A healthcare VC who helps oversee $1.1 billion reveals the biggest mistake she made and how it shapes her investments today
- Annie Lamont has spent the last three decades as a venture capitalist backing some of the biggest names in healthcare.
- But not all of her investments have panned out.
- One investment misstep she made in the 90s, investing in a roll-up of doctor's practices that flamed out, has helped guide the investments she makes today.
- Lamont is one of Business Insider's 10 People Disrupting Healthcare. You can see the whole list here.
Looking back, Annie Lamont is glad she did it.
Lamont is the co-founder and managing partner at Oak HC/FT, and she's been investing in healthcare companies since the 1980s.
In the 1990s, while working at Oak Investment Partners, she was involved in a company that was essentially a roll-up of doctor's practices, known as a physician practice management company or PPM. The idea was to combine the management of different practices and in exchange give doctors stock in the company so they could benefit financially from the company doing well. That didn't exactly pan out.
"The reality was, for the doctors, this was a stock play," Lamont said.
The company that oversaw the practices wasn't helpful at making the doctor's jobs easier than they'd be if they were on our own. At the time, it didn't make as much sense to join forces.
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"There weren't as many reasons you needed to aggregate," Lamont said.
In the end, Lamont said, it was a "massive flameout."
She recalled a group of doctors that really put the nail in the coffin.
"We had a group of 12 doctors we paid out $18 million for, and they just left and started it all over next door. They had no problem with that," Lamont said. The lack of doctors, and competition facing the initial practices made it impossible to sustain. "That's what cratered it, it was the doctor's lack of commitment to it."
To be sure, the company could have done more to make it worth the doctor's time to stick around, Lamont now says. "It's a two-way street."
Read more: A top VC who's spent 3 decades investing in healthcare shares her best piece of advice for investors
The investment taught Lamont an important lesson she uses today when picking her healthcare investments.
"The lesson was 'Don't invest in a financial play,"' Lamont said. "A roll up that's just about the financials, and you're not really providing joint value, is not going to work. It's not what we're about. It's not where we want to be in healthcare."
That's where the idea hit her:
"If we're not lowering costs and improving quality, I'm not interested. I'm not interested in just increasing people's salaries or taking more money from the system."
Today, she's still making investments in companies that put a number of doctor's practices under one management team. But when vetting them, she makes sure that it's for the right reasons.
For instance, Oak HC/FT has invested in primary care companies like VillageMD and Paladina Health, which operate primary care practices. Her hope is that by combining practices, the primary care doctors might be able to get paid more for the care they deliver because they'll be on the hook for managing their patients' health and keeping them from needing more costly types of care.
"We want more primary care docs in America, we don't really need more specialists in America," Lamont said.
- Read more:
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