Qliance Nails $6M From Bezos, Dell, Drew Carey for Primary Care That Avoids Insurance

4/27/10Follow @xconomy

Qliance Medical Management isn’t the richest startup in Seattle, but it may have the most star power behind it. The company, which deals directly with patients and doesn’t accept health insurance for primary care medical services, has nailed down another $6 million in venture capital from a group led by Amazon founder Jeff Bezos, and which included Dell Computer pioneer Michael Dell and actor Drew Carey.

Besides those three famous names, Qliance attracted more cash from its existing investors Second Avenue Partners, New Atlantic Ventures, and Clear Fir Partners. The company got started in 2006 with a $3.5 million venture round, followed by another $4 million last July, bringing the company’s total to $13.5 million since inception. Rich Barton, the founder of Expedia and co-founder of Zillow, is another one of the big names that have put money to work at Qliance.

The big idea at the company, which we first profiled in December 2008, is a simple and disruptive one to the current U.S. healthcare system. Qliance runs what it calls a “direct practice” in downtown Seattle, which doesn’t accept any health insurance and deals directly with patients. The patient hands over a credit card, and agrees to pay a $44 to $84 monthly membership fee to Qliance for unrestricted access to its primary care medical services. The model allows Qliance to avoid spending its time doing things to get insurers to pay for primary care, which frees up the doctors to spend more time with individual patients.

Routine primary care—things like women’s health exams, flu shots, X-rays—make up almost 90 percent of the medical issues that prompt people to see a doctor, Qliance says. Going through an insurer to get these routine things done is sort of like asking your car insurance provider to reimburse you for an oil change; insurance is really needed when you’ve been in a serious accident, Qliance CEO Norm Wu said last month at an Xconomy event. Once people use “direct primary care” that avoids insurance, Qliance says consumers can get a catastrophic health insurance policy to cover them in case of a serious accident, or a cancer diagnosis, that is beyond the scope of what a primary care doc can treat.

Norm Wu

Norm Wu

By combining the monthly fee of primary care with the secondary insurance, Qliance contends employers and patients can save as much as 50 percent on their overall health spending, and improve overall health by making it easier for people to see a primary care doc who can help them focus on prevention and wellness.

“It’s not often you come across a business model that is truly transformational and disruptive in a sector ripe for reform, but that’s how we view Qliance in health care,” said Melinda Lewison of Bezos Expeditions, in a company statement. “We see significant long-term opportunity in Qliance as it’s easily scalable to other communities and health care reform has added wind to its back with the ability to compete in the insurance exchanges.”

The Amazon connection is a pretty clear one. Nick Hanauer of Second Avenue Partners, an early and enthusiastic backer of Qliance, was one of the early investors in Amazon.

Encouraging as the financing is, Qliance has had to clear a number of legal hurdles to get to where it is now. The company had to lobby hard in the Washington state legislature in 2007 to make sure lawmakers understood the business model avoids insurance, and therefore shouldn’t be covered by state insurance regulations. Last year, the legislature made it possible for employers and self-insured health plans to pay direct primary health care providers as part of an employee health benefit program, as is commonly done with traditional health insurance. That has enabled Qliance to sign up more than 70 employers to its monthly primary care service, which allows their employees access to primary care clinics in downtown Seattle, Kent, and Mercer Island.

The new round of financing will help Qliance take this vision of “direct primary care” beyond Washington state. Wu personally spent a lot of time in the past year paying close attention to the national healthcare reform debate, and enlisting allies like Sen. Maria Cantwell, the Washington state Democrat, to make sure that the new law wouldn’t create any barriers to Qliance’s model (regardless of whether insurance companies might like to stop it).

The new law that President Obama signed last month, the Patient Protection and Affordable Care Act, allows states to begin operating insurance exchanges in 2014, which makes it easier for small businesses and individuals to buy health care. What few people realize is that Wu’s advocacy apparently paid off, because “direct primary care” models like Qliance will be able to compete in those state insurance exchanges.

You can bet the full $6 million that just went into Qliance that not a dollar would have materialized if the new health reform law had created new obstacles to Qliance’s plan to expand nationally. That’s still a long way off since the company is still in its early days. But the market potential, as Wu noted in our original profile in December 2008, is about as big as it gets. Capturing a meaningful slice of the market—in which 250 million people in the U.S. need primary care services at an average price of about $50 a month—is the hard part.

“Our growth will not be limited by market potential, but by our ability to execute,” Wu said in the original story.

By posting a comment, you agree to our terms and conditions.