Eying unfilled parts of the consumer health market, UnitedHealth Group could end up owning a digital health company that's servicing its rivals' clients, and make another Ivy League dropout a millionaire before age 30 in the process.
UnitedHealth announced that its Optum subsidiary is buying a majority stake in Audax Health Solutions, a Washington, D.C.-based maker of web- and mobile-based health risk assessment and engagement applications.
United did not disclose the exact percentage of the majority stake or the financial terms of the deal, saying only that Audax will be a "freestanding investment of Optum" with the goal of expanding its offerings to "more broadly support consumers' need for integrated benefit selection, wellness and health care administration."
Audax's main product, made available to Cigna members in a five-year deal inked last year, is a web-based wellness app and platform called Zensey, described as "your guide to healthier living -- one small step at a time." The startup pitches the product as a "remagined" health risk assessment that's "dynamic and graphical."
Under the deal with Optum, Audax will continue to be led by CEO Grant Verstandig, a 25-year-old former Brown student who dropped out to found the company in 2010, and president and COO David Ko, a former Yahoo executive who most recently oversaw operations at the online game company Zynga.
"Joining with Optum, especially with its unmatched depth of experience and resources, accelerates our momentum, providing the additional reach and scale," Verstandig said in a media release.
David Wichmann, UnitedHealth Group CFO, argued that Audax will help Optum in the pursuit of "serving people across virtually every health care channel."
Verstandig started Audax after suffering a number of knee injuries while playing lacrosse at Brown University, ultimately receiving seven knee surgeries and a partial knee replacement. That experience and a hard-to-accept doctor's prognosis of not being able to play again left Verstandig mulling a move into entrepreneurship, even though as a neurobiology major with a high school internship at the National Cancer Institute under his belt, he could have pursued a career in biotech or healthcare.
After starting the company from his parent's home in the greater Washington, D.C. area, he's since managed to garner more than $55 million in backing from Florida Blue subsidiary Navigy Holdings, New Leaf Ventures, Cardinal Health, Cigna and former Aetna and Apple executives. He also got some direction from a family friend, Richard Klausner, MD, CMO at the genomics and molecular diagnostics company Illumina, who's now Audax's board chairman.
The company's app includes features to let employees or groups of friends compete against each other in exercise challenges such as walking, with the option to offer winning staffers prizes, as well as an online health forum that's advertised as helping people "find your tribe and chat freely...because you pick an anonymous username, you can ask those touchy questions in a private, safe space."
The company is also partly banking on the quantified self movement, partnering with the companies BodyMedia, FitBit, Polar and Withins to offer employees in its customers' wellness programs wearable devices that can track exercise, diet and more.
Those clients include group members of Cigna, which in January 2013 signed a five-year "strategic alliance" with Audax to offer its apps in wellness programs.
Cigna CIO Mark Boxer, who took a place on Audax's board, argued at the time that the startup's "digital personalization, social networking, gamification and analytics can turn a mundane or onerous task into something positive, fun and rewarding."
While Cigna was an early client of Audax and former Aetna CEO John Rowe was an early backer, the startup also has a number of UnitedHealth connections that may have hinted at its future in Optum's portfolio.
Audax chief customer solutions officer Brian Dolan is an insurance industry veteran who worked as business development senior vice president in United's group insurance unit when it was called Uniprise, and Phil Harker, Audax's senior vice president of client development, spent 10 years working on risk management and payer services at Optum, back to when it was called Ingenix.