Rethinking Healthcare

Castlight offers health reform all buyers can believe in

Posting in Environment

If Castlight can help us put our thumbs on the health care price scale, they will be providing health reform everyone can believe in.

Regardless of your politics, everyone agreed during the health care debate that price transparency would be a very good thing to have.

You know what your car costs. You know what your PC cost. Why shouldn't you know what your medicine or operation will cost?

There are two reasons, one sound and one unsound.

The sound reason is that medical costs are often unexpected. A traffic accident, a heart attack -- when an emergency happens you can't shop around.

You are giving the ambulance driver or the surgeon what Seth Godin called "intravenous permission." They can sell you blood, adrenaline, or a tracheotomy, and you will pay. Your insurer may negotiate the price down afterward, but you're not in the market. You have no choice.

The unsound reason springs from the sound one. Insurers determine prices, in negotiation with hospitals and other providers. Most consumers never see a retail price. They pay a "co-pay," or some percentage of what the insurer is paying.

Example. My dearly beloved had a skin procedure recently. The bill arrived this week. It cost almost $2,500. She paid $40. Everything else was either paid for by insurance or negotiated away.

And that's the way it usually is. We think of the price as being $40, whatever is left to us after a public or private agency has intervened in the market for us.

One reason for health inflation is these payors are outgunned. The doctor places the order. The doctor chooses where it will go. The doctor isn't price-shopping.

So both sides in the health care debate sought a thumb on the buyer's side of that price scale. Liberals sought new business models. Conservatives called for more personal responsibility in the market.

One thing both sides agreed on, however, was the need for greater price transparency. And now we may be able to get some.

Insurers like Aetna, publishers like Thomson-Reuters, even start-ups like Change:Healthcare in Brentwood, Tenn. have sought to collect and deliver price data to health consumers. But none has drawn the excitement of Castlight Health, formerly Ventana, which announced a $60 million capital infusion this week.

It's not just the money, although the latest funding brings the total to $81 million. It's about team.

The team is headed by CEO Giovanni Colella (above), an experienced entrepreneur whose last company, Relay Health, developed the idea of secure doctor-patient online communications and (best of all) made nvestors a profit when it was sold to McKesson in 2006.

His directors include Bryan Roberts from Venrock Partners, one of the valley's oldest venture firms (the rock is short for Rockefeller); David Singer of Maverick Capital, a hedge fund which also backs CVS Caremark, and Annie Lamont of Oak Investment Partners, one of the most experienced health start-up VCs in the game.

To smart management and smart money you need to add smart allies. Allies like the Cleveland Clinic, one of the nation's most efficient hospital providers, and Todd Park, who might be managing the company right now except he was called upon last year to become CTO of the Department of Health and Human Services.

There is also a valid business model, one we've seen with many wellness firms over the last year. Castlight wants to get monthly fees from employees, through their employers or their insurance companies, for helping them save both the employer and employee dollars in a secure Web environment. One-time fees for other buyers will follow.

I have seen many companies try to build directories of doctors, of hospitals, and pricing databases alongside them. I have yet to see a start-up with this pedigree.

If they can help us put our thumbs on the health care price scale, they will be providing health reform everyone can believe in.

Share this

Dana Blankenhorn

Contributing Editor

Contributing Editor Dana Blankenhorn has written for the Chicago Tribune, Advertising Age's "NetMarketing" supplement and founded the Interactive Age Daily for CMP Media. He holds degrees from Rice and Northwestern universities. He is based in Atlanta. Follow him on Twitter. Disclosure