HealthTap Positions Itself for Rush of Obamacare Patients in 2014
When you run into a Silicon Valley startup that’s been around for two or three years and has a popular, fast-growing product or service, but is earning little or no revenue, then you know that one of two things is going on. Either the startup has a clear business model in mind, but is waiting for the right moment to put it into action; or it has no idea how to make money and will happily settle for some other kind of payoff, such as getting bought by Facebook (see: Instagram).
The problem for a tech reporter like me is that almost every pre-revenue startup claims to be the first type, whereas a lot of them are really the second.
Which type is HealthTap, the medical Q&A site founded back in 2010? After raising $14 million in venture funding, signing up 34,000 physicians as contributors, and acquiring millions of users, the Palo Alto, CA-based startup is still giving away almost everything for free. That lack of revenue might sound like a red flag. But after a long conversation recently with HealthTap’s founder and CEO, Ron Gutman, I’m fairly convinced that the company has a well-thought-out value proposition and business model. It’s just one that won’t be persuasive until after January 1, 2014.
That’s when the individual mandate portion of the Patient Protection and Affordable Care Act, aka Obamacare, will go into effect. At that point, 30 to 40 million people who are currently uninsured will be able to buy insurance from new health insurance exchanges in each state. All of those people will need doctors. And to cope with the influx, Gutman believes, physicians and the companies they work for will need better communications tools—for example, mobile apps that let doctors answer patients’ questions without making them come in for an office visit.
What you see right now at Healthtap, in other words, is only the chrysalis. Inside, Gutman says, the startup’s designers, developers, and salespeople are feverishly preparing for the coming overhaul in the healthcare economy. And soon, he predicts, HealthTap will metamorphose from a Q&A site into a service that doctors, hospitals, or provider organizations will buy to manage their larger patient pools more efficiently.
“We want to be the platform where doctors interact with patients outside of office visits,” Gutman says. “That is hugely important and monetizable. We could have been a profitable company today if we had turned on pharmaceutical advertising and stuff like that, but I think there are business models that are much more compelling.”
Not everything on HealthTap is free. If you want an answer from one of HealthTap’s doctors right away, or if you ask a question that’s longer than 150 characters, you have to donate 99 cents to charity. If you want to pursue a private conversation with a doctor, there’s a $9.99 fee. But Gutman says imposing prices for certain interactions is not a way of generating cash for the startup—rather, it’s a way to gather data about what users really want.
“Ninety-nine point nine percent of our focus now is going into growth, distribution, and engagement,” he says.
HealthTap has been through a number of iterations. When I first profiled the company back in April 2011, it had just opened up for public beta testing, and its Q&A system covered just two medical subtopics: pregnancy and infant care. The service was mostly focused on guiding people with active symptoms to pre-packaged yet personalized answers and suggestions. For example, if a questioner stated that she was 18 weeks pregnant and had a mild fever and tenderness in one side, the site would suggest a kidney infection as a possible diagnosis and recommend seeing a doctor (since a kidney infection during pregnancy can be a serious complication requiring hospitalization).
Under the hood, the system was built around a complex “ontology,” or knowledge structure, built in collaboration with more than 500 volunteer obstetricians, gynecologists, and pediatricians. The original idea was to extend the ontology eventually to every medical specialty. That was done, and the infrastructure is still there, fulfilling specialized functions. But after much testing, the outward face of HealthTap evolved into something far simpler. It’s now a Q&A site in the same genre with Quora, Yahoo Answers, Formspring, AllExperts, Askville, and many others, except that all the questions come from consumers, and all the answers come from licensed U.S. physicians whose credentials are in good standing.
HealthTap counts 34,000 physicians in its network across 120 specialties, and Gutman says that every question elicits at least one answer within 24 hours—sometimes much faster. (When I asked a question this week, I got two answers within three hours.)
These are nothing like full medical consultations—Healthtap encourages patients to limit their questions to roughly the length of a tweet, and it encourages physicians to keep their answers to 400 characters. But Gutman says the company’s observations show those are the ideal message sizes for both patients and doctors, especially considering that either or both may be using HealthTap from the small screens of their smartphones. “It’s not replacing a doctor visit, but it’s giving you an item of information you need to understand your health better and do the next thing, such as choosing a physician,” Gutman says.
In the spirit of transparency, the site lets users see not just the names of the answering physicians, but their location, areas of expertise, and the number of kudos they’ve received for participating in HealthTap’s community. Users can also see who’s in the doctor’s referral network—-the other doctors to whom they refer their patients most often. And every physician also gets a “DocScore,” similar to a FICO score or a Google rank, based on their career accomplishments and the scores of the doctors who refer to them. It’s all intended to help patients assess the credibility of the answers and find physicians who might be able to help with their specific problems.
To facilitate that, there’s a button on each doctor’s page leading to an appointment request form. But Gutman notes that the average wait for an appointment with a physician in the U.S. is 20 days. And that’s the difficulty that the startup originally set out to address.
There’s no reason someone should have to wait that long for an answer to a simple medical question, Gutman argues. At HealthTap, “The whole promise is to create immediate access to the best physicians and their information,” he says.
To make it all work, though, the startup had to give physicians a reason to spend their time answering questions. It came up with several. For one thing, the system uses game mechanics such as votes, medals, trophies, and thank-yous to “bring fun back to the practice of medicine—this whole notion that you can interact with patients and actually enjoy it,” Gutman says.
At the same time, doctors use HealthTap’s maps and DocScore system to build their own referral networks. And using another recently added feature called “curbside consults,” doctors can ask each other questions privately.
Most of HealthTap’s features, including the referral network maps, got their start in the form of suggestions from doctors, which was key to the company’s early growth, Gutman says. “The secret sauce was that we gave them a voice. They love that we take their ideas and incorporate them into the product. It made them turn around and invite other doctors. They’d say ‘These guys really mean it. There is somebody who actually listens to us.’”
HealthTap’s network of 34,000 doctors represents about 6 percent of all U.S. physicians. That’s a lot, for such a young startup. Then again, it will take a lot of work to reach the other 94 percent.
At the same time, the company aims to expand is base of consumer users, which is now in the single-digit millions, to “more than 100 million,” Gutman says. “At the end of the day we want to be the number one player in how patients connect with doctors.”
The more users HealthTap can line up in 2013, the more leverage it will have when the new health insurance exchanges go into operation next year. Which brings us back to HealthTap’s business model.
“What will happen with Obamacare is exactly what happened with Y2K, but with substance this time,” Gutman predicts. “Three or four months before these 30 or 40 million Americans flood the healthcare system, people will wake up and say ‘Oh my god, this is going to happen and nothing is going to stop it.’ They will need to do something, and they will resort to technology.”
With so many new people using medical services, Gutman thinks, there will be a scramble inside physician practices and hospitals to cut costs. If you look at the nation’s total medical bills, office visits represent one of the biggest line items—some $487 billion a year. But at least 25 percent of the patients who show up doctor’s offices could have gotten their questions answered without actually seeing a physician, Gutman says.
So here’s his math. If the 25 percent figure is correct, then unnecessary office visits currently cost the nation more than $120 billion a year. Using a premium version of an electronic system like HealthTap, Gutman thinks, health systems might be able to lower the costs of those interactions by two-thirds, saving $80 billion a year. That’s enough to support HealthTap and a lot of other startups.
“If you reduce those costs by 66 per cent, you make the insurance companies happier, the government happier, the taxpayer happier, the doctor happier because they can manage more patients efficiently, and most importantly you make the patient happier,” since they’ll presumably get their question answered faster, Gutman says.
It’s not clear which players in the complex world of healthcare and healthcare payments will be the first to see the wisdom of investing in a new digital platform for doctor-patient communication. “Who exactly will pay for it, I agree, is to be determined,” Gutman says. “But what we are saying is that HealthTap will let them pay less than they would otherwise pay.”
A few big healthcare providers—including Kaiser Permanente and Sutter Health, the two largest non-profit health systems in Northern California—already have their own online patient portals where doctors can post lab results and exchange messages with patients securely.
But while these companies “have the vision,” in Gutman’s view, “they don’t execute well….they don’t know software.” Healthcare providers should “concentrate on what they do really well, which is providing care and making patients better, and we need to focus on building software that will enable interactions between doctors and patients,” he says.
HealthTap is betting that if it can win the trust and loyalty of enough doctors and consumers now, health systems will be willing to pay for its services in their hour of need—which could come in about 300 days.
“We need to think of how we are going to take care of 30 million more people, when we cannot build more hospitals or open more medical schools that fast,” says Gutman. “Technology has traditionally been good at creating a pressure valve to take care of some of the extra demand.”
Below: I couldn’t resist including a video of this fish-shaped, remote-controlled mini-dirigible, which adds a bit of levity to HealthTap’s bustling Palo Alto office.