Telemedicine needs a shot in the arm — a consumer experience that’s 10x better!
[This article first appeared on Factor Daily on June 20th, 2017. Accessible at: https://goo.gl/2Lp3cR]
With a paltry 0.7 doctors per thousand Indian people and a very real access problem for people outside large cities, it seems natural that connecting patients to physicians remotely should be a winning business idea. Then why isn’t it taking off? At Lightspeed, we met and spoke with 50+ entrepreneurs building digital health products in India and elsewhere to try and understand the opportunity and challenges; here is a summary of what we learnt.
As a physician, founder of a clinic chain and later an investor in two hospital chains I am painfully aware that many Indians don’t have access to great doctors, yet have experienced first-hand the challenge of scaling up brick and mortar models. I wonder what it takes to build a scalable and profitable primary care platform. I’m sharing my observations to provoke some thought and start a passionate conversation on what it takes to crack this nut.
To simplify the discussion, let us think of telemedicine as an offering of remote medical consultations; as opposed to booking appointments, ordering tests or even comparing prices of medicines.
Market is small and will evolve slower than it seems at first
Top-down market sizing yields a seductive billion plus market, but don’t let that lead you astray. My view is that the addressable market is very limited and expand slowly: in the US, where large players like American Well and Teladoc have been around for 10+years, our estimate is about 30M teleconsults occur annually, over a transacting base of about 20M people, corresponding to 11% of the 220M ecommerce shoppers. In China, where over 450M people shopped online, we estimate a paltry 10M teleconsults occur annually. India, with a much smaller 12–15M monthly unique e-commerce shopping base, is likely a market of only ~10M annual consults at present (see exhibit). And it will grow slowly if consumer preferences in US and China are indicative of how things might unfold.
Discounts don’t work. They do more harm than good.
When was the last time you went to a doctor because she was offering a 50% discount? Now contrast that with: will you try a new store because it offers 20% discount on your favourite phone? You see where I’m going with this.
First, health is a category where margin for error is zero and quality is hard to measure. It is not a commodity. So how does a consumer decide? Ironically, price is one indicator of quality. At my clinic chain, we anecdotally observed reverse price-demand elasticity: people perceived clinics to be higher quality when we charged them a bit more! They visited more often and referred more people.
Second, there is little overlap between free-loading consumers and those that are ready to transact: they have different questions and care about distinct things. Product-market fit completely shifts once discounts are switched off, and takes time to rediscover, adding to the peril of many freemium models. If you’re building a valuable service, charge from day one.
Trust is more important than any other category; and it takes time to build
Let’s go back to the basics. Why should I trust an app with random ratings with my health? Trust is not easy to build but there is no beating around this bush. My view is that in early days, the trust will rely with individual doctors — not with the platform. Like hospitals, it will take a handful of years for a platform brand to emerge and resonate in the minds of people. So, what does one do to build trust?
First, aim for quality and design for a transformational experience. Get the best doctors, aspire to offer best-in-class care. Provide end to end care — close the loop. As a patient, I don’t gain much from a consult, unless I can also get tests, medicines and come back to consult you if I’m not getting better. If my doctor today is already available to me over WhatsApp why do I need another service? How does the consumer experience become 10x better?
Second, try to foster a long term doctor-patient relationship. Can I follow up with my family doctor I see offline? Or have a way to return to the doctor I saw the last time? Xingren Doctor* (China) allows patients to follow up with their doctors. DocsApp (India) allows patients to speak with the same doctor over and over again. Third, try to find offline touchpoints (I am not saying build offline presence) such that patients are able to waltz back and forth, find someone if things don’t work out.
Failure to build trust is the #1 reason why freemium Q&A models have failed to scale. Yes, they generate a lot of traffic, but 90%+ volume comes from casual enquiries like erectile dysfunction, impotence and sexual health.
Low value and infrequent use case
Finally, ticket sizes are small ($2 to $5) and the service is used 1–2x a year. Pick categories where repeats are high, disease state is long, and spend adds up over time — consider diabetes, pregnancy, cardiac care. Because network effects are limited, growth will have to be efficient — there’s no point pumping marketing dollars here. Overtime, bulk of the revenue might come from pharma and blood tests (at our clinics we saw >90% of our revenue and 60%+ margin in these categories).
Going B2B could be the other strategy. Teladoc (US) does over 120M$ in revenue, 85% of which comes through subscription contracts with large enterprise. While similar scale in India is hard to imagine (because enterprise spending on healthcare is low), it could still provide interesting clues to building scale. Ping An (China) does more than $100M in revenues and lots of consults, but they are all reimbursed through the insurer.
Imagine the future
Imagine your diabetic parent wore a lens that monitored her glucose, a smart drug delivery patch that delivered round-the-clock measured doses of insulin, and her doctor checked-in with her remotely every fortnight. Now that’s 10x better!
I believe that telemedicine will work, but it has to fundamentally transform the consumer experience and bring step-change in clinical outcomes. The reason it’s possible is that there’s a technology inflection in our ability to discover new data (wearables), make sense out of them (AI) and act accordingly (smart therapeutics). If you disagree with me, have a new approach, or are building something interesting, I’d love to hear from you!
