Identify a broken patient experience that speaks to deeper complexities and misaligned incentives in healthcare, then connect this to a bolder vision of healthcare’s future.
- Identify a broken patient experience
- Isolate the core opportunity
- Align monetization and stakeholder incentives to maximize patient experience
- Think beyond the status quo experience
This is Part 1 of a series. Here’s the Intro, Part 2, and Part 3.
Identify a broken patient experience
There’s a difference between finding a problem, and finding the right problem. More often than not, successful founders personally witness a broken patient experience, and/or have the depth of healthcare exposure to be able to identify patient-facing bottlenecks.
**Note: Throughout these series, I will be providing examples from these organizations. These examples are ordered in alphabetical order, not necessarily priority.
Capsule
- “I had this moment like, ‘What is going on? How could the experience of getting something so simple as a Z-pak be so terrible and broken that I wasn’t even able to get it? How is there a pharmacy on every street corner in America, and is this happening to the millions and tens of millions of Americans who go to the pharmacy way more often than I do?’ So, I just started digging in.” — CEO Eric Kinariwala
Cedar
- “My fiancé had a terrible billing experience after a short ER visit in Manhattan hospital. The two-hour visit resulted in three separate bills that were very difficult to understand. One of the bills ended up going into collections. I thought, if a first-tier hospital in Manhattan has such an antiquated billing technology, the entire industry must be broken.” — CEO Florian Otto
Maven
- “About six years ago, most of my friends were starting to have children, or, like myself, thinking about having children, and I was witnessing their experiences with a broken healthcare system. Even though healthcare is a primarily female market it wasn’t built to completely support women, especially women in the workforce.” — CEO Kate Ryder
Oscar
- “Having a baby is one of the only positive reasons to interact with the healthcare system, but our experience left us confused about our options and costs. There wasn’t an easy way to interact digitally with providers. There was no good way to understand what the costs would be for a procedure. And, generally the insurer didn’t seem to be particularly pleasant to talk to.” — CEO Mario Schlosser
Ro
- CEO Zachariah Reitano’s personal experiences with erectile dysfunction and its ties to deeper health issues (provided in-depth here) inspired him to obsess about healthcare.
- “With Ro, I found something that I feel so fulfilled obsessing about. I get so excited going down the healthcare rabbit hole, reading some thesis or economic report from 1975 about physician supply, trying to understand the space better to serve the products we build.” — Reitano
Trialspark
- “In my graduate work, my lab discovered a few candidate drugs. When we talked to pharma companies about exploring a clinical trial, we were exposed to how expensive and time consuming that process was. It was eye-opening to learn how they review hundreds of drug candidates a year, and that a new clinical trial could cost hundreds of millions of dollars across all phases.” — CEO Benjamine Liu
- “I think the industry is recognizing that we need to engage more patients in clinical trials, and one way to do it is to allow patients to participate with their doctors.” — Liu, 5:50
Isolate the core opportunity
Take the broken experience, and drill down to find the corresponding underlying problem in the healthcare system. This involves understanding the status quo of healthcare within that domain. What are the assumptions upholding the current experience? Where are the bottlenecks along the value chain?
Where is it complex, expensive, ineffective, and impersonal? Why are things the way that they are? Finding answers to these and similar questions unveil wrinkles of competitive advantage.
Regulation changes also create pockets of new opportunity. The resulting gold rush can sometimes lead to the adoption of poor products that meet the new criteria, but also introduce new problems. When riding these tides, it’s crucial to build with a patient-centric mindset, both for the sake of the patient and for longevity.
Capsule
- Key opportunity: Resources dedicated to inefficient physical pharmacy locations could be best used towards improving the patient experience.
- Additional insight: The pharmacy is the most frequent interaction in the healthcare ecosystem, but these interactions are underutilized.
- “Why do they spend so much money on rent, and what happens if we actually didn’t have thousands and tens of thousands of stores, and we took all of the money that you invested in rent, and we put that back in hiring better people who can care for you better?” — Kinariwala
Cedar
- Key opportunity: The complexity of patient billing creates friction for patients trying to resolve their bills, although healthcare organizations are increasingly reliant on patient payments.
- “Despite the growing importance of this revenue stream, providers fall short in effectively capturing patient monies. There is a common misconception that people don’t want to pay their healthcare bills and avoid the task. Research indicates that most patients are willing to pay — yet only 30 to 40 percent actually do. What this means is that healthcare organizations have more of a process problem rather than a patient-willingness issue.” — Otto
Maven
- Key opportunity: Despite women controlling about 80% of healthcare decisions, women’s health itself is underserved, with a severe lack of products and brands built for women by women.
- Additional insight: Poor maternity leave policies are detrimental to workforce productivity for self-insured employers, an underexplored customer group at the time of Maven’s launch.
- “Why, for example, aren’t there easier ways for women to navigate fertility problems, get postpartum care or access birth control? Why is seeing a good doctor so difficult and inconvenient that getting a prescription for something like a urinary tract infection requires putting your entire life (and your family’s life) on hold? How is it even possible that the United States has the worst maternal mortality rate in the developed world?” — Ryder
Oscar
- Key opportunity: User engagement tied with virtual care is underutilized in healthcare, but will unlock lower unit economics while maintaining or even improving user satisfaction and care quality.
- Additional insight: Health insurers have great data visibility into the healthcare ecosystem, but haven’t taken advantage of this.
- Key regulation: The passing of the ACA opening health insurance exchanges created the ability for insurers to go direct-to-consumer, as well as catalyzing Oscar’s early growth by increasing the market in downstate New York from 20,000 to one million.
- “As health care becomes increasingly fragmented and crowded with point solutions that fail to gain traction, value in health care will accrue to personalized, engaging member experiences.”
- “As the insurance company, we’re in a unique situation to essentially say that the more cases our telemedicine doctors can resolve, the more we can lower total cost of care and increase the satisfaction for the member.” — Schlosser
Ro
- Key opportunity: The convergence of emerging telemedicine regulation, patent cliffs, and increasing deductibles creates an opportunity for direct-to-consumer healthcare, with high pain point conditions as a clear entry point.
- Additional insight: Physicians and care providers are seeking alternative income sources and flexibility as HIPAA-compliant tools that can provide those benefits become easier to build.
- “The insight that we had is that there are certain health conditions that prevent people from thinking about their long term health. We wanted to start with ED because we started with a present pain point that’s indicative of someone’s underlying health, that builds a bond and creates trust with a physician, but the relationship is founded on something that we know we will have the opportunity to add additional value to their life over time.” — Reitano
Trialspark
- Key opportunity: Finding and enabling eligible patients to participate in clinical trials expands the total pool of patient participants.
- Additional insight: Variability and inefficiency in clinical trial operations exacerbates costs and prevents participation from willing physicians despite significant shortage.
- “If you don’t live near an academic center or an existing trial site, you often will need to travel far distances to access clinical trials and leave your doctor to participate. Our model changes this, enabling patients to participate in clinical trials at their local doctor’s office.” — Liu
Align monetization and stakeholder incentives to maximize patient experience
This isn’t just the nice thing to do, it’s the smart thing to do.
People demand results. In order to make sure healthcare is outcome-driven, your company should be outcome-driven. By structuring your business model so that you’re paid for the value you create, you put your money where your mouth is, and champion the patient experience as a result. Everybody needs checks-and-balances.
Meanwhile, for other stakeholders, participation in improving the patient experience was previously not conducive to their best interest. Create the system where working for the patient is intuitive, not full of friction, for everyone involved. This then aligns with your mission and your bottom line.
Alignment creates an easier sell and hones your organizational focus. Patients are going to vote for the best experience with their feet and their wallets. Enterprise clients see an oversaturation of solutions, most of which deliver mediocre or unclear results while racking up fees that don’t match the created value. Since you have to improve the experience to succeed, it’s clear to buy what you’re selling — an easy pill to swallow, if you will. It’s worth noting here of course that, as the market grows increasingly saturated, the demand for better outcomes and smarter incentives alignment grows as well.
With the customer acquired, your focus turns to retention. In DTC healthcare, you seek a maximized LTV / CAC ratio, whereas for B2B2C, you optimize for efficiency of delivering results for clients. With incentives aligned for the patient, the differentiating retention strategy in all patient-facing healthcare converges to patient engagement. By finding new ways to elevate the patient experience (through convenience, cost, outcome, or personalization), you improve engagement, and continue to retain and/or reduce operational costs as a result.
B2B2C
Capsule
- Free delivery for patients, Capsule generates revenue per prescription filled primarily through insurers and collection of copays.
- Kinariwala quotes that only “fifty percent of prescriptions go filled”, mainly due to high patient friction. Capsule reduces this friction to achieve higher fill rates and improved recurring revenue per patient, balancing out its heavier investments into marketing / branding and delivery logistics. It’s also possible that Capsule charges premium rates to insurers by demonstrating improved patient adherence.
- Capsule provides software to doctors, hospital systems, insurers, conventional pharmacies, and manufacturers, delivering information on patient adherence, inventory prediction, etc. that improves clinical and financial outcomes.
Cedar
- Cedar reduces frictions, increases flexibility, and adds transparency to improve a patient’s historically terrible billing experience. For providers, this increases collection volume while decreasing collection time, with the added benefit of an improved patient satisfaction rate. Cedar is paid a percentage of bills collected through the platform.
- “The Cedar business model is based on aligned incentives. In short: we get paid when our client partners see results. Our performance-based approach helps ensure that we continue to deliver the most innovative solutions to providers and an outstanding experience to patients.” — Otto
Trialspark
- Promising faster, better clinical trials, Trialspark doesn’t “get paid by the sponsor unless the data gets checked by the monitors.” [Liu, 12:12]
- To accomplish this, Trialspark addresses bottlenecks throughout the trial process such as patient recruitment, which accounts for up to 40% of clinical trial expenditure. By taking the clinical trial to where eligible patients are and providing a smoother experience, Trialspark is able to dramatically reduce trial attrition compared to its incumbent CRO competitors.
- “There are also a few misaligned financial incentives: the CRO business model is a cost-plus model, so the more variability there is at the site level, the more billable hours they can charge to the sponsor.” — Liu
B2C
Maven
- Maven’s B2C product is offered at less than common copays. Early on, Maven appealed to mission-driven providers to accommodate for the lower compensation rates they provided due to being an early-stage company.
- As one of the early players in the self-insured employer market, Maven provided better fertility experiences and alleviated one of employers’ top benefits expenses in pregnancy and maternity leave. Here it was a double-whammy: reduced medical expenses and faster return-to-work, in addition to improved employee productivity & satisfaction.
- “We cover everything from helping women transition back to work in a healthy and productive way (to help drive retention) to helping employers reduce maternity-related costs, which are often the #1 or #2 healthcare cost for companies.” — Ryder
Oscar
- “The other important characteristic was that the economic interests of insurers and patients are actually aligned — they’re both better off if costs come down. If an insurer is able to help keep its members healthy, to the point where they need less care or even less-expensive care, both insurers and patients win.” — Schlosser
- “If we prove we can pay claims faster, maintain a selective network and show good NPS scores, the providers want to work with us.” — Schlosser
Ro
- “Ro makes money in two ways: 1. Providing software and administrative services to providers. 2. Fulfilling patients’ prescriptions if they choose the Ro Pharmacy Network.” — Reitano
- Ro’s patients pay for their prescription with cash, and $15 to physician consultation and ongoing care, which goes purely to the physician (minus processing fees).
- Reitano wrote up an extensive dive into Ro’s DTC metrics. At large, with cash pay prescription fulfillments being its significant revenue driver, Ro’s incentives are aligned with the patient’s best interest. By focusing on continually adding value for the patient, retention metrics improve, justifying CAC and maximizing LTV / CAC. This results in a “virtuous retention cycle”, well-drawn by Reitano below.
Think beyond the status quo experience
Finally, you need to be bold in how you set your vision. Some of these companies are still riskier, relatively unproven models, but they’re swinging for the fences trying to change healthcare as opposed to approaching it incrementally. Reimagine healthcare with new standards in a way that makes sense, creating an escape from the pointlessly convoluted maze of American healthcare.
Capsule
Capsule seeks to be “ the hub of healthcare”, as the “single most trusted, simplest place for consumers to engage with their health on their phone.”
Cedar
“In the next 5 years, we aim to be the leading comprehensive healthcare consumer engagement platform for providers, engaging with over half of the US patient population to improve their lives.” [Source]
Maven
“For Maven, success in 5 years means enabling women everywhere to get the information they need, affordably, to help them make good healthcare decisions for themselves and for their families.” — Ryder
Oscar
“We founded Oscar to catalyze in American healthcare the same positive market forces that have long existed across every other major consumer market: the need for a clear and differentiated value proposition, competition, and choice.” — Schlosser
Ro
“Our ultimate vision is to be every patient’s first call. So whenever they have a question or a symptom, they reach out to Ro first.” — Reitano
Trialspark
Reverse Eroom’s Law by running trials “50% faster“ than the previous year [Liu, 13:11]
