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A Tale of Two Equities: Private and Health

Analysis  |  By Laura Beerman  
   May 26, 2022

Just how much private money is invested in the social determinants of health (SDOH) and will it help or hurt outcomes?

To paraphrase the holiday favorite It's a Wonderful Life: Every time a healthcare bell rings, a cottage industry gets its wings.

The bell that's ringing, loudly, is health equity. The companies that have emerged improve outcomes through data, platforms, and analytics form the cottage industry. Many of these companies are funded by venture capital, traditional and corporate. And because they are, it remains to be seen which of the equities will be prioritized—private or health—and if new disparities will be created as a byproduct.

Growth of SDOH companies: 1985 to present

"The combination of increased SDOH funding with inefficient mechanisms to meet patients' SDOH needs has led to the emergence of the for-profit SDOH industry." This from an October 2021 Population Health Management analysis of SDOH companies from 1985 to July 2021. During that time, 58 companies have received $2.4 billion in private equity (PE) funding and have been valued at more than $18.5 billion. Highlights include:

  • Most SDOH companies (nearly 66%) were founded after 2000 but before 2010.
  • Between 2015 and July 2021, 19 companies have been founded.
  • Between 2017 and July 2021, nearly half of SDOH companies (46.6%) were focused on the home care/general caregiving sector.
  • Additional subsectors are community care coordination (20.7%), food insecurity and nutrition (10.3%), nonemergency medical transportation (10.3%), and value-based provider (8.6%).
  • More than 73% of SDOH companies during this time period have secured more than or equal to $100 million in funding. Another 88% have been valued at $1 billion or more.

Learning from value-based care

Healthcare has been here before.

Inc. once called the Affordable Care Act "the gazillion-dollar startup machine" whose emphasis on value-based care (VBC) had already spawned $10 billion in funding for 500 new companies by 2016. As Bob Kocher—a physician, venture capitalist, and leading healthcare policy advisor during the Obama administra­tion—said at the time: "Anytime you take a sector and apply a whole bunch of regulatory changes and economic incentives to it, it creates enormous opportuni­ties for new entrants to come and take advantage."

It still does and SDOH is the new vehicle. But not all SDOH investments, or motives, are created equal. To its analysis, Population Health Management adds:

"It is possible these companies structure their focus to the SDOH interventions most supported by new Medicare and Medicaid regulations. The most saturated subsector, home care and general caregiving, is responsible for nearly half (27, or 46.6%) of companies in the industry. Despite research heavily supporting outcomes from investments and interventions in food insecurity and care coordination, these sectors represent smaller components of the industry."

The study's authors specifically question "the downstream effects they [SDOH startups] will have on community-based organizations also working to improve SDOH."

Investment on a downturn

The PE bull market has now turned bear.

Citing CB Insights, HealthLeaders recently reported that Q1 2022 PE investment decreased quarter over quarter in two SDOH-associated areas: a 60% decline in mental health tech funding and a 32% decline in telehealth funding.

In a May 2021 letter that can only be described as scary, early-stage accelerator and investment leader Y Combinator advised companies to "plan for the worst." The letter's post-script adds: "If for whatever reason you don't think this message applies to your company or you are going to need someone to tell you this in person to believe it… please reassess your beliefs on a monthly basis to make sure you don't drive your company off a cliff."

Balancing need, utilization, and investment

While investments were down, other PE barometers were up. Funding for the Q1 2022 telehealth market was still $3.2 billion-funded and startup valuations climbed 350%.

While the positive role of PE and its long-term SDOH investment may be in question, the downturn clearly comes at a bad time as the need for more telehealth and mental well-being services remains high.

In its 2022 Environmental Scan, the American Hospital Association (AHA) reports that telehealth utilization is still 38 times higher than pre-pandemic levels. The AHA further reports that 40% of consumers and 57% of physicians want to continue using virtual care. FAIR Health adds that mental health continues to generate the highest percentage of telehealth claims at 64.2%.

Stakeholders have decisions to make

Payers and other traditional healthcare stakeholders—including those with PE investment arms—must navigate these contradictions. Two examples are integrated provider-payer giant Kaiser Permanente and not-for-profit, mid-Atlantic leaders CareFirst BlueCross Blue Shield.

Per Population Health Management, Kaiser has "a large databases of SDOH tools tailored to specific domains, as well as an evaluation of each." This is rare in an industry still searching for SDOH standards.

CareFirst has announced that it is expanding its investment in SDOH data across all business functions for an "enterprise-wide social risk intelligence strategy" with its existing partners, Socially Determined. What began as a pilot focused on the root causes of diabetes has expanded to employer, philanthropic, and care management decisions and investments.

Both Kaiser and CareFirst have distinct venture arms—Kaiser Permanente Ventures and Healthworx—although the above-referenced developments are not specifically tied to those companies.

The broader SDOH business case

An August 2021 HealthLeaders feature posed the question: When private equity firms invest in healthcare, who benefits? The article noted the importance of "build[ing] economic models that do not simply lead to near-term profits and cause damage to the healthcare ecosystem."

While the quote referred to PE physician practice investment, it applies equally to past decisions on VBC and evolving ones for SDOH. Improving health equity will require multiple business and ROI cases and companies that are in it for the long haul. That ROI ranges from lowering total cost of care and adverse utilization/readmissions, to improving care plan adherence for a specific condition/population, to increasing the number of healthy days that individual consumers experience.

Massive valuations do not equate to long-term success. And when the objective left in the lurch is health equity, it can be a lose-lose proposition.

Laura Beerman is a contributing writer for HealthLeaders.


More than half of SDOH companies have a valuation of $50 million or more, with five companies valued as high as $1 billion.

These numbers reflect that health equity is mirroring value-based care developments: as industry challenges grow, so do private-market solutions.

Improving health equity will require multiple business cases and companies that are in it for the long haul so that people in need are not left in the lurch.

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