Behavioral health company Ontrak Inc. moves from Santa Monica to Nevada.

HEALTH CARE: After 20-year run, Ontrak moving to Nevada

Struggling behavioral health company Ontrak Inc. has joined the ranks of companies leaving Los Angeles County, quietly disclosing on May 11 that earlier this spring it had relocated its headquarters from Santa Monica to Henderson, Nevada.

The disclosure came in Ontrak’s quarterly

earnings release.

“On March 24, 2022, the company entered into a lease agreement for new office space in Henderson, Nevada, which now serves as the company’s new headquarters. The office space under lease in Santa Monica, California, the company’s prior headquarters, has been subleased to a subtenant on April 12, 2022.”

In a subsequent statement to the Business Journal, Ontrak Chief Executive Jonathan Mayhew said the relocation took place in April and provided some insight into the rationale behind the move.

“Ontrak Health has always been a virtual company, even before Covid,” Mayhew said in the statement. “Our hundreds of employees are based all over the country and collaborate on behalf of our customers this way every day. Having not typically relied on a traditional corporate headquarters, we have evaluated our real estate needs and made the decision to maintain a physical office in Nevada for company meetings and a small footprint of employees, as was the case in Santa Monica.”

Mayhew did not provide a current figure for the number of employees. The company reported in its annual report that as of Dec. 31, it had 231 full-time employees.

Managing behavioral health

The move ended nearly 20 years of the company’s headquarters in Los Angeles County. Ontrak was founded as Catasys Inc. in 2003. Catasys had developed an artificial intelligence platform that predicts certain people whose chronic disease will improve with behavior change, recommends effective care pathways that people are willing to follow, and engages people who are not receiving the care they need.

Catasys marketed this technology platform – which it called Ontrak – to major health plans, with the aim of improving health for their enrolled members so that expensive hospitalizations, surgical procedures and prescription medications could be avoided as much as possible. This was intended to deliver substantial savings for the health plans, in theory more than offsetting the cost of the contracts that health plans signed with Catasys.

Customer defections

In July 2020, Catasys changed its name to its main brand offering, Ontrak. But since then, it’s been a very bumpy ride for investors.

In February 2021, Ontrak’s single largest customer, Aetna – a subsidiary of Woonsocket, Rhode Island-based CVS Health Corp. – abruptly announced it was ending its contract with Ontrak. Under that contract, Ontrak had provided analysis of behavioral health patterns and health guidance for 8,400 patient members with Aetna.

Ontrak later confirmed that after that contract cancellation, it laid off about 250 of the 726 employees it had as of Dec. 31, 2020.

Six months later, Bloomfield, Conn.-based health plan giant Cigna Corp. ended its contract with Ontrak, representing a revenue loss of $90 million over three years for Ontrak. Cigna switched its business to San Franciscobased on-demand mental health care startup Ginger.io, Inc.

More layoffs must have followed that contract loss, since the company reported 231 full-time employees by year’s end.

Given these customer losses, it’s little surprise that the rest of the first quarter earnings report conveyed dismal news for Ontrak investors. The company reported first quarter revenue of $5.3 million, down 83% from the same period last year. And the company reported a loss of $16.9 million for the quarter, more than twice the $7.7 million loss for the same period last year.

But the company stuck by the full-year revenue guidance of between $25 million and $30 million that it provided three months ago. This would indicate the company expects contract revenue to pick up substantially for the remainder of the year.

Mayhew told the Business Journal in September that Ontrak was working on a strategy to broaden the behavioral health services it offers. The goal, he said, was to appeal to more types of customers, including employers and physician groups.

And in a May 11 earnings teleconference call with analysts, Mayhew said Ontrak was in contract negotiations with one major health plan and was in the “data exchange” phase of discussions with two other potential customers.

Investors were heartened by the guidance news, sending the share price up 22% to close May 12 at $1.34. But that’s still close to penny stock territory and represents a drop of 98% from the all-time high for Ontrak shares of $79.29 reached just 16 months ago, early last year.