In-house entrepreneurs ready Providence's third incubated company for spin-off

March 1, 2021


Sara Vaezy, Providence St. Joseph Health chief digital strategy and business development officer, takes part in a virtual meeting with colleagues. Vaezy plays a central role in ensuring Providence St. Joseph Health's incubated companies and the entrepreneurs who run them have the resources and staffing they need to grow and succeed.

This quarter, Providence St. Joseph Health's digital innovation unit is launching DexCare, the third company that it has incubated for spin-off. Under its Entrepreneurs-In-Residence program, the not-for-profit Catholic health system employs businesspeople who shepherd some Providence start-ups to independence and continue to lead those companies as they find their legs in the marketplace.


Aaron Martin, Providence executive vice president and chief digital officer, says employing entrepreneurs in this way is part of the health system's nearly decade-long acceleration of its digital technology strategy. The Providence Digital Innovation Group Martin heads buys or develops from scratch, nascent technologies with the potential to significantly enhance health care delivery. It refines the products and field tests them at Providence health care sites.

If a technology platform shows broad commercial promise, the digital group creates a start-up company to move the product along to a wider market. It may hire entrepreneurs with a proven track record to position the start-up to eventually leave the incubator and secure first-round financing from private venture capitalists.

Providence will receive founder's shares in DexCare by virtue of its role as creator of the company. Separately, Providence's venture capital arm, Providence Ventures, will evaluate DexCare as a potential investment.

Proof of concept
Created and then scaled by the Providence Digital Innovation Group since about 2016, DexCare is a technology platform that the health system uses to make it easier for people who are searching for an ambulatory care provider to find a clinician at Providence who suits them and has open appointments.

It employs artificial intelligence to pull information from the Providence electronic medical records system and its workflow system. DexCare identifies which providers or facilities have capacity to receive new patients and it gives patients and prospective patients a choice of locations and appointment times, guiding individuals to the appropriate care setting.

Innovation group employees built DexCare from the ground up. Providence says that with DexCare it has created a new product category it calls an access and capacity optimization platform.

Serial startups
The innovation group is made up of nearly 200 strategists, software engineers, marketing specialists and investors. Entrepreneurs in residence have had a hand in guiding two of the three technology companies the group has incubated to date: DexCare and Xealth.


After identifying DexCare as a spin-off candidate, Providence hired as entrepreneurs in residence Derek Streat and Sean O'Connor. The duo, who had worked together on another start-up, have been preparing the company for its launch since April 2020. Counting DexCare, Streat co-founded or has been involved in the earliest stages of six venture-backed technology companies. Just prior to joining Providence, he was vice president of digital solutions at Johnson & Johnson, which acquired C-SATS, one of the start-ups Streat led on. O'Connor partnered with Streat in C-SATS. Prior to that, he'd held several senior posts at Intuitive Surgical, a medical device company.


O'Connor says, "There is a lot of value to ideas growing from and developing within large, complex health systems" such as Providence. Streat says this is because the business concepts are put through the ringer of real-life use before they are exposed to what he calls the wild world of courting venture capital funding.

As clinicians, prospective patients and current patients use the DexCare system, the business plan concepts are tested. The providers and patients won't adopt the technology if it's not useful, and that fact drives the entrepreneurs and the digital innovation team to keep refining and polishing the product, says Streat.

Providence uses DexCare technology to increase the number of patients seeking care at its ambulatory care sites including primary care offices and urgent care facilities. DexCare has helped the health system to respond nimbly as patient volume has shifted from in-person venues to telehealth venues during the pandemic, according to information from Providence.

In addition to Providence, five other health systems are using DexCare. Streat said they are not disclosing the names of those systems at this time.

First up
The innovation group began creating Xealth around 2016, and it was the first spin-off to employ the Entrepreneurs-in-Residence development model. It was spun off as a private, for-profit company in 2017. Providence Ventures has invested in Xealth's series A and subsequent financing rounds.

Clinicians use Xealth to "e-prescribe" educational videos and other resources to patients to improve health outcomes. Before turning their attention to Xealth, the four entrepreneurs who shepherded that company, Mike McSherry, Aaron Sheedy, Eric Fu and Sundar Balasubramanian, had worked together at Swype, a virtual keyboard company.

McSherry was Swype's chief executive, Sheedy was chief operating officer, Fu was vice president of platform engineering and Balasubramanian worked in business development. McSherry and Sheedy now hold those same jobs at Xealth. Fu is Xealth's chief technology officer. Balasubramanian is no longer with the company.

Xealth made Fast Company's list of "Most Innovative Companies" for several years. Last summer, Cerner and LRVHealth announced a partnership with — and
$6 million investment in — Xealth.

Providence's Martin serves on the boards of Xealth and Wildflower Health, another company that has a product with roots in the Providence Digital Innovation Group.

Wildflower Health bought Circle in 2018. Circle, a company with a women's health app that gives patients access to health information on pregnancy, breastfeeding and other topics, was incubated within the Providence innovation group. Providence became a customer of Wildflower Health when it acquired Circle. Providence Ventures is a minority investor in the private, for-profit Wildflower Health. (The Circle incubation did not involve entrepreneurs in residence.)

Three, two, one
When DexCare launches as a private, for-profit company and closes on its series A round of funding, Streat and O'Connor will cease to be Providence employees. Other employees who have been working on DexCare will join them at their new start-up.

At that point, Providence will become an investor in and customer of DexCare. The health system has been helping DexCare to identify additional investors.

Streat says, "I am a firm believer that if you are a nonprofit and you want to scale your mission to many people, you need the access to capital that a for-profit can have. You need investment to build these technologies, and that is difficult to do as a nonprofit."

Streat notes that Providence's incubation approach has been successful because the system is able to identify pressing needs in the health care field and make the mission-based case for new technology to fill those gaps. It can get that technology started, and then it can spin it off when the capital is needed for large-scale commercialization and growth.

Streat encourages other ministry systems to consider incubating for-profit start-ups. "I hope more health care systems will do this because there are a lot of problems to solve in health care, and while it's very challenging to address those challenges, if you can find a way to do it in your system, and nurture those ideas, you may be able to scale those ideas" so others can use them as well.

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