Recent conversations around healthcare have surfaced words like “crisis” and “collapse”. Besides being confused by the existing system, 20% of Americans can no longer afford basic healthcare (including their insurance premiums), leading to a higher number of people who are uninsured or underinsured. Now, unbundling is enabling a wave of new business models as the healthcare system shifts towards more virtual, independent, local points of care (an idea introduced to us by Dave Chase in his book, “The Opioid Crisis Wakeup Call”).
These new approaches generally fall into one of two buckets: change of infrastructure (who pays, when they pay, how they pay) and change of venue (from in person to online). The emerging business models tend to be much simpler and instead of operating in bundled networks, there is an increase in independent clinics and care delivered through mobile phones.
Change of Infrastructure
Four novel models of care are emerging: direct to consumer, direct to employer, value-based, and group cost-sharing for catastrophic events. Recently, we’ve been looking at this first category, however, they could all broaden access with the advent of unbundled health services.
Direct to Consumer Healthcare
Direct primary care practices are opening up independently of a hospital network or insurance company. In this model, each physician operates as a separate entity and can decide how to charge their patients. Many, such as Unorthodoc and Gold Direct Care, seem to be using a subscription model and some practices use different tiers of pricing depending on the level of care that a person needs (usually around $30 to $120 per month). Another example, SparkMD, offers custom packages including family rates, house visits, and telemedicine.
While well-loved concierge practice One Medical prices their membership package at a premium (~$150 per year on top of the cost of care), DPC clinics generally hustle, trying to provide affordable options wherever possible. They broaden access. The subscription model for primary care (Healthcare as a Service, or HaaS), whether in person or virtually, aligns incentives more naturally between the patient and provider.
If each primary care physician - which many view as the center of healthcare - operates an independent practice and is able to communicate with local specialists to find the best price for their patients, then smaller microeconomics could start to form in each city or town that allows patients to make decisions with full price transparency. In today's more centralized model, physicians that are part of larger network tend to refer patients to facilities in-house even if they are more expensive.
Direct to Employer Healthcare
Instead of decentralizing healthcare to local neighborhoods, the system can be broken down to a different unit: employers. Today, employer-based healthcare tends to prioritize convenience over affordability. However, with more unbundled services and specialists, what if every employer had its own system for patient care and external referrals? Euphora, Paladina, and Apostrophe are examples of companies enabling this model. In the case of the latter, in particular, by replacing third party administrators for self-insured employers and saving employers money in the process. Elation proposes that employees are more likely to seek out preventative healthcare - and thereby lower downstream costs - through an on-site clinic.
Employers are one of the most incentivized players to keep healthcare costs low and employees healthy. If primary care operated in-house, employers would manage the workflow and payments through a platform like Eden, for example. More interestingly, this can be extended beyond unbundled primary care. Sano Surgery offers self-insured employers access to medical professionals in 13 specialty verticals and even allows them to pre-purchase medical services, which fundamentally changes payment dynamics.
Employer-based healthcare doesn’t necessarily solve the ‘access to healthcare’ problem because employer-based insurance covers only 56% of the US population today. This begs the question, should companies (or even, can companies), in addition to their mission, be focused on healthcare as well?
In value-based care, payment is based on health outcomes for entire episodes of care rather than solely on initial treatment plans. This is straightforward for commoditized parts of healthcare, such as a routine surgery, where a la carte pricing works. A great example of a simple business model is the Surgery Center of Oklahoma, where patients know prices and pay up front for each “episode”. The SCO website lists medical surgeries as food would be listed on a menu. As patients continue to visit from in and out of state, their goal is that more centers and practices will adopt this practice, making the back-and-forth with insurance companies obsolete.
Thinking about long-term illnesses - for example, diabetes management, cancer, or asthma - becomes more complicated. For an independent specialty clinic like Pure Cardiology, value-based care might require making a plan and having the patient pay when specific milestones are reached. While this solution could result in delayed payments for doctors, they can ensure that incentives are aligned for both short-term and long-term episodes of care.
New Forms of Insurance
Medical cost-sharing groups, where people pay to support others in their community, are appearing more often. Medishare, Sedera and Liberty HealthShare are examples of cost-sharing within local communities, neighbors if you will, that combine a non-medical community - either geographic or religious - with their medical insurance for both routine health issues and catastrophic events. In some instances, these groups may appear closer to non-profits than large insurance companies: Liberty HealthShare’s decision guide emphasizes that they are not “insurance”, and are incentivized to work towards decreasing the healthcare burden on the whole group. Still, for-profit innovation is occurring on the insurance side.
Change of Venue
Virtual Primary Care
Many companies are working towards a future with at-home testing, processing prescriptions with one tap on your phone, and virtual appointments (including USV portfolio companies Modern Fertility and Nurx). More fundamentally, there could be a subscription option for primary care for those that only interact with their doctors by mobile phone unless otherwise necessary. Companies like Sherpaa and Nurx are changing the venues of care to text-based conversations, at-home testing, and remote monitoring. Asynchronous, structured data collection thrives in a decentralized model of healthcare because it is cheaper and time efficient, allowing each doctor to help more patients and decrease the points of friction in getting care.
A pure VPC model eliminates fixed costs associated with brick and mortar expansion and is able to focus resources on reaching more patients, recruiting more doctors to their platform, and improving the experience for current patients. Payments on a subscription basis allow doctors to get paid more consistently rather than waiting for insurance companies to process claims and paying overhead costs to negotiate reimbursements with their billing offices.
Mobile, pop-up clinics in different healthcare verticals (from urgent care to specialized medicine) are also growing. An open question regarding broadening access is whether this model is scalable to all parts of the country, or whether it perhaps favors population dense cities. Two examples in women’s health are Kind Body and AskTia. Women can go for a regular checkup or with specific questions related to fertility, IUDs, etc, and receive a highly specialized experience. This can feel much simpler from the patient perspective, as these models often rely on subscription payments or disclosed, fixed pricing for each service. Another example, specific to cardiology, is Heartbeat, where people get direct access to a fully-digitized boutique cardiology clinic. Here, the venue of care is shifted here from hospitals to pop-up clinics, that are smaller and easier to scale.
Health-related issues are confusing as is, so the system around it should be as simple as possible. New business models are lowering the barriers to entry for users to get access to high-quality care. Cost is driven down through technology and healthcare is made simpler through new unbundled business models, streamlined payments, and better user experiences. As companies continue innovating in this space, both in terms of business model and venue, the future of healthcare is starting to become clearer. We’re excited for that future.