Par8o, from Sermo Founders, Aims to be Patient-Physician Matchmakers

1/10/12Follow @xconomy

[Updated 1/11/12 5:15 pm. See below.] “Sermo has been my baby, my blood and tears,” its former CEO Daniel Palestrant told me in a phone call last week.

So it was pretty shocking last week when news surfaced that the founder of the Cambridge, MA-based online community for doctors was moving onto a new Web startup, along with Sermo chief medical officer Adam Sharp. It wasn’t always going to be that way, Palestrant said, but more on that later.

Par8o, the new startup, began as a research project within Sermo. Drawing on the insights of its large online physician community (more than 130,000 people strong now), Sermo had formed the opinion a few years ago that the healthcare bill would not achieve its goals of improving patient care and lowering costs, Palestrant said. Among other things, the community thought the bill (signed into law March 2010) needed greater reform to medical malpractice policy and ways to improve patient engagement.

The research team at Sermo hypothesized that to achieve these goals, what’s needed is “the introduction of Pareto dynamics,” where efficiency is created through better matching supply and demand, said Palestrant. The idea comes from the Italian economist Vilfredo Pareto.

So what exactly does that look like and how can a new health Web startup help? Palestrant explains that in Par8o’s case, it’s about improving the patient referral process. Referrals, he said, are “a critical moment in a patient’s healthcare journey, either a change in diagnosis or an escalation in care.”

Often, this means the general practitioner sees a new health problem in a patient and needs to bring in a specialist to really tackle it, said Palestrant. That should work fine, right? Not exactly, according to Palestrant. Of the tens of millions of patient referrals per year, somewhere between 20 percent and 40 percent never actually result in another appointment or handoff to a new doctor. “The patient never goes to the critical step in treatment process and falls through the cracks,” he said.

That’s where Par8o comes in. The company hopes to use software to provide a “universal, very simple mechanism for healthcare providers to refer patients to one another,” Palestrant said.

“Not only can we make sure that the referral occurs, but doctors in all parties involved can track and manage that process,” he continued. “They can make sure the appointment actually occurred. We’re then able to allow the healthcare system to start introducing the Pareto efficiencies. In this case the specific challenge is what healthcare provider best suited to address this [patient's problem].”

So for example, if a doctor has a young, Spanish-speaking, female patient newly diagnosed with diabetes, he can refer her to a physician who frequently treats patients matching that demographic and health profile. In theory, that doctor would be much better suited to treating her than one used to treating diabetes in English-speaking, senior citizen populations, said Palestrant.

Palestrant and the others at Par8o see patient referrals as an area of healthcare that’s key to lowering costs and in much need of improvement. “It’s far more nuanced than writing a prescription, and much like matchmaking and dating,” Palestrant said. He also said that the company has thought of ways to work within the current insurance system, which often requires patients to see physicians within a specific network.

Palestrant and the rest of the par8o team originally began working on the concept as part of Sermo. They researched the medical referrals landscape throughout 2010 and started developing the software in early 2011. But later last year the company’s board recognized that ultimately Par8o’s business model and target customers would differ from Sermo’s, and approached Palestrant about the spinning the project off as a new company, he said.

Palestrant didn’t go into too many specifics on the Par8o business model, other than to say that different parties interested in the referral outcome (doctors, insurance companies, and hospitals, for example) could pay to “participate in the process.” Sermo meanwhile, targets drug makers, medical device companies, clinical research organizations, and other life sciences firms as its paying customers.

He also kept mum on the exact financial arrangement between Sermo and Par8o, saying only that, “we came up with a structure that made sense to everyone.”

What he did say is that all of the Sermo people who were working on the Par8o project within the company walls have joined the new spinoff, and that Par8o’s headcount runs between six and 14 people, depending on how you count contractors.

Par8o has been heavily testing and validating its software, and we can expect to see it released in the next few months, said Palestrant. The company is also assessing its funding options among a list of potential suitors, and we can expect to hear more on that in the future, he said.

Meanwhile, what’s happening with the leadership at Sermo now that its CEO and chief medical officer are off on their new adventure? Sermo vice president of marketing Jon Michaeli was also pretty quiet on the specifics, but said that Sermo will announce a new program sometime this week “that will soften the blow and really give us the opportunity to spread the leadership on the medical side amongst multiple constituents.” He wouldn’t say more on what’s happening with the open CEO slot, though he did indicate that Rich Westelman, Sermo’s current COO, is running the day-to-day operations of the company with the help of the executive team. [Paragraph updated to add detail about COO Rich Westelman's current role].

In the meantime, we’ll have to keep our eyes out on Par8o and how its patient-doctor matchmaking plays a part in the healthcare system.

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