Health Dialog $775 Million Sale to BUPA Yields 15-Fold Return to Spencer Trask Investors
BUPA acquires the outstanding stock in healthcare pioneer Health Dialog — delivering a 15-fold return to Spencer Trask Ventures on an 8-year investment. The transaction values Health Dialog at $775 million.
Health Dialog was founded on 40 years of ground-breaking research by Dr. John Wennberg of Dartmouth University, whose research exposed “unwarranted variation” in healthcare. His findings revealed striking differences in care from hospital to hospital and region to region, with no medical justification. For his pioneering work he was awarded “The Most Influential Health Policy Researcher of the Last 25 Years.”1
Health Dialog uses unbiased “evidence-based” medical information to empower patients to make better decisions about their healthcare. Health Dialog drives out “unwarranted variation” with informed patient choice.
“By giving power to the patient, Health Dialog flips the healthcare paradigm on its head,” said Kevin Kimberlin, Chairman of Spencer Trask & Co. “Health Dialog shows that big ideas can change the world and deliver substantial returns.”
Health Dialog: Cure for the Looming Fiscal Crisis?
Medicare’s unfunded liability was estimated to be $68.1 trillion in 2005,2 which is staggering when compared to the U.S. gross domestic product (GDP) of approximately $13 trillion in 2006.
In testimony last week, Peter Orszag, director of the Congressional Budget Office (CBO), endorsed eliminating “unwarranted variation” as the most effective strategy to tackle the unrelenting fiscal crisis caused by runaway healthcare costs. Orszag stated, “(R)esearch suggests that national costs for healthcare can be reduced by perhaps 30% without harming the quality (of healthcare).”3
Dr. Wennberg, as early as 2003, boldly published: “(S)avings of up to 30% of Medicare spending might be possible, and the Medicare Trust Fund might remain solvent into the indefinite future.”4
Health Dialog’s eliminates “unwarranted variation” by helping patients understand their medical options. Built to collaborate with the not-for-profit Foundation for Informed Medical Decision Making established by Dr. Wennberg, Health Dialog’s resources include unbiased medical information and 24/7 support through health coaches.
Transaction Fuels Expansion
To date, 20 million individuals access Health Dialog services through major health plans, large employers, provider groups, and government programs. The company was named one of Inc. magazine’s fastest growing private companies for three years running, with sales growth of 327%.5
“With BUPA, Health Dialog can continue its tremendous momentum and bring the informed-patient revolution to the global stage,” said Kimberlin.
In January 2000, Spencer Trask Ventures co-investors closed $10 million in a Series A financing. Those $1 shares are being acquired for approximately $14.75 in cash.
“Spencer Trask was among the first to understand what we were trying to do,” said George Bennett, Chairman and CEO of Health Dialog. “They got it quickly and they stayed with us.”
Other Spencer Trask firsts include: Myriad Genetics, the first human genome company; Ciena, the first wave division multiplexing system to power the Internet; Osiris, the first company with an FDA-approved stem cell therapy; and Next Level Communications, the first VDSL broadband system.
About Spencer Trask & Co. and Spencer Trask Ventures
Spencer Trask is a private equity firm that transforms bright ideas into great companies. Through a collaborative network of business leaders, domain experts and co-investors, Spencer Trask builds market-leading companies with a sustainable competitive advantage. Clients invest on a deal-by-deal basis rather than through a fund. Spencer Trask Ventures is a wholly owned subsidiary of Spencer Trask & Co.
1 Health Affairs, November 1, 2007
2 Long Term Vision, National Review, April 28, 2005 by Bruce Bartlett
3 Orszag PR. CONGRESSIONAL BUDGET OFFICE DIRECTOR’S BLOG [Internet] [cited 2007, December 12] Available from: http://cboblog.cbo.gov/
4 Annals of Internal Medicine, February 18, 2003, Volume 138 number 4
5 Inc. Magazine, October 27, 2005, Special Issue, America’s 500 Fastest Growing Private Companies