“We want to build an iconic healthcare company.”
This article was originally published in the Winter 2018 edition of Silicon Slopes Magazine. To sign up for the print version, subscribe to Utah Business Magazine and Silicon Slopes Magazine will be included with the purchase.
Wise business people always claim that starting a company with friends is a fool’s errand. Today, we examine evidence to the contrary.
Adam Green, Wylie van den Akker, and Chris Klomp grew up together in Boise, Idaho. Despite some momentary hiccups in the friendship — Green and Klomp both started rival lawn care businesses during their teens, battling for what Klomp admits to be meager profits — they all graduated from high school and roomed together at Brigham Young University in the late 1990’s and early 2000’s.
While in college, Patti Green — Adam’s mother and an emergency department social worker still living in Boise — approached Adam with a problem. Through her work, Patti had noticed remarkable inefficiencies in the way each emergency department operated on an island, without access to information on a patient’s visits to other hospitals. Her idea was to link emergency departments together with a software program allowing hospitals to exchange data and work together for the well-being of patients.
Using Patti’s idea, Adam and Wylie built a business plan around the idea of using software to solve this specific problem in complex patient utilization — Collective Medical was born. They entered into a business plan competition, won, and set out to sell the world their software.
“They took it out into the market ready to conquer the world of complex patient emergency department care coordination and….crickets — nobody was interested,” said Klomp.
As it turns out, selling software and explaining complex healthcare problems is not the easiest path for college students, especially when many in the industry didn’t yet recognize the problem. All three ended up taking jobs outside Collective Medical — Adam and Wylie writing software for other companies, Chris working at Bain & Company and later, Bain Capital.
In 2009, Chris began attending grad school at Stanford University. He had made a commitment to return and work at Bain Capital upon graduation, an agreement he would end up honoring as VP of North American Private Equity. Alongside Adam and Wylie, he had also co-founded a new company — BlackSwan Neuroscience, an artificial intelligence defense technology platform — that ended up winning Stanford’s startup competition that year. Just like that, the top VC firms in the world were coming after them with eyes flashing dollar signs.
“All of these VCs were now courting us, who didn’t even know we existed the day before,” said Klomp.
This was a crossroads moment for Collective Medical. Chris recounts a meeting with Wylie and Vinod Khosla of Khosla Ventures and trying to explain all the different areas they were dabbling: BlackSwan, Collective Medical, Bain Capital, grad school. Khosla was quick to give advice, in what Chris describes as the nicest manner possible. The general basis: focus.
Adam, Wylie, and Chris sat down to gameplan for the future. Together, they decided to put a pause on BlackSwan, with Wylie and then Adam transitioning full-time to Collective Medical in 2012. Chris continued to fulfill his obligations at Bain Capital, while receiving their blessing to work on Collective Medical during nights and weekends in all of his spare time. This is how things progressed for two years — Adam and Wylie concentrating full-time on Collective Medical’s platform, Chris in a part-time capacity helping with product strategy and go-to-market approach.
In 2014, Chris began to feel the entrepreneur’s itch again.
“I was wrestling existentially with what I wanted to do in my professional life,” said Klomp. “I loved my team and the work we were doing at Bain Capital — amazing people from whom I learned an extraordinary amount and with whom I felt truly grateful to get to work with — but I really wanted to try and build something, and with two of my best friends.”
Though things were going very well at Bain Capital, Chris and his wife Elise decided to take a drastic pay cut, move their family cross-country to Utah, and join Collective Medical full-time as CEO in the summer of 2014.
At the time, Collective Medical was being used by every hospital in Washington. Using Patti’s original idea of linked care across emergency health channels, Collective Medical had built a product that did exactly that — it allowed an exchange of data between emergency departments while facilitating collaboration.
“If you’ve got a patient that is bouncing around multiple emergency departments, these are not serial interactions, they are episodic,” said Klomp. “They come to an ED once, they don’t know who their doctor is, they don’t have a long-term relationship. So they get care, they leave, they go somewhere else and do the same thing. It’s an amazing care channel but they’re not talking to one another — that leads to fragmentation of care, which leads to medical uncertainty, which undermines the quality of care. That’s the value chain. We realized that you couldn’t divert a patient outside the emergency department up front (they’re going to go where they’re going to go), so you need to serialize the emergency department. Even though you have a bunch of different emergency departments and hospitals, you help them look and operate as if they’re all on one team. One emergency department has access to the patient’s history — wherever those visits may have occurred — and more importantly, helps ED physicians, nurses, care managers, case managers, and social workers collaborate on a common plan of care for the patient, so they can deliver a consistent set of interventions. This was a really novel concept.”
Using Collective Medical’s software, emergency departments in Washington were able to drastically reduce the amount of unnecessary visits. Efficiency, applied to healthcare — complex patients directed to the right places and providers best positioned to help coordinate their care.
“It was a great product but it was small and low-revenue,” said Klomp. “It was going to be hard to build a scalable company on it, we needed to be able to do more. Basically, we were a one-trick pony in one state and the question was, could we build more products and could we do it in more than one state?”
Transitioning from a product to a company is not easy. Adam, Wylie, and Chris began bouncing around ideas about what Collective Medical could become. They had already experienced success coordinating care across emergency departments. They also knew that encouraging data sharing and collaboration across every health channel — primary care facilities, health plan care managers, skilled nursing facilities, mental and behavioral health sites, etc. — is a universal need felt by everyone in healthcare. For many, it’s the holy grail.
This idea represented the entry point for Collective Medical as a full-fledged company, rather than a single product. The mission: eliminate avoidable risk and friction in healthcare delivery. The execution: a software platform that identifies and aligns incentives of payers, providers, and patients. In other words, help healthcare providers catch people before they fall through the cracks of a fragmented healthcare landscape.
“Can we get health plans and payers to share data with one another?” said Klomp. “They don’t always trust one another, but can we get them to share data and more importantly, collaborate with one another for the good of the patient? Even though they might have wildly different incentives, we want to get those incentives to align. Imagine a complex, opioid-seeking patient who is frequenting multiple emergency departments. What does the payer care about? They would like to not pay for all those visits unnecessarily. What does the provider care about? They would like to restore their patient to a healthy outcome, but they’re also really busy and would like to be focusing on the patients who need their care the most, not somebody who is showing up in pursuit of opioids. What does the patient want? In the short-term they want opioids, but what they actually want is to lead a healthy life. So everyone has very different needs and incentives, but they can all be aligned. You can restore the patient to good health by generating collaboration across different care settings, reducing duplicative testing and saving the providers time, while the health plan is spending less money as a result of this. Everybody is winning. We seek out these problems where we can align incentives across the care community and we use our software to encourage that collaboration.”
For the last three years, Collective Medical has grown. Their software platform now serves every national health plan in the country, hundreds of hospitals and health systems, thousands of providers across the healthcare continuum, with an operational footprint in 15 states. To this day, they’ve never lost a customer.
The employee base has also grown. Three friends can only take a company so far before requiring the help of others better than they — today, Collective Medical has roughly 75 employees, mostly stationed in Draper, and has reached an agreement with GOED (the Governor’s Office of Economic Development) to add nearly 600 jobs to Utah in the next eight years. Now, the process of hiring more people — the right people — begins.
“We’re assembling a group of incredibly talented individuals who believe in the mission that Patti, Adam, and Wylie first set about tackling years ago and who are passionately committed to achieving it,” said Klomp. “And we need even more of these types of folks, who show up every day and give a perfect effort, who demonstrate empathy for those whom we seek to serve as some of the most vulnerable members of our society, who aspire to excellence and remain unfazed in the face of otherwise daunting problems, who self-start but also embrace the same collaboration we seek to facilitate with our software, and who fundamentally strive to be better. In turn, we’re trying to provide an environment in which people thrive, feel truly happy and fulfilled, have loads of fun, and are surrounded by equally impressive, high-performing, and world-impacting individuals who collectively help one another grow and improve.
By design, Collective Medical was a self-funded company until November 2017. That changed with a $47.5 million Series A round led by Kleiner Perkins and a host of other investors — Bessemer Venture Partners, Maverick Ventures, Kaiser Permanente Ventures, Providence Ventures, Intermountain Innovation Fund, Peterson Ventures, and Epic Ventures.
“We don’t believe in charging until we deliver value for our customers,” said Klomp. “That means we internalize the cost of network building. And we believe in earning our keep along the way, we didn’t want to lose people money, and we wanted to make sure that what we were doing was working. We’re now building a network effects-enabled platform and as it turns out, that’s really expensive. We drive value when we get a bunch of people together to collaborate.”
In the same way that Facebook only offers value if it has a network of people, Collective Medical requires an expansive network to be successful, needing to have a thread tied into every care channel — unravel one thread and the value proposition greatly diminishes. Collective Medical has spent the last eight years building this network and a user-friendly software platform because they believe people (whether payers or providers) want to do the right thing. In Klomp’s words, “Our job is to make it easy for them to do the right thing.”
“We want to build an iconic healthcare company,” said Klomp. “We want to be a pillar organization of the healthcare community. Our name is not made up — this idea of collective effort, of the collective coming together to care for the individual, is key to who we are. We hope to build a company that enables the community to collectively care for its most vulnerable members and restore them to a life of happiness and health.”