Our healthcare systems are facing unprecedented challenges today. We’d be remiss in making that statement and not immediately acknowledging the incredible dedication and extraordinary work of the medical professionals working tirelessly to prepare for and treat those afflicted by the COVID-19 pandemic. We are so grateful for their continued, selfless service.
Hospitals Under Strain
Even without pandemic conditions, our healthcare systems are under considerable pressure to provide the best care they can while reducing costs and improving affordability for patients. They’re grappling with an aging population requiring more intensive care and simultaneous shortages of medical professionals from physicians and specialists to nurses and skilled technicians. On the administrative side, there are evermore complicated billing processes and an under-utilized administrative workforce with historically one of the highest turnover rates by industry. Not surprisingly, a recent study showed that nearly one third of healthcare spend in the United States goes to administrative costs.
On the cost reduction front, more health systems than ever are setting explicit cost reduction goals according to a 2019 survey conducted by Kaufman Hall and the Healthcare Financial Management Association. In the survey, just 4% of executives had no cost savings goals for the year. At the same time, the survey found that fewer than one in four respondents stated that their organization had achieved most of their cost-cutting goals for the year.
Going forward, hospitals and health systems will need to set more aggressive cost-cutting goals to break even at Medicare, especially as the population ages and the organizations rely increasingly on public programs for revenue. And the starting point was a challenge to begin with: Not-for-profits’ median operating margin was 1.8% in 2018 according to Moody’s.
Our Investment in Olive
This is where we believe the company Olive can make a substantial difference.
Olive is modernizing administrative processes for large healthcare systems with its AI workforce. Built specifically and exclusively for the healthcare industry, Olive’s unique model of AI-as-a-Service not only works with popular health system electronic health records and other software, it does so while applying machine learning to become ever more proficient over time and across multiple providers. These unique, combined technologies when applied against voluminous and monotonous tasks like insurance verification and prior authorization checks have the potential to deliver significant cost savings to hospitals.
Olive CEO Sean Lane (l) and newest board member Dr. Ron Paulus (r)
The company’s ambitious mission is to “carve a trillion dollars out of the cost of healthcare, and increase quantity and quality of human life.” We’ve been incredibly impressed by founder Sean Lane and his team and their commitment to this mission. Concurrent with this round of funding, Dr. Ron Paulus, former president and CEO of Mission Health, a $2 billion integrated health system serving western North Carolina, and long-time friend of General Catalyst, will join the Board. Together, this team has deep experience in healthcare and in building businesses in regulated, complicated markets. We believe they are building the company and the culture to deliver on their ambitious mission.
With success, the team at Olive has the potential to reshape the financial positions of some of the most important and impactful organizations in our society: our healthcare institutions. We are grateful that they’ve brought General Catalyst along on their journey, and today we welcome them to the GC family.
— Matt Brennan & Team GC