Healthcare Has a Frictionless Future
For years consumers watched as technology reduced costs and enhanced the quality of services in all industries except healthcare. That is changing. Direct-to-consumer solutions are rapidly permeating healthcare verticals and will radically improve accessibility for patients. The COVID-19 response has only accelerated this evolution as all medical services transitioned online. HIPAA regulations have relaxed, allowing for providers to practice across state lines, and insurance companies have waived copay for telemedicine consultations, liberating startups to scale and allowing private practices to compete.
Unbundling of Clinics & Pharmacies
Among the most disruptive new care models are digital clinics. The traditional approach of primary care services entirely dependent on physical clinics will soon be a thing of the past as consumers opt for the convenience of virtual care alternatives where applicable. In 2017, Physician and clinical services accounted for 20% of national health expenditures, and retail prescription drugs accounted for 10%; these are attractive markets conducive to remote solutions.
General Clinics
There are already established providers for men’s digital clinics with Roman, Hims, and Canadian UPGUYS gaining momentum. The platforms offer clients remote primary care visits, prescription ED and STD treatments, and holistic health supplements among other products. Launched in late 2017, these platforms have scaled rapidly. Hims will go public through a SPAC this year, and Roman raised at a $1.5b valuation in a round led by General Catalyst.
Meanwhile, the female digital health space is relatively underdeveloped. The space is particularly attractive considering that women on average spend nearly double what men do on healthcare annually.
Challengers in the space include Rory and Hers — the female counterparts to Roman and Hims, respectively — who have substantial primary care treatments and skin & hair care products with limited sexual health options. Primary-care-focused startups include Maven, Ask Tia, Advantia. Still, other challengers are focusing on reproductive health and fertility: Nurx, Pandia, Simple Health, Modern Fertility, and Pill Club. Many more seed-stage startups are tackling this space as well. Among them are Parla, June, Hey Jane, Proactive, and Robyn. To learn more about opportunities and challenges in the women’s space you can read my consumer research report here.
Condition-specific Platforms
Some startups are carving out a niche by building a brand and practice around specific conditions. These are full-stack solutions for particular diseases. This is a very attractive space as the CDC estimates that 90% of annual healthcare expenditures are linked to chronic conditions.
Paloma Health is a complete ecosystem for hypothyroid patients, from blood test to prescription to lifestyle plan. After completing the blood test at home and receiving results, patients can schedule remote consultations with doctors and nutritionists, subscribe to supplements, and track progress through the Paloma app. Hypothyroid medication Levothyroxine is the most prescribed drug in the US, at a whopping 114,344,324 total prescriptions, and has been amongst the top three prescriptions for the past 10 years.
Livongo, which was recently acquired by Teladoc in an $18.5B deal, addresses chronic diabetes, hypertension, and behavioral health management. The merger gives Teladoc an entry to chronic care and the ability to engage patients outside of remote visits. Another startup focusing on diabetes is Center health which will be discussed in the home based-care section. Then there’s Virta, which is offering nutritional therapy for Type 2 Diabetes, just reached unicorn status in a Series D led by Sequoia.
Sprout, seeded by General Catalyst in July 2020, is building a digital clinic for ABA therapy for autism. They are using a distributed, in-home care model to bring down the time it takes to get care to children who need it.
NOTE ON SUBSCRIPTION BUSINESS MODELS IN TELEHEALTH
Many of the startups mentioned above make money through prescriptions, whether they own the pharmacy or outsource it. Chronic conditions and health needs like contraception and hypothyroidism require ongoing treatment and lend themselves well to the subscription business model popular across technology startups. There are some notable exceptions to this like AskTia, though we don’t know how much of their revenue comes from the membership fee. For startups leaning on subscription prescription revenues, the balance of CAC/LTV will always be an important focal point. Outsourced prescriptions and competition from other pharmacies online and offline to fulfill generic drug orders limit their margins, and it is still too early to say how long-term retention will look in these industries. Successful businesses, therefore, will have to innovate on the customer acquisition side by building strong brands and finding innovative paid and organic acquisition channels.
Physical Clinics
Telehealth or no, there will always be a need for in-person treatments — think urgent care, flu shots, etc. — and companies like Carbon Health and One Medical are pioneering the digital/physical “omnichannel” approach.
Carbon Health raised a $100M Series C in November 2020, just six months after their Series B. They aim to engage patients throughout the lifecycle of care, allowing patients to schedule appointments, message providers, and integrate their medical devices on the mobile app, while providers can access electronic health records, write electronic prescriptions, and process payments.
One Medical concentrates on personal membership plans and employee benefit programs; two methods to establish a recurring revenue model and raise the LTV of customers/patients. As employers return to work, One Medical is seeing a jump in membership plans following the COVID-19 pandemic. They are offering a reentry program with daily screenings, comprehensive testing, and recommended workplace safety protocols. This was a strategic pivot that has resulted in substantial membership growth, but will likely slow going into 2021. Focusing on B2B partnerships increases the lifetime of patients given that companies won’t regularly change their healthcare providers.
If this hybrid model proves a success, we might see more telehealth clinics launching permanent locations. But the window of opportunity is small. Walmart recently partnered with primary care service Oak Street Health to bring their clinics to three Walmart supercenters; Carbon Health, One Medical, and others must act fast to carve out their consumer base.
Virtual Portals
What about the thousands of private practices and providers today, how can they keep up with patient expectations? Telehealth startups selling to providers are focusing on a narrow process to be automated and deployed at scale.
Doxy gives providers and private practices secure, regulation-compliant video solutions. Doxy has a tiered subscription model, offering their basic plan for free, subsidized by their Professional and Clinic versions. The paid memberships include advanced features to host multiple patients, integrate Stripe payments, and receive priority support. Though the features may seem simple, Doxy maintains its competitive pricing by targeting the core requirements for hosting virtual consultations and not much more. There are a number of competitors in this space including: Updox, Simple Practice, OnCall Health and more.
Medical billing startup Nirvana Health coordinates insurance reimbursements and claim filings for therapists, saving them time and allowing patients to maximize their insurance contribution. By automating these processes, startups like Nirvana enable providers to focus on providing good healthcare.
Outfitted with these tools, private practices can operate like telehealth clinics. In the past, HIPAA standards and lower demand for telehealth have made this area unattractive. By instigating new regulations on telehealth and changing the norm for health visits, covid has presented startups and providers alike with a new opportunity to enter the space.
Mental Health
The mental and emotional impact of COVID 19 and quarantine creates tailwinds for mental health providers. As employees matriculate back into regular work environments, startups like Lyra Health and Spring Health provide mental health benefits for employers. Spring Health raised a $76M Series B led by Tiger Global, within a year of raising their $22M Series A. Spring Health emphasizes their impact in improving employee performance and productivity, alongside saving companies considerable costs.
Teletherapy startup Marvin is Lyra Health for hospitals. Marvin develops therapy programs for medical responders to combat physician burnout and mood. Launching in 2020, Marvin recognizes that the hospital environment — particularly during COVID-19 — prevents physicians from being treated for anxiety and depression with traditional methods.
Like digital clinics, teletherapy startups can be first mover solutions for particular demographics. Where Marvin addresses physician concerns, other solutions accommodate children, patients with addiction, relationship counseling and more. Pediatric teletherapy startup Little Otter Health is launching their pilot program for children five and under. Osmind partners with rehabilitation centers, particularly for ketamine, to monitor treatment and optimize patient engagement. Couples therapy app Lasting was recently acquired by Talkspace, in a move to widen their services. Talkspace is a global leader in telebehavioral health, among other generalist teletherapy platforms like Brightside and BetterHelp. There is also the Hello Alma business model which acts as a trip advisor for therapy.
Home Based Care
Beyond virtual consultations and prescriptions, some services offer at-home test kits and supplies.
Supplies
If you’ve ever wondered where to buy the equipment for a BiPAP machine, look no further. Tomorrow Health is a marketplace for recovery supplies that patients, particularly the elderly, may require. Tomorrow Health’s clients are home-based health providers or agencies helping patients transition out of hospitals. Tomorrow Health can deliver anything from ventilators to wheelchair ramps within two days. They hope to scale to all 50 states by 2021, however, this will largely depend on the growth of these home-based care agencies.
Test Kits
Everywell has an extensive inventory of test kits patients can administer at home to evaluate metabolism, check for STDs, test for allergies, and more. Everywell partners with labs to analyze the collected samples and results are reviewed by independent physicians. The kits range in price depending on the test from $50 to $300, and users can sign up for memberships to reduce costs.
Competitor Lets Get Checked provides a library of kits worldwide. Lets Get Checked has its own medical staff, but appears to also outsource the lab work. They also offer in-app connectivity with wearable devices to improve insights. Other kits providers include Choose Health and iamaware.
Monitoring Devices
Where testing kits empower patients to take control of their current health, monitoring devices prioritize prevention plans. For doctors, wearable devices have painted a clearer picture of patients — when do they work out, how much do they sleep, etc. Simple tracking applications remind patients to take medication and chart their progress. Startups that develop technologies to monitor symptoms or vitals with minimal burden on patients will see rapid adoption. Only ½ the patients with hypertension and high cholesterol are succesffully treated and yet they’re the two most common conditions for adults over 65. There are opportunities to offer preventative care solutions for prevalent, often untreated diseases.
Other preventative health tools look a bit more like a personal lifestyle coach. Think recommendations tailored to your particular body and DNA, keeping you healthy and happy. Nightingale focuses on lifelong health. Patients can get their blood drawn at a Nightingale Nest location and then follow up on their results which include a health index, health indicators, and biomarkers. A second blood test reveals improvements. Other players in this space include Helix, Parsley Health, and ORIG3N.
As mentioned in the condition-specific section, Center Health is providing diabetes patients the ease of monitoring their blood sugar through a smartphone accessory and test strips. The meter is included for free with any purchase of strips. Unlike most monitoring business models which prioritize high margins on kits or devices, Center Health is establishing a subscription service.
Meanwhile, Levels is commercializing blood glucose monitoring technology originally developed for diabetes for a new vertical: athletes and anyone without diabetes but with an interest in understanding how nutrition affects their blood sugar. Supersapiens is another earlier startup in the space for glucose tracking to improve workout performance.
Only 8% of adults in 2015 used preventative services; this indicates a completely untapped opportunity for startups but also challenges surrounding consumer adoption. Whoever can develop preventative tools that patients seamlessly can integrate into their habits will have not only unlocked huge potential but will change US healthcare dispersion. I expect to see a lot of capital invest in solutions aimed at tackling prevention.
NOTE ON TELEHEALTH FUNDING
As you would expect, quarantine restrictions have been good remote clinics’ business. Teladoc competitor, Amwell, saw 30–40x more telehealth visits since the pandemic began; Amwell clients who once had only 3% of patient volume online are now recording 75% online. The surge of virtual consultations has made capital cheaper than ever for telehealth startups. Several companies — Everlywell,Carbon, K Health — are raising multi-million $ rounds merely months after previous funding concluded to keep up with demand. Healthcare represents 17% of US GDP, that’s a $3.6T market. It’s a good time for telehealth!
To summarize, we’re seeing lots of innovation across digital pharmacies, condition-specific clinics, at home testing and provider software. I believe there are opportunities across the board for new technologies that are able to deliver meaningful improvements in quality and accessibility of care. The coronavirus pandemic has accelerated these developments and I expect the healthcare landscape to change substantially over the next 10 years.
If you are interested in learning more, here are some resources I found useful:
Freakonomics, The Doctor Will Zoom You Now
Nikhil Basu Trivedi, Consumerization of Healthcare