An apple a day keeps the doctor away. With the ever-rising cost of healthcare, the ROI of one apple a day looks pretty good.
Welcome to pay per outcome disruption coming to healthcare Payers (Insurance companies) and Providers (doctors etc).
Nobody knows what Trumpcare will look like, but some direction of travel seems clear. Please note that this is not a political blog, please refrain from any comments like that; one cannot ignore politics when looking at Healthcare InsurTech, but our focus is the business of technology not politics.
So far we know this about the Healthcare InsurTech market:
- It is huge (about 18% of GDP in America)
- It is broken (ask any consumer and most doctors)
- It is dominated by America (so what President Trump will do is critical)
- There can be no meaningful change at the Insurance level without breakthroughs in health technology; thankfully we can see a lot of that.
- Regulation (and therefore politics) has a massive impact, but not even politicians can change the big secular trends around technology and demographics.
The one trend that seems clear is the move from pay per procedure to pay per outcome. Consumers aka patients aka citizens/voters want this and many medical practitioners want this, but it’s a wrenching change for payers and providers, so one can expect plenty of resistance from incumbents. The most logical extension of pay per outcome is the perhaps apocryphal story of the Chinese Emperor who paid his doctor when he was well, not when he was sick, on the basis that when he was well the doctor was doing his/her job right.
Prevention may include an apple per day, but that is only a simple starting point.
A move towards prevention and pay per outcome will disrupt the U.S. healthcare business. As healthcare is about 18% of GDP, there is a lot at stake. Payers and providers will have to transform themselves to meet this emerging reality. The driver is the same as the democratization of wealth management. As investors get more information, they can make more informed decisions on their own. The same is true with patients. The strategic response from incumbents and startups is to deliver new services that improve convenience while lowering cost by leveraged big data to provide personalized solutions.
The fundamental shift is to rewarding prevention at least as much as for fixing a problem. Which brings us to the corporate self-insurers. People talk about the grand vision of insuring healthcare for all consumers/citizens/patients, but that requires a political will and is hugely complex. However, within the domain of a single large company, it is a different story.
These numbers add up. According to some estimates the
total number of employees among all Fortune 500 companies is over 26 million.
Whatever direction the politics takes us, the trend towards an increased focus on the healthcare consumer seems clear, simply because the tools are there to deliver that. Whether we move to Health Savings Accounts (HSAs), or providing tax credits (similar to what employers currently get), or mandates for the whole population, the focus will be on ensuring quality of outcome for consumers.
In this post, we look at 4 of the companies positioned to do well from a general trend to an increased focus on the healthcare consumer and pay per outcome:
Accolade describes itself as a healthcare concierge. Its customers are large, self-insured companies—as well as health insurance providers—that want to see their employees and their families make better use of the healthcare benefits they provide. People can call on the service for personalized help navigating health plan benefits, evaluating care options and other questions, all from a single point of contact. The company says its services reduce costs by 5 to 15 percent, while improving insurance usage, health outcomes, and patient satisfaction.
Their CEO, Rajeev Singh, expressed it well in a recent interview in Xconomy:
“If you’re a wealthy person in this country today, you go get a concierge doctor and you pay $35,000, $40,000 a year for that concierge doc. They are your central point of navigation. Anything goes wrong with anybody in your family, you call them and they fix it. This is fundamentally the democratization of that idea.”
Accolade recently raised $70 million in new capital from Andreessen Horowitz and Madrona Venture Group, among others, bringing the total venture capital raised by to $160 million.
Disclosure: I have an indirect financial interest in Accolade.
Omada Health focusses on prevention related to obesity, which the company describes as an epidemic and pegs as a $500 billion a year cost for employers, insurers, and consumers/patients.
Their product name – Prevent – says it all. Prevent is a digitally-based lifestyle intervention that helps individuals reduce their risk for obesity-related chronic diseases such as diabetes and heart disease.
When people sign up for Omada, they receive a wireless, digital bathroom scale, pedometer, resistance band, and tape measure. Customers are also paired with health coaches and are given a proprietary health-related curriculum and connected to a like-minded online peer network.
Omada operates on a pay-for-outcomes pricing model and has been tackling the obesity epidemic with a lot of scientific evidence, published in its own clinical two-year study in the Journal of Internet Medical Research.
Their last funding round was a $48 million Series C in September 2015 led by Norwest Venture Partners. Its strategic investors include two Omada customers and health care leaders – Humana Inc. (NYSE: HUM) and Providence Health & Services, as well as prior investors US Venture Partners, Rock Health, and Andreessen Horowitz, and new investors GE Ventures and dRx Capital.
Sherpaa is a New York City-based digital healthcare service that offers a back to the future relationship with your doctor – ye olde family physician. In their words:
“Sherpaa is your own personal primary care doctor, online. You use Sherpaa doctors for issues a primary care doctor or urgent care center would treat. Just subscribe, fire up our app, communicate, and get care. Our doctors diagnose, order tests, prescribe, treat, refer if we need to, and check in until you’re all better.”
They make two statements that few patients/consumers would argue with:
– Communicating with your doctor should be as easy as communicating with your friends, family, and co-workers.
– A consistent doctor helps you best.
Boundlss, from Australia, offer staff wellness programs to improve outcomes for Insurance carriers, corporates and individuals. They offer an AI powered chatbot personal coach called Loyd who can make customized wellness suggestions. The platform connects to over 150 wearables and apps already tracking health metrics for a user, which it no doubt leverages to makes its custom suggestions. (We covered them earlier in this post)
Health insurance is all about data.
Buying Health & Life Insurance today is like filling in a form to tell Netflix what movies we say we like at that moment in time – versus what movies we actually watched recently. You fill in a snapshot report of your health, with blood samples and other tests run by a doctor and the premium is set. The fact that you later put on 40lbs and developed diabetes – or gave up smoking and alcohol and ran a marathon and reduced your blood pressure – impacts Insurance risk but is ignored by Insurance companies today.
Wearables and in-home sensors (such as in bathroom scales) could change all of that and revolutionize health and life insurance by a) personalizing insurance and risk and b) changing the delivery of healthcare by augmenting the intelligence of healthcare workers through cognitive computing linked to this avalanche of data and c) improving health outcomes by engaging patients with personalized but automated coaching.
Our premiums would go down as we became healthier. Becoming healthier would not only make us feel better, it would also save us (and our employer) a lot of money.
Imagine an exchange like this over chat bot:
- Patient: I am not feeling well.
- Healthcare worker: I can see why; your xxx vital sign does not look good. I suggest you do yyy right now and let’s schedule some time so I can run some more tests.
We see an increasing trend for digitally savvy wellness programs to partner with insurtech ventures. For example, Limeade partnered with Accolade.
Outside the US, VitalityHealth, originally from South Africa, is an insurance carrier that was early pioneer of wearables before they were called that. They have expanded globally through partnerships; they moved into the UK, with Pru Health and China with Ping An. In the US they have the novel strategy of partnering with 6,000 gyms; they can track actual attendance from a swipe of their membership card.
Australian insurer Medibank has partnered with loyalty program flybuys, offering bonus points for fruit and vegetable purchases. In addition bonus points can also be accrued for every 10,000 steps made a day, measured by linking up your Fitbit device. Like Vitalit Health they have has also partnered with local gyms via its GymBetterprogram.
Healthcare is massive and massively complex
Fixing something as big and complex as the healthcare business was never going to be easy. There is no simple Uber like app to fix this and many early VC funded attempts hit issues such as 23andMe, Theranos and Zenefits. The prize is still big but it will be like scaling Everest – very, very hard and it takes time. For example, it takes many years for an innovation like Telemedicine to go mainstream, but when it does it will be a game-changer and with almost ubiquitous high bandwidth, it is inevitable if not imminent.
Two big hurdles face the data driven healthcare changes:
- Hurdle # 1: PreExisting Conditions. One lasting legacy of the Affordable Care Act (aka Obamacare) is that consumers cannot be denied coverage based on a pre-existing condition. That is a problem if the wearables data shows we have a new condition that could have been present but indetected at time of application. We want our Insurance to go down when our health improves, but we don’t want it to go up when our health declines.
- Hurdle # 2: Data Privacy. Privacy regulation varies by jurisdiction, with Europe tending to tougher than USA; but even in USA in some States you must communicate to consumers if you use factors such as gender, age, zip code in pricing.For wearables and in-home sensors to impact Insurance premiums, policyholders must be willing to share data with the Insurer. This may be an area where Millennial attitudes to privacy (it’s done, put a fork in it) may rule. Or there may be consumer and regulatory backlash as the data is so sensitive. The companies will need to prove that their aggregated anonymous data cannot be reverse engineered to create Personally Identifiable Information (PII); any hacker that breaches that will create a reputation crisis, so it has to be really secure.
These are real obstacles, but entrepreneurs treat obstacles as something that defines their action list. They find a way to solve those problems. Given the scale of the opportunity, somebody will surely solve them.
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