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Circulation CEO Talks Sale to LogistiCare & Amazon’s Healthcare Play

Xconomy Boston — 

[Corrected 10/9/18, 10:09 am. See below.] The recent acquisition of Circulation, a software startup trying to make non-emergency medical transportation more efficient, could offer a glimpse of the next phase in the “consumerization” of healthcare—and, perhaps, another target market for Amazon.

Those were some of the takeaways from a conversation I had Friday with Robin Heffernan (pictured), co-founder and CEO of Boston-based Circulation.

First, the news: Her company agreed last month to be acquired by Atlanta-based LogistiCare, a 32-year-old competitor owned by The Providence Service Corporation (NASDAQ: PRSC), which invested in Circulation last year.

The acquisition price was $57.5 million, but LogistiCare will pay out around $44 million in cash upon the closing of the transaction, Heffernan says. The difference accounts for Providence’s existing ownership stake in Circulation, she says. The deal also stipulates that Heffernan and Circulation co-founder John Brownstein, the chief innovation officer of Boston Children’s Hospital, will each receive $1 million if they remain LogistiCare employees or consultants for three years after the deal closes. Circulation had raised $10.5 million from investors, including Flare Capital Partners, LabCorp, Humana, and Boston Children’s Hospital, which helped incubate the startup. [Updated to include total deal value.—Eds.]

The company will continue operating under the Circulation brand name, and its nearly 40 employees will remain with the company, Heffernan says. The plan is to expand Circulation’s team to about 100 people, she adds.

“It’s an opportunity to scale our model far faster than we could organically,” Heffernan says of the acquisition.

Circulation’s software coordinates rides for patients—many of whom are elderly, disabled, or low-income—via Uber, Lyft, non-emergency ambulances, and other transportation options. The software also handles billing, which can be complicated, especially if the patient receives care from multiple healthcare organizations. (Read this Xconomy profile for more details on how Circulation’s service works.)

The problem Circulation is trying to solve is this: the U.S. government spends about $3 billion annually subsidizing patient transportation, yet an estimated 3.6 million Americans miss medical appointments each year because of transportation issues, the company has said. That results in significant costs for the healthcare system, in part because it increases the odds that patients will miss a crucial check-up and end up being admitted to a hospital.

Circulation has claimed its service can result in fewer missed appointments, increased patient satisfaction with their transportation experience, and reduced ride costs. The cost savings mainly come from increased efficiency and the fact that rides through providers such as Uber are generally cheaper than taxis and other options, Heffernan has said.

LogistiCare manages about 65 million rides for more than 24 million Medicare and Medicaid patients each year. Circulation has a much smaller client base; it serves patients at about 3,000 healthcare facilities spanning 45 states. But it has a broader mix of customers than LogistiCare, including Medicare Advantage insurers, hospital networks, and independent health clinics, Heffernan says. “The two client bases are very complementary,” she adds.

Circulation has also begun expanding its services into home healthcare and delivering medical goods. Its software is being used to manage the transportation of nurses, social workers, and other healthcare workers making house calls. And on a smaller scale, the company has also tested delivery of prescription medications and durable medical equipment, Heffernan says.

She is positioning Circulation’s software platform as “an enabler of better care delivery.” “It’s not a transportation platform,” she says.

That highlights a broader trend that Circulation is contributing to: healthcare is moving outside the walls of hospitals and traditional clinics. Patients are using wearable devices from Apple (NASDAQ: AAPL), Fitbit (NYSE: FIT), Empatica, and others to more closely monitor their health and, in some cases, share that information with doctors via cloud-based software. Telemedicine companies such as American Well continue to reap huge amounts of venture capital. Meanwhile, retail pharmacies such as CVS Health (NYSE: CVS) are building more walk-in clinics; CVS also recently introduced a telemedicine service using Teladoc’s (NYSE: TDOC) technology.

The list of companies competing with Circulation and LogistiCare is growing. Other startups focused on non-emergency medical transportation include RoundTrip, Kaizen Health, and Acuity Link. Big corporations are jumping in, too: Ford (NYSE: F) launched a non-emergency medical transportation service in April.

In the future, Heffernan thinks Amazon (NASDAQ: AMZN) could get involved as well. It’s no secret Amazon has healthcare ambitions. One of the most visible signs was its June acquisition of New England-based online pharmacy startup PillPack, which could help open the door for the tech giant to sell prescription drugs.

Heffernan also points to Amazon’s increasing investments in its delivery infrastructure. The company recently ordered 20,000 Mercedes-Benz vans to help deliver packages to people’s homes. She thinks Amazon could decide to get into the business of moving people, too, whether it’s transporting patients or nurses, for example.

People might someday turn to Amazon when they’re feeling sick, Heffernan suggests, and the company’s software could help manage the whole process of accessing care and paying for it. That could mean more competition for her company, but she says she hopes Circulation would be able to form a partnership with Amazon.

It’s all just speculation at this point. But even if Amazon went that route, would consumers want to put the company at the center of their healthcare? Heffernan seems to think they might.

“What I’ve seen from Amazon is just this amazing expansion of trust from the consumer,” from buying books to buying almost anything from the tech giant, Heffernan says. “I don’t think it’s crazy to think about Amazon really disrupting how you get your healthcare.”