Olive AI Inc. plans to divest one of its two remaining product lines, prior authorization software for insurers, leaving the unicorn's original focus on administrative automation for hospitals.
Less than two years after raising $400 million, the Columbus health IT company is facing "an unforeseen and significant shortfall in our capital plan," according to a Feb. 9 all-staff memo from co-founder and CEO Sean Lane that Olive shared with Columbus Inno this week.
The memo was to announce 215 job cuts, which Inno previously reported, but it also announced the planned divestiture of the product line, called Utilization Management, and its associated employees. The company did not publicly share that move at the time.
"In our current position, we cannot make the necessary investments to be successful in transforming both Autonomous Revenue Cycle and Utilization Management journeys for our customers," Lane said in the memo. "We must prioritize and direct our critical resources toward Olive’s established strengths."
"This means a return to our core area of focus: building automation and intelligence technology for health systems that makes their revenue cycle operate more effectively and efficiently."
Through a spokeswoman the company declined to provide further details such as the relative size of the division and number of employees impacted. The online publication Axios first reported on the divestiture after obtaining a copy of the memo.
Lane pledged to keep remaining employees updated on the timing, structure and other details of the divestiture as they take shape, as well as keeping customers informed of any changes.
This month's cuts followed the termination of 450 employees in July. At the time the company had 850 workers remaining. Olive did not confirm its current headcount; it could be 635 or less after the latest cuts. Some affected employees, in updating their LinkedIn status, said the reduction was 30% of staff, which would mean 500 remaining.
Because Olive's workforce is distributed nationwide, 44 of those losing their jobs in this round live in Ohio, according to a layoff notice filed with the Ohio Department of Job and Family Services. Affected positions listed in the notice, totaling 209, include an executive vice president and several senior leaders, including vice presidents of engineering, business development and brand. The largest category was software engineers. Olive also is cutting its head chef.
"I know this is not easy news to hear," Lane's memo said. "I regret that we are in this position, and I apologize for the impact it will have on the lives of our team members. ... I’d like to express my sincere gratitude for everything you’ve done to make an impact in healthcare."
Olive is paying employees for 60 days with eligibility for an additional two weeks, and continuing benefits through the month of April.
In the fall Olive sold off some software products, representing 3% of sales, to a sister company that it had spun out of its Olive Ventures division.
What remains is the autonomous bot "co-worker" for hospitals that began the identity of Olive, although it has added capabilities over the years. Called Autonomous Revenue Cycle, the software checks coverage status, checks claims for errors before submission and determines if a procedure requires prior authorization before submitting a claim.
Olive's claims management software received the second-highest score for the category in a January survey by Klas, which rates tech vendors, the trade publication Revcycle Intelligence reported. Clients cited high satisfaction with the product and responsive customer service, the report said. The Klas website says customers initially chose Olive for price and functionality.
"We have years of learning and expertise that are unmatched by our competitors; we have better infrastructure and better technology than ever before," Lane's memo said. "We are uniquely positioned to make sure that health systems are compensated for the care they provide so they can keep providing that care."
Putting Olive in a national context
Olive built up both the product lines through acquisitions. At the end of 2020, days after reaching unicorn status with a $225 million venture capital round valuing it at $1.5 billion, Olive acquired Minneapolis-based Verata Health. In August 2021, one month after a state-record $400 million VC round that valued the company at $4 billion, Olive acquired Oklahoma-based Healthcare IP.
Verata made insurer-focused prior authorization software, part of what became the Utilization Management side to be divested. Healthcare IP was a digital intermediary between hospital billing departments and insurers, part of the remaining core.
Lane's memo appears to indicate the division would be sold rather than shut down.
"This (divesture) will allow this promising solution to get the dedicated time and support it needs to scale," he said.
Verata's founder, Jeremy Friese, who became Olive's president over health insurer markets, was among several top executives including its CFO who left the company in fall. Dr. YiDing Yu, who also came from Verata, is Olive's chief medical officer and and added the title of chief product officer in October after her predecessor departed.
The memo also blames "headwinds of a volatile financial market" for the funding shortage, without elaborating.
Across the country, venture capital firms raised record amounts in 2022, but that drastically slowed to a nine-year low in the fourth quarter, sister publication BayArea Inno reported. Rather than pouring in more capital, VCs are advising portfolio companies to focus on revenue and cut expenses.
Nearly 240 U.S. tech companies of all sizes, public and private, have cut nearly 130,000 jobs in January and February alone, on top of some 160,000 cuts last year, according to online layoff trackers.
