The current moment of health innovation and investment spurred by the COVID-19 crisis seems to be accelerating, if not driving, the consolidation of the digital health space. While Teladoc and Livongo loom as the most striking recent example, Omada’s purchase of Physera in May was also bolstered by the pandemic and its follow-on effects, CEO Sean Duffy told MobiHealthNews in a recent interview.

The COVID-19 moment

“Boy, it made the case clear that this needed to happen,” he said. “I mean, look at in-person physical therapy. It’s really struggling, because patients are more nervous than they used to be about going in and getting in-person treatment. So the value case became stronger than ever. I think care is being pushed into the cloud at a rate that’s stronger than ever before in the history of the U.S. healthcare system.”

For Physera, the effect of the crisis was a flurry of interest in every part of the business, said CEO Dan Rubinstein.

“When COVID hit, we saw a number of things happen,” he said. “First of all, we started getting a lot of inbound inquiries from health plans and employers who all of a sudden had a remote workforce of people who didn’t want to come into clinic, and they needed treatments. So we saw huge customer inbound interest. We saw a huge spike in patient interest, so suddenly people who couldn’t go to the clinic came to us in much higher numbers. And of course on the provider side, a number of clinics reduced their hours, so there were a lot of PTs wanting to work for us as well. So COVID was an amplifier for our business among all major constituents.”

That COVID-19 multiplier hasn’t been lost on investors either, which enabled Omada to do a round of funding with Perceptive around the same time as the acquisition.

“In this moment of COVID, I’ve probably gotten more investor interest than ever, just because people are trying to find ways to invest in the next generation of healthcare,” Duffy said. “We felt that we could have gone with many options as partners there, but we really liked the Perceptive folks.”

A long history

All that said, Omada and Physera’s relationship is much older than the pandemic, and the deal might well have happened anyway. In fact, Rubinstein said, his relationship with Duffy started not too long after his company launched.

“When we were starting Physera we didn’t know what we wanted to do. We just knew we wanted to apply data and technology to solve healthcare problems,” he said. “And we surveyed the market, and we listed all the big products in the market. And diabetes was there, but there were really big companies like Omada going after it, and so we decided that it was too crowded. We’re not going to do diabetes. But we should go talk to the CEO of that company so he can help mentor us.”

Perhaps that mentorship link is responsible for the compatibility of the two companies’ DNA. Duffy told MobiHealthNews that Omada approached Physera after seeing a persistent customer demand for a musculoskeletal offering.

“Both the product design and philosophy were uncannily aligned in that our belief is that you’ve got to have qualified, incredible care professionals that use their expertise in concert with the best of design or technology, and that’s Physera through and through. So it felt like a perfect product and vision match.”

Both companies share two high priorities: evidence-backed technology and a hybrid approach of high touch and high tech.

The latter point is especially personal to Rubinstein, who shared the story of his own father’s experience with musculoskeletal care.

“My father was complaining about lower back pain for a long time,” he said. “And it went misdiagnosed for an enormous number of months and finally he was sent to get some X-Rays and it turned out that what he thought was sciatica turned out to be stage 4 lung cancer that had metastasized to his bones. So I can’t imagine, if he had just been given an app and told to go do some exercises and put on some sensors … There’s a disconnect there. I think it’s critically important to have a musculoskeletal expert give you a diagnosis.”

What’s next?

Now that the two companies have merged, they are taking their time to integrate, Duffy said.

“We’re on a path to make sure there’s not a compromise between doing a great job in each care area and breadth,” he said. “Over time we’re going to integrate the companies, but preserving the capabilities of each is really important.”

For the moment the companies are operating more or less independently, but providing bundled sales options for customers interested in the whole range of care offerings. But, Rubinstein said, there are a lot of synergies to explore as time goes on.

“Being within the Omada family will give us some very interesting opportunities to treat across disease categories,” he said. “I think a lot of conditions can get into a vicious cycle and a family of products can help you break out of that cycle at any point, whether it’s weight, or mental health, or musculoskeletal pain. They all sort of start feeding off one another, so having the broad portfolio of products that Omada offers is very exciting, and also having the resources and the experience.”

What about the public markets? Is Omada considering getting in on the current wave of health tech IPOs? Duffy declined to say either way, but said the company is keeping its options open as always.

“The plan of record for Omada has always been, and I always tell entrepreneurs to do this, is build the sort of business where, if you want, it can persist as an independent entity. But make sure to focus on your customers and your growth first,” he said. “The folks that led our most recent rounds are very experienced in growth and with companies that are considering options like that.”