Who are Livongo customers?

Investment Analysis Clubs Saul’s Investing Discussions
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My previous healthcare investments, save TDOC, had not been too productive and my latest ones in remote monitoring, BEAT and IRTC, are not going anywhere during this pandemic but I’m willing to be convinced provided I understand the business model, not the technology, the business model. So I asked my research assistant, Ms. Google “who are Livongo customers?”

The first most important item is the distinction between “clients” and “members.” (this is a year old article)

Livongo’s client base, which includes self-insured employers, health plans, government entities and labor unions, is growing rapidly, according to the company’s prospectus. Livongo had 218 clients by the end of 2017, 413 clients by the end of 2018 and 679 clients as March of 2019. The company’s diabetes program had 114,000 members in 2018, and by March of 2019, that number had grown to 164,000.

https://www.marketwatch.com/story/livongo-health-ipo-5-thing…

Unlike BEAT and IRTC, Livongo’s clients want to keep down their healthcare costs, the cost of providing healthcare to the people they are responsible for. The people using the devices are called “members” and they get the service for free. This is a terrific business model if they can deliver. Livongo does not have to deliver better healthcare even if that is a laudable goal, they just have to deliver cheaper healthcare and any accountant can figure that out. Follow the money, ROI by clients.

Digital health group Livongo has pioneered a new business model, convincing multinationals, government bodies and pharmacy benefit managers to pay for its technology, which enables users to manage chronic conditions. This approach seems to have worked, at least so far, with its third quarter revenues topping expectations.

Applying themselves

Several companies offer apps intended to help patients manage various disorders – Glooko’s diabetes-focused software, for example, or Pear Therapeutics’ addiction management apps. But Livongo’s technology, which covers conditions including diabetes and hypertension, is paid for by employers – and even then, only if the employees actually use it.

“In the US, the person with the chronic condition doesn’t always pay for it, so they don’t have a huge incentive to reduce that cost,” Glen Tullman, Livongo’s executive chairman, tells Vantage. “The person who does pay for it in the US is either large self-insured employers – big businesses – or the government.”

Livongo’s pitch is that its technology can keep a company’s workforce healthier, reducing the insurance costs incurred by sickness and boosting productivity since staff will require less time off. Mr Tullman says it has signed up more than 770 organisations, including “almost 25% of the Fortune 500”.

https://www.evaluate.com/vantage/articles/interviews/keeping…

More stuff found by Ms. Google

who are Livongo customers

https://www.google.com/search?newwindow=1&client=safari&…

Seen in this light, LVGO is definitively an investment opportunity.

Denny Schlesinger

mauser96 replies:

I don’t want to be argumentative Denny but diabetes is one disease see definition…

That’s the medical definition but from a patient’s point of view, type 1 is chronic while type 2 is reversible. The problem is that doctors don’t cure or reverse type 2 diabetes, they just palliate it for life. The cure is a change in lifestyle, not something doctors study in school.

But this is off topic so let’s leave it at that

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…The problem is that doctors don’t cure or reverse type 2 diabetes, they just palliate it for life. The cure is a change in lifestyle, not something doctors study in school.*** (unsure how you get this into italics. lol)

As a medical professional, no truer words have been spoken. lol.

And I would even add, Big Pharm wants to palliate it for life as well, as well as many other lifestyle diseases.

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…The problem is that doctors don’t cure or reverse type 2 diabetes, they just palliate it for life. The cure is a change in lifestyle, not something doctors study in school.*** (unsure how you get this into italics. lol)

You surround the text in HTML tags

The cure is a change in lifestyle, not something doctors study in school.*** (unsure how you get this into italics. lol)

You won’t see the HTML tags, I’ve used some special HTML code to make them visible. :wink:

BTW, thanks for the vote of confidence!

Denny Schlesinger

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Excellent!

Thanks Denny for the tip!

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And remember, if you are using an iPhone, make sure the slash in the ending tag is a forward leaning slash, not a backward leaning slash. This is a common mistake on iPhones because the first slash offered on the keyboard is the wrong one. Not so on the Android keyboard.

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And remember, if you are using an iPhone, make sure the slash in the ending tag is a forward leaning slash, not a backward leaning slash. This is a common mistake on iPhones because the first slash offered on the keyboard is the wrong one. Not so on the Android keyboard.

Good to know! Thanks.

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The problem is that doctors don’t cure or reverse type 2 diabetes, they just palliate it for life. The cure is a change in lifestyle, not something doctors study in school.

This is simply incorrect. Medical students learn it. Lifestyle modification is usually the first thing listed when discussing diabetes treatment. There’s just not all that much to learn about lifestyle changes that are essentially common sense or at least very easy to understand. Like weight loss or quitting smoking, there’s no need to go to a doctor to have them coach you on doing that. Time in medical school is spent on the stuff that patients can’t understand, and that’s the pathophysiology, medications, and other treatments.

The problem is that doctors only spend 10-30 minutes with a patient once every several months, if lucky. That’s not enough to help someone actually make lifestyle changes or stick with those changes. It’s often clear when a diabetic is not eating well, someone with vascular disease is not exercising or starts smoking again, or an alcoholic starts drinking again. The doctor can remind them of those lifestyle changes but what can they really do in that short time? Usually, following a doctor’s instructions to take a pill is much more likely than instructions for diet and exercise.

Admittedly, we don’t learn motivational techniques for weight loss or behavioral modifications because there are other specialists that do that.

Livongo is filling in those daily gaps. It only works if the patient is motivated to begin with but I suppose just a fraction being motivated can be worthwhile for an insurance company. It might even be worth financial incentives to engage with the service. There might not be any real technological advantage and perhaps at some point the big insurers will just think they can take things in house but until then you just have to rely on the LVGO sales team being good enough to generate revenue.

In the long run Saul is correct in that the TAM is limited by the population while usage based services analyzing data can grow indefinitely, but that might just shorten the investment horizon.

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Denny, I’d like to build on your point on the business model because it only paints half the picture of the bull thesis for Livongo.

I believe the bull thesis lies not in whether it’s effective or if it builds a better mousetrap. The bull thesis lies in the inherent incentives for both parties involved (clients and members).

As you pointed out, clients (the self-insured employers, health plans, government entities and labor unions) are incentivized to reduce their huge medical expenditures. They believe that proper management of diabetes through the Livongo solution allows them to do so. Livongo also has the results to back their claim of cost savings.

On the other hand, members (diabetic individuals) have their medicine co-pays reduced or waived totally if they follow the prescribed monitoring solution. The initial equipment is free. Testing strips are also free and sent automatically to them when they run low. This arrangement creates a powerful incentive for members to first try out, and then continue using the Livongo solution.

If we were to compare this business model with other solution providers that sell DTC, one can see how Livongo’s model is vastly superior. I believe this explains Livongo’s rapid growth relative to competitors.

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Denny, I’d like to build on your point on the business model because it only paints half the picture of the bull thesis for Livongo.

I believe the bull thesis lies not in whether it’s effective or if it builds a better mousetrap. The bull thesis lies in the inherent incentives for both parties involved (clients and members).

Of course all they do is designed to make the business successful but can you identify the keystone? It’s not reducing workers’ co-pay. What’s in it for the guy who pays the bill? That’s the keystone. Everything else is the roadmap to get there.

Denny Schlesinger

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One of every five health care dollars is spent caring for someone with diabetes.
Diabetics have medical expenditures that are 2.3 times higher than other victims of chronic disease.
They have more frequent and longer hospital stays, more doctor and emergency visits, more nursing facility stays, more home health visits, and more prescription drug and medical supply use.
it’s a disease that’s costing Americans $83 billion a year in hospital fees – 23 percent of total hospital spending…

With 95 percent of cases being Type 2 diabetes, that’s some $206 billion spent on a disease that can largely be controlled and prevented by diet and exercise. “One of the key messages here is that [these costs] could be prevented,

* If the current trend continues, one in three children faces a life with diabetes.*

https://khn.org/news/diabetes-cost-ft/

Possible “Solutions” like Livongo have a low bar, what we are doing now clearly does not work,it is a classical broken process. In the US we are overwhelmed by diseases due to bad life style choices. Probably only a minority of those people are amenable to any kind of self directed aid, but even a small percentage pays off big in reducing costs to insurance companies. It’s probably some sort of bell shaped curve, even one end is a significant number of people.

A bit longer term it remains to be seen whether the help Livongo gives is enough to tip many diabetics permanently over to better drug compliance and better diet control. Ideally it would get some of the Class 2 diabetics into losing weight and exercising, which would be a "cure"for many

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Many with Diabetes 2 can completely wean off of drugs through proper management. LVGO has the capability to bring the cost of management to almost Zero. (annual well visit, excepting)

For that portion of Type 2 Diabetics, the savings is huge. Although that doesn’t apply to all, the numbers are staggering.

A recent bloomberg article estimated ~$30B as addressable market for Diabetes care now. (they didn’t specify US or world, although, I suspect that’s US only). An additional $~20B for heart disease.

Adrenal insufficiency, Renal failure, anemia, hypo/er thyroidism and many other hormonal disorders could use better preemptive care.

None of that is currently covered, but is all subject to management through the platform.

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