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Bright Health Group IPO: is the healthtech platform a buy?

By Nicole Willing

Edited by Valerie Medleva


Updated

Bright Health Group logo

US health insurance technology firm Bright Health Group (BHG) is capitalising on growing investor interest in the intersection of healthcare and technology to launch an initial public offering (IPO) that will allow it to repay its debt.

The COVID-19 pandemic of 2020-21 has accelerated the growth of healthcare technology startups, and seen a rise in the number of such firms raising investment financing or going public. 

Financing for insurance technology companies climbed to an all-time high of $7.1bn across 377 deals in 2020, with a 12% rise in funding and a 20% increase in the number of deals compared to 2019, according to CB Insights. 

Similarly, data from Renaissance Capital shows that health care companies accounted for 44% of IPOs in the US in the past year. Bright Health rival Oscar Health (OSCR) went public in March, although its share price has dropped by 23% after an initial spike. 

So how will the Bright Health Group IPO fare? What sets the company apart, and what are the details of the listing? In this article, we give you the information you’ll need to make a decision.

An integrated technology platform

Bright Health was founded in Minnesota in 2015 and uses smart tools and technology to simplify health insurance. The company was co-founded by Tom Valdivia, Robert John Sheehy and Kyle Rolfing. 

Valdivia previously co-founded healthcare management consulting company Valquist and health care software provider Luminat. Sheehy previously held various executive positions at UnitedHealth Group, including spells as chief executive officer of UnitedHealthcare, operating partner at Genstar Capital, executive partner at Flare Capital Partner, and strategic advisor at Cimarron Healthcare Capital.

In its IPO prospectus filed with the Securities and Exchange Commission (SEC) the company said: “We are founded and led by industry veterans intimately familiar with the challenges that have plagued US healthcare for decades.” 

“We believe that to drive meaningful change, we must leverage technology and bring together the financing and delivery of care, while strengthening healthcare’s strongest relationship: that between the consumer and their primary care physician.”

Bright Health has developed a consumer-centric healthcare platform, the Bright Health Intelligent Operating System (BiOS). The platform is built on its intelligent data hub, Consumer360, which integrates with connected care partner data and technology infrastructure to power DocSquad, its suite of solutions for consumers and care providers.

The platform aims to provide customers with the information they need when they need it, either through direct interactions with the company or through embedded experiences with its care partners. Consumers are able to see providers on their terms, using DocSquad to personalise in-person or virtual interactions.

 The Current Healthcare System 

The company operates two businesses, NeueHealth and Bright HealthCare, connecting the delivery and financing of care. 

NeueHealth 

NeueHealth is an enablement and technology business, which builds and manages personalised care networks localised to each market. NeueHealth was created in 2020, following Bright Health’s acquisition of AssociatesMD Medical Group (AMD) in December 2019. 

As of April 2021, NeueHealth works with more than 200,000 care provider partners and operates 28 managed and affiliated clinics within its integrated care delivery system. NeueHealth maintains nearly 75,000 unique patient relationships. It also manages care for a further 33 clinics through its value services organisation.

Bright Healthcare

Bright HealthCare is a healthcare financing and distribution business. From serving 10,765 consumers in one state product line five years ago, the business now aggregates and delivers healthcare benefits to approximately 623,000 consumers through a range of product lines in 14 states and 99 markets. 

Bright HealthCare participates in several specialised plans and recently began offering employer group plans. Its customers include commercial health plans serving 515,000 individuals across 11 states, as well as around 108,000 Medicare Advantage consumers.

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Bright Health has raised a total of $1.6bn in five rounds of financing, from investors including Bessemer Venture Partners, New Enterprise Associates, T Rowe Price and Blackstone Group. The most recent round was its $500m Series E funding in September 2020 (source: Crunchbase).

Bright Health’s funding history

Bright Health boasts rapid revenue growth

Bright Health has rapidly increased its revenue since it launched, climbing from $130.6m in 2018 to over $1.2bn in 2020. The company is on track to report another sharp jump in revenue in 2021, having generated $874.6m in the first three months of the year alone – a 340.4% increase from the first quarter of 2020.

The rise in first-quarter revenues was driven by Bright HealthCare’s number of commercial consumers rising by 300,000, or 217%. This increase came both from organic growth and from the company’s acquisitions, namely of Brand New Day by Bright HealthCare in April 2020, and of Premier Medical Associates of Florida (PMA) by NeueHealth. 

The bulk of the group’s revenue came from the Bright HealthCare business, with NeueHealth accounting for only 2.2% in 2020, but the company expects it to ramp up in the future. The company said: 

“While Bright HealthCare is currently a larger contributor to revenue, due in part to the significant health plan premium revenue contribution from our consumers, we believe NeueHealth has a disproportionate impact on our enterprise today and anticipate it will become increasingly important to our business and prospects, contributing an increasing percentage of our overall revenue in the long-term.”

The S-1 filing noted that approximately 97.1% of Bright Health’s revenue in 2020 came from sales of health plans subject to regulation under the Affordable Care Act, so any changes to the Act or its repeal could have a material impact on the business.

The company is currently loss-making as it invests in building out the business. Its net loss doubled from $62.6m in 2018 to $125.3m in 2019, and almost doubled again to $248.4m in 2020. 

The company expects to continue to make losses in the near to medium term as it invests to increase its consumer base, diversify its product offerings, sign up additional care partners, increase its workforce and expand into new markets including through acquisitions.

In addition to Brand New Day and PMA, the company acquired True Health New Mexico and Zipnosis in March 2021, Central Health Plan of California in April 2021, and Centrum Medical Holdings in May 2021.

As of 31 March 2021, Bright Health held $975.9m in cash and equivalents, up from $488.4m at the end of 2020 and $522.9m at the end of 2019.

Bright Health Group IPO: everything you need to know

Bright Health Group IPO: key information

Bright Health Group is going public on the New York Stock Exchange on 24 June under the ticker symbol BHG, according to the calendar. The company is selling 60 million shares in the offering and has granted the underwriters, including JP Morgan, Goldman Sachs, Morgan Stanley and Barclays, the option to purchase an additional 7.2 million shares at the IPO price. 

The Bright Health Group IPO price is estimated between $20 and $23 a share, which would value the offering between $1.2bn and $1.38bn. That would give the company an overall valuation of more than $14bn.

The company estimates that it will receive net proceeds of around $1.2bn from the listing, based on an IPO price of $21.50 a share, in the middle of the price range. This would increase to $1.38bn if the underwriters exercise the option to take additional shares.

Bright Health intends to use the proceeds to repay all of the outstanding debt under its credit agreement, which totalled $200m as of 31 March. It will use the remaining money raised for working capital and other general corporate purposes, including continued investments and its growth, the filing said.

Read more: Doximity IPO: is it a strong telehealth play?

Markets in this article

OSCR
Oscar Health, Inc.
14.96 USD
0.73 +5.140%
OSCR
Oscar Health, Inc.
14.96 USD
0.73 +5.140%
OSCR
Oscar Health, Inc.
14.96 USD
0.73 +5.140%

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