Call9

What did it do?

Call9 was a telemedicine company that connected elderly patients with remote emergency physicians through trained medical staff it placed in nursing homes and video links over iPads. The aim was to reduce unnecessary emergency department visits by nursing home residents, who are among the most frequent callers to 911.

Why did it shut down?

A graduate of Y Combinator's summer 2015 batch, the company raised a total of $34 million from investors such as Index Ventures, Joe Lonsdale and Anne Wojcicki. The service formed partnerships in New York with care providers such as Centers Health Care and ArchCare, and expanded to the Albany area in April 2019. But the company's revenue depended on value-based contracts that pay according to patient outcomes, and the US healthcare system was moving in that direction from fee-for-service very slowly. CEO Timothy Peck said the cash flow of an early-stage value-based company could not keep pace with that of one paid fee-for-service. Unable to find new funding, Call9 ceased operations in June 2019 and laid off around 100 employees.

The story

While teaching at Harvard Medical School, emergency physician Timothy Peck turned his attention to a familiar picture: among the most frequent 911 callers in the US were elderly people living in nursing homes, and some of these patients' trips to the emergency department were unnecessary. In 2015 Peck founded Call9 with Celina Tenev, a postdoctoral researcher in radiology at Stanford, and joined Y Combinator.

The model combined technology with people on the ground. Call9 placed trained staff in nursing homes, and when needed this team reached remote emergency physicians over a video link on an iPad. The company was run from Brooklyn in New York, partnered with care chains in the area and in April 2019 also expanded to the Albany area. According to MedCity News, by the time it closed Call9 had carried out more than 142,000 telemedicine consultations and treated over 11,000 patients. The company raised a total of $34 million from backers including Index Ventures, Joe Lonsdale, Anne Wojcicki and Ashton Kutcher.

The problem lay on the payment side. Call9's business model rested on value-based contracts that envisaged it taking a share of the savings achieved by reducing hospital visits. In the US, however, most healthcare was still run on a fee-for-service model that pays for every procedure performed. Peck explained that value-based contracts were better for patients, but in the short term fee-for-service brought in more revenue, and start-ups felt that pressure.

Unable to find new investment, the company decided to shut down in June 2019 and laid off around 100 employees. The Call9 Medical unit, which employed the physicians, continued operating for a while longer. Peck later founded a new start-up building technology for nursing homes.

Lessons for founders

• If you tie your revenue to a payment model that has not yet spread through the healthcare system, plan a second revenue stream from the outset to carry the company until that model matures.
• A healthcare service that employs staff in the field does not have the cost structure of a software company; do not calculate its cash needs using software metrics.
• Under outcome-based contracts it takes a long time for savings to turn into payments; reflect that delay clearly in investor expectations and in your cash plan.

Sources

1. Venture-backed telemedicine startup Call9 is shutting down (TechCrunch, 2019-07-01)
2. Once Backed with $34M, Skilled Nursing Telehealth Provider Call9 to Shut Down (Skilled Nursing News, 2019-06-25)
3. New York telemedicine startup Call9 winding down operations (MedCity News, 2019-06-25)

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