Show Me the Money: How To Get Paid In Healthcare (Part 3 — Payer)

Healthcare is one of the only industries where the consumer of the product / service is usually not the one who pays for it. Understanding who pays for healthcare is important in bringing innovation to the space that’s lasting.

This is a series that aims to help start-ups, in particular those with tech founders who are entering healthcare for the first time, get up to speed on the basics of healthcare commercialization.

To review, healthcare services and medical devices are sold to three major categories:

1. B2C: the consumer (the smallest)
2. B2B: the provider
3. B2B: the payer

This is part 3, where I’ll deep dive into payers, and where exciting work is being done outside of “sick care” into “health” care.

B2B: The Payer

What they care about: payers want to manage the population they serve by lowering the overall cost of care

• Payers are a great place for chronic disease management that are not so “episodic”, and where recent push in healthcare to provide “health” rather than just “sick care” have gained more traction.

• New technologies can gain reimbursement and coverage from payers by showing better efficacy and lower overall cost, though they are still paid through the providers in this case
• Several programs target payers directly by helping them manage a population (e.g. diabetics) whereby preventing, delaying, or managing the chronic condition over a long period of time allows payers to save money

Types of Payers:

• You’ve probably heard of the large insurance companies like Blue Cross Blue Shield, Anthem, Cigna, etc. though sometimes they hold the risk while other times they’re simply the interface to administer the insurance program (e.g. new companies such as Collective Health)
• Many large companies (think Walmart, Amazon, Lowes, Home Depot) choose to self-insure, (61% of covered employees according to Kaiser Family Foundation), meaning they take on the cost of the care for their employees and dependents
• There’s been many new companies in the insurance space itself as well such as Oscar and just launching Anglehealth that bring a new tech angle to this existing business, by adding tech enabled tools, preventative services, and revamping the whole patient experience

Example companies:

• Chronic disease management companies love to target self-insured employers, such as Omada, Virta, Onduo, Livongo (now Teledoc), and Hinge

• This started in diabetes but nowadays you think of a chronic disease and there’s likely a company (or five) trying to tackle it: heart failure, diabetes, mental health, gut health, hypertension, sleep apnea, etc.
• Others such as Carrum Health try to help them arbitrage differential cost of care but don’t provide the care directly
• With COVID, telehealth and care at home have been on the rise, targeting both providers with tools to enable them to do telehealth (e.g. Myia health) but also going directly to payers. In fact, Amazon Care just launched with its own version of telehealth first serving it’s own employees.

Limitations: Self-insured employers as well as Medicare Advantage plans seem to be the best place to start for many of these companies. Since many programs target chronic diseases, it can take quite a long time to establish efficacy.

Once “sold” to an employer, it’s just a foot in the door to also obtain employee engagement to use the services, so it’s both B2B and B2B2C sales. Given patient privacy issues, employers cannot get into specific identification of who should actually enroll in certain programs so programs need to get the attention of individuals to engage and adhere

Opportunity: Much of healthcare is long term and not episodic, and given the way healthcare is paid for in the US, which is mostly by payers and not consumers, this is where large scale population based impact on health and wellness can really make a dent before it is too late

Stay tuned Monday for the final part 4 bonus: medical device channels