contract is with Minnesota’s Medicaid program. There are 77,000 potential subscribers in the Minnesota system. HealtheMed will be paid $3,600 per year for each subscriber. HealtheMed markets to social workers to encourage them to enroll their clients in the HealtheMed program. 

HealtheMed has not formally launched, and the company has not generated revenue since its founding in 2018. Last year, the company operated at a net loss of $13,000.

HealtheMed is led by president and CEO Thomas Spencer. He is a longtime healthcare professional with previous experience leading a healthcare company and advising several other companies as a consultant. Spencer is joined by Robert Arnold, HealtheMed’s COO. Arnold has worked for several healthcare companies over the last 10 years, primarily in sales and marketing. He previously founded two SaaS companies with reported 5x and 3x returns for investors. HealtheMed’s founding team also includes Ronald Mandelbaum as the Chief Revenue Officer. He has worked in sales and business development for a number of firms in HR, materials, and conservation over the last 20 years.

HealtheMed is raising a seed round, split between accredited investors and crowdfunders, before beginning to fulfil its contract with the state of Minnesota.

After launching that contract, HealtheMed will expand to other states. The company has an exclusive contract with MMCAP Infuse — a national government healthcare group purchasing organization — and will receive marketing rights to the organization’s 12,000 institutional members across 50 states.

• Unique direct-to-government business model: HealtheMed is somewhat unique among telemedicine companies in that it contracts directly with state Medicaid offices. This model removes the complexity and margin loss from middleman deals with insurance providers and other large healthcare players. It is true that reliance on government contracts is somewhat risky given how difficult it typically is to close those sales cycles. However, HealtheMed has already secured a contract with one state and has a nationwide partnership that will provide insider access to additional stakeholders. These are both encouraging factors in the company’s favor.

• Telemedicine solution at a critical medical moment: The COVID-19 pandemic has rapidly accelerated the adoption of telemedicine. Many patients are not leaving quarantine to visit clinics and hospitals for anything less than life-threatening circumstances. HealtheMed patients — low-income patients with disabilities or chronic illnesses — are particularly vulnerable to COVID and other contagious viruses like the flu. The HealtheMed telemedicine solution is ideally suited for the newfound urgency of their home-based care. 

HealtheMed has secured a unique relationship with a state Medicaid provider to pilot its telemedicine solution for low-income and disabled patients. This system is particularly well-suited for the COVID moment. It also has the potential to win widespread adoption as more and more states address both the immediate and long-term health needs of Medicaid patients. 

That being said, HealtheMed is a very early-stage company with little to prove in the way of operational success. The company has demonstrated some traction through their Minnesota Medicaid contract and partnership with a nationwide group purchasing organization. But it remains to be seen whether the company will actually be able to facilitate large-scale care with its somewhat complex hardware and software solution. The company is also vulnerable to competition from more technologically-advanced companies — whether startups or incumbents — that might easily overtake HealtheMed due to its lack of technical leadership on the founding team. 

If HealtheMed can succeed in its launch contract and continues to expand to win market share in other states, it has solid options for exit. Telemedicine is a booming industry with rabid interest from venture capitalists and other funders, particularly since COVID hit. This early-stage capitalization leads to major exits, whether by acquisition or IPO. Teladoc — a leader in the space that itself went public — acquired a competitor earlier this year for $600 million. Amwell, another virtual care provider, may be the next valuable telemedicine IPO.

While HealtheMed is a very young company, it has already secured a potentially lucrative contract with the state of Minnesota. It also has the potential to line up additional partnerships quickly after proving operational capacity later this year. The company’s business model is unique among telemedicine startups and is all the more attractive during a global pandemic. Therefore, HealtheMed is a Deal to Watch.