On some days, Vesta Healthcare CEO Randy Klein’s job requires some preaching.
Having a unique business model is a strength, but it also means dedicating time to explain how the company operates and its overall value add. It’s a position Klein has often found himself in.
“I used to have a boss that referred to that as an ‘evangelical sale,’ because you actually have to evangelize what you’re doing,” he told Home Health Care News on the latest episode of the Disrupt podcast. “People don’t know what it is at first.”
New York-based Vesta Healthcare is a specialized medical group for individuals receiving home-based care services. The company oversees, coordinates and supervises care in the home. It recently raised $65 million in a Series C funding round.
At the center of all of this is the belief that caregivers are an integral part of health care. HHCN recently caught up with Klein, who went into detail on this topic. During the conversation, Klein also talked about where sees home-based care business opportunities and how the company has been able to expand so rapidly.
Below is that conversation, edited for length and clarity.
Subscript to Disrupt to be notified when new episodes are released. Listen today on Apple Podcasts or SoundCloud.
HHCN: For the listeners that are unfamiliar with Vesta Healthcare, can you go into detail about your company’s business model and how it works with home care providers?
Klein: We are a specialized medical group for people with long-term home care. We have a highly-integrated network of non-medical providers, particularly personal care agencies, but other provider types as well. We get referred patients from the community and other providers the way that anybody would get referred, and then we work with the agencies that are servicing those folks to integrate the [people] who are providing that care, and their service coordinators and what have you, into the care that’s actually being delivered.
It’s a unique model that allows us to take the insights and access that people in the home have and convert it into actionable events for medical care delivery, in a way that the medical side of the house can reimburse for. I think it’s very effective in engaging the home in terms of improving quality of care.
Let’s take a step back, can you share with listeners what your health care background is, particularly on the home-based care side?
I grew up in a home care family. My dad worked for a health plan. My mom is a social worker. My grandparents worked in health care as well. Health care is kind of in the blood.
I ended up starting my health care career working for a company in New York called Visiting Nurse Service of New York (reporters note: The company is now VNS Health). It’s one of the oldest and largest nonprofit home care companies around.
I had the very weird entry point of implementing an episodic reimbursement program for home care, Medicare, PPS — that I’m sure many people here know. I really started my health care career from the standpoint of value-based home care. Over the past 20 years, I’ve had the ability to work on this from a variety of perspectives. I’ve been an operator of a plan. I’ve been a vendor that’s focused on in-home assessments and care management. I’ve done episodes of care payments, but all of it has been really around this idea that the home is a very important, overlooked and disconnected setting of care. If you can engage the people that are there, as part of the delivery system, you can actually create better outcomes, as well as reduce cost and improve satisfaction.
I’ll give you one quick anecdote. When I was working at VNS, I was on a project for one of their executives. I had the ability to actually go out and do a whole bunch of home care visits studying what happened in the home. I remember being absolutely blown away by what these nurses and aides were doing. I came back, a naive 20 something, talking to my boss about how great all this stuff was, and what a difference it must have made. His comment was something to the effect of, ‘wouldn’t it be great if?’
What came from that was the idea that, ‘Oh, wait a second, this part of the system actually isn’t being used properly.’ Later on, I had another person there refer to home care as the caboose of health care. That’s been one of the things that I’ve spent a lot of time thinking about and working on ever since.
Caregivers — whether informal family caregivers or ones with agencies — are such big pieces of Vesta Healthcare’s puzzle. Why is that so?
They’re the ones that have the most access and positions of trust. We got into this with the idea of making health care better, and there’s been a tremendous amount of investment and innovation in the system.
This caboose part of it — if you look from a dollar spend perspective and a population spend perspective, it’s actually a very large caboose. It’s kind of gigantic. It makes up a huge percentage of state Medicaid budgets. If you look at people who are older adults with functional limitations, the likelihood that you end up on Medicaid. You look at the size of the workforce, you’re talking about millions of paid aides, tens of millions of caregivers, it dwarfs almost anything else, but it really doesn’t get a lot of focus. We built a company, and a program, around the idea that the enormous resource — which I’ve come to call the dark matter of the health care system — we can do good things if we engage it. That’s why it’s the center.
Your company recently raised $65 million in funding. Can you walk listeners through Vesta Healthcare’s funding history, and what this latest round of funding will enable the company to accomplish?
Vesta Healthcare was founded in 2019 and we were founded out of a prior company.
What we did was we raised our initial round of capital from some of the original investors. That would be what you would consider round A. That was really designed to get us proof of concept. Can we demonstrate that we have a business that folks are interested in working with? We did that, and then shortly thereafter, we ended up doing our B round. That was really designed to help us scale, because we had some demonstration that what we were doing was working. The B round was designed to get us to a point where we had essentially unit economics. We knew that our business was working, economically, so it would be viable in the long term.
We hit some pretty rough market conditions over the past few years. The health care innovation landscape has been a very tough place to actually access capital in, and I’m really fortunate to have great investors and partners that have helped us along this journey, and we were able to grow and scale during that time. Then earlier this year, we were able to raise our C round, which is a growth round that’s designed to help us digest all the opportunities that we’ve been developing over these past few years, so we’ve been growing very rapidly. You may have seen that we were on the Inc. 5000 for the fastest growing companies, almost 1,000% growth over the past three years. We have more than that lined up over the next few years.
Growth is expensive. You have to hire, you have to invest. We’ve expanded our footprint geographically. We’ve expanded the programming that we can support. In addition to our present models, there’s a new one called GUIDE coming out that we’re going to participate in. There’s other value-based, aligned programs that we participate in. All that requires investment.
What this round of investment is going to do is twofold. We use debt to help finance some acquisitions that helped us catalyze our growth, so it retires that older debt. The equity portion of it is primary equity that we’re using to grow the company to the next stage.
Let’s talk a little bit about Vesta Healthcare’s expansion. In 2021, the company was in five states, and now it’s in 21 states. How have you expanded so rapidly, and where do you want to go next?
We’re seeing patients in 12 states, and we have 21 we can see patients in. What we’re doing is basically following our referral patterns. We don’t ever enter a state without there being someone that’s bringing us into the state.
The nature of our business is that you’ve got imperfect overlap between payers and providers. We work with home care agencies that cover multiple states. We start with them in one state, and they want to expand with us. We go to the next state with them. When we get to the next state with them, we have to get to scale, so we apply for network participation. I’m really proud that we’re in network with over 100 health plans at this point in time. Then we use the ability to be in that state with a partner as a catalyst to recruit other partners to work with us, which then does the same thing again. It brings us into new geographies, and we repeat it all over. We’re just following where the growth is taking us, and that’s been the reason why it’s happening so quickly.
What are some of the growth barriers that you’re seeing in the market? More importantly, how is Vesta Healthcare navigating these challenges?
First and foremost, for a company like ours, the biggest barrier to growth is understanding what we are. If you go and talk to most participants in the system, they probably say, ‘Hey, we already do care management in some form or another,’ and they do. There’s lots of care management out there. If we’re a different form of current care management, or we’re not care management at all, then what are we?
One of the things we’ve had to learn how to do over the past few years is tell our story, which is why I told it the way I did. We’re a specialized medical group for people with long-term home care. We oversee and coordinate and supervise care in the home, and we engage the aides and caregivers as part of that. When you start to frame it in that sense, many payers will recognize that they don’t have a provider or network that’s doing this. Many providers will recognize that they would benefit from this. This is something that could help them improve their own businesses and improve their own quality. That’s the first part, I used to have a boss that referred to that as an ‘evangelical sale’ because you actually have to evangelize what you’re doing. People don’t know what it is at first.
The second part of it is just the inertia of the delivery system. If you’ve ever tried to get a contract with a payer, get in network, get anything through that stuff, it just takes a long time. We come in through the front door in most places. There’s nothing fast about it. We have to get in network. We have to get credentialed. You have to recruit credentialed providers. You have to get to scale. All of that takes a long time and a lot of resources. Which comes back to having great partners. But once it’s in, it also tends to be pretty durable.
Where are you seeing key home-based care business opportunities right now?
I think that the future of care in the home is in the earliest innings right now. The ability for technology to rapidly upskill and scale what can happen, the ability of better information flow will enable much more personalized approaches that do a much better job of using the home setting as an actual setting of care. Payment models have to continue to innovate to support that.
If I were looking at ways to continue to expand what folks do, I would be looking at how to get skilled agencies to the top of their license, how to move end-of-life care into the home on a greater basis, how to upskill the non-skilled, to get them to the top of their ability levels. I would be looking at virtual models that can augment home-based models, so you can get greater scale out of them. I would be looking at personalized approaches for management of medications. I would be looking at ways to really simplify getting things like DME into the home.
I think there’s so many different places here where, in the home, you can do things that will ultimately be higher quality and lower cost. Behind that, I think there’s also a ton of back-end stuff right now. There is a lot of administrative burden that happens around home-based care. As the system gets smarter on this and understands what it’s doing, it will be able to eliminate a lot of the paperwork and back and forth that, frankly, exists because of the complexity of the system, but doesn’t add any value.
As CEO, what goals do you have for the near-term future?
I want us to clearly demonstrate the value that integrated care in the home creates.
There’s still too much evangelizing happening around this. I’ve met some folks who are innovating around similar models, and I cheer for them. We have to get to a place where the notion that care in the home that’s not integrated is an anathema. That you would always expect that care in the home is going to be part of just care in general.
Secondly, to make sure that the business that we’re running is sustainable. I run a business. I have to make sure that what I’m doing works economically. I have to be really careful as we grow, that we don’t take on too much. I have to be really careful that we continue to perform well. The second part, as a CEO, is to run a great company. I would say the third part of it is to make sure that I am a very valuable partner.
If I’m not a valuable partner, I’m going to lose my partners. I need to make sure that the folks that I’m working with on the provider and the payer side are experiencing the value that we set out to create for them, and in my mind, that does extend all the way to the caregivers. Whether you’re a family member, or an aide in this system, I believe there should be a material difference to being supported by someone like us, where you feel greater access, greater support, greater control, greater participation.
Companies featured in this article:
