WellTok Raises $18.7M Series B to Gamify Healthcare, Gets New CEO

4/10/13Follow @MichaelXBD

If your health insurance company has you playing games, you’re probably not happy. If you talk about insurance or healthcare to your friends on a social network, the odds are you’re complaining.

But a growing number of companies are trying to change that by improving consumers’ experiences and engaging them—in part through gaming and social networking—in a way that keeps them happier and healthier, all while improving the bottom line for businesses and insurance companies.

WellTok, a health IT startup, thinks it can do that, and investors agree. The Denver-based company announced today it has raised an $18.7 million Series B round, bringing the total money raised by the company to almost $26 million.

WellTok also announced that Jeff Margolis, founder and former CEO of TriZetto, is now its CEO. He previously had been the startup’s executive chairman.

Margolis believes the U.S. healthcare system has many problems, and he has even published a book, titled The Healthcare Cure, about them. He believes one of the biggest problems is getting consumers to take better care of themselves.

“The promise of engaging the consumer in their own healthcare is the missing pillar in healthcare today, and it’s not being addressed,” Margolis said.

WellTok is developing CafeWell, a platform-as-a-service intended to fix that, by bringing together consumer engagement and social networking tools. Users can set goals or enter competitions (think “quit smoking” or “lose more weight than colleagues”), get support from their social network, and consult with coaches to develop strategies. If they stick with it and improve their health, they and their insurance companies could spend less money on treatment.

As a pilot project, WellTok worked with an insurer to create a program to encourage users to walk more. It found that using WellTok’s social network to invite users to participate and keep them informed about each other’s progress improved fitness and customer satisfaction. It estimated an annual return on investment of $584 per engaged member at a program cost of $120 per member.

Margolis acknowledges this idea isn’t new. Insurance companies already have invested a lot in making websites more user friendly, and exercise and weight-loss contests are pretty common at many businesses.

Margolis believes the number of wellness programs on offer can overwhelm consumers and such programs are rarely are customized to an individual’s needs. CafeWell will be a place where users can go to find the right program.

Many companies are trying to use similar engagement strategies to improve healthcare outcomes, but WellTok said its platform has been much more successful than competitors. WellTok claims customers spend an average of 50 minutes per month using the site, and that it has engagement rates 400 percent above the industry average.

WellTok’s release said 10 million people are enrolled in plans that use the pilot version of CafeWell, and that two of the five largest insurance companies are clients. It did not identify the companies.

Emergence Capital Partners, InterWest Partners, and New Enterprise Associates were the investors in the Series B round, according to a news release.

The money will support a company that has grown to between 35 and 40 employees.

“We’re using it to further develop the CafeWell platform, which I think already is the leading program in the industry,” Margolis said. Along with product development, WellTok will be building its client-support and sales teams and finding partners to provide programming it can offer users, he said.

WellTok believes it is addressing a market that could be in the neighborhood of $13 billion, Margolis said. Monetizing the data CafeWell users generate could double that.

“If that sounds like a big number, keep in mind the healthcare industry is a $2.7 trillion industry,” he said.

WellTok pitches CafeWell to insurers and employers as a way to lower medical costs and gain insight about how consumers are using the plan and what their medical needs are. WellTok said it keeps consumer information confidential, and only provides employers with aggregate data.

WellTok hopes to carve out a niche by working with health insurance plans, accountable care organizations, and other plan managers. Competitors seemed to be focused on selling to employers, but WellTok thinks its potential customers will be more lucrative and have the ability to add hundreds of thousands of consumers to its user base.

“The insurance companies are at the top of the food chain, in terms of how the dollars flow,” Margolis said.

Margolis has built a successful healthcare IT company before. He founded TriZetto and ran the company through its startup phase, IPO, and eventual sale in a $1.4 billion leveraged buyout. TriZetto invested in WellTok before Margolis left the company.

 

Michael Davidson is the editor of Xconomy Boulder/Denver. He covers startups, venture capital, clean tech, energy, aerospace, telecoms, and whatever else happens above 5,280 feet. Contact him at mdavidson@xconomy.com. Follow @MichaelXBD

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