The pleasure and pain of digital health go-to-market
The Achilles heel of digital health has always been the go-to-market strategy. Early digital health companies, to their credit, focused exclusively on solving problems for patients and providers. Their solutions were often effective, for example Omada, Big Health and Propeller Health [Disclosure: Hogg previously served as COO and CCO at Propeller], but did not look like the tools traditionally used in healthcare.
Digital health companies were not drugs, not DME, not labs, not traditional clinical services. When these companies were “clinical services” they used the “wrong” providers or delivered the care in the “wrong” setting, according to lengthy and complex billing rules and code descriptors. They were products and services without a classification, which is not a great place to be in healthcare.
Without a standard classification, traditional reimbursement was impossible, so two models emerged from entrepreneurs that worked around the classification system. Early on a few companies were able to acquire patients directly and charge cash, or for example Kardia. This segment is now growing quickly, as evidenced in startups like Ro, Cove and Calibrate.
However, most went to payers directly, self-insured employers included, and sold them a new product to offer to their members. After the B2B contracting was complete*, these companies were allowed to market to the members of the payer included under the contract, adding the 2C in B2B2C**.
*This is not a fast process.
**Marketing to members comes with significant oversight and restrictions.
The arrival of B2B2C
The digital health B2B2C market exists because new digital health companies needed a way to get paid by payers, but also needed to go around the rigid benefit categorizations and benefit designs implemented by payers and plans. In a B2B2C model, vendors first contract directly with employers and payers, allowing these companies to get paid for their “non-standard” offerings.
These vendors are then allowed to market to the payer’s members or employer’s employees to sign up and use their digital health tool or service, using lists with limited contact information and strict rules around content and frequency.
Sometimes these companies got paid a small amount per employee or member, regardless of whether anyone actually used the product or service. This approach was really pioneered by Teladoc the Great, which made the most money of any company in history relative to actual use of their product. Most often payment was somehow tied to enrollment, or engagement, or even a real outcome like weight loss.
This B2B2C distribution model often plays out in a frustrating pattern. A company might spend 18 months getting the contract they really want, celebrate the huge win, get bogged down in marketing approvals, show limited enrollment due to implementation challenges, and then get limited revenue from slow enrollment. It can be pretty frustrating.
Some might think B2B2C is the path to riches and $17B exits, and it will be the way for some, but the truth is that B2B2C can be a slog where you often do not control your main lever of growth, and thus, revenue. Today B2B2C is a very crowded market with a line out the door of every self-insured employer, benefit broker and plan.
These buyers are increasingly choosing only a few new products per year and deciding which populations to build for, and even how to build. Like any maturing market, the bar to entry has gotten higher, with a need for HIPAA compliance audits, HITRUST certification and published clinical data just to get a meeting.
Those who are excited about building new B2B2C companies have probably not lived the pain and horror that is B2B2C sales and execution, but a little lack of direct personal pain is often useful when starting a new company.
The new world of virtual care
The acceptance of virtual care as a valid modality for clinical services changes the go-to-market landscape for the digital health market. New entrants can now build their products and offerings as ‘traditional clinical services,’ unlocking traditional reimbursement pathways.
These new entrants, if structured as true clinics, can attempt to contract with individual payers to become part of their provider networks, allowing them to file claims for approved clinical services. These new virtual clinics would then be allowed to acquire members, establish new patient relationships virtually, provide billable services to members and bill insurance companies as would a typical in-network provider.
All new brick-and-mortar clinics must market directly to patients to build their practice. Usually this is done via very location-specific channels and word of mouth. Since a virtual clinic is disconnected from geography, the target acquisition area is much broader, although not infinite due to complex state rules and laws.
This broader target acquisition opens up many additional marketing channels, and starts to look a lot like a marketing campaign for a consumer product or consumer subscription service.
In this new world of virtual care, companies have the ability to acquire patients directly using modern user acquisition techniques and the ability to get broadly paid by payers for providing those users with approved clinical services. When we combine these two components we get a new go-to-market model, B2C2B, which will become the dominant model for the virtual care era.
The arrival of B2C2B
We are about to see a proliferation of virtual care companies formed, funded and launched, and many of these will attempt this new B2C2B go-to-market strategy. The thought of being able to control user acquisition and growth, and have the offering subsidized or paid for by insurance is just too compelling.
The need to directly acquire users will place a heavy emphasis on products and services that solve real problems for end users, rather than ones that are easy to sell and implement within an employer or payer. Since users must be acquired directly and retained, and will pay some portion of the bill as a co-pay or other out-of-pocket expense, these new offerings will have to be significantly better than current offerings.
The bar for success of products in B2C2B is very high, but it will be the end users who benefit with well-designed and well-executed products, services and experiences.
The focus on direct acquisition will lead to narrow and focused offerings, targeting narrow and focused populations and problems. It is hard to market online to everyone for everything, but these channels can work well if you have a clear target audience.
With this direct acquisition model, we will see a lot of condition-based virtual-first solutions and offerings targeting specific populations. There are a few new – and awesome – companies that fit this description, but they accept only cash today. I assume most of these will evolve into a B2C2B model or some hybrid. If a user is willing to pay $20 a month for your offering out of pocket, as a covered service your revenue could be $100, including insurance payment.
Putting the 2B in B2C2B
Most roads in healthcare eventually lead to B2B sales and contracting, and most companies will eventually want payer contracts with good terms. The goal is to have leverage in conversations with payers, so you can capture more value over time, including with risk and capitation agreements.
One approach is to try to sell B2B first and pitch your offering as a new product that the payer should offer members, along with many others, and with limited patient experience and data. Another approach is to acquire and enroll a thousand members that are of interest to the payer, demonstrate your ability to acquire patients directly, engage and retain them, deliver a high NPS offering and improve clinical outcomes.
If the goal is a good contract with good rates or risk, the latter approach will be more likely to succeed in this increasingly crowded and competitive market. When you can acquire patients directly and deliver an engaging and impactful offering, everybody wants to be your best friend.
Thinking bigger, the B2C2B model gets very interesting if you think about directly acquiring very high-value users, such as patients with full risk from an MA plan, or direct-contracting with CMS. When the market values an at-risk Medicare life at $55k, as ONEM paid for Iora per patient, or even $160k per patient with a better growth rate, like at Oak’s IPO valuation, you can spend a lot of money on customer acquisition costs and the services you provide to users.
New products and solutions enable, and often require, new business models and go-to-market strategies, and the biggest winners in new markets usually create or dominate these new go-to-market approaches. The rise of virtual-first care will be no different. Some of the biggest future healthcare companies are being built today, and they will be built for B2C2B. We are all lucky to be able to help build that future.
About the author:
Chris Hogg is a long-time digital health advocate and entrepreneur. Chris most recently served as COO and CCO of Propeller Health, which was acquired by ResMed in 2018. Prior to Propeller, Chris cofounded an early mobile health company in 2011 that used design and data science to promote behavior change. Chris spends his free time thinking about the future of virtual-first care.