Raj Singh’s Accolade wants to cut waste in U.S. health care costs
Accolade’s stock began trading on the Nasdaq stock exchange in New York today. Rajeev Singh, chief executive, Shantanu Nundy, chief medical officer, and Harish Naidu, chief technology officer, are among the senior executives of the fast-growing U.S. health care services provider.
America “spends the most per capita on healthcare by a wide margin, with the best trained clinicians and state-of-the-art facilities, yet our outcomes lag,” says Singh in a letter included in Accolade’s public offering document.
$1.4 billion market value despite losses
In the fiscal year ended February 2020, Accolade had revenues of $133 million, up from $77 million in fiscal 2018. Following its stock market listing led by Goldman Sachs and Morgan Stanley, the stock jumped to $30, up from the offering price of $22. Accolade, which is based near Philadelphia and with over 1,000 employees, has a market value of about $1.4 billion.
At fiscal year-end 2020, Accolade had accumulated $322 million in losses. Apparently, the losses were ignored by those buying its stock because they view it as way to invest in the huge business opportunity of reducing medical costs.
Employers, both private and public, bear the bulk of the costs for providing healthcare to about 185 million Americans. About 80% of employers with more than 500 employees are self-insured, funding and managing the medical insurance costs for their employees.
Over $800 billion in wasted medical expenses
In 2019, large employers are estimated to have spent an average $10,000 per employee for medical insurance coverage. This cost keeps rising by about 6% a year. Employers are very eager to contain their ballooning medical costs.
Employers also bear indirect costs in the form of absenteeism, decreased productivity, and diminished morale. Currently these issues are intensified since many employees are forced to work remotely due to the threat of COVID-19.
It is widely acknowledged that about a quarter of the annual spending on healthcare in the U.S., an estimated total of $760 billion to $935 billion, is wasted “for reasons ranging from failures in care delivery and care coordination to fraud, overtreatment, and mispricing,” says Singh. Healthcare decisions, he adds, are too often made with a lack of information about medical options and available benefits, little expert guidance, and insufficient understanding of the future repercussions on finances, family, and the possible healthcare outcomes.
Using health assistants to cut costs
Accolade helps employees of large businesses, and their family members, navigate the “siloed, bizarrely complex, and opaque,” health care system. It does this by providing a single platform for their health, healthcare, and related benefits needs. The platform, which uses cloud-based intelligent technology, offers phone, mobile and online guidance from nurses, physicians and behavioral health specialists, coordinated by a health assistant.
The assistants help employees choose the most appropriate health plan based on their personal needs; understand the extent of their benefits; decode and manage their medical bills; find high-quality providers; make sense of and stay coordinated through prescribed care plans; and address any problems that may arise along this continuum.
In a 2018 study by insurance company Aon, of employers with more than 10,000 employees and their family members, Accolade's service was shown to reduce medical claims costs by $782 per employee per year, compared to similar employer groups not using Accolade. For an employer with more than 100,000 members, Accolade reduced claim costs by $527 per employee per year, according to the Aon study.
Accolade currently assists 1.7 employees and their family members from 60 customers. Clients include media company Comcast and the U.S. Defense Health Agency. Employers pay it a contractually recurring per member-per month fee, estimated to be about $100 per year. .
Launched by Michael Cline in 2007
Accolade was co-founded in 2007 by Michael Cline and Tom Spann. In 1999, Cline founded Accretive, a firm that launches companies. Cline and his team come up with an idea, conduct research to test it out, launch the business and then find a team of senior managers to run it. Earlier Cline was a partner at New York based General Atlantic, which invests about $34 billion around the world, including in India. He earned his B.S. from Cornell and an MBA from Harvard.
Companies launched by Cline include Fandango, an online vendor of movie theater tickets, which was sold to cable services provider Comcast in 2011. In 2015, Cline approached Singh and his colleagues, Mike Hilton and Rob Cavanaugh, to take over Accolade’s management. Cline and Accretive’s stake in Accolade are now worth about $300 million.
Singh co-founded Concur and sold it for $8.3 billion
Prior to joining Accolade, Singh spent 22 years working at Concur, which he co-founded with Hilton and Cavanaugh. As president of Concur, Singh helped grow the provider of cloud-based travel and expense management software. It competed successfully against much larger rivals like Microsoft and Oracle. In 2014, Concur was acquired by German software giant SAP for $8.3 billion. At that time, Concur served more than 25,000 customers and 25 million consumers in over 150 countries.
Singh says he learned a valuable lesson from his experience with Concur: “to truly disrupt an industry, you must be willing to identify and embrace contrarian principles that others may lack the courage to follow.”
Prior to Concur, Singh worked at Ford Motor and General Motors. He serves on the board of directors of Avalara Inc., a tax compliance software company. He earned a B.S. from Western Michigan University. Singh has sent out nearly 3,000 tweets and has over 5,100 followers on the social media platform.
Shantanu Nundy Accolade’s chief medical officer
Shantanu Nundy, Accolade’s chief medical officer, earlier served as a senior technology advisor in the World Bank Group’s Health, Nutrition and Population Global Practice. He was a director of the Human Diagnosis Project, a healthcare Artificial Intelligence startup and Managing Director for Clinical Innovation at Evolent Health, a population health and predictive analytics company, where he improved hospital and chronic disease outcomes for more than two million patients in the U.S.
Nundy co-invented SMS-DMCare, an automated text messaging software for individuals with diabetes, adopted by the World Health Organization. He is the author of Stay Healthy At Every Age, a Wall Street Journal top 5 book in health and wellness of 2010. He practices primary care at Mary’s Center in Washington, D.C. He earned his BS from MIT, MD from Johns Hopkins and MBA from the University of Chicago.
Harish Naidu, Accolade’s chief technology officer, joined the company in 2016. He was an executive vice president at GlobalScholar and also worked at Microsoft for 22 years. He earned his BS from the Guindy College of Engineering, Chennai and a MS in electrical and computer engineering from the University at Buffalo.
Following the public offering, Singh’s stock ownership in Accolade is worth about $75 million. In fiscal year 2020, he received $3.2 million in salary. If he can grow the company and its profitability, and hence boost the stock price, he could be one more Indian tech billionaire in America. But he faces major challenges which have derailed numerous others, including successful Indian entrepreneurs. After all, as Singh acknowledges, “Let's not sugarcoat…(the fact that)…heath care in the U.S. is broken.”
