Will medical practices become 'Uberfied'?
The U.S. seems more than ready to embrace on-demand healthcare with the widespread adoption of telemedicine and the recent spike in the number of doctor house calls and medicine delivery apps. Recognized as holding great potential to reduce healthcare costs and improve health outcomes by many industry experts, on-demand healthcare presents unique challenges to “Uberification,” which don’t affect other industry sectors (ie. food, transportation, home services).
That potential has been backed by investors with $1.3 billion raised in 114 mobile digital health deals, according to CB Insights. Funding specifically for on-demand healthcare has totaled $692 million since 2011. Teladoc, one of the first telemedicine companies, filed for an IPO this summer. It raised $157 million and announced it had 10.6 million members and 4,000 clients at the end of Q1 2015. Additional telehealth companies are raising revenue as well: Mercom Capital Group estimated a 300% increase in funding towards established and startup telemedicine companies.
Investors are banking on consumer satisfaction with virtual visits being equal to an in-office visit, but more convenient and less expensive. In fact, Teladoc reported in a recent company press release it maintains a 95% patient satisfaction rate.
Unique challenges may hinder adoption
“On-demand healthcare” as defined by Rock Health, a venture firm dedicated to digital health, is “on-demand technologies that allow consumers to purchase a product or service online with either offline or real-time virtual fulfillment.” The firm, in a recent report "Why there is no Uber for healthcare," divides on-demand healthcare into three areas: telemedicine, house calls, and medication delivery services.
Several drivers are increasing the number of on-demand healthcare companies, such as physicians wanting flexible work schedules, widespread adoption of smartphones (71% of U.S. adults) and increased populations in dense, urban areas, according to Rock Health's report. In addition, the authors credit the Affordable Care Act’s (ACA) individual mandate as increasing demand for more access to healthcare providers and services. The growth of this market is directly tied to the “Uberification” of the economy and the authors conclude the “uberification of healthcare seems to be the next quest for many entrepreneurs who are vying for a slice of this three trillion dollar industry.”
However, on-demand healthcare challenges are wide-ranging. In a commentary on CNN, Dr. Sreedhar Potarazu, founder and CEO of healthcare software company VitalSpring Technologies, says some of these issues include a primary-care physician shortage, difficulty establishing an infrastructure to move and share data among numerous systems, and regulatory issues regarding patient privacy.
In addition, Rock Health says, “the unit economics are far more challenging for on-demand healthcare versus other on-demand sectors.” For example, the number of transactions per user, per year are much lower for healthcare. The average number of physician visits per year in the U.S. is only four. Also, a Rock Health survey of 4,000 U.S. adults found even though 52% of consumers agree they are responsible for their own health, only 7% are willing to pay out-of-pocket for their healthcare expenses. Since the stakes are higher in healthcare (ie, incorrect diagnosis) than other industry sectors, consumers are more concerned with care quality prior to adoption and costs versus novelty and convenience.
Telemedicine reaching its full potential
The top three leaders in telemedicine, according to Modern Healthcare, are Teladoc, Doctor on Demand, and American Well. Teladoc has seen tremendous growth in the past year. Jason Gorevic, CEO, reported in 2014 the company had over 100% growth and added, “Yesterday, we did 1,200 telemedicine visits, with an average response time of 11 minutes. We’ll do more than a half a million telemedicine visits next year. The data is pretty clear there’s this massive wave building and I think we’re really just at the beginning of that wave.” Teladoc announced in a recent prepared statement it reached a major milestone with its one-millionth telehealth visit.
It’s interesting to note although Teladoc and American Well were not originally “digital” (a majority of telehealth visits are done over the phone), these companies accounted for 20% of on-demand funding in 2015.
Telemedicine has gotten a boost from big insurers like Anthem and UnitedHealth Group now covering telehealth visits. Anthem announced last year it would offer telehealth visits with no co-pay to Medicare Advantage members in 12 states, including California, Florida, and New York. Doctor on Demand partnered with UnitedHealth Group in April – making it the payer’s first telemedicine provider. In addition, an estimated 75% of large employers plan to offer telehealth services to employees next year, up from about half in 2015, according to a National Business Group on Health survey.
Twenty-nine states and the District of Columbia mandate commercial insurance reimbursement of telehealth services with six of them and Washington D.C. mandating parity – reimbursement at the same rate as an in-person visit. However, there are four states (Iowa, Massachusetts, New Hampshire, and Rhode Island) that have no laws requiring Medicaid to reimburse for telehealth.
All three companies (Teladoc, American Well and Doctor on Demand) partnered with CVS Health this summer to potentially provide telehealth in the companies’ 1,000 store-based clinics. Andrew Sussman, executive vice president and associate chief medical officer of CVS Health, said, “With the increased demand for patient care anticipated in future years as a result of the expansion of coverage through the Affordable Care Act, the primary care physician shortage, aging of the population and epidemic of chronic disease, telehealth gives us the opportunity to offer high-quality care to an expanded group of patients in a variety of convenient and cost-effect locations.”
Physician house calls - just a passing trend?
The rising popularity of doctors on demand has received a lot of press over the past year with new smartphone apps from companies like Pager, Heal, and Curbside Care. With out-of-pocket costs for visits ranging from $50 up to $249 with limited, if any, insurance reimbursement, some industry experts question whether the services will be limited to the wealthy. Pager, based in New York City and co-founded in 2014 by Uber’s former CTO Oscar Salazar, charges $50 for a first time visit, $200 thereafter, but said the company plans to become affordable by accepting in-network policies in the near future. “We have to start somewhere,” Gaspard de Dreuzy, a company co-founder told Inc. “It’s a very challenging thing to do because health plans and regulations change state-by-state.” He added Pager’s technology should “streamline” the process with future in-network insurance providers. However, this doesn’t seem to concern investors, who have provided $24 million in funding to date for the startup. Pager has treated about 5,000 patients since its launch last year, according to The Wall Street Journal.
Uber actually jumped into the house call scene earlier this month, albeit for one day, when it provided flu shots in 36 cities for a flat $10 fee. Customers were able to summon a nurse to their door by simply tapping the Uber app called “UberHEALTH” on their smartphone, as reported by Healthcare Dive.
This month, Heal, with services in San Francisco and Los Angeles which has doctors on call from 8 a.m. to 8 p.m. every day, announced it is now in-network with Anthem Blue Cross of California and Blue Shield of California. Doctor visits will not cost more than a PPO members’ normal co-pay at an in-office visit. For those users not paying through insurance, there is a $99 flat fee for a high-quality physician to come to their home. Heal also offers to pick up prescriptions for an extra $19. A unique option Heal offers is to allow consumers to transfer their medical records to make Heal’s physicians their primary care providers.
Curbside Care, available in Philadelphia, charges $99 for a nurse practitioner and $199 for an MD or DO per visit. Customers can opt to meet the healthcare providers at various locations. The company also covers some mental health issues as well as the regular array of common conditions.
On-demand prescription delivery
Prescription drug delivery services are the latest to join the on-demand healthcare market, with the newest being NYC-based Zipdrug. Customers provide payment and insurance information as well as what pharmacy their prescription has been sent to by their doctor. Costs include a flat $10 delivery fee and medication costs after insurance deductions. The company claims it is the first to offer on-demand service for prescriptions written the same day. However, it won’t deliver certain controlled substances, such as pain narcotics, seizure medications, and ADD stimulants. The company partnered with Pager in September and recently received $2.6 million in seed funding. Pager said it plans to bring Zipdrug’s prescription delivery service with it when it expands its business to California.
PillPack provides a personalized PillPack (with date and time pills should be taken on each pack) and dispenser, free shipping via mail order, proactive refill management, and 24/7 support. This works more like a medication management service where the company handles refills and prior authorizations if needed. PillPack works with most major insurance plans, including Aetna, and most forms of Medicare Part D. There are no additional costs to the customer’s regular co-pay. The company has raised $62 million, and Forbes estimates it could top $15 million in revenue this year.
Just as with telemedicine and physician house calls, Zipdrug is banking on the superior convenience of a quickly filled order. CEO and co-founder Stu Libby said, “We’re not trying to introduce a new service. A lot of pharmacies deliver. We’re just trying to make it easier. I like to equate it to ordering a car service before Uber versus ordering a car service with Uber.”
However, questions arise whether on-demand house calls can be scaled up to reach a mass consumer audience. A Daily Briefing article by the Advisory Board Company says although having doctors on demand is “appealing,” it requires a lot of money to set up a roster of independent contractors, pay them wages to ensure someone will always be available, but keep the service cheap enough so customers are willing to use it. “That’s not to say there isn’t a market for these Uber-like services, especially if a sharing economy starts changing how all Americans work. But it might not be a mass market – especially because the house calls aren’t generally covered by insurance, introduce a range of quality-control issues, and may require patients to pay $100 or more out of pocket,” the article states.
A blog post on The New York Times concluded telehealth and doctor on demand apps are “not replacements for traditional doctor appointments, particularly with a physician who has known you for years. But for ailments and symptoms that aren’t life-threatening, this next generation of health apps can save time and energy – which is a pretty big deal when you are not feeling up to waiting in a doctor’s office.”
- The New York Times An uber for doctor housecalls
- The Advisory Board Uber for healthcare
- The Wall Street Journal Startups vie to build an Uber for healthcare
- mobihealthnews Teladoc loses $1.5M Highmark contract - sparks debate on pricing, utilization of telemedicine
- Rock Health Why there is no Uber for healthcare