Cortica has extended its Series D funding round by an additional $40 million.
The round comes amid a downturn in investment volumes in behavioral health. Both private equity and venture capital activity in health care has slowed down immensely. But Cortica has secured a total of $115 million in its Series D round. The company announced the initial $75 million round in April.
The new funding will go to helping the company scale up its integrated specialty care model for children with autism and other neurodivergencies. Specifically, it will fund the expansion of Cortica’s office count, technology development, research and clinician and patient experiences.
CVS Health Ventures led the round. LRVHealth, Ascension Investment Management and the University of Wisconsin Foundation also participated in the round. Justin Brock, executive director and partner at CVS Health Ventures, is now a member of the Cortica board of directors.
Cortica offers multiple specialties in each clinic to care for children with autism and other neurodivergent conditions. These include developmental medical care, neurology, speech-language pathologists and physical therapy. The model is geared toward holistically improving health, simplifying the family-patient experience and innovating payer reimbursements through value-based care.
“I do think that this is the direction that optimum care is going, or at least at minimum, needs to go,” Ellen Herlacher, a principal with LRVHealth, told BHB. “It’s [the autism industry] very fragmented. There’s a tremendous amount of capital going into this segment, but no one is really stitching together everything that needs to be stitched together like Cortica.”
Last year, Cortica announced a value-based care arrangement with the insurer Point32Health. The company is at the forefront of value-based care contracting in the autism space. Few providers and payers engage in the practice of using alternatives to the fee-for-service reimbursement model. Cortica CEO Neil Hattangadi previously told BHB that a small portion of the company’s revenue is tied to value-based care.
The company also provides care in the home as well as in centers. Cortica’s leadership recently told BHB it aligns its care setting toward the patient’s needs. The company also deepened its clinic presence by acquiring Trumbull, Connecticut-based Springtide Child Development and Scottsdale, Arizona-based Melmed Center. This was announced in conjunction with the previous $75 million funding announcement.
“With 1 in 36 children in the United States now affected with autism, and that prevalence continually climbing, partnerships between the field’s most innovative clinicians, strategic investors, health plans, and health systems are essential to defragment the traditional care model and evolve the reimbursement paradigm,” Hattangadi said in a news release. “We can no longer wait. Collectively, we’re in a position to solve one of the most pressing challenges confronting humanity.”
The autism therapy segment faces several brutal challenges. The most potent are wage inflation, workforce shortages, elevated interest rates and stagnant payer rates. These challenges have led to high-profile stumbles among the segment’s largest companies. For example, the Center for Autism and Related Disorders (CARD) was sold back to its founder over the summer, and Invo Healthcare and Hopebrige have contracted their footprints.
Herlacher said the company may be able to overcome workforce challenges through its integrated care model and cultural appreciation of coordinated care.
“This is an aspirational approach to care that is very appealing, especially to MDs,” Herlacher said. “For BCBAs (board-certified behavior analysts), that is an area that does have more turnover. … Cortica has done interesting things to shore that up by having schedules that provider a more reliable, more sustainable quality of life.”
CVS Health Ventures has made several recent investments in behavioral health-related business. These include the autism- and research-focused electronic health record provider SpectrumAi and telepsychiatry provider Array Behavioral Care.
“We’ve been very impressed by the results of Cortica’s integrated model, which aligns with CVS Health’s strategy to improve holistic outcomes, increase patient and clinician satisfaction, and reduce excess utilization,” Brock said in the release. “Cortica is taking a national leadership role in defining whole-child, whole-family, value-based care for autism, and we’re excited to be a partner in that evolution.”