As a plethora of startups, from Accolade to Grand Rounds, look to build a new “front door” for how people access their health benefits, Cedric Kovacs-Johnson is wondering: who is managing the back end?
His startup, Flume Health, is looking to take on that task by providing a modern alternative to third-party administrators that process claims and manage benefits, many of which still rely on spreadsheets or pen-and-paper processes. It lets companies bring in specialized providers to address musculoskeletal pain, diabetes, mental health and other specialties.
The company recently emerged with $10 million in seed funding and its first group of clients. Crosslink Capital led a recent $6 million seed round, bringing Flume’s total to $10 million. It also brought on Ann Joo Kim, who was a program director for Haven, as its COO.
Kovacs-Johnson is familiar with the extent that behind-the-scenes administrators can affect people’s care. He started Flume in 2017, after seeing his sister grapple with getting approval for an epilepsy-related surgery.
“The most powerful force in the whole ecosystem was not her neurologist, was not her PCP. It was the coverage that we had that could take three months to approve or deny the procedure,” he said in a Zoom interview.
The New York-based startup primarily works with self-funded companies, outside of the usual marquee names in tech.
“These companies are in a sort of death spiral where their healthcare costs are so high, their hand has been forced, and they’ve had to cost shift onto employees,” he said. “The only way out is to restructure how the health plan works.”
Flume brought on its first customers last year, including an auto dealership, an optometry firm and a construction company. Its approach ranges from case to case. In one case, it found drug manufacturer discounts for people taking costly specialty medications. In another, it restructured a company’s network using reference-based pricing.
One of its users, Case Construction, a 100-person construction company in Indiana, told MedCity News that it trimmed its healthcare costs by nearly half in the last year.
Flume charges a per-member per-month fee for its services. Bringing on its first customers just before the start of the pandemic, Kovacs-Johnson said he prepared for the worst, expecting revenue could be cut in half if the companies they worked with had big layoffs.
But the opposite happened. Employment stayed at capacity, and more businesses began taking a closer look at their health benefits.
“We saw customers of ours like law firms or auto dealerships in Charleston, West Virginia, saying how can we give mental health support to our employees? They wanted to build in therapy as a free benefit in their plans,” he said.
Looking to the future, Flume is talking to more self-insured companies, brokers and health systems, Kovacs-Johnson said. It’s also looking for ways to bring together an increasingly fragmented health system, with dozens of point solutions and digital health solutions to choose from.
“If you fast forward five years, when you sign up for benefits, you might not just be picking between Blue Cross silver and bronze,” he said. “There’s a whole new world of health plans.”
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