How to Make Money on Consumer Health Tools 10/21/11

Consumers, inclusive of patients, are a big target of health reform. Patients are supposed to play a bigger role in their own care, have ready access to more of their clinical data, and even be called on to participate in the leadership of ACOs.

I  think we’ve collectively come to realize that healthcare isn’t the answer to all of our health problems, at least in the traditional sense. Individuals make multiple decisions every day that play into their overall health and wellness, decisions that have nothing to do with what medication a doc prescribed and whether a patient received an x (FILL IN WITH AN EVIDENCE-BASED PROCEDURE).

With that in mind, many new startups and some established companies are creating mobile and online tools targeting consumers. Although all of the tools I outline below are meant for use by consumers, the business model of each is very different. As I’ve written before, one of the challenges in healthcare is finding the right combination of user and customer.

Payer is Provider – ZocDoc

ZocDoc is getting a lot of press lately. It helps consumers find open appointment slots for doctors. Doctors list their available slots and ZocDoc fills them (presumably increasing utilization) for a provider participation fee of $250 per month. I’m still uncertain if this is the best business model, but investors seem to think so because ZocDoc has raised a ton of cash recently to take the service national.

Though providers use the service to list appointments, it is all about consumers if you go to its website or download its mobile app. Users search, find open slots, and book the appointment, all free of charge. I’ve read concerns that this type of booking could result in a large number of no-shows, but according to an interview I read awhile back, ZocDoc says the number of no-shows is lower than the average for health visits.

It’s little unclear from ZocDoc’s site about how many appointments it books a month. It says only that 700,000 searchers occurred. If anybody knows this number, I’d love it if you would share.

Payer is the Consumer – RunKeeper / Fitbit / Zeo

Getting consumers to pay directly for medical services, especially apps or remote services that aren’t "essential," is hard. I put essential in quotes because I think some services, like medication adherence, are essential if you only take your medications 50% of the time. I’m not sure that most patients agree with me.

From my experience, with the exception of some very low cost apps (mostly $0.99,) the only consumers who are willing to pay are those that already relatively healthy. That’s why RunKeeper does well. It caters to the right crowd.

Most vendors and investors have learned this lesson. The cost of services for chronic disease are not being pushed directly to patients.

Payer is Health System – iTriage

I think of iTriage as the health-specific yellow pages. It goes further by providing a symptom checker and medication reference. As opposed to ZocDoc, it is more system- or hospital department-based and not as focused on specific providers. I know it lists specific providers, but I haven’t heard anything about iTriage sales to individual docs. I do keep hearing about iTriage sales to health systems, hospitals, and urgent care.

iTriage is most similar to ZocDoc in terms of its revenue model. It is free to the consumer to find a provider or facility. Providers and facilities are charged for Premium Listings. These paid listings enable facilities and providers to have a nice logo, a standout color for their entry, and more information for the patient, including ED wait times and even patient pre-registration. Like ZocDoc, it’s a smart model for fast user uptake and probably the reason both ZocDoc and iTriage are doing pretty well.

As a side note, I’ve heard rumors from pretty credible sources that iTriage has some very big news it is going to be releasing soon. If anybody has any details about the news, as I’m still a little in the dark on the details, please let me know.

Payer is Employer – Castlight Health

Castlight works directly with large employers, mining claims data through a proprietary algorithm to come up with tools to help the organization and employees save money on health services. By working with large employers, Castlight is able to get access to all claims data and use it to boil down benefits into understandable and actionable tools that employees can use to make more informed decisions about healthcare. At least this is how I understand what it does.

In addition to cost, it offers quality metrics to help employees decide among providers, though I’m not sure what these metrics would be and can’t imagine how they would be generated from claims data.

I assume the employer pays some fee per employee for the service and then offers it to employees free of charge, hoping employees will use the tools to save everybody money.

Castlight was co-founded by Todd Park (who I think has divested all of his interest in it since becoming CTO of HHS) and Giovanni Colella, founder of RelayHealth. It got a lot of attention pre-launch because of the amount of money it raised and the fact that Cleveland Clinic was an investor.

Payer is Family – Independa

Another model targeting consumers is to get the families (usually adult children) to pay for the services for an elderly patient. Independa offers online tools (med reminders, telehealth, etc,) as well as a new tablet called Angela to help people stay in their homes longer and avoid the need for nursing homes.

I consider nursing homes to be basically one foot in the grave. Anything that can be done to maintain independence, which is equivalent to better quality of life, is something that is worth trying. Add to that the much lower cost of services like Independa relative to nursing homes and it seems like an easy sell. The most current data I’ve seen is that ~25% of households in the US are surrogate caregivers, so this is a big market to target.

Challenges will remain in targeting consumers directly, either the patient or the family. Some degree of integration with the existing health system is necessary. Getting docs to promote or advocate for it or getting it integrated into overall care delivery would be a huge bump for Independa.

Payer is Pharma – Vitality

I think Vitality is the perfect example of the power of pharma to accelerate a business. Vitality GlowCaps helps consumers be more adherent to medications, a big benefit for patients and overall care. It’s automated and thus requires no patient input, so little to no training or interaction is needed. Additionally, it connects to families so they can track adherence and nudge patients along, leaning on resources outside of the health system.

Consumers and family have an obvious benefit, but don’t pay anything for the service. Instead, pharma pays because:  1) it increases the number of refills and medications taken (Vitality has some nice calculators to show how much this is worth for each medication); and 2) it offers access to dashboards that show real-time information on patient medication use, geography, and pharmacy used. I’ve heard (but again, this is not confirmed) that pharma pays about $15-$20 per med per month for the service. I’m still unclear if the retail pharmacies themselves pay any portion of the service.

Chasing the Payer, Lessons from Keas

Keas is a good example of a company targeting the consumer as a user, but having to shift customer models to make money. Keas started several years ago as a care plan exchange where consumers could join, find care plans for organizations or individual docs, and subscribe to these plans. Since that time, it has shifted to a health gaming company that designs health games as components of employer wellness programs.

The big lesson of Keas is that the consumer is not a great health customer. If you want them to use something, you probably need somebody else to pay for it. What’s interesting to me is that I’m now seeing new companies like Avado that seem to be doing something similar to the original Keas in terms of online care plans. I think Avado has more linkages to the providers and is straddling the portal/PHR space, but custom care plans are certainly a part of the service.

I have to run to catch a plan to DC for the AMIA Symposium. Hopefully I’ll see some of you tomorrow at my talk on startups in healthcare.

Travis Good is an MD/MBA involved with health IT startups.

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