What happened at Forward Health?

I’ll acknowledge that I’ve been skeptical for some time now of primary care businesses in health care that are cash pay, clinic-based and claim to differentiate themselves through technology.

If primary care is truly concierge, meaning there’s a wealthy patient base in mind, then it’s usually discrete, heavy on services, and not backed by venture capital. Some of the most elite, concierge medical practices I’ve encountered in my career don’t even have a website by design. You have to know the right people to find your way to it - and if you’re lucky enough to be allowed on the waitlist, expect to pay $50,000 a year (or more).

Forward Health launched about a decade ago with a vision of high-end primary care via subscription, where patients in urban areas could get access to the latest and greatest technology. Think of it like a more expensive, more tech-forward version of One Medical. But with no health insurance accepted. The company had clinics in urban areas, like San Francisco and New York City, and in its most recent iteration, it built “CarePods” that claimed to use AI to do automated medical checkups. The company announced it raised $100 million to roll those out.

One year later, Forward has now said that it’s shutting down. Here’s a screenshot from a missive to patients, which the company acknowledges is abrupt:

The company hasn’t yet explained why it’s shutting down in any detail. As an outside observer, my best guess is that it’s run out of money, likely because of a high burn rate. If the company raised $100 million a year ago, and twelve months later, it’s shutting down, either it saw the writing on the wall and is returning capital or it ran out of funds because of a failure to attract follow-on capital.

#medtwitter isn’t what it used to be but I did take a gander through the tweets (or X’s) today to see what folks thought about the shutdown. I was hoping to get a sense of what patients felt, in particular, as I haven’t personally used Forward Health. I didn’t see much from patients. But there are plenty of entrepreneurs tipping their hat to Forward’s CEO Adrian Aoun for trying to fix health care (that’s a classy thing to do). Other commentators are correctly pointing out that there’s a world of difference between digital health and actual clinical medicine — although I’d argue that those two worlds are blending together given how many digital health companies have moved into virtual or hybrid clinics.

As someone who’s seen (and heard) a lot over the past 15 years, here’s a few of my takeaways:

1. Asking people to pay out of pocket for subscription-based health care is certainly possible. But it’s hard. Just look at the success of Function Health, which by all accounts is growing furiously and providing a basket of lab tests for a $499 a year price tag. Neko Health out of Europe is another good example of what seems to be working. But like I said, it works in a few defined circumstances. The offering must be repeatable by design, meaning it needs to be clear to people why they’re paying for it year after year. The data should also be dynamic. That’s where a company like 23andMe has struggled because very few of its customers opted to do the test more than once. It becomes expensive to acquire those patients, but there’s not much long-term value there. Many physician friends have shared with me that primary care is always a good thing — and yet for younger, healthier millennial audiences with capital to burn (Forward’s primary target) it may not be obvious why super regular, short check-ups are valuable. This audience might be interested in paying for an extensive, in-depth session with a functional medicine doctor over an acute problem — but it’s unclear why they’d pay more for visits and more automation.

2. Brick and mortar makes sense in some cases, but it needs to be very well thought through: I’ve written extensively that I’m actually a fan of hybrid models, and I think we overdo it with virtual only. But brick and mortar is also super capital intensive (hence why I suspect Forward’s burn would have been high). That doesn’t give founders much time to experiment and pivot strategy before they need to generate real revenue. It’s also why I like to see brick and mortar used creatively. Companies like Origin PT (women’s health) and Modern Animal (vet care) do leverage clinics in core geographies, but have become fixated on using every square inch of space effectively. There is a real expertise in doing that, and I don’t see it enough in health-tech.

3. We aren’t focused enough on those who really need care: Direct primary care can be a highly effective model, but I worry about applying it to populations who are wealthy and generally healthy. In general, we as a digital health industry have not focused enough on vulnerable populations who really need the care we are providing. Part of the problem is that entrepreneurs will often start with a vision to build the medical experience they would want for themselves or their peers — and not those who may be older, sicker, frail and/or experiencing disabilities.

4. Primary care is a tough starting point for a subscription model: I suspect we’ll see Forward-like models that do work in specialty areas like dermatology, cosmetics/plastics, infertility and migraine relief. Conditions that may be episodic in nature, but the need is acute enough and regular enough where a subscription makes sense. Note: These businesses may need to be funded differently though, and venture capital might not be the right vehicle.

5. Timing is everything: I know brilliant founders and investors who have not had much success because they seem to have the right ideas at the wrong time. If Forward had started today, versus eight years ago, I wonder if this AI technology would have been developed enough to make the vision make sense? Perhaps the company wouldn’t have needed clinics at all? Who knows… Hindsight is 20/20. But it’s interesting food for thought.

That’s all for now as I’m still digesting the news on Forward myself. But as always, I’d love to hear from you. What do you think? And are there any useful takeaways for entrepreneurs and operators in the industry?

Drop me a line at [email protected].