How much light can Castlight shine?

Summary:Of all the financial events that followed passage of health reform none has caused the excitement of the launch of Castlight Health, in part because it is independent of that reform.

Of all the financial events that followed passage of health reform none has caused the excitement of the launch of Castlight Health, in part because it is independent of that reform.

Castlight, which today announced a $60 million venture capital infusion to go along with $21 million it previously raised, is trying to do nothing less than bring price transparency to medicine.

Such transparency was one of the few bipartisan demands in the health reform debate, a magic bullet that can bring market pressures to bear on medicine.

There are other companies trying to get into this business -- insurers like Aetna, publishers like Thomsen-Reuters, even another start-up called Change: Healthcare -- but none has Castlight's potential because of the team it has put together.

The team is headed by CEO Giovanni Colella,  well-known to the industry for having founded Relay Health, now part of McKesson, which is in the business of enabling secure communications between doctors and patients.

Colella made a small fortune with Relay, and led it through the start-up life cycle from launch to successful sale. In VC terms he's a made man.

Relay was also one of the private precursors to the National Health Information Network (NHIN) now so beloved of Washington policymakers.

Speaking of Washington policymakers, Castlight is quick to note that former AthenaHealth CEO Todd Park was also part of the original launch team. He's not there now because he is serving as CTO of the Department of Health and Human Services.

Another impressive early "get" for Castlight is the Cleveland Clinic, which is among the investors. Why would the clinic get involved? Possibly because they are known as one of the few lower-cost providers of high-quality medicine, and a big user of health IT which has done deals with Google and Microsoft.

Good advice is another important component to success, and who invests to give that advice is a marker of potential. Castlight has lined up Venrock, Maverick Capital and Oak Investment Partners. Not a bad team. Money will not be the problem.

The business model is familiar to those in the wellness business, a monthly per-employee fee from self-insuring companies and those just wanting to control costs. In time a per-use charge via the Web is expected.

Critics are going to be all over this. Price and quality are different measures, they will charge. Markets are controlled by insurers, not customers.

But reform, from both parties, has changed the game. The new health reform law provides a business model that can embrace all forms of savings, including on the price of services, and deliver them to buyers. Republicans have long argued that a service like this would make other reforms unnecessary.

More important is the fact that consumers are, over time, going to be bearing more of the cost burden for their own care, even if they're insured. Castlight is riding both the political and market waves, and their market entry is most welcome.

Topics: Banking


Dana Blankenhorn has been a business journalist since 1978, and has covered technology since 1982. He launched the Interactive Age Daily, the first daily coverage of the Internet to launch with a magazine, in September 1994.

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