Seattle startup Xealth lands investment from Cerner as COVID-19 accelerates digital health adoption

Xealth CEO Mike McSherry. (Xealth Photo)

The COVID-19 pandemic is forcing hospital systems to adopt digital tools at record pace. They are getting help from startups such as Xealth, a Seattle-based company that just announced a key partnership with Cerner and an investment from the publicly-traded healthcare giant.

Xealth will team up with Cerner, a leading electronic health record (EHR) tech company, to help hospitals incorporate digital health programs. Cerner also made a $6 million investment in the startup, along with LRVHealth, a health-focused VC firm based in Boston.

Founded in 2017 by two Seattle startup veterans and spun out of Providence Health & Services, Xealth uses patient data to recommend services from a variety of vendors for possible prescription. The company lets doctors and nurses issue digital prescriptions such as apps and digital media. It also routes the flow of data from services back into the hospital’s EHR.

“Clinicians easily find and order the right digital tools and programs from within their current EHR workflows, send these digital health orders to the patient’s smartphone or computer, and then monitor patient engagement, analyzing the effects of the tools on patient care,” said Xealth CEO Mike McSherry.

Xealth is already integrated with Epic, and the deal with Cerner means Xealth is now working with the two largest hospital EHR vendors in the U.S.

“Cerner’s investment is a realization and commitment that digital health, telehealth/remote monitoring is now part of care delivery going forward,” McSherry said.

McSherry said the pandemic has “really turned digital tools into must-haves” as hospitals aim to treat patients safely without risking exposure to COVID-19.

“We worked practically around the clock to help our customers, including Providence, stand up COVID-19 specific workflows and automation in just days around telehealth visits, remote patient monitoring, behavioral health and supporting in-patient visits,” he said.

Xealth customers include Providence, Duke Health, UPMC, Atrium Health, Partners and The Froedtert & the Medical College of Wisconsin health network.

The startup makes money by licensing its platform to healthcare providers. Competitors include Redox and Sansoro Health, both of which integrate third-party applications into EHRs.

(Xealth Image)

Xealth is one of many digital health startups that have seen demand rise this year. Venture funding for the U.S. digital health sector is expected to break a new record in 2020; companies already raised $5.4 billion through June, according to RockHealth.

“While the pandemic appears to have stoked investors’ appetite for digital health companies in particular, their focus could shift in a longer term economic downturn,” RockHealth said in a recent report. “On the other hand, there’s never been a greater need — or demand — for technology-enabled healthcare, a viewpoint the digital health investor community has so far this year resoundingly affirmed.”

Tech giants including Apple, Amazon, Google and Microsoft are also investing heavily in digital health products and services.

McSherry started Xealth with co-founder Aaron Sheedy. The pair have been working together for more than two decades, tracing their roots back to a shared office at Microsoft in the 90s. They worked together at Swype, the popular texting keyboard maker that raised investment from Nokia and Samsung and sold to Nuance Communications in 2011. McSherry was CEO at Swype and became Nuance’s VP of advertising and content and Sheedy its VP of mobile product.

They took the plunge into healthcare after McSherry was invited by Providence CEO Rod Hochman to be an entrepreneur-in-residence at Providence Ventures in 2015.

The company received a $1-to-$2 million loan from the federal government’s Paycheck Protection Program. It had a small number of layoffs to help manage costs, given that its customers have lost billions of dollars in revenue due to the pandemic with cancelled or delayed procedures, surgeries, and doctor visits, McSherry said.

Xealth now employs 58 people. Total funding to date is $28.5 million. Other backers include Atrium Health, Cleveland Clinic, Froedtert and the Medical College of Wisconsin, MemorialCare Innovation Fund, Providence Ventures, and UPMC, as well as McKesson, Novartis, Philips, and ResMed.

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