As we turn the page to 2022, I find myself thinking a lot about where Carbon Health was a year ago, where we are today, and the road that we have travelled as a company, as a nation and as a global community during the past year.
One year ago this week, barely one week after we first met with Los Angeles city officials, we opened and began operating in partnership with CORE and LAFD, the largest mass COVID vaccination site in the country at Dodger Stadium on behalf of the City of Los Angeles, which was seeing 1,500+ COVID-related deaths per week at the time. Neither party knew exactly how the details of the arrangement would play out. We were concerned from a cash perspective about the working capital drain that the program might demand of us. And we really had no idea what the revenue model would even be for the project. Nevertheless, we jumped into the effort with both feet. One of our core values as a company is to “assume karma exists,” and this is the spirit in which we marshaled resources from every corner of our company in what was truly a whole company undertaking. Ultimately, we delivered over 1.5 million vaccine shots to the people of Southern California and catalyzed the region’s progress toward one of the highest vaccination rates of any large city in the world. In so doing, we increased exponentially the awareness of Carbon Health in the region and beyond as well as advanced our company’s mission of delivering an accessible, easy-to-use, technology-forward experience to a broad cross-section of health care consumers. The City of Los Angeles vaccination project was not the most profitable thing we could have done with our time and resources. But it was the right thing to do for the community, and it will pay dividends for Carbon Health in many ways for months and years to come.
Yet, as I reflect on that whirlwind experience, the hope and optimism that COVID vaccines heralded for the better part of the past year is, of course, tempered in the current moment by the persistent and, unfortunately, surging reality of the ongoing pandemic. The best civic-minded efforts and resourcefulness of public health officials, of private companies like Carbon Health and others, and of tens of millions of people around the world to beat back COVID are being matched by a virus that is proving to be resilient. Much progress has been made, but we find ourselves facing a stubborn set of challenges that make it appear sometimes like we have travelled back in time to late 2020 or early 2021. For a second year, Carbon Health clinics have been filled to overcapacity during a holiday season with those sick from or concerned about yet another COVID surge. And for a second year, I am truly humbled by the work of, in particular, our front-line team members who have sacrificed holiday time and put their own well-being at risk to serve our patients at another moment of crisis.
At Carbon Health, after a year of trying to forecast the course of the pandemic and adjusting our business plans and financial projections based on the vagaries of this unpredictable time, we are now operating as if COVID is endemic; meaning, it will be with us for the indefinite future and that there is no such thing as a “non-COVID” environment on the immediate horizon. For now, being a healthcare company will continue to necessitate being, in some capacity, a COVID care company.
In such an environment, the challenge that we have navigated over the past two years and that must continue to animate all of our efforts is building the greatest modern healthcare company in the world, with all that that entails, in the midst of continuing to do our part to address the exigencies of the public health crisis. I communicated to you a year ago that I believed that, in 2021, the long-term vision I set out when founding Carbon Health – to become the best and largest modern health care provider delivering great care accessible to all Americans – would start to take shape. Undeniably, we have made many significant strides in this direction over the past twelve months.
And recently, as I have been thinking quite a lot about how to build upon the foundations we have laid and accelerate the progress that has been achieved, I have contemplated more deeply what is actually required to become “the greatest modern healthcare company in the world.” Here are the key pillars that define this today, in my view:
• A brand that is widely known and understood to stand for delivering exceptional, affordable, high-quality care
• A widespread presence that makes great health care accessible to as many people as possible
• A capability of delivering care in multiple venues and formats where patients want to access it. To use a word that I feel I at least popularized and is now being co-opted by so many others: delivering care in an “omnichannel” capacity
• A vigorous, multi-dimensional response to COVID, the singular public health crisis of our lifetime
• A relentless pursuit of technological innovation in product and service delivery
• An ability to deploy solutions in an integrated fashion with like-minded partners in the broader care delivery ecosystem
• A focus on clinical innovation that is nimble, timely and relevant
• A capacity to scale people operations and become an employer of choice in an increasingly competitive health care recruiting landscape
• A magnet for world-class talent across key disciplines
• Best-in-class financial performance and balance sheet strength to enable ongoing investment in growth
As I will articulate a bit further, Carbon Health has made significant advances and/or laid important building blocks over the past year along each of these dimensions.
1. Rapidly growing brand awareness (a brand that is widely known and understood to stand for delivering exceptional, affordable, high-quality care)
→ There is no doubt that, in 2021, Carbon Health took its first steps in becoming a national brand. Underpinned by our coast-to-coast expansion to 16 states and bolstered by our leadership across all facets of COVID response, our share of voice increased to 40%+ at times among our competitive set. We are now tracking an increasing number of patients who first utilized Carbon Health in California and then specifically sought out our locations in new markets across the country when they moved to another state.
→ Our visibility has increased multifold across a wide variety of media. Highlights included a feature spotlight in Inc. magazine in conjunction with Carbon Health being named the second fastest growing private company in America, as well as an in-depth profile in Forbes. Moreover, many of our clinical leaders – notably Drs. Caesar Djavaherian, Sujal Mandavia, Bayo Curry-Winchell and Aaron Weinberg – have become the go-to sources for broadcast and print media in local and national markets for COVID-related expertise and guidance.
→ Our brand awareness continues to be fortified by exceptional NPS scores which continue to run typically in the 80+ range across all age and demographic groups even as we expand our footprint at breakneck speed, high-quality backlink actively now numbering in the tens of thousands, as well as significantly enhanced content on our website.
2. Geographic expansion (a widespread presence that makes great health care accessible to as many people as possible)
→ We grew our clinic footprint from 40 at the beginning of 2021 to 95 at the end of the 2021. We are averaging 1-2 clinic openings every week and are now in 16 states with physical locations and 35 states with virtual care.
→ We significantly stepped up the pace of both organic de novo growth as well as acquisitions. We have begun to build real density in all key San Francisco Bay Area and Southern California markets. We entered key markets such as Austin and Philadelphia (with Boston soon to come) with new clinics. We entered markets such as New Jersey and Tucson (Arizona) at scale with 10 clinics each via acquisition. Looking ahead, our de novo and acquisition pipelines are as active as they have ever been, and we anticipate announcing our presence in some additional large and important markets in the very near future.
→ Our expanded footprint enabled us to serve over 2.6 million patient appointments in 2021, a 7x increase from the prior year.
3. Omnichannel presence (a capability of delivering care in multiple venues and formats where patients want to access it)
→ A couple years ago, I began using the term “omnichannel care” to describe our market approach, and since then the phrase has been picked up and used by everyone from digital health startups to 60-year-old pharmacy chains. Rite Aid, of all companies, used the word “omnichannel” 16 times during its earnings call last month. For most other companies, omnichannel usually means adding a virtual care capability to go with a physical presence or vice versa. Notwithstanding this being co-opted, our definition of omnichannel care is evolving in a much more expansive direction.
→ Indeed, our vision of omnichannel care encompasses home-based care and robust hardware integration. We made significant progress this past year in investing in this model, including the acquisitions of Steady Health and Alertive Healthcare. Through the seamless integration of hardware, software and our physical locations, we can deliver a connected, proactive care experience that few primary care providers can offer. With the capabilities that both acquisitions have brought us, we have piloted remote patient monitoring programs in our clinics for our diabetes and hypertension patients, which we plan to further scale next year.
→ Our omnichannel vision also increasingly encompasses enterprise channels through which we serve patients. During Year 2 of our enterprise business in 2021, we continued to expand our presence and scale, and the enterprise business has become a vital part of our revenue growth at an attractive margin profile. Across our enterprise and occupational medicine service lines, we have served over 2,000 organizations and have performed almost 300,000 COVID tests as part of our travel clearance partnerships with various airlines to enable safe air travel. And looking to a future where value-based care will be part of our arsenal, we have begun developing our competencies in this arena.
4. COVID response (a vigorous, multi-dimensional response to COVID, the singular public health crisis of our lifetime)
→ As the pandemic has obstinately persisted, we continue to serve and guide our patients through these difficult times. In many respects, we have become the de facto preferred provider in our markets for COVID testing, treatment and care, and we embrace this responsibility in ways that sometimes make commercial sense but often in ways that may not…at least in the short term.
→ As I alluded to earlier, we have delivered over 1.5 million COVID vaccinations. We have consistently led in terms of providing easy access to testing in traditional and non-traditional (popup clinics, mobile formats, at-home testing) formats. In recent months, we have been at the vanguard of innovative COVID treatment protocols (something which I’ll touch on later in this update). These initiatives have generally had a depressive impact on our revenue per visit and margin profile, but we continue to lean into these activities because we cannot be a great health care company today without doing so.
→ Overall, in 2021 we solidified the reputation we began building in 2020 as the most nimble, innovative and aggressive provider of COVID-related services. When the pandemic, at least in its current virulent form, ends someday, I have no doubt that we will look on this period with great pride at what we were able to contribute as a company. Equally, I am confident that this period will have proven to be a watershed moment for us as a company in terms of patient acquisition, brand awareness and an opportunity to advance our technology and operational capabilities – all essential elements of our journey to becoming the greatest modern healthcare company in the world.
5. Advancing our product and service capabilities (a relentless pursuit of technological innovation in product and service delivery)
→ In 2021, we built key elements of our future foundational service delivery functionality in areas like (a) scheduling, enabling greater provider utilization and reduced gaps / downtime; (b) care adherence, helping our care teams complete 97% of urgent referrals; and (c) patient experience, with our Patient App 2.5 initiating support for diabetes, COVID care and our first hardware integrations with Dexcom and Abbott for continuous glucose monitoring. We also materially advanced our core capabilities in data science and machine learning in support of price transparency, OCR and diagnostic suggestions for CDSS (clinical decision support system).
→ This past year, we also invested significantly in scaling our product infrastructure. We launched micro-services which can eventually be exposed to third-party developers for prescriptions, scheduling and labs. We also improved our interoperability to more quickly integrate acquired clinics as well as facilitate data exchange within the broader care delivery ecosystem. These investments will prove critical in embedding Carbon Health more deeply at the center of our patients’ overall health care experience.
→ Key to maintaining our technology advantage is scaling our product organization. On this score, we grew our R&D teams 5x this past year with hires from the leading technology companies in the world such as Apple, Google, Amazon, Square, Uber and others. We also built necessary expertise in integrating R&D teams from acquired companies like Steady and Alertive, which is crucial as we integrate these new capabilities into our product and service delivery offering.
6. Partnerships and business development (an ability to deploy solutions in an integrated fashion with like-minded partners in the broader care delivery ecosystem)
→ Increasingly, we realize that our singular mission of making great health care accessible to as many Americans as possible requires that we address the extreme fragmentation of care in our health care system. As a next step in “de-fragmentizing” health care, we recently announced an incredibly exciting initiative called Carbon Health Connect – an expansion of our ecosystem which we are achieving by partnering with exceptional specialists and health systems in the communities we serve. With Carbon Health Connect, our patients will continue to experience seamless care even when they must seek services that Carbon Health does not provide.
→ Over the past two months, we have announced our flagship Carbon Health Connect partners – John Muir Health and Prime Healthcare – and we just communicated our collaboration with Stanford Health Care this week. This year, we look forward to announcing many more Carbon Health Connect partners. In the future, we aspire to connect our patients with a network of partners that extends beyond health systems and specialists to include myriad other digital health and health-related consumer services. In doing so, we aim to fulfill our mission to make care more accessible and less confusing for all.
7. Leadership on clinical innovation (a focus on clinical innovation that is nimble, timely and relevant)
→ This past year, we launched our Metabolic Health Assessment program, which leverages continuous glucose monitoring (CGM) technology to identify people who have a high risk for diabetes and guide them to appropriate care. Carbon Health is the first primary care provider to create a broadly accessible risk-assessment program integrated with CGMs to identify at-risk patients and connect them to primary care and endocrinologists.
→ We have also continued to be at the forefront of COVID-related treatment protocols. We launched a monoclonal antibody program which includes rapid evaluation, testing, eligibility and medication administration – all available in a single clinic visit. We were a key participant in the research trials which led to approval of Merck’s molnupiravir COVID antiviral pill. And we launched a comprehensive mobile clinic model called Care Beyond COVID that delivered essential health screenings in addition to COVID testing and vaccine services to the most vulnerable demographic communities in partnership with local government and community organizations.
→ Finally, we made great strides in developing our overall primary care offering in 2021 as well as laid important groundwork for expansion in 2022. We created primary care capacity in 28 clinics in California, and we have plans to expand to ~55 clinics next year. Beyond provider growth, we plan to invest in panel expansion and management and quality improvement initiatives to ensure we have a solid foundation for our advanced primary care model.
8. Employer of choice (a capacity to scale people operations and become an employer of choice in an increasingly competitive health care recruiting landscape)
→ One of the first things I am asked about when people hear about our rapid scaling is how we have been able to hire enough clinicians to enable our growth. Clinician recruitment and retention is certainly on the short list of hot-button issues in U.S. health care, and most people I encounter assume this is a bottleneck for us. One of the things we are most proud of as a company is that, because (a) our mission resonates with health care professionals, (b) our culture attracts and motivates them, and (c) our technology enables them to spend time with patients and not with administrative work, we have been incredibly successful in hiring and retaining the care teams we need.
→ In 2021, we hired over 300 providers and over 1,000 total clinic staff, with industry-low rates of turnover. 40%+ of our new hires are internal referrals. We have never delayed a new clinic opening due to staff recruitment shortfalls, and we have experienced virtually zero clinic closures due to staff turnover.
9. Building a world-class team (a magnet for world-class talent across key disciplines)
→ We have scaled our management infrastructure with an incredible array of senior hires from the worlds of technology and health care over the past year.
+ Russ Fradin, Vice Chairman, who was one of Carbon Health’s first investors and board members and a longtime confidante of mine
+ Claire Hough, Chief Technology Officer, who I have known from my Udemy days and brings 25 years of technology management experience
+ Myoung Cha, Chief Strategy Officer and President of Home-Based Care, former head of Apple Health
+ Nita Sommers, Chief Growth Officer, former president of HonorHealth and chief strategy officer of Castlight Health
+ Uzair Qadeer, Chief People Officer, former Chief Diversity Officer of Alexion Pharmaceuticals
→ We have also brought on four additional outstanding independent board members who bring a wealth and diversity of experiences and perspectives to help guide Carbon Health on the next steps of our journey
+ Jim Alling brings over three decades of executive leadership with consumer brands that have scaled rapidly, having served as CEO of TOMS Shoes COO of T-Mobile USA and President of both International and U.S. for Starbucks.
+ Julie Smith brings to us extensive extensive health care industry and government experience including federal, state, consulting and senior health plan executive positions with organizations such as The Department of Health and Human Services, The Centers for Medicare and Medicaid, Blue Cross Blue Shield and Deloitte Consulting.
+ Judy Smith is a leading communications and media expert who has advised some of the world’s largest and most influential companies such as Sony, Walmart, Target and Lowe’s. She is also the inspiration for the Olivia Pope character in the hit TV show “Scandal.”
+ Christine Gorjanc is the former CFO of Arlo Technologies and Netgear, a board member of multiple high-profile technology companies, and a financial expert with global expertise scaling businesses and taking companies through the IPO process.
10. Stellar financial performance and capitalization (best-in-class financial performance and balance sheet strength to enable ongoing investment in growth)
→ I will update you further on our full-year 2021 once our books are closed, but based on our preliminary estimates, we know that our financial performance this past year was exceptional and reflective of the enormous progress we have made as a company and that I have outlined in this update. We expect full-year revenue of over $220 million, which would represent over 3XX% increase over 2020. It’s hard to believe that just two years ago, we earned $7 million of annual revenue. We expect full-year gross margins of ~25% and clinic-level EBITDA margins of ~15%. Given what is still a largely immature clinic portfolio attributable to our significant ramp, we are very pleased with these operating margins relative to our long-term targets.
→ Our mature clinics largely generated EBITDA margins of 30-40%+ for most of the past year, and this was true across a cross-section of both organic and acquired clinics, giving us conviction that we can profitably scale our clinic footprint across different markets and modalities.
→ As we continue to invest heavily to drive future growth and achieve our strategic ambitions, our operating and capital expenses remain high. But our positive operating momentum and ability to attract investment capital leave us in a very comfortable position from a liquidity standpoint. During 2021, we raised $350 million of equity capital from a world-class group of new and existing investors (thank you to many of you receiving this update!) who will support us as capital and strategic partners as we ultimately transition to being a public company. We also recently increased our corporate debt facilities. And with these capital injections, we are entering 2022 with a more than healthy amount in cash and debt availability.
So when I look back on all that we have accomplished, the investments that have been made and the foundations that have been established over the course of 2021, I believe we are exceedingly well-positioned vis-à-vis what I think are the key pillars necessary to build the greatest modern health care company in the world. Certainly, we are still in the early stages of this journey, but the vision is starting to become real, and I can clearly see the pieces taking shape. I look forward to being in touch as we embark on what should be another year of successes, challenges and surprises.