The Uberization of Healthcare
“Just as Uber changed the transportation industry in positive - and sometimes controversial - ways, healthcare will be infiltrated by startups wanting to change the healthcare model from hospital-centric to patient-centric. Medical device companies and healthcare providers that don’t realize that a major shift is taking place will become the equivalent of today’s taxi industry.” – Stuart Karten, Principal of Karten Design, adapted from a speech given at MD&M West on Feb. 12 2015.
Related Companies: Uber & CVS Health
Related Strategies: Digital Health & Personalized Medicine
We would like to share with you an emerging industry trend, the “uberization of healthcare.”
Five years ago a startup called Uber brought its “personal driver” service to the city of San Francisco. The selling proposition: Any time you want a car ride, just pull out your smartphone and tap the Uber app, and a car will respond within minutes. The efficiency and convenience was unbeatable. Today Uber is valued at $41.2 billion, more than the market capitalizations of publically traded companies Delta Air Lines, Charles Schwab, Salesforce.com and the Kraft Foods Group.[1]
The Washington Times posted a story when Uber first came to Washington D.C. that highlights the technological differences of Uber and its competition: “Taxis, whose business model has hardly changed since the invention of the taxi meter in the 1940s, have a lot to worry about. A taxicab company’s technology and business model compare to Uber’s like a Model T does to a Chevy Volt (an award winning electric hybrid car).”[2]
The healthcare industry, which typically lags behind other industries, is ripe for an Uber-like disruption. The healthcare business model has also hardly changed since the 1940s. When a patient needs a doctor, he or she must book - sometimes weeks - in advance for a physician visit, and in cases of emergency, go to the emergency room (ER). In the U.S., there are nearly 600 million outpatient visits to physicians’ offices and nearly 100 million visits to the ER annually. This is certainly not efficient nor convenient, and it is costly. Time Magazine has reported that a trip to the emergency room could produce a bill that can exceed the cost of a semester of college.[3]
CVS Health and its MinuteClinic business is an example of a company that is leading the change. CVS Health is the second largest drugstore chain in the U.S., filling out more than 700 million prescriptions yearly – all while selling customers everything from groceries to gift wrap.
Now the drugstore is pivoting to do more medical care. CVS Health is putting nurse practitioners in a MinuteClinic in each of its stores to help diagnose minor illnesses, help decide on treatments and then sell them pills they need to get well. The MinuteClinics offer convenient and immediate after hour’s visits for patients who can’t get in to see their doctors at hundreds of dollars less than it would cost if the patients were seen in the ER.
For the average insured patient, MinuteClinics offer a particular type of bargain. Plans with high deductibles that require substantial initial out-of-pocket payments are becoming more popular. The MinuteClinics offer routine treatments at a lower cost than the average physician. Thanks to posted prices, what you see is what you pay: $59 for a kid’s camp physical, for instance, or a maximum of $99 for flu symptoms. The underlying economics are simple to understand: according to the Bureau of Labor Statistics, the median salary for nurse practitioners and physician assistants in the U.S. is $90,000; for medical doctors in family practice, the salary is more than double.[4]
“A silver tsunami, or the 10,000 people turning 65 each day, is swelling the Medicare rolls… The MinuteClinics help solve one problem: the confluence between more people entering the insured market and at the same time a growing shortage of primary-care physicians.” - Larry Merlo, the CEO of drugstore giant CVS Health, in a WSJ interview on Jan 23, 2015.[5]
Another key reason why Uber has beat even its own ridership and revenue forecasts is its use of sophisticated technology to measure service metrics related to all levels of customer service, such as speed and product quality.
A Washington Times article highlights Uber’s importance of measurements, “The company created a brain trust comprising a nuclear physicist, a computational neurosurgeon and a machine-learning expert to predict the demand for drivers, match the supply with the demand, and then position the cars where the demand will be. The whole point of the math department is to minimize pickup times and maximize utilization. It’s happening all the time, in real time. There’s literally information coming in every second of the day. We’re using that information to make better, smarter decisions.”
Parts of medicine, preventative and chronic disease will eventually follow the “retail market” and its components will provide care or service directly to the patient just life Uber does for travelers. Wearable technologies (highlighted by the recent launch of Apple’s Watch) that can monitor patient’s vital signs 24/7 and the availability of healthcare clinics like at the corner drugstore is a strong foreshadow of the times to come. We at Triventures are actively monitoring this trend and are continuously assessing new ventures that can shape this paradigm.
[1] Uber Snags $41 Billion Valuation - The Wall Street Journal, Dec. 5, 2014.
[2] James A. Bacon - The Washington Times - Thursday, February 2, 2012.
[3] Bitter Pill: Why Medical Bills Are Killing Us, Time Magazine, April 23 2013.
[4] CVS Wants to Be Your Doctor’s Office, Time Magazine, February 12, 2015.
[5] The Revolution at the Corner Drugstore – The Wall Street Journal, January 23, 2015.