ZocDoc on the #1 healthcare consumer problem that never changes

In this weekly series, CNBC takes a look at the companies that made the inaugural Disruptor 50 list 10 years later.

Many startups have seen their missions change dramatically over the past decade. Consumer preferences, technology trends and market fluctuations may necessitate rapid changes to new business models.

But for ZocDoc — even operating in the healthcare industry where disrupting the status quo is a daily ambition of many billion-dollar market heavyweights like Amazon — that’s not the case.

When ZocDoc was launched in 2008, the idea of ​​being able to search for doctors and book appointments online was a new idea, but an answer to a very old medical problem: access to healthcare.

“ZocDoc’s original vision lives on,” says Oliver Kharraz, MD and CEO and Founder of ZocDoc. “Our North Star has been patient power, patients first, and we still do. The fundamental problem is that it’s really hard to get access to a doctor.”

That hasn’t changed either, with the average time to get a doctor’s appointment being longer now than it was in the decades before ZocDoc existed.

There have been some big generic events along the way. About 1% of medical appointments made through ZocDoc were telehealth before the Covid pandemic.

“We’ve moved from a primarily in-person market to a hybrid market, and we’ve certainly evolved,” Kharraz said, but the problem for the healthcare consumer has remained a constant.

ZocDoc had telehealth as an offer even before Covid, but the demand was very low. “There were millions of consumers coming to our website, and we could count on both hands of those using telemedicine,” Kharraz said.

At the height of the pandemic and lockdowns, this reached 40%, but for most medical specialties, telehealth remains below 10% of volume.

“The long-term steady state is changing very slowly,” he said.

With one big exception: mental health. “It continued on an upward trend after the pandemic, at least most of it, already passed,” Kharraz said. And it’s a place where he’s ready to make a bold prediction about an industry that’s been slow to embrace change.

“My prediction is that mental health is going almost completely remote,” he said, with the caveat that this will require the insurance reimbursement system to support this platform, but consumer demand is here.

But for all other parts of medicine, “it’s dominated by in-person providers…or in-person, but have telehealth as an option,” Kharraz said.

A telling statistic from ZocDoc: 71% of healthcare consumers who are offered multiple telemedicine choices always end up choosing a doctor within driving distance. “They want that option to continue in-person care. They don’t want to start over,” he said.

Many healthcare startups have built business models around the needs of insurance companies or the needs of providers, but Kharraz likes to think his company chose the patient “long before it was fashionable.”

But that doesn’t mean he didn’t make mistakes. Large. In fact, what it says ZocDoc got “most wrong” is the business model itself; a subscription model it tackled in 2012-2013 in which each doctor on the platform paid the same amount, regardless of the number of patients they had access to.

“Some were getting 10,000 patients and 10 and we were charging the same amount when the value they were getting was so different,” Kharraz said. “It was not a viable model.”

The unit economy was not business or physician friendly, and often physicians would leave the platform when they did not see the level of results that made sense for the subscription fee.

The business model made sense for physicians in the most densely populated regions of the United States, but not for physicians outside of those regions, and for a company founded to increase access to healthcare, it meant that ZocDoc failed in his mission. “Not in New York, but with the general American population,” Kharraz said.

When Kharraz stepped into the CEO role in January 2020, it was to focus on the transition, and it was what he described as an “all-consuming effort over a number of years.”

But the focus on suppliers doesn’t mean the mission has changed. “We’re unabashedly a patient-focused company, but that doesn’t mean it comes at the expense of the provider,” Kharraz said. “The system is so inefficient, so far from optimal trade-offs, and we want to be a facilitator of these incremental changes to a health care system that makes more sense for everyone,” he said.

While many players in the digital health space who have already gone public have had their values ​​compressed and others lumped into existing players, Kharraz says a lesson everyone has learned about the intersection of technology and health is that it does not evolve exponentially. user adoption curve. “And it’s the opposite of many other consumer tech companies,” he said. “We are more like a Galapagos tortoise and it takes a long time,” Kharraz said. Large incumbents buying up multiple health care companies show both buyer and seller realizing that health care takes a long time to grow, he said. This includes both tech giants and retail health giants buying into hybrid medical practices like Amazon’s recent purchase of One Medical and CVS’ deal for Signify Health.

What Amazon has revealed by shutting down its own Amazon Care hybrid primary care practice is that healthcare operates on a different time scale. “There’s a huge learning curve,” he said. “It’s one of those classic problems where people think if they can solve a problem in one area, they can clearly solve it in another.”

“What’s happening, even with consolidation, is that companies are trying to get really good at what they do, whether it’s primary care [One Medical] or home health [Signify] and it actually leads the whole space instead of disconnecting it,” he said.

ZocDoc sees itself as a beneficiary of consolidation rather than a target of it. “Signing up doctors is not a door-to-door situation, it’s hundreds or thousands at a time,” Kharraz said.

As the healthcare industry grows in size and focus, ZocDoc sees one of its major business shifts happening right now as it reaches out to product developers for the first time with a platform Open API, ZocDoc for Developers, which it launched in July. The patient scheduling technology that ZocDoc has been working on for 15 years now aims to defragment, at least a little, what Kharraz calls the still “stubbornly analog” or at least still very fragmented market. The flow of patient information between offices and systems will be the target of the largest providers combining in-person care and telehealth. “Our role is changing with consolidation,” he said.

Kharraz said he didn’t think about a possible exit when he founded the company and still doesn’t think about it today. “I saw a huge problem and ways to solve it, and it’s still the same today. There’s so much more to do to create that consumer orientation, and that’s how I spend my days. Things like how the business is financed and sources of capital have never been critical. At this point, the situation is favorable, economic unity, and we can focus on building the company.

With 40% of all healthcare spending worldwide made in the United States, he says the company still has a lot to do domestically.

Now, the healthcare logistics engine it built will be more tied to what developers come up with again, but the most important piece of the puzzle is still access to healthcare and use of technology. to enable consumers to make more informed choices, whether it’s a detailed comparison of treatment effectiveness, in-person care versus telehealth, or cost and payment options.

“It’s the ultimate threat going forward,” Kharraz said. “And if we arrive at this vision, we can inherently arrive at a system that rewards activities and services that consumers actually want rather than those that prevail in the bureaucratic ways that the system operates today between payers and providers. “, did he declare.

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