Most on-demand technology companies are able to rely on the novelty of their services to pique the interest of “trial” users and continue acquiring customers primarily by offering convenience. Further market uptake occurs when the service proves to be reliable at an “affordable” price point. In contrast, the stakes are much higher in healthcare—receiving broken eggs from a grocery delivery service is not the same as receiving an incorrect diagnosis for pneumonia. Consequently, consumers are much more concerned with ensuring care quality prior to adoption and are less likely to use on-demand healthcare services solely for the appeal of novelty and convenience. The resulting catch-22—alleviating consumer concerns around service quality and reliability requires greater consumer awareness and higher utilization rates—imposes significant growth hurdles. Low willingness to pay out-of-pocket for healthcare expenses, as discussed above, also slows market adoption. In today’s environment, even early adoption requires coverage through third parties such as insurers and self-insured employers. Low consumer willingness to pay forces on-demand healthcare companies to seek alternative payment models. In an effort to lower customer acquisition costs and expedite market uptake, many companies are shifting to a B2B2C business model where the middle “B” plays a key role in distribution and reimbursement. HealthTap recently announced their newest offering, Compass, to target employers and Dispatch Health has partnered with Centura Health. Striking such partnerships necessitates strong value propositions oriented around financial ROI (e.g., cost savings for health systems and payers by driving up medication adherence or reducing the number of high-cost emergency room visits). Moreover, such partnerships also allow for better integration into the patient care continuum, which may be key to capturing a more sizeable portion of provider and pharmacy interactions and replicating some of the success seen to date with retail clinics. Aided by the high foot traffic of retail pharmacies, retail clinics have been able to coordinate care with health systems by helping fulfill physician oversight requirements and managing chronic care patients—there are at least 100 partnerships between retail clinics and providers. With near universal coverage from payers (e.g., 84% of visits to CVS clinics were paid for by third parties), retail clinics have been able to take consumer cost concerns off the table and leverage their convenient location and little-to-no wait time to drive utilization. Still, as retail clinics become more integrated into the care continuum, new challenges have arisen that must be addressed, such as adhering to standardized clinical protocols and implementing interoperability infrastructure to ensure data is shared with the physician and care team. The most common B2B2C model used by on-demand healthcare companies (e.g., Teladoc) is one where intermediaries pay a per-member per-month (PMPM) fee regardless of utilization. However, as the industry focuses on value-based care and cutting costs, some on-demand healthcare companies (e.g., Doctor on Demand) are taking on the risk and charging based on utilization. In this latter model, intermediary businesses often do not incur costs unless ROI thresholds are met or consumers actually use the service. The onus is on on-demand healthcare companies to enable user engagement in order to generate revenue and deliver cost savings. As a result, while B2B2C distribution necessitates delivering financial ROI, on-demand healthcare companies—by offering a high-quality, preferred consumer experience—must also be able to show that consumers will, and want to, use their services. Identifying the most value-added use cases will be key to not only demonstrating the ROI benefits but also driving adoption. For instance, house call companies should work closely with distribution partners in order to promote adoption in target populations (e.g., elderly, maternity) that could benefit most from in-home services. The promise of telemedicine, house calls, and medication delivery to reduce healthcare costs and improve outcomes has undoubtedly caught the attention of providers, payers, and self-insured employers. But because of the unique unit economics hurdles in healthcare and the need to both demonstrate financial ROI to distribution partners and cater to consumer quality concerns, the path to building a successful on-demand business is likely longer and more complex than originally hoped. We would like to thank Ophelia Brown (Index Ventures), Julie Papanek (Canaan Partners), and Blake Wu (NEA) for taking their time to share insights about the challenges and opportunities facing on-demand healthcare.
In a blog post questioning the lack of a digital health start-up analogous to Uber, healthcare innovation venture capitalist Rock Health tell us not to hold our breath: there will be a "longer and more complex" route to disruptive health start-ups, due to the "unique unit economics" and the need to cater to "consumer quality concerns". Patients are less likely to pay out of pocket for healthcare services in the same way as a taxi service, and have much higher demands when it comes to privacy. At it's core however, the problem is that healthcare interactions are simply less frequent: we visit physicians far less often than we take taxis, meaning more patients have to sign up to make any potentially disruptive service viable.