• Revenue Cycle Management
  • COVID-19
  • Reimbursement
  • Diabetes Awareness Month
  • Risk Management
  • Patient Retention
  • Staffing
  • Medical Economics® 100th Anniversary
  • Coding and documentation
  • Business of Endocrinology
  • Telehealth
  • Physicians Financial News
  • Cybersecurity
  • Cardiovascular Clinical Consult
  • Locum Tenens, brought to you by LocumLife®
  • Weight Management
  • Business of Women's Health
  • Practice Efficiency
  • Finance and Wealth
  • EHRs
  • Remote Patient Monitoring
  • Sponsored Webinars
  • Medical Technology
  • Billing and collections
  • Acute Pain Management
  • Exclusive Content
  • Value-based Care
  • Business of Pediatrics
  • Concierge Medicine 2.0 by Castle Connolly Private Health Partners
  • Practice Growth
  • Concierge Medicine
  • Business of Cardiology
  • Implementing the Topcon Ocular Telehealth Platform
  • Malpractice
  • Influenza
  • Sexual Health
  • Chronic Conditions
  • Technology
  • Legal and Policy
  • Money
  • Opinion
  • Vaccines
  • Practice Management
  • Patient Relations
  • Careers

The challenge of getting paid for digital health entrepreneurs


Doctors are being encouraged to seize the entrepreneurial moment as a new breed of tech founders with innovative solutions

There have been recent high profile calls for more physicians to join the ranks of health tech entrepreneurs from the American Medical Association and the venture community. The digital age offers exciting opportunities to address pressing health needs in new ways, and doctors are being encouraged to seize the entrepreneurial moment as a new breed of tech founders with innovative solutions.

And as underscored by venture capitalist Ben Horowitz in The Hard Thing about Hard Things, tech company origin stories can be compelling. A developer frustrated with credit card hassles founds Square, a pivot creates a viable new business for DigitalOcean, the leap from personal to semiprofessional crafts establishes a maker’s marketplace called Etsy. All of these stories address the academic hurdles of problem-solution fit (having a valid solution for a problem worth solving for a significant population) and product-market fit (building that solution into a product that can satisfy your market). It’s hard, but it can be done.
The lifeblood of these ventures, beyond investment, is their ability to capture revenue drawn from a bevy of digital business models: pay-per-service, transactional revenue, Software-as-a-Service (SaaS), among others. Innovation in business models is enabled by innovation in efficient payment systems. 
Modern payment systems-such as WorldPay, PayPal, Stripe, or Adyen-all deliver these benefits for a fee, typically 2.5–4.5 percent of transaction value plus some flat charge. Importantly, they abstract the data handling, risk management, and other financial matters away from the entrepreneur, and then interact as a trusted partner with traditional payment networks-such as Visa, AMEX, or bank-to-bank payment clearinghouses (ACH). This navigable infrastructure has empowered and enabled trillions of dollars in online transactions and fueled the growth of the digital economy.
The net result is a homogenous experience for customers across e-commerce. We know what to expect when it is time to check-out or buy services. 

But it’s different in healthcare.
Healthcare Is Extra Hard
Building a health-tech company adds an extra layer of hard. 
The same hurdles Square or Etsy overcame (standard startup challenges like funding, staffing, scaling, and competition in addition to attracting customers) also exist in health tech - and patients and physicians have to want to pay for the solution the entrepreneur offers. But unlike the rest of the economy, healthcare is saddled with greater validation complexity and forced to answer to an ever-evolving and contentious political debate.

And on top of it all, the simple act of collecting money is extra hard. There is no reliably homogenous experience when it comes to healthcare billing and payments. There is no intelligible payment-capture infrastructure.

The situation reads like a litany of ailments. In no particular order, the U.S. healthcare system creates unnatural market dynamics, necessitates support for myriad unrelated business models, demands a creative pathway search to reimbursement, stipulates delivery-network negotiations as preconditions to reimbursement, and obfuscates payments wrapped in nebulous insurance claims processes. And this list excludes regulation considerations or the costs of validation/proof-of-benefit to the patient.

It’s like starting a café and having to negotiate with every card-issuing bank who demands to taste your coffee as a precondition to requesting payment. Each bank then demands a rebate on purchases for its customers and demands you to submit the coffee receipts to get paid, 45 days later.
Assuming a digital healthcare company navigates funding, identifies a method of reimbursement, gets included in the appropriate service-delivery network, and possesses some external validation of value, they additionally have the added fortune of figuring out how to bill payers - how much is covered by which amount and by whom under what circumstances today? Most physician providers, like the local general practitioner, employ revenue cycle managers for up to 15 percent of bookings to do just this. 
Doctor on Demand (DoD) is a telemedicine platform startup and one example of a health tech outfit that seems to have effectively navigated this labyrinth to build what many consider to be a trailblazer in the space. It quickly expanded access to services through negotiations with payers by acting as a virtual practice, and through HR managers as a means of reducing corporate premiums to self-insured businesses. In the process, the company built a great interaction model for services that are paid for, in part, by patient insurers or employers.
This is how innovation should work to improve how we all experience digital healthcare.
But most digital healthcare companies don’t achieve the DoD model. The payer infrastructure hurdles are just too high. To avoid the unwieldy and byzantine nature of our reimbursement systems, health tech companies wind up selling directly to HR managers on a per-user/per-period basis or to provider systems as utilities. Thus, providers foot the bill, payment cycles are unaffiliated with collections, and costs are disconnected from revenue sources - the system expands to fulfill the needs of the system.

This hobbles healthcare innovation and ultimately limits patient choice and access to care.

While building a technology company is hard, building a healthcare technology company is next-to-impossible. Short of scrapping the entire insurance system of the United States, there must be adaptation to remove roadblocks for digital innovation to flourish in healthcare. Patients deserve better and health tech entrepreneurs want to deliver it to them. That shouldn’t be so hard.
Warren Templeton is a finance product expert who has executed launches for two startups and led operations and technology teams at Deutsche Bank, J.P. Morgan, and Morgan Stanley. He currently heads the product division for Health2047 in Silicon Valley, with a particular focus on business models that solve real health problems.

Related Videos