As of October of this year, the number of homeless New Yorkers sleeping each night in municipal shelters was 35% higher than 10 years ago. For mobile health care provider DocGo, COVID-19 was a chance to do some good for those people (while building a revenue stream).
Through a program with NYC Health + Hospitals, DocGo, contracted by NYC, treated tens of thousands of unsheltered New Yorkers in 18 months. It started with COVID-19 testing in homeless shelters, running more than 40 of its mobile units throughout the city, mostly in underserved neighborhoods. The service then progressed to medical consultations, vaccinations, and social work engagements. “We’re doing well by doing good,” Norman Rosenberg told CFO in a December interview. Rosenberg, previously CFO of DocGo’s subsidiary, Ambulnz Holdings, LLC, officially assumes the DocGo CFO title on January 1.
COVID-19 brought another positive thing to DocGo: as a potential accelerant of a nascent trend in medical services delivery — mobile health.
When COVID came around, people got used to the idea that things were delivered to the home. That just accelerated a trend that I think was already occurring. — Norman Rosenberg, DocGo
Mobile health is not telehealth, though this new model for “last-mile” health care delivery potentially eliminates trips to hospitals, doctors’ offices, and urgent care centers. DocGo provides mobile medical services and transportation at a patient’s home or office, mostly for episodic care.
The company’s proprietary tech platform handles the logistics of dispatching emergency medical technicians (EMTs), paramedics, and nurses. Overseen by a remote physician, they provide testing, vaccinations, bloodwork, IV hydration, wound care, mobile imaging, and remote patient monitoring.
The platform allocates resources based on predictive demand analysis, and machine learning algorithms “predict reimbursement and help ensure collectability.”
“When COVID came around, people got used to the idea that things were delivered to the home. That just accelerated a trend that I think was already occurring,” said Rosenberg. Going to a hospital or doctor for some types of care — like getting a throat culture — “just doesn’t seem efficient and it doesn’t seem to make sense in today’s day and age.”
There’s a mismatch within health care of the activities being performed and who’s performing those activities, Rosenberg said. EMTs, paramedics, and nurses come at a fraction of the cost of doctors.
Rosenberg: “I love doctors. My brother’s a doctor. But it just doesn’t make sense — we have people that are highly paid and highly trained performing commodity-like services. … There’s almost a built-in arbitrage.”
Existing health care systems are not competitors to DocGo — Rosenberg sees DocGo filling in the gaps for care that hospitals and outpatient facilities can no longer provide efficiently. “An ambulance service for a hospital is a big pain point,” said Rosenberg, “most of them don’t want to do it on their own. It’s just another headache.”
Launched in 2017 with $40 million in venture capital, DocGo went public via a special purpose acquisition company (SPAC) in November 2021, raising $158 million in cash from the combination. A private investment in public equity (PIPE) from Light Street Capital and Moore Strategic Ventures was part of the funding package. The company’s shares were hovering around $6 the week of December 19, better than many other SPAC alumni.
DocGo had $179.4 million of total cash and equivalents as of September 30. To bolster the balance sheet, it added a $90 million line of credit with Citi on Nov. 2, which remains undrawn. The company is not highly levered, with total debt of $20.6 million, mostly in lease liabilities.
Mobile health care is not a slam dunk — it will require a behavior change from consumers and in some respects challenges the well-entrenched model of U.S. health care delivery. To make inroads, DocGo needs plenty of financial runway.
Rosenberg spoke of three financial challenges.
1. Optimizing working capital. DocGo has four categories of clients: hospitals, payers, municipalities, and corporations. Some of these customers are very slow to pay receivables.
“I’m spending money on personnel and supplies and then I get paid on a somewhat longer cycle,” said Rosenberg. “Thankfully, we haven’t had to turn any [work] down.
“If it’s a good project with a good margin, and they’re a reliable payer, I can deal with a longer payment [cycle]. I’d rather have longer payment terms from a reliable customer than shorter payment terms with a customer that I really lose sleep about.”
2. Manage operating costs. DocGo assumes a “healthy” year-over-year increase in the average hourly wage for its workers. (The company has more than 2,000 employees.) Fuel costs are a big deal because the company uses a fleet of vehicles. DocGo attempts to save money on other areas of procurement — lab testing and medical supplies, for example. The procurement team is incentivized on the basis of lowering costs on a per-unit basis. Every quarter procurement personnel get a target to lower the cost of a supply or service by a set amount.
“We make sure we align everybody’s interest with some very granular KPI,” said Rosenberg. “It’s not just a matter of, wishing that we could lower costs, it’s having a game plan for doing that.”
3. Replacing COVID-testing revenue. Many of DocGo’s COVID-testing contracts have ended. COVID-testing-related revenues amounted to about 35% of the company’s total in the third quarter of 2021. In the third quarter of 2022, they represented a percentage in the mid-single digits. Replacement revenue is going to be a mix of organic and M&A, Rosenberg said.
One market where the company sees growth is in contracts with municipalities, following the positive experience in New York. The lower-cost services are a selling point to local and state governments and for DocGo it’s a direct-payer relationship. “We’re always willing to work with [governments], so we can figure out innovative ways for them to pay us. We can do it in a way that’s most cost-effective for them,” said Rosenberg.
Whenever we go through chaotic times, I like to tell people, ‘You haven’t seen anything!’ — Rosenberg
International business is a small percentage of revenue so far. DocGo has some operations in the United Kingdom, and Rosenberg sees it growing at a rapid pace. Just this week, DocGo scored a U.K. contract to provide a “rapid falls response service” for elderly patients. The goal is to provide “a quicker response to help elderly patients recover from falls without requiring a trip to the emergency room, and establishes clinical pathways to help prevent future incidents,” according to the company.
Rosenberg is philosophical about disrupting medical care. He spent the early 2000s in the telecom industry (including a CFO position at IDT Telecom). That was a time of great upheaval with the breakup of the incumbent phone carriers and the shift to open competition and revolutionary pricing models. Said Rosenberg: “Whenever we go through chaotic times, I like to tell people, ‘You haven’t seen anything!’”
Disruption has gone on for decades, said Rosenberg, it’s just taking different forms now. “It helps to look back at other periods and in other industries and figure out the lessons that can be gleaned and apply them to the current environment.”