Healthcare's Passion Economy (Part 1)
How to use relationships to quickly penetrate into complex healthcare spaces
In this series I will be exploring an emerging trend that I think will be a meaningful path to patient aggregation now and in the upcoming years. Explicitly, I’ll elaborate on:
Part 1 (this post):
Growth strategies employed by passion economy companies
How these strategies have parallels in healthcare, leading to a framework for patient aggregation
How the application of this framework may be advantageous over other healthcare strategies
Potential impact and opportunities
Case studies of companies using this framework
Opinions are my own. Let’s dive in!
In 2008, Kevin Kelly (Wired magazine’s founding editor) wrote the evergreen 1,000 True Fans, which has since become the philosophical backbone for the passion economy. Its core themes are:
For success, individual creators need to obtain and maintain direct relationships with ~1,000 true fans.
“The big corporations, the intermediates, the commercial producers, are all under-equipped and ill-suited to connect with these thousand true fans. They are institutionally unable to find and deliver niche audiences and consumers”
The key word here is “relationships”. By providing platforms of tools and services for “1,000 fan” writers, video game streamers, small business owners, and creators, businesses like Substack (you’re here now!), Twitch, Shopify enable creators to capitalize on relationships with their new and existing consumers. What’s more is that these relationships are not abstracted away (as would be the case for successful Gig Economy businesses like Uber) - rather, they’re celebrated as core components to the business.
But why did Substack, Twitch, Shopify, etc. focus on these relationships? The powerful element of relationships is their ability to accelerate growth and consumer distribution. Let’s look at one of my recent favorite examples, Cameo.
You most likely have heard of it by now, but if you haven’t, Cameo has been equally lauded (TIME's 50 Genius Companies of 2018) and dismissed (“a respirator for C-list celebrities gasping for their last bit of relevancy and revenue”) because of its business. Essentially, Cameo offers a marketplace for consumers to purchase personalized video messages from celebrities, ranging from a TikTok-famous monkey to Floyd Mayweather.
One of the most undeniable components of Cameo’s business is its growth strategy. Lenny Rachitsky broke it down best recently: instead of recruiting thousands of users, “Cameo found that if they recruit celebrities, the celebrities themselves bring the fans to the marketplace”.
(With Gig Economy models, this type of growth cannot occur. Drivers do not build/maintain relationships with riders because they provide a commoditized service and can be easily replaced with other drivers. Therefore, Uber must recruit both driver and rider, as they cannot take advantage of driver-rider relationships for growth.)
Cameo’s focus on tapping into the creator’s relationship and ability to connect with the consumer exponentially improves their customer acquisition ability. One-to-one becomes one-to-many.
In sum, passion economy businesses achieve scale by:
Identifying domains with “1,000 fan” creators who cultivate relationships with consumers
Providing creators with tools and services which empower their business and encourage consumer connection
Capitalizing on creator-consumer relationships to recruit consumers
Let’s apply these learnings. How do these passion economy strategies relate to healthcare?
Just as Cameo and Shopify zeroed in on under-resourced creators / small-business owners with relationship-building ability, healthcare companies have the opportunity to zero in on similar individuals, who I’ll refer to as “service providers”. Essentially, this will be all individuals or small scale organizations who are involved in a given person’s care experience - healthcare practitioners, healthcare support, care agencies, insurance agents, social workers, etc.
Healthcare is commonly viewed as having three main players: patients, payers, and providers. However, “providers” here more often than not looks to the large revenue, incumbent health systems, and less so the individuals that comprise the system. Any individual/organization outside this realm commands even less mindshare.
Service providers however are the ones with the most frequent and direct contact with patients, and thus are in the most advantageous position to develop relationships, increase engagement, and influence care decisions. As patients increasingly become (or are forced to be) decision makers in their own health, it’s not unlikely that they will turn to these service providers for deeper assistance. In other words, service providers will become nodes of patient aggregation. This is especially the case in more complex healthcare problem spaces.
Every domain of service providers also is rife with pain points to be solved. Broadly speaking, service providers are:
Under-resourced: Burnout is a well-documented problem for service providers. They also often need additional resourcing to be able to make or implement optimal decisions for patients. An example: during her time at Clover, Uno Health CEO Anna de Paula Hanika noticed that the task of enrolling individuals in cost-savings programs often fell on either clinical or insurance staff, who often lacked the time and/or necessary expertise to provide such assistance.
Misaligned: Healthcare’s poor incentive structures can create conflict between a patient’s best interest and a service provider’s business priorities.
Inefficient: Service providers have specific capabilities, but patients have a wide variability of needs. This results in a supply-demand matching problem, which, if unsolved, leads to inefficient coordination and additional costs for both patient and service provider.
Lacking in scale: By nature of functioning in smaller settings, service providers do not have access to the benefits that come with scale - not only resourcing, but pricing leverage, scaled data insights, etc.
There are (at least) two ways to monetize this avenue as well:
Sell directly to service providers
Sell access to aggregated service providers (and their patient relationships) to payers or incumbent provider systems.
By utilizing service providers to engage with patients (through initially solving service provider patient points), healthcare organizations can unlock the same one-to-many distribution to consumers (aka patients) that passion economy companies experience. Applying the passion economy strategy to healthcare results in a framework for patient aggregation:
Healthcare Patient Aggregation Framework
Identify the domains of healthcare where:
The core service provided requires (or is greatly enhanced by) a longitudinal relationship with the patient
There exists a long tail of fragmented service providers
This long tail of service providers is underutilized and/or under-resourced
Empower service providers with tech infrastructure, process improvement, data insights, services, support so that each can:
Grow their own business
Lower operating costs
Provide patients with top-of-the-line experience / care
Nurture patient relationship and engagement
Through service providers, recruit and develop long-standing relationships with their patients
Continually elevate patient experiences and outcomes with data/tech infrastructure
Utilize engaged patient population to exert scaled leverage on incumbent systems
Aggregation is the name of the game in all fragmented industries, and especially in healthcare. As digital health pioneer Chris Hogg penned in his recent piece, “Healthcare organizations in the U.S. strive to obtain scale and mass in order to wield power in pricing and contracting. This level of scale and mass comes from the aggregation of patients, physicians, facilities and buyers (employers).” It creates more than just larger revenues - done correctly, aggregation creates influence.
Of course, this is no secret, and the incumbent system knows this as well as anyone. Their misuse of this leverage combined with inadequate/misaligned business models, inefficient infrastructure/technology, and inability to innovate leads to what happens everyday - higher prices passed onto patients without marked improvement to the quality of services. With no meaningful way to aggregate, patients cannot collectively bargain against the system. The failures of the system more often than not are forced upon them, while anything better than the status quo experience relies on goodwill from healthcare incumbents.
Yet, patients are obviously the true end-user in healthcare, and patients, in aggregate, will sway the decisions of incumbents. In an arena of Goliaths, how do you create a David-like advocate for patients? Can you aggregate patients for good and exert patient-favoring leverage? How do you do this as fast as possible and build a successful, sustainable business?
This framework provides an answer to those questions.
Click here for Part 2 or Part 3.
Special thanks to Nikhil Krishnan, Andrew Pajela, Chris Hogg, Alex Zhang, Neal Khosla, and Byron Edwards for helping workshop this. Candidly, this series was a whole mess before their feedback :)
Please feel free to leave comments or questions, and don’t hesitate to reach out to connect or collaborate!