The healthcare industry is racing toward a future in which both your general health and diseases will be managed, in part, through apps. From managing weight to monitoring blood glucose, these digital health solutions are increasingly seen as an important complement to drugs.
This shift has helped fuel the rise of startups such as Xealth, which makes a marketplace for digital health apps that doctors can use to order digital prescriptions for patients. Xealth today closed a $14 million round and added three new strategic investors. The company previously announced $11 million from the same Series A round and has raised $22.5 million to date.
Founded by two Seattle startup veterans and spun out of Providence Health & Services, Xealth uses patient data to recommend services from a variety of vendors for possible prescription. The company wants to make its marketplace available to hundreds of thousands of doctors and nurses, letting them issue digital prescriptions, such as apps and digital media, or anything else they want to prescribe beyond a traditional drug.
In the three months since Xealth announced the first phase of funding, the landscape for digital health prescriptions has changed dramatically. Pharmacy benefits manager Express Scripts announced plans in May to launch a digital health formulary in a bid to be the one-stop shop for both digital prescriptions and drugs. And two weeks ago, CVS Health debuted a new service to help its own clients manage digital health prescriptions.
To help fend them off, Xealth CEO Mike McSherry has sought funding from providers rather than going the more traditional venture capital route. The idea is to build close relationships with the very providers whose clinicians will use the platform to prescribe treatments.
McSherry said that “there’s a collective pushback” against the idea of pharmacy benefit managers owning digital health prescriptions.
The latest investors to back Xealth are healthcare providers Atrium Health, Cleveland Clinic and MemorialCare Innovation Fund, all of which are Xealth customers.
“By enabling our care teams to prescribe and monitor digital health solutions directly from within their clinical workflow, Xealth is the de facto standard for bridging the digital divide between our clinicians’ workflows and our patients’ everyday lives, enabling strategies that will improve health and dramatically better the consumer experience,” Dr. Rasu Shrestha, executive vice president and chief strategy officer for Atrium Health, said in a statement.
Xealth says its platform is also more than a marketplace: It also routes the flow of data from services back into the hospital’s electronic health record system. The company is currently tracking data from 40,000 sleep apnea patients who are using CPAP devices for Providence St. Joseph Health.
Xealth currently offers services from 30 digital health vendors. The startup makes money by licensing its platform to healthcare providers. Competitors include Redox and Sansoro Health, both of which integrate third-party applications into electronic health records systems.
Last year, Xealth debuted a service from Amazon for products that could be prescribed through its marketplace.
McSherry and Xealth co-founder Aaron Sheedy make for unlikely healthcare innovators. The pair have been working together for more than two decades, tracing their roots back to a shared office at Microsoft in the 90s. They worked together at Swype, the popular texting keyboard maker that raised investment from Nokia and Samsung and sold to Nuance Communications in 2011. McSherry was CEO at Swype and became Nuance’s VP of advertising and content and Sheedy its VP of mobile product. They took the plunge into healthcare after McSherry was invited by Providence CEO Rod Hochman to be an entrepreneur-in-residence at Providence Ventures in 2015.
Xealth reflects a broader surge in interest in health by people and companies from the tech industry. The frenzy around digital health has been stoked by significant entries into the space from the likes of Apple, Amazon, Google and Microsoft. Venture investment in digital health grew 42 percent last year to $8.1 billion, according to a report from Rock Health.
Other Xealth investors include McKesson Ventures, Novartis, Philips, ResMed, Threshold Ventures, Providence Ventures, Froedtert, the Medical College of Wisconsin Health Network, and the University of Pittsburgh Medical Center.