Health-tech company Deacon Health launches with titan health care backers

Nashville has a new health-tech startup, backed by local health care titans.

Kyle Cooksey, who spent four years at one of the nation’s fastest growing companies, Monogram Health, on Tuesday launched his company, Deacon Health, a technology-based specialty care management provider.

Deacon Health, which also launched a platform that supports patients with multiple chronic diseases, is entering the community with $7 million in seed funding. The funding comes from Herb Fritch, founder and former CEO of HealthSpring; Larry Cash, former president and chief financial officer of Community Health Systems (NYSE:CYH); David Vandewater, founder and former CEO of ArdentHealth Services; and other parties.

“This is my first position of leadership as a CEO, so I have held off for a very long time to leverage my relationships,” Cooksey told the Business Journal. “I think both through decades of trust and my proven ability through Monogram and my leadership position there, everyone just saw the right person in the right leadership at the right time to really get behind and support.”

Deacon Health is now a player in the value-based care space, an area of health care that has been buzzing in recent years, and is "the future of health care," according to Vandewater. The company has been built up over the past couple of months with the help of Cooksey’s investors, who helped craft the right business model after the original owners of the technology, Nashville-based Episode Solutions, began winding down their operations.

“Today’s health care providers face a challenging shift in pay models, which takes away from their primary focus – providing quality care for their patients,” said Fritch in the release. “Deacon Health’s underlying technology is proven to improve patient outcomes and cost efficiency resulting in savings for providers and payers alike”

The company — which has 40 employees, 32 of which came over from Episode Solutions — partners with hospitals, accountable care organizations, management services organizations and payers to help specialty surgeons navigate care before and after surgery. The company also works on care through non-surgical pathways when it’s appropriate. The goal is to provide patients with the right care, provider and journey so they have positive outcomes while reducing unnecessary visits and costs.

“When you think about how this is different from Monogram or CareBridge, I would say that we’re specially focused on the [muscular and skeletal] population within a supporting polychronic model of care for those comorbidities,” Cooksey said.

Deacon Health is powered by technology it acquired from Episode Solutions, where Cooksey spent roughly seven months as president and four months as CEO. Episode Solutions still exists in a winding-down capacity, according to Cooksey who transitioned from Episode to Deacon on Feb. 1.

“Their business model was broken, and they took on too much debt. And so, the company went through an Article 9 UCC process, and our senior creditor decided to support the future of the business, but in a way that was not laden with way too much debt,” Cooksey said. “We were successful navigating through that process and then launched Deacon Health as the new debt-free, well-capitalized, proven platform.”

Cooksey purchased the technology after Episode’s senior lender acquired it through public auction and gave it to Deacon Health for an equity ownership position in the company. The technology, which works with the Centers for Medicare and Medicaid Services, lowers the cost of care by 13.5%.

“There's a lot of waste in that post discharge world, and we historically have been able to reduce that,” Cooksey said. “We believe that that number will increase because as payers focus on conservative pathways, avoiding surgery when unnecessary, then we will see that number rise even more.”

Over the past three years, the cost of health care has increased by more than 5% each year, according to Cash.

“Given the complexities of our health care system, providers and payers face an especially challenging situation – controlling health care costs while continuing to provide quality care,” said Cash in a press release. “With extensive experience and expertise alongside its proven technology, Deacon Health is well positioned to partner with health care organizations to successfully participate in value-based care, improve quality and control cost.”

The $7 million in funding will be used as runway to get the company going while it raises its next round of funding, according to Cooksey. The company currently has 18 contracts across its four key pillars of businesses teed up for completion in the next three months.