Healthcare's Passion Economy (Part 2)
How does this framework provide advantages over existing healthtech strategies?
This is Part 2 of a series. Here’s Part 1 and Part 3.
Current Implications
While on the surface, this framework may just seem like “Cameo / Shopify for Healthcare”, there are deeper implications that make this a particularly compelling strategy.
It’s well known that there are now two dominant approaches to building in patient-facing healthcare - B2B selling solutions to large payers and employers, and (to a much smaller degree) DTC. These approaches have propelled companies to varying degrees of success, but also encounter common struggles, especially as both approaches strive towards more complex healthcare. These problems can be readily addressed by the patient aggregation framework.
Not only this, but I think constructing infrastructure around service providers will enable the collection of truer metrics around cost, quality, outcome, and experience, which will help facilitate the transition into value-based healthcare experiences for these verticals.
Most importantly, over time, this strategy will result in the aggregation of the long tail of service providers within the chosen healthcare domain, and an advantageous path to an aggregated patient base. With both of these forces aggregated and the added factor of a scaled tech/data infrastructure that can truly support the two, perhaps this creates the existential threat that can impose significant leverage against the healthcare establishment that the overall system desperately needs.
Here are some of the problems patient-facing DTC and B2B companies face today:
Problems:
Costly patient distribution:
Scaling patient distribution is expensive. DTC has finally succeeded in healthcare after years of failure by focusing on healthcare’s transactional domains and acquiring patients through heavy growth marketing efforts. However, as these organizations seek to extend patient LTV by reaching beyond transactional domains into deeper, more complex patient problems, they need to prove effectiveness of their growth strategies for these more complex issues.
Meanwhile, B2B is a tried-and-true GTM strategy in healthtech, but lengthy, extensively bureaucratic sales cycles and the threat of heavy product influence from high-leverage clients are well-known problems. With both the payer and employer channels becoming increasingly saturated, the competition has never been higher, and winning the market will depend on aligning with consumer preference and delivering true utilization - as Joe Connolly said in his recent piece, “instead of fighting for payer contracts, companies will fight for consumers”.
Low patient engagement
With out-of-pocket spend steadily increasing and more options available than ever (cash pay options, MA plans + individual exchanges, novel healthcare models, etc.), more patients are shouldering the burden of making healthcare decisions and becoming shoppers. New wave DTC companies zeroed in on very specific problems that are disruptive pain points for patients and create moments of high transaction intent, but low enough in complexity that the entirety of the patient journey could be virtually isolated, commoditized, then marketed. However, while this approach proved successful in earning high patient utilization in the less complex, transactional domains of healthcare, these companies will need to prove the sustainability of their high engagement as they move deeper into healthcare’s more complex problems.
However, at large, patients are still at-best infrequent utilizers of healthcare, and creating strong engagement is a hurdle that even the best companies like Omada struggle with. Some main problems being:
Complexity: Choosing the optimal path of healthcare decisions requires a strong understanding of both health and the healthcare system, which most patients do not possess. To make matters worse, healthcare information lacks the transparency, usability, and interoperability needed for optimal decision making. This, combined with poorly-designed experiences result in deep patient frustration, which often leads to lack of engagement or outright neglect of important healthcare choices. For instance, 57% of Medicare enrollees do not review their coverage options, with many citing difficulty as a main turn-off. This in turn results in volatile engagement intent from patients, which is difficult to build around.
Patient Trust: Building relationships with patients is mission-critical for not only long-term engagement, but providing better care/experiences. This starts with trust in either the platform or the human contact service provider, which is both difficult to establish and challenging to scale.
(Grabbing deep in my reference bag, I’m reminded of a particular episode of the 90’s hit show Doogie Howser, MD - When Doogie Comes Marching Home. During the episode, teen doctor Doogie Howser takes pride in having broken his previous record of patients seen, but also is challenged by the case of an elderly woman who’s increasingly becoming ill. By spending time with the patient, he learns a detail that helps him successfully diagnose and heal the patient.)
Localization
The more complex the healthcare problem space, the more localized its healthcare will be.
For one, healthcare is embedded with localized workflows, regulation, and operational challenges that vary across communities. Additionally, if your company deals with care delivery, there may inevitably be a point where a physical presence is required, and this virtual-physical handoff is notoriously difficult to coordinate and accomplish successfully.
Meanwhile, building a physical presence (like a clinic) is of course extremely capital intensive.
These challenges mean that the supply of service providers can’t be completely virtualized and commoditized - for instance, telemedicine companies like Teladoc may provide access to a broad net of providers, but service providers that can provide both localized market/navigation expertise and a physical presence to patients when needed are scarce, yet are also the individuals that can provide best-in-class experiences to patients. These problems impede the scaling and scope expansion of virtual-first platforms.
How this strategy addresses these problems:
Compared to other healthtech strategies, the ideal execution of this framework provides the following advantages:
Unlock one-to-many patient distribution: Similar to celebrities on Cameo (and the passion economy at large), service providers are nodes of patient aggregation through which organic distribution can occur. They may either already have penetration through existing relationships with patients or know best practices for developing new ones. Optimally, they are also self-incentivized to maintain and grow these relationships. A tangential example is GoodRx utilizing doctors to distribute to customers. From the Caseload: “Doctors don’t generate any value for GoodRx directly, but are critical as a marketing channel. A patient that hears about GoodRx from their doctor is not just aware, but getting a valuable endorsement from a trusted source.“
*Also - Minimize enterprise-scale sale cycles: The bane of existence for many healthcare companies is the B2B sales cycle: pilot programs, relationship and implementation management, etc. Best-in-class organizations go live within 6 months which is an eternity, especially considering feedback and product iteration needs, and the graveyard of healthtech companies is littered with feature houses that suffered a death by thousand cuts from large enterprise requests.
The monetization avenues for this strategy offer advantages to the standard B2B cycle. Selling directly to service providers will have greatly reduced sales cycles because of the lack of bureaucracy. Meanwhile, access to aggregated service provider networks is an easier sell than a particularly novel solution, especially as value-based care initiatives kick in.Capitalize on pre-existing utilization + engagement intent: Patients that have sought the services of these service providers are already inbound users with high intent for engagement. For the remaining patients, service providers are incentivized to foster deeper engagement. Further, for domains with less frequent interactions / volatile patient intent, working through service providers that are patient aggregation nodes offers an ability to spread the risk of that volatility across many patients.
Achieve patient trust by proxy: Through association with service providers, a company has a faster path to building trust with the patient, which then can be leveraged into deeper engagement and relationships with value-add products/services that go beyond a provider’s abilities.
Overcome localization challenges: Partnering with localized service providers allows access to their understanding of local market dynamics, their existing abilities in coordination and navigation at the lower level, and their referral networks to other local service providers (who can provide access to more patients). If the company provides care, the virtual-physical handoff hurdle is more easily overcome through the patient relationship with the physical presence of service providers. Service providers will also simply use the physical resourcing they already have, allowing you to be much more selective and strategic with capex spending and to pass on savings to patients.
Utilize existing complex healthcare problem expertise: By working with service providers’ existing knowledge, you’re afforded the ability to immediately provide services at current standards and also the time to incrementally improve the standards of experience.
At the end of the day there still will be a need to extend any existing engagement intent into a deeper relationship. There are keys to success here as well - a quick few thoughts:
Patient Experience
When at a crossroads, the patient’s experience should take priority, and the experience of the service provider (and other stakeholders) should be curtailed. Enabling a tight patient-service provider relationship and incentivizing repeat patient engagement will account for this, as well as strengthening the patient’s ties to the company and brand.
Investing in strong brand will enhance patient trust and become a competitive moat at scale. Companies utilizing this framework will be among those that unbundle healthcare from institutions, and unbundling companies need to systemize trust - AirBnB’s disruption of hotels is perhaps the best modern example.
Service provider accountability should be optimized through network design and/or patient choice clarity.
Provide patient choice clarity and autonomy through patient-facing data transparency and interoperable data flows. I’m of the opinion that this is absolutely critical in becoming a true patient aggregator/advocate, as opposed to a PBM-like deadweight middleman.
Provider Experience
To start, create authentic, lasting partnerships by driving conspicuous business value for service providers, with the aim to handle business complexities while enabling service providers to do what they do best: growth & lead generation, process optimization, operational cost reduction, patient (client) retention, service support.
The most business-critical will be to facilitate reimbursement workflows between service providers and larger healthcare incumbents. Not only is this a key value proposition for service providers, but absorbing part of the reimbursement can be the primary business model for the framework.
Referral and coordination workflows with other service providers will often be a core value proposition, but it will also enable supply growth loops and potential new vertical expansion opportunities.
Defining and incorporating metrics on cost, quality, outcome, and experience will enable provider accountability. This will require building data infrastructure and capturing relevant data from the onset.
Identifying vertical-specific granularities early on will empowering service providers’ ability to provide specialized, personalized experiences to patients and power enhanced supply-demand matching.
Looking Forward
As healthtech as a whole begins to focus on more complex problems, this framework will become more ubiquitous. Here are some of the verticals where I see potential for the framework (curious to hear where you might see opportunities!):
Direct Contracting
Skilled Nursing Facilities and Post-Acute Care (Now-defunct Call9 is an interesting case here)
Mid-High Acuity Behavioral Health
Dentistry
Autism Spectrum Disorder
Medicare
Rural Healthcare
Specialized outpatient clinics
I also think there’s implications for compelling potential new business initiatives for existing companies as well - for one, it may be intriguing for Cityblock Health to explore expanding reach through providing care coordination software, operations, and logistics to clinics in heavy Dual-Eligible population regions.
Assuming this strategy becomes continually utilized, there’s growing business need for:
Patient triage and funneling
Supply growth optimization
Back office APIs - compliance, contracting, payroll, licensing, etc.
Healthcare-specific workflow APIs - case management, optimized patient engagement for service providers (ex. Capable Health)
Contracting with incumbents and reimbursement workflows as a service
Supplementary clinical resourcing as a service (ex. Axle Health)
Supplementary operational resourcing as a service (ex. Wheel for care navigators)
Source: Julie Yoo, a16z
At the end of the day, the framework starts with providing operational efficiencies as a means to acquire relationships with service providers and by proxy their patient populations, but the most critical thing to be focused on will be the patient’s overall experience. With a proper tech infrastructure laid down and patient aggregation in hand, one should act with urgency to capitalize - can you deliver on better care, better experience, better cost, better outcomes? Are you aligning, incentivizing, and enabling service providers to do this?
It’s common to become jaded in healthcare but I think there’s reason now to be less so. Regulation trends, data interoperability, understanding of systematic problems in healthcare, industry interest from key talent, and other factors are all trending in the right direction and will result in the development of new business models that can truly better American healthcare. Companies that follow this framework will be steps in the right direction towards that future state.
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!