Kaia Health Secures $75 Million in Series C Funding

New York-based Kaia Health, a provider of AI-assisted digital therapies delivered through a mobile application, has successfully raised $75 million in a Series C funding round. The company focuses on chronic pain management related to musculoskeletal (MSK) disorders and Chronic Obstructive Pulmonary Disease (COPD).

Investment Details

This funding round was spearheaded by a prominent, yet unnamed, growth equity fund. Existing investors also participated, including Optum Ventures, Eurazeo, 3VC, Balderton Capital, Heartcore Capital, Symphony Ventures – the investment arm of golfer Rory McIlroy – and A Round Capital.

The current investment closely follows a $26 million Series B round completed last summer. The increased adoption of telemedicine, accelerated by the pandemic, has significantly benefited Kaia Health, leading to a notable surge in demand for its virtual treatment options.

Addressing the Rise in MSK Issues

The shift towards remote work during the pandemic likely contributed to an increase in musculoskeletal problems among office workers due to suboptimal home office setups. Kaia Health’s motion coach provides real-time feedback and offers treatment for pain affecting the neck, hip, knee, shoulder, hand/wrist, and foot/ankle.

During COVID-19, many conditions were considered ‘elective care’, potentially restricting access to traditional physical healthcare services like physiotherapy. Kaia Health experienced a remarkable 600% growth in its business during 2020, potentially filling this gap in care.

Future Growth and Market Dynamics

Kaia Health anticipates a substantial increase in new client onboarding in January, coinciding with the annual renewal of medical benefits by employers – a key customer segment. Despite not actively seeking funding so soon after the Series B, the opportunity presented itself as a straightforward process, according to co-founder and CEO Konstantin Mehl.

Mehl explained that the pandemic created a surge in demand as in-person treatments for chronic conditions were largely unavailable. He also noted a dramatic shift in employer interest, from 20% considering digital therapies pre-pandemic to 100% immediately following the outbreak. The market’s increased attractiveness also played a role in the decision to raise additional capital.

Market Position and Competition

Kaia Health asserts that its digital MSK platform is currently accessible to 60 million patients globally, positioning it as the leading provider in terms of covered lives. Other companies in this space include Hinge Health, Sword Health, and Physera, which was acquired by Omada last year.

Strategic Allocation of Funds

The newly acquired funding will be primarily allocated to expanding Kaia Health’s commercial team. While the company prioritizes product development, Mehl recognizes the importance of effectively reaching potential customers. Investment will also be directed towards enhancing its computer vision capabilities, a key differentiator for the company.

Leveraging Computer Vision Technology

Kaia Health’s digital therapies utilize computer vision to digitize established treatment methods, enabling delivery outside of traditional healthcare settings. The app assists patients in performing exercises correctly through real-time feedback.

The app requires only a smartphone or tablet with a camera, eliminating the need for wearable devices. Kaia Health is also exploring the integration of 3D data from depth-sensing cameras found in newer mobile devices to further improve the accuracy of its body tracking models.

Objective Biomarkers and Progress Tracking

Mehl emphasizes that the app can replicate the corrective functionality of a personal trainer within a home environment. Furthermore, Kaia Health is now utilizing motion-tracking to objectively measure patient progress, supplementing subjective pain assessments.

By tracking body movements, the app can identify areas of reduced flexibility and monitor disease progression. This objective data can help guide patients towards appropriate specialist care, as pain is a leading cause of work disability linked to decreased body functionality.

COPD Management and Pandemic Impact

Kaia Health also applies similar progress-tracking methods to patients with COPD, using tests like sit-to-stand exercises. The pandemic underscored the importance of remote care for COPD patients, who face the highest mortality rate among COVID-19 patients.

With pulmonary rehabilitation centers temporarily closed due to infection risks, Kaia Health’s app provided a vital alternative for patients to continue their rehabilitation programs at home.

Activation Rates and Future Projections

In the U.S., Kaia Health reports an activation rate of 5%-10% within employer populations, varying based on communication strategies. The company anticipates a 5x-10x increase in revenue over the next 12 months as new partnerships take effect.

In Germany, Kaia Health plans to seek prescription authorization for its app through doctors and aims to secure 10,000 prescriptions within the same timeframe, pending approval under the national reimbursement system.

Integrating Kaia with Comprehensive Healthcare Systems

A primary focus for Kaia recently has been the seamless integration of its platform into broader care pathways, enabling connections with healthcare providers when necessary.

In February, the company initiated a significant integration of its MSK therapy and pain-management application – utilized directly by patients – with a referral network. This system connects to services provided by other healthcare organizations, employing an escalation algorithm alongside screening and triage protocols, known as Kaia Gateway, to pinpoint patients who may require more intensive or invasive interventions than the app’s digital therapies can offer. This referral process is currently being implemented with select, high-value partners within employer or health plan ecosystems.

These partners are equipped to deliver supplementary medical services to identified patients, encompassing both general and specialized care solutions. These include disease management programs, physical therapy, telemedicine, care navigation, and access to expert medical opinions. Furthermore, partners gain access to comprehensive treatment histories of referred patients through Kaia’s APIs.

“Our ambition extends beyond simply being an app-based therapy; we aim to expand further along the treatment continuum,” explains Mehl. “We also intend to collaborate with external medical professionals – physicians, for example – and direct our users to the appropriate specialist at the optimal time, preventing any worsening of pain that our app cannot address. This approach fosters increased trust in the application.”

“The proliferation of digital therapies is notable. Initially, as a smaller company three years ago, we primarily offered the app without a clear understanding of the preceding or subsequent care. Now, we are prioritizing integration.”

“We are establishing exciting partnerships in the U.S. with larger medical providers boasting extensive networks of physicians,” he continues. “Integrating with these providers will allow us to refine the entire treatment journey. Patients will feel secure knowing they are not confined to app-based therapy when a different approach is more appropriate.”

“We are adopting a platform approach, but we recognize the value of specializing in specific conditions,” Mehl adds. “We are beginning with our chronic pain program in the U.S., focusing on optimizing the treatment path. A key concern is preventing patients from becoming frustrated with our app and reverting to previous methods, such as pain medication, opioids, or surgery. This is why integration with healthcare professionals is essential.”

“Integration is crucial to providing the best possible care. Without it, patients may lose faith if they find the app insufficient and are not directed to a medical professional for a new diagnosis or alternative treatment. Trust is easily lost.”

“Considering varying levels of chronicity, our scalability allows us to identify individuals earlier in their condition’s progression, when it may still be reversible. Even if our app remains the most effective treatment, involving a medical professional can validate a diagnosis and provide reassurance, motivation, and a definitive assessment. This ensures patients receive the highest standard of care. This represents a significant product and operational undertaking for us.”

Currently, Kaia is initiating case referrals manually through an in-house medical case review team comprised of doctors and therapists, supported by a triage system that automatically identifies patients for review. However, Mehl anticipates increasing automation through the use of AI.

“Our case review system identifies potential concerns based on information provided in the initial assessment, exercise feedback, therapy feedback, and interactions with motivational coaches,” he explains. “The review team then assesses these cases and determines if a referral to an external medical provider is necessary and when.”

“We expect this process to become increasingly automated over time,” he adds. “We aim to leverage machine learning to optimize the treatment path more effectively than relying solely on manual oversight. This is a substantial challenge that will shape our product roadmap for years to come. However, it also represents the greatest opportunity to enhance the quality of care. Siloed solutions are detrimental; patients suffer when the treatment path is fragmented.”

“Clinical oversight will always be necessary. Machine learning can assist medical professionals by prioritizing patients for review, as they cannot assess everyone simultaneously. This filtering process is ideally suited for machine learning.”

Could Kaia potentially evolve into a healthcare provider itself? Companies like Sweden’s Kry have combined telemedicine services with digitally delivered treatments, launching online cognitive behavioral therapy (CBT) in its home market in 2018 while also operating a full healthcare service in certain regions.

Mehl suggests this is unlikely, arguing that telemedicine companies are inherently generalists, catering to “the top of the funnel” by handling and filtering patients with diverse complaints. This, he believes, makes them less suited to deeply focusing on specific diseases.

Conversely, Kaia is dedicated to developing technology for treating a limited number of specific conditions, and therefore is not ideally positioned to provide general medical services. Partnering with established medical service providers is, therefore, the logical course of action.

“Considering the patient journey, telemedicine companies may integrate some treatment paths, but they rarely match the depth of expertise we can achieve by focusing on a single chronic disease,” he says. “Many chronic disease patients seek a treatment solution after consulting numerous doctors. They desire something effective and, at the appropriate time, access to a qualified medical professional. This differs from the approach of telemedicine companies.”

“Another consideration is the extent to which we want to internalize the medical provider’s role in the treatment path. We are fundamentally a technology company. We are not inclined to become a medical provider, and there are numerous exceptional medical providers already established in various countries. These providers have adapted to digital platforms during COVID-19, making partnerships readily available. Why would we attempt to replicate decades of expertise in running a hospital when our strength lies in technology?”

“Ultimately, this benefits the patient. They receive the best of both worlds – optimized care and access to data-driven insights for medical professionals, enabling more informed decision-making. They can review a complete dashboard of the patient’s progress, providing a more comprehensive understanding than a brief consultation.”

The U.S. has recently surpassed Europe as Kaia’s largest market, leading to a concentrated effort to serve its growing U.S. customer base. The addressable market in the U.S. is substantial, with approximately 100 million chronic pain patients, representing around a third of the population.

However, Kaia continues to refine its offerings in several European markets, including Germany, where the business originated. Mehl notes that its Munich team is evaluating the practical implications of a recent reimbursement law for app-based health treatments. While it has not yet secured the necessary reimbursement code for doctors to prescribe its technology, it is actively pursuing this goal.

Mehl acknowledges that persuading doctors to prescribe its app remains an “open challenge” in the German market.

“Some startups have begun to do so, but scaling this approach requires further learning,” he says regarding German app prescriptions, adding that they are preparing to submit an application related to its COPD app, which will be launched in Europe with a pharmaceutical partner.

“We have also established a partnership with a pharmaceutical company for Germany, the UK, and France to distribute our app through pulmonologists – a promising development. We are launching this partnership now,” he adds. “It will be interesting to observe the resulting prescriptions.”

Mehl expresses admiration for Germany’s approach to digital healthcare, noting that it facilitates obtaining a general reimbursement code, which then allows the app developer a year to demonstrate cost savings and deliver the promised care. He frames this as a compromise between the “lengthy” approval process for pharmaceuticals and the data-driven requirements of startups needing to demonstrate traction to secure investment for growth.

“Healthcare is inherently complex due to the need for clinical trials and a slower pace of development. A longer approval process further complicates the launch of useful solutions. I anticipate that the UK, France, and the Nordic countries will introduce similar legislation to facilitate innovation,” he adds.

“We anticipate that other European countries – and countries globally, including Canada, Australia, and Asia – will update their regulations to encompass digital therapies. This will provide clarity on how to obtain prescriptions and establish alternative pathways, such as those already present in the U.S. Given our app’s scalability, we can readily expand into these countries compared to companies more reliant on specific healthcare systems or hardware limitations.”