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Health Catalyst was founded in 2008 to bring data analytic and warehousing tools to healthcare. The company’s product keeps track of over 100M patient records to help networks increase clinical, financial, and operational efficiencies. When a patient visits their doctor or interacts with any part of the healthcare system, their records are updated with any new medical tests, symptoms, or new prescriptions. However, hospitals and networks had EHRs to structure that information but did not have sufficiently powerful tools to analyze the data.
So Health Catalyst built a series of tools that have supported a business with over $100M in ARR and still a long way to. In particular, the company helps hospitals:
Store patient data on HC’s warehouse product. The idea here is to reduce medical errors and coding problems and make it easier to track events in the hospital. But the analytics tool was the beachhead to get patient data.
Apply analytics to that data given back to their customers through a dashboard. Examples are more accurately measuring a patient’s risk for disease recurrence or recommending things like drug use or inducing early labor during birth.
Services to support hospital interpret and act upon the analysis
The first slide of their latest corporate presentation highlights the 3 key parts of Health Catalyst’s product suite.
The next slide goes into the company’s mission. The slide doesn’t fully capture Health Catalyst’s customer-focused culture. The CEO starts off his meetings highlighting customer and employee satisfaction, not sales or something financial.
Since the company is public now, Health Catalyst uses a slide to make an argument on why its an attractive investment: (1) Huge addressable market, (2) Hundreds of data sources now, and (3) Scalable business model.
Then the company goes into the impact of COVID-19 on the business - usage and adoption is up with a short-term revenue slowdown.
Health Catalyst describes the problems in the US healthcare system. Over $1T in overspend.
Health Catalyst has gotten almost every hospital network of interest on their platform.
Putting them in a leadership position for healthcare analytics.
The product value proposition is a fully-integrated analytics tool from patient care to reimbursement and staffing. Pretty impressive.
This comprehensive product creates moats on the data and services side.
This slide is pretty complicated and goes into depth on the company’s product.
Which creates differentiation from standalone products in each niche.
This has led to continual improvements in customer success as measured by “documented improvements.”
The next slide serves as a case study on the product’s impact. Allina Health, a network in the Great Lakes area, used Health Catalyst to help with early intervention for sepsis patients and recovery for patients after colorectal surgery.
UPMC is another case study to map out the true costs for their patient care.
Memorial Hospital was very motivated to decrease length-of-stay at its hospital due to penalties and decreasing reimbursement rates.
This type of work has made customers pretty happy with Health Catalyst.
The company is led by a very experienced team. Daniel Burton (CEO) is the brother of the company’s co-founder and was an early investor until coming on board.
Interestingly, the company lays out its principles. This is really good. More companies ought to do this.
A similar slide on Health Catalyst’s culture.
The company’s growth strategy is focused on expanding the number of new applications and markets.
Their business model is highly focused on recurring revenue.
That is enabled by the product’s high customer engagement. Durable ARR is feasible if the product is essential for the customer’s daily routine.
Another part of a SaaS business model is the high gross margin.
The following slide describes the company’s long-term financial goal of getting to profitability.
In appendix, the company describes their customer strategy of providing two tiers of products.
This slide again shows the company’s Integrated product.
With sepsis as a use case study.
With an adoption model focused on aggregating patient data to help with population-level tools and direct-to-patient recommendations.
A slide on financials - profit.
Another financials slide on EBITDA.
Health Catalyst’s presentation does a good job at showing its market leadership position and culture. However, the product is pretty complex and I’m not sure there is a better way to simplify it. The company has done a brilliant job at convincing hospitals to provide patient data for analysis - this is part of a large push toward value-based care and great sales from Health Catalyst. Overtime, the company is alluding to expanding to applications to directly help patients and do things outside of hospital networks.
Follow up questions for the team:
What new entrants are around that threaten Health Catalyst’s 3 part product suite: data, analytic, and services? Any M&A opportunities here?
Are there new ways Health Catalyst could deliver recommendations to physicians, nurses, and patients?
How does the services business and its cost footprint scale with the analytics/software side?