Why Omada Health is resisting an AI takeover after its IPO

Tech companies are rushing to bring AI into every part of their business. But one newly public healthcare player says it won’t go all in on AI just yet.

Chronic care company Omada Health went public on Friday, 14 years after its founding. Its exit marked the second digital health IPO this year, following physical therapy startup Hinge Health’s public market debut on May 21.

On the day of Hinge Health’s IPO, CEO Daniel Perez proclaimed that Hinge Health would use AI to automate as much of its care delivery as possible. “The long-term vision is to continue to peel away aspects of in-person care and deliver the care itself via technology,” he told BI.

That strategy could be attractive to many investors as healthcare companies like Hinge Health speed up their operations by replacing clinicians’ tasks with AI. Healthcare startups focused on AI pulled in 60% of all VC investment in the first quarter of the year, per CB Insights.

But Omada Health CEO Sean Duffy told BI that his company won’t take the same approach.

“I’ve yet to find someone who feels accountable to Chat GPT,” Duffy said. “I always quip that there’s a reason that artificial intelligence is a buzzword and artificial empathy is not. You can expect us to always have a proactive people component.”

Omada Health, founded in 2011 to deliver virtual care for conditions like diabetes and hypertension, just released its first consumer-facing AI in May — an AI agent that can answer nutrition-related questions and guide patients through goal-setting sessions about their food habits. It’s used AI in the background for years to help its coaches more effectively and efficiently care for patients, like by surfacing educational videos in Omada’s content library that might be helpful to a particular patient.

Some of its peers have begun to use AI much more directly in patient care. $3 billion musculoskeletal startup Sword Health started using AI to generate messages for physical therapists to send to patients last year, BI reported in November. $1.6 billion startup Hippocratic AI is taking it a step further, partnering with Nvidia to create generative AI “nurses” that can video chat with patients.

Duffy said creating a chatbot to message patients instead of a care team is “too easy.” A lot of the tools on the market are “embellished,” he said — “It’s just getting the big box models, opening up their API, and having a support agent.”

He pointed to Omada’s new AI agent for nutrition goal-setting, a practice backed by clinical evidence, and which on Omada’s platform delivers discreet insights that help providers better care for patients. Plus, it’s clear to members that they’re messaging an AI agent rather than a provider, he said.

“Am I going to expect Omada’s users to carve out 10 minutes on a Saturday to chat with a model? No. But our care teams can hold accountability against it,” Duffy said.

Bucking the trends

Clinical evidence has long been Omada’s north star; the company has published 30 peer-reviewed papers over the years about the efficacy of its various products. So it’s perhaps no surprise that Omada hasn’t rushed to apply AI to its platform without clinical evidence to support it.

Dr. Justin Wu, Omada Health’s vice president of clinical innovation and quality, told BI in May that the company finally feels ready to allow patients to interact with AI directly after significant improvements in the underlying models. He added that Omada fine-tuned its new AI agent with its own clinical data.

The company has similarly refused to hop on the GLP-1 bandwagon as new weight loss drugs like Ozempic and Wegovy take over the market. While Omada’s metabolic care programs have taken off, including to manage patients taking GLP-1 drugs, the company doesn’t prescribe the drugs, unlike many of its public and private competitors.

Duffy clarified that Omada hasn’t shied away from prescribing GLP-1s because it doesn’t have the ability to do so. “I would like to remind people that we prescribe [continuous glucose monitors],” he said. “Prescribing is not that hard to do.”

But he says Omada prefers to allow patients’ primary care doctors to prescribe the medications. Omada’s job is to augment primary care, not replace it, he said.

That’s not to say the company won’t be swayed if its members consistently want to get their GLP-1 prescriptions from Omada, Duffy said. He said he hasn’t seen that demand so far.

“We’ll let the members speak, so if all of a sudden 10 out of 10 members next year are like, please, Omada, help me here, we may, but that’s not our strategy right now,” he said.

Omada went public on June 6th at a $1.1 billion valuation, similar to its last public market valuation of over $1 billion at the time of its $192 million Series E in 2022. Its stock opened at $23 a share, 21% above its initial price. It was trading at $22.60 at Monday’s close. CAN WE UPDATE THIS?

The post Why Omada Health is resisting an AI takeover after its IPO appeared first on Business Insider.