Circulo Health will lay off about a third of its workforce, effective immediately, as it narrows its strategic focus.
Going forward, the Columbus, Ohio-based startup will be a tech-backed home- and community services (HCBS) provider, mothballing its Medicaid health plan business and its primary care clinic business. The health plan business was the company’s original concept.
Circulo Health employed about 380 people; 250 worked in the HCBS segment, before Friday’s layoffs. The HCBS segment was not impacted by the layoffs, executives with the company said in an interview.
The HCBS division, named Circulo Home, serves the intellectual and developmental disabilities (IDD) population in 12 Ohio counties via direct support professionals (DSPs).
DSPs are not health care providers or caregivers. Rather, DSPs coach or guide people with IDDs toward independence and community integration.
Most of the terminated employees worked in product development and services roles for Circulo Health’s Medicaid insurance plan and primary care clinic businesses, said Chief Marketing Officer Dana Guilfoyle.
Olive AI Inc., a health and insurtech startup in Columbus, spun out Circulo Health in February 2021 to use Olive’s tech and AI stack to become a next-generation Medicaid managed care company (MCO). That business never debuted. Olive has also had to lay off staff.
Circulo Health landed a $50 million Series A round from the same venture capital firms that backed Olive: Drive Capital, General Catalyst, Oak HC/FT and SVB Capital.
In January, the CEO of Albany, New York-based primary care startup Huddle Health said his company was acquired by Circulo Health. Circulo intended to roll out primary care clinics that would serve all populations in coordination with the expansion of the health plan.
Axios Pro first reported the layoffs. The report states up to 50% of Circulo’s workforce could be impacted.
Tom McMahon, vice president of IDD programs, said the company will use part of the tech and other tools the insurance business developed to bolster the HCBS business. These will include workforce management, session and client tracking, and other to-be-developed tools to improve the lives of people with IDDs.
McMahon said he is excited about new HCBS tools and services for two reasons — improving the markedly bad experience people with IDDs have in the health care system and lowering their care costs.
“It’s a really bad health equity problem that people with disabilities will be treated so poorly in our healthcare system,” McMahon said. “It’s just unconscionable just as human beings and they haven’t had really bad outcomes that are extremely expensive.”
Medicaid covers the lion’s share of HCBS-related and IDD-related costs.
About 12.6% of Ohio’s Medicaid spending — $3.21 billion out of $25.4 billion — went to HCBS. But enrollees who received HCBS totaled about 7.4% of the total enrollment. Both figures are based on data for the fiscal year 2020 maintained by the Kaiser Family Foundation.
CareBridge, another Ohio Valley startup in the HCBS space, has also made recent news. The company has raised $140 million in a funding round led by one of Circulo’s investors. CareBridge seeks to help Medicaid MCOs reduce the total health care costs of members receiving HCBS by improving their care outcomes.
Circulo Home is focused on growing its DSP workforce, McMahon said. It has hired 206 employees since March. The company announced last month it would hire 1,000 direct support professionals.
McMahon said that the company is facing a potential tailwind with several IDD agencies laying off staff or shutting down under the pressure of wage inflation.
“It’s the key to the business,” McMahon said of hiring. But he also acknowledged that turnover among DSPs is high, meaning that 1,000 DSP hires may translate to a much lower workforce number.
He gave 500 as an example of the number of DSPs the company may have by the end of the year.
“But that would be a meaningful increase in revenue for us — It’d be more than double,” McMahon said. “It turns out that revenue is as important to investors as almost anything else. It’s part of why they want us to focus on this. The other things we were engaged in are very exciting, and they may come back at some point.”