Modern Health: From Silicon Valley to the Lecture Hall

The Diagnosis
There are one billion people worldwide suffering from mental, neurological or substance (MNS) disorders, with mental illness accounting for 30 percent of the non-fatal disease burden. These mental health issues are widespread and pervasive, impacting people regardless of age, sex, socioeconomic status, and ethnicity. They have been exacerbated by the COVID-19 pandemic, which has negatively impacted the mental health of over half of Americans.

In the workplace, employees are beginning to see mental health as an important issue that needs to be prioritized as an element of culture, training, and on-going support. Despite this, seeking support for mental health issues is a challenge for most employees, with 80 percent of workers reporting that shame or stigma stop them from seeking mental health treatments. Moreover, a 2019 study revealed 60 percent of American workers had experienced symptoms related to mental health, but nearly all of them refrained from speaking to colleagues about their discomfort. Ultimately, while employees want more mental health support, seeking help is a challenge due to cultural stigma.

When employees lack enough support for mental health issues, companies also lose out. A report by the Lancet Commission discovered that mental disorders pose a significant economic burden, and are projected to cost the global economy $16 trillion by 2030. This loss will be attributed to the early onset of mental illness and lost productivity, including 12 billion working days forgone to mental illness each year. At the end of the day, companies that fail to invest in mental health initiatives are missing out on the profound economic upside of investing in mental health. According to the WHO, for every $1 invested in treatment for common mental disorders including depression and anxiety, there is a corresponding return of $5 through employees’ improved health and work abilities.

A Cure for Enterprise
Founded in 2017, Modern Health is a software-as-a-service (“SaaS”) business that provides mental wellbeing software to enterprises. Modern Health’s app includes digital content such as videos and audio and covers topics such as financial wellbeing, healthy lifestyles, mindfulness, and anxiety in a centralized dashboard. Users can also take mental wellbeing assessments and connect with licensed therapists who best suit their needs. Ultimately, while the product itself is similar to blue-chip telemedicine businesses such as Teladoc and Doctor on Demand, Modern Health is a distribution platform focused solely on mental health professionals. This specialized focus allows it to work towards capturing the 80 percent of workplaces currently planning to increase their mental wellbeing support initiatives and growing their Total Addressable Market (“TAM”).

However, what stands out the most about Modern Health’s product is the high level of employee engagement. While regular Employee Assistance Programs have two to three percent employee usage rates and competitor Lyra sports 15 percent engagement, Modern Health boasts over 30 percent engagement. For one example, within one month of beginning its Modern Health subscription, the startup Zendesk saw 20 percent of employees engaging with the Modern Health app and completing an average of 8.2 digital “programs” including assessments and videos.

One potential explanation for this is Modern Health’s digital content collection, which spans a much wider range of topics than competitors. Generic telemedicine companies like Teladoc have scarce content on their apps, and Lyra’s content only focuses on general mental health issues. Modern Health, on the other hand, covers topics such as work performance, relationships, diversity, meditation, and financial wellbeing. CEO Alyson Watson explains that Modern Health, as a result, “covers the full spectrum” of mental health issues and can engage a wider range of employees within an organization.

Moreover, unlike consumer-facing SaaS products including Headspace, Calm, and Teladoc, Modern Health is designed to provide solutions that work across an organization. By functioning at scale, Modern Health helps enterprises track employee engagement and measure their return on investment. Although Modern Health has focused on corporations in Silicon Valley thus far, its organization-wide mental health approach could work for any large group or institution.

The Patients
According to the National Institute of Mental Health, young adults aged 18 to 25 have the highest prevalence of any mental illnesses. In particular, 39 percent of college students report some kind of mental health issue, many of which are developed during their undergraduate careers. Given the prominence of this issue for undergraduate students, it is imperative that academic institutions are large proponents of the solution.

On campuses, student bodies have increasingly pressured administrators to spend more on mental health resources. This has translated to 72 percent of university presidents in the U.S. allocating more funds towards mental health initiatives between 2016 and 2019. However, these investments have done little to support students. Reports show that only 26 percent of students are aware of on-campus services or how to access them; the number who actually use the services is likely much lower.

At present, academic institutions have one powerful resource: on-site counsellors and therapists. However, wait-times to see a counsellor range from a few weeks to several months. In recent years, the rise in demand for counselling services has outpaced enrollment growth by five times and is not matched by the hiring of new staff. Mental wellbeing is one of the strongest predictors of academic performance, and universities are observing fatal consequences such as self-harm, substance abuse, and suicide. Universities need better processes to ensure their investments in mental health are effective and meet student needs.

The Treatment
Given Modern Health’s core competencies and students’ mental wellbeing issues, it is clear that Modern Health’s product-market fit in university campuses is strong. Modern Health has an organization-focused software product with 30 percent engagement rates and a large library of digital content. Meanwhile, universities are suffering from the increased prevalence of mental wellness issues, low levels of engagement, and outdated infrastructure to facilitate counsellor-student relationships. With Modern Health, universities can finally invest mental wellbeing budgets more effectively, and Modern Health will have a quickly-scalable SaaS product that introduces its product to the workforce of tomorrow.

To address universities’ ongoing struggles of managing demand for mental health services, Modern Health should establish client relationships with universities. University administrations would gain access to the Modern Health app through an enterprise subscription paid for using student fees. Then, students would be granted access to the digital content library with existing courses on financial wellbeing and anxiety. Providing access to this content library will help universities support the large number of students struggling with their mental health.

The Beneficiaries
University administrations stand to benefit from introducing Modern Health as their centralized mental wellbeing dashboard. Almost immediately, administrators would benefit from higher student engagement, less-bureaucratic counsellor interactions, and reduced wait-times. Not only would scheduling be streamlined, but meetings themselves would also be more efficient. Telemedicine visit times have proven to be about 20 percent shorter than in-person appointments while maintaining the quality of care, allowing counsellors to reach more students and better meet growing demand.

In the long-term, administrators stand to gain powerful data that can inform countless decisions. For instance, universities could use the data to adjust the annual scheduling of major academic events, such as mid-semester breaks and exam periods. With the wellbeing assessment tools, students can be given a wellbeing “score” to track their mental wellbeing progress and monitor their health throughout a stressful academic career. Additionally, administrators can use Modern Health to collect direct feedback from students. The app can include a feedback form to help universities understand current problems while giving students an outlet to discuss problems.

Exam-ining Value to Students
To enhance its existing content library, Modern Health should add new digital courses that would specifically benefit university students. This can include content on “Dealing with Exam Anxiety” and budgeting for tuition and housing costs. By tailoring the content library to students, Modern Health and institutional partners can maximize the value students receive.

Modern Health should also create a post-graduation subscription option to increase the lifetime value of student customers. This would allow graduated students to access the app’s digital content library by paying a monthly subscription fee. By capturing students early on and creating a reliance on the curated content and measurement tools, Modern Health can create sustainable demand that spans longer than a four-year degree. These students would eventually encourage their employers to invest in the app, resulting in further opportunities for Modern Health.

Making an Impact
To implement their solution, the company should begin with U.C. Berkeley, which is located close to Modern Health’s offices and spends more than $11 million in annual student fees on mental health. After a successful implementation at Berkeley, Modern Health can quickly expand the program to other academic institutions in California and, eventually, across the U.S.

Each year, Berkeley spends an estimated $282 per student on mental health, well above the national average of $70 per student. Additionally, with colleges like Berkeley raising mental health-related fees by up to five percent per year, Modern Health should price its university solution at $7 per student. This annual cost is easily coverable by student tuition fees.

With implementation at Berkeley alone, Modern Health can generate $293,000 in annual recurring revenue, complementing existing sales growth. Assuming Modern Health is able to capture 20 percent of existing academic institutions in California within the next few years, the firm can generate $2.4 million in annual recurring revenue. In reality, the financial opportunity could be much larger, as Modern Health’s strong recognition among young employees will better position it to capture new enterprise clients.

Final Review
To improve quality of life and avoid trillions of dollars of lost economic potential, workplaces and academic institutions must accelerate investments in mental wellbeing. Modern Health should adapt its existing mental wellbeing solution to suit the needs of undergraduate students in the U.S. By doing so, the company will find a stronger product-market fit with universities while educating future employees about enterprise mental wellbeing software. This is an opportunity for Modern Health to increase its annual recurring revenue by $2.4 million within a few years while also solving an imminent health issue.


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