Mike Botta, Sesame, on building a direct care marketplace as a first time founder

Sesame is a New York-based startup building out a direct care marketplace for individuals to purchase a full range of medical services (think doctor’s visits, MRIs, X-rays, etc.). Sesame was founded by Mike Botta, John Fontein, and David Goldhill, who have deep expertise in healthcare policy. We’re super excited to have Mike Botta join us on this episode, where we talk about the opportunity in direct care, what it’s like to operate out of midwestern markets, and his journey to becoming a founder.

Mike gives us the run down on his (extremely impressive) career path (0:43–2:30)

• Began his career with IMS Health, which inspired him to more closely examine incentives. This motivated him to get his PhD.
• Received his PhD from Harvard in Health Policy. During his PhD, interned at the Obama White House on the Affordable Care Act.
• Following his PhD, worked in McKinsey’s healthcare practice, working with public and private sector clients. Met David Goldhill along the way, and the two of them eventually started Sesame.

What problem is Sesame hoping to address? (2:51–5:30)

• Sesame is a direct-care marketplace, where a doctor can sell directly to consumers who want to make appointments and pay up front. It’s not so different from Hotel Tonight, which helps hotels sell of available hotel room inventory for last minute travelers, or Expedia in letting doctors customize offerings and market to specific patient segments.
• Mike and David were looking to solve problems for people who were both insured and uninsured, which have more in common that you might think. Insured populations, given the increase in deductibles, are spending a lot of money on both premiums and out-of-pocket spend towards deductibles. 80% of people with high deductibles don’t hit them! In many ways, this can feel like not having insurance at all.
• On the other hand, while the number of uninsured individuals went down due to the Affordable Care Act, this number is slowly increasing again. Many of these people could access health insurance through the insurance marketplaces, but they choose not to because of the expense. So they spend money out of pocket on healthcare.
• Sesame solves this problem by allowing people to pay up front to save money on their total healthcare spend. Mike makes the great point that this platform isn’t for everyone. But, for people who are unlikely to spend their full deductible, the confidence that comes with paying up front out of pocket is really meaningful. We’ve seen this in a lot of other industries, so the model is just being applied to healthcare.

What are the challenges associated with reaching customers who may be unfamiliar with a product like this? (6:52–12:05)

• It’s hard for some people to wrap their heads around the fact that you can save money by paying up front. The Sesame team spent the past year testing through a ton of online and offline channels, refining their message to understand how to most effectively reach and educate their consumers.
• Right now, the core geographic regions are Kansas City, Wichita and Oklahoma City. Reaching these target segments required a lot of learning, especially given Sesame operates out of New York. They selected cities based on the volume of uninsured patients or patients with high deductibles, and they also looked where customer acquisition costs were low. This allowed them to iterate quickly through a lot of different testing channels.
• The direct-care market in healthcare has historically focused on very consumer-focused luxury items that offer convenience. These platforms usually focus on younger populations with strong income. Sesame instead focuses on a value customer. They think this is a solid long-term play as insurance becomes more expensive and more people look for more ways to save money. Sesame gives people a way to more effectively comparison shop, and people are just beginning to understand the benefits that paying up front offers.

How do you think about managing quality and utilization? (12:25–15:48)

• Historically, the healthcare system has not done a great job of measuring quality. We use cost as a proxy, though there isn’t actually a correlation here in healthcare. There is also evidence that getting recommendations from friends and family doesn’t have a large impact on outcomes.
• Sesame thinks about quality from two perspectives:
  1. They use some of the best quality measures available, such as logging how frequently a provider performs a certain service, which is a good predictor of outcomes.
  2. Working with physician leaders around measuring Patient Reported Outcomes (PRO) on a range of conditions so that Sesame can surface what patients are saying about a given practice.
• We can think about moral hazard here, too, which is the concept that when you’re not paying for the entirety of what you’re using, you might use more of it. With Sesame, the thought is that people will make better decisions when they spend their own money. Plus, many services, like MRIs, still require referrals, so there is still a qualified opinion who can validate utilization.

What’s it like being a first time founder? (15:50–18:05)

• Unsurprisingly, starting a company is different than working in an industry job because you’re taking something that didn’t exist and building it.
• It’s been really inspiring moving from a group of 3 to a group of 40 between New York and Berlin.
• The stress is real. Some of the most stressful moments Mike cites are times when he is testing the infrastructure and the first time he sat down with a group of venture capitalists.
• Hot take: it’s more work than McKinsey was, but he loves doing it!
• You can read all you want about starting a company, but doing it yourself is really unique.

What it’s like to work at Sesame (18:09–22:47)

• Sesame leadership was really intentional about setting company values. The company is unique in that they’re both a tech company and a marketplace, and the values and culture need to reflect these differences. A lot of healthcare companies talk about putting patients first. That’s the first value at Sesame and it’s critical to what they are doing. It’s important to grow in a way that establishes trust with their customers, too.
• The company also spends time thinking about what it means to present healthcare information in a way that is intelligible. They take inspiration from companies outside of healthcare, in spaces like travel, e-commerce, and reservation platforms. Working at Sesame is about building something by remixing some of the best tools and business in the world, while also getting excited about doing something meaningful.
• They just raised a round of funding from General Catalyst, and this capital will be deployed to go even deeper in learning how to serve customers and users, especially in new markets. This is how they’re thinking about growth from a hiring perspective, too, so if you’re reading this and are interested in everything Mike has just described…

Final thoughts (23:51 — End)

• Reach out! You can follow up at Sesamecare.com — they’d love to hear from you.
• If you’re interested in starting a business, do it. There’s plenty of room in healthcare, too.