Executive Exclusive: Healthworx's Ricardo Johnson on Venture Investment and Tech Decision-Making

"We honestly believe that solutions in healthcare cannot be proprietary ... The best ideas won't come from any one company," says the head of CareFirst BlueCross BlueShield's venture affiliate.

This week, HealthLeaders speaks with Ricardo Johnson, head of Healthworx—the innovation and venture capital (VC) arm of CareFirst BlueCross BlueShield. Johnson details the plan's approach to venture decisions and how the best investments are those that increase equity and affordability while benefiting the entire healthcare delivery system.

HealthLeaders: What is driving traditional stakeholders to make VC investments?

Ricardo Johnson: A few things, including for Healthworx and CareFirst specifically. The industry is tackling a broad base of problems and must be able to test solutions that meet critical need to reduce risk. To be a future-focused company and payer, we must identify how to get our hands on more levers of the healthcare journey. The levers that any one enterprise has are not enough to affect real change. Other stakeholders are feeling the same way and are investing in ways that are complementary to their business models.

HL: What is needed for these investments to succeed?

Johnson: You need a dedicated focus; you have to be left alone to do the work. Another aspect is making sure you are seeding fertile ground so that the opportunities you invest in are responsive to innovation and can scale. Even as you begin to scale, some investments might still fail so then, how do you pivot? It takes nimbleness within an organization that you have to build from culture and process.

All of this is what we're trying to do. Healthworx is still in its beginning phases. On the tech side, we believe we offer an incredible amount of data and experience, and we look for companies where we can add value.

HL: How does Healthworx decide what to invest in and is there such thing as a non-tech investment?

Johnson: It's hard to find a company that doesn't have a tech component. Most investments and partnerships have underlying platforms that are a core piece of their value proposition.

How we decide what to invest in depends on the solution presented and our members' needs. At CareFirst, affordability is our North Star. We believe nothing threatens equity, access, and quality as much as cost of care.

HL: What is a specific example of this focus?

Johnson: Last year, we put a lot of weight on how to get more care out of hospitals, giving access to a quality of care that is more affordable because it's not burdened by brick-and-mortar fixed costs.

We have levers to affect this and CloseKnit was one of the results. [Note: CloseKnit is CareFirst's 24/7 "virtual-first primary care practice" with services ranging from online support chats and prescription refill access to urgent and chronic care with pathways to in-person and specialty services.]

We knew we had to have our hands on the lever of primary care access. Even here, services you don’t typically think of as tech driven, like home health staffing, benefit from platforms and analytics.

HL: How does Healthworx decide what to invest in?

Johnson: We look at three things. Again, number one is affordability. Here we search for ways that tech can deliver, while bringing efficiency, value, and needed quality.

Number two, we look at the largest-cost areas; and number three, are we placing bets there and how are they working? We have many levers that affect affordability and [we] also want to test levers we don't currently have.

HL: What areas does Healthworx invest in?

Johnson: Healthworx invests through both VC and partnerships. For our VC investments, we usually invest in Series A, take an equity position, and have shared subject matter experts with CareFirst. Through 1501 Health [a partnership with LifeBridge Health], we provide an incubator for early-stage companies, providing some seed and pre-seed capital but investing more intellectual capital and resources to help them build their business models.

When we decide to partner, we do so with companies that are combining unique resources and assets to create their products, businesses, or joint ventures. This includes Cityblock and Union Blue, the latter being an example of a larger-scale partnership.

We honestly believe that solutions in healthcare cannot be proprietary so a big part of how we work is through partnership. The best ideas won't come from any one company.

[Note: Cityblock is a provider-payer partnership that delivers integrated care and non-clinical supports to communities in need. Union Blue is a labor-union-focused insurance product jointly offered by payers CareFirst and Highmark. The Healthworx portfolio also includes numerous tech-based investments to support maternal and child health, medication adherence, mental health and multiple B2B companies that support data and workflow integration. The Healthworx podcast features more companies including Fabric Health, which uses the laundromat to connect with people about their healthcare and other needs.]

HL: What does the decision-making and assessment cycle look like?

Johnson: We start with an if-then process of whether to invest, partner, or build. And we created Healthworx to allow us to build with any stage of company. With investing, we look at high-potential companies that are, say, 40% there with the problem they're trying to solve and that we believe we can get them to 100% using our team and assets.

We don't want to just build things that CareFirst benefits from. We take the approach of looking at both member needs and market needs and ask, where are the intersections? This helps identify opportunities that are sustainable and help make things happen through a series of changes. Neither payers nor private equity firms alone can achieve that.

Editor's note: This story was updated to correct Ricardo Johnson's title. Updated on March 10, 2022.