When people ask me my Big Hairy Audacious Goal (BHAG) for Zipnosis, I reply: “To make the transactional cost of healthcare $0.00.” The looks I get range from quizzical to quizzical and concerned. After all, people are used to the current payment model and don’t see how Zipnosis will be able to stay in business without transactional revenue. Of course, this isn’t going to happen overnight – but the healthcare of the future is going to be paid for differently than it is today.
Remember, for a minute, Blockbuster – the prime example of a company on the wrong side of the payment and technology equation. In the Blockbuster era, renting a movie was transactional. You went to the video store, chose your movies, and paid at the counter. Until there was Netflix. Even before the advent of streaming, Netflix erased the transaction from renting movies. By selling movie rentals on a monthly subscription model, they broke the transactional payment mold and helped seal Blockbuster’s fate. The same is occurring, albeit more slowly, in healthcare.
For me, this is the most important change in the industry today – not the technology we’re developing, but the ability to help shift the pricing and reimbursement discussion away from fee-for-service and closer to value-based care delivery. And that’s really the difference between the current state (telemedicine) and the future state (virtual care) – the shift from transactions to value. This shows up in two key ways: technology and payment structure.
Transactions vs. Value: Technology
The healthcare industry has been testing out uses for telemedicine for ages because it is familiar. Telemedicine feels close to our current health system/experience: I sit in front of a computer or on a phone and talk to a healthcare provider instead of in a clinic. The only difference is my location. Telemedicine technology, like video queues, call centers, and nurse line systems, have been architected to support this 1-to-1, transactional experience.
But the analog technology telemedicine brings can only scale so far. Just like video stores could only serve so many people, telemedicine has an upper utilization limit. If as an industry and society, we are truly committed to increasing access to care, telemedicine technology becomes a wall at which the number of visits will exceed the infrastructure’s ability to manage them.
The future is more on the Netflix model, where technology and workflow enable significantly higher volume than previously imagined. Another company that successfully harnesses technology to facilitate an unbelievable number of transactions is Amazon. Instead of building a massive call center to meet the needs of their shoppers, Amazon invested in a technology platform that can and does handle far more transactions than humanly possible. There literally are not enough people on the planet to process the transactions Amazon processes.
Similar to both Amazon and Netflix, for healthcare to move beyond transactions, it must adopt new technology platforms – like virtual care. Virtual care is designed to handle a stream of data from many devices and sources. If we want to even contemplate continuous monitoring or predictive care models, we must not just transform the back-end “big data” warehouses, but the last mile of care delivery so its actually available to patients and clinicians. To put a fine point on it, analog telemedicine technology cannot meet this need but digital virtual care platforms do.
Transactions vs. Value: Payment
The transition from fee-for-service to value-based-care is happening in very quantified ways using bundled payments. This is akin to a shift from the Blockbuster model of renting a video – if you want 10 videos you pay $5/video or $50 – to Netflix, where you’re paying a set fee and can consume as much content as you’d like. Netflix can do this because their transactional cost is effectively $0 for you to view the content – even back in the DVD subscription days.
This is where the technology and the payment intersect. You cannot have a scalable value-based care payment system using transactional telemedicine technology. Conversely, transactional fee models are not fit for most virtual care platforms; it’s like asking Netflix to charge you each time you watch The Unbreakable Kimmy Schmidt. They can’t, and why would you?
The Future of Healthcare Revenue
Which brings me back to my BHAG for Zipnosis: driving a $0.00 transactional cost for healthcare. It’s terrifying for a Blockbuster-type payment model, but manna from heaven in a value-based world. It also creates a juicy chicken and egg problem. Do the technology platforms need to be in place before the economics? Or vice versa?
Both value-based care and virtual care technology are here and growing, but I think consumer choice will be what creates the tipping point in the industry. Our research shows that most patients don’t want video visits, and we know that transactional, video-based solutions aren’t the standard of convenience in any other industry. It’s simply not the way the rest of the digital economy works.
The good news is that health systems who have a line of sight into value-based care and are bold enough to install virtual care platforms will be the Netflixes and Amazons of healthcare’s digital age.
|Telemedicine Transactions||Virtual Care Value|
|Cost: Pay per visit – high transactional costs||Cost: $0.00 transactional cost – pay for value|
|Back End: Human processing||Back End: Platform (technology) processing|
|Reimbursement Model: Fee-for-service payment||Reimbursement Model: Value-based care models|
|Volume Impact: Value is in single-purpose use||Volume Impact: Scalable to meet demand|
About the Author
Jon Pearce is co-founder and CEO of Zipnosis. As a healthcare entrepreneur with experience in med-tech start-ups and as a venture analyst, he is focused on leveraging the power of technology to improve the way health systems engage with and treat their patients.