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May 13, 2019

Uber's IPO: The 5 takeaways for health care

Daily Briefing

    By Jackie Kimmell, Senior Analyst

    Uber's initial public offering on Friday was one of the largest in tech history, with trading starting at $45 a share, or an $82 billion total valuation.

    June 5 webcon: What Amazon is planning in health care

    While the debut ended up falling below market expectations, it was still the largest for a U.S.-based company since Facebook in 2012. Uber is now expected to be worth more than the combined value of General Motors and FedEx—a shocking valuation for a company that's not currently profitable—it lost $3 billion in 2018—is facing a number of legal challenges worldwide, and has been hammered for creating a workplace culture that fueled sexual harassment.

    So why are investors still buying into the company? In part because of the company's broader vision to go beyond ride sharing alone. Uber executives are laying out an ambitious plan to market the company as a logistics expert that uses data to make freight forwarding and delivery more efficient, and its already launched a health care platform, Uber Health, that is currently being used by over 1,000 health care organizations.

    Uber executives have indicated the company wants to move deeper into the health care space. However, doing so will require overcoming numerous regulatory and legal barriers, as well as its competitor in the area, Lyft. Here are five things you should know about Uber's health care business.

    1. Uber Health has garnered substantial industry support—but it's taken a large amount of investment for the company

      Uber believes expanding into health care is a win-win for both the company and the industry. Patient no-shows cost the health care industry an estimated $150 billion per year, and research shows a lack of transportation plays a large role in those missed appointments. Uber thinks it can help to close that gap. "We think every rideshare company should provide a way for the health care industry to utilize their product," Dan Trigub, head of business development for Uber Health, said in February, "It's good for Uber, it's good for the industry."

      And they've invested heavily to launch a viable health care product. In 2018, the company launched Uber Health, a HIPAA-compliant dashboard that allows providers to book non-emergency transport for patients. Providers can schedule the ride up to 30 days in advance, and they are able to track the trip status in real time to see when patients were picked up and when they're anticipated to arrive. The service is also available for all patients, even those without smartphones, and can be integrated into existing workflows and electronic health systems, according to Uber.

      Over 100 health care organizations were part of Uber's initial Uber Health beta program—and more than 900 have joined since then. Many hospitals and health systems, like MedStar Health, have reported benefits from using the service—including a 40% reduction in costs over previous systems and a 5-10% increase in doctors' appointment fill rates. Boston Medical Center reported a savings of $500,000 from using the service to replace shuttle buses between its campuses and clinics—and reported higher patient satisfaction.

      Uber said it has taken slow, intentional movements into the health care space. "What we did, from the ground up, we built an infrastructure," Uber's former head of health Aaron Cromwell has said. "We brought in consultants who were experts in those fields… our data is encrypted, our staff is HIPAA-trained. Those things are really important or you can't work in the space; we wouldn't really be protecting the clients and organizations we work with." He added, "Obviously from a patient standpoint, [we have] GPS tracking, knowing exactly where riders are, and obviously the background checks."

      Our take: Uber and Lyft want to partner with you. Is that a good investment?

    2. To be successful, Uber will need to overcome a number of regulatory and legal challenges

      Still, that caution and HIPAA-compliance hasn't made Uber immune from the numerous legal and regulatory challenges of entering health care. Uber contracts with a dedicated compliance company, Clearwater Compliance, to perform periodic audits of its platform and health care program. It also has a dedicated in-house compliance team and has worked to make sure drivers don't know that they are taking Uber Health riders when completing trips.

      Regardless, it still faces a number of legal and regulatory vulnerabilities. Because drivers are classified as independent contractors and don't have to undergo HIPAA-training, the company could face penalties if drivers were to leak the names of patients being driven to appointments or where they're going. Uber is also uniquely vulnerable to a data breach, given their access to millions of patient names and transportation records.

      Uber is already a target for many governments and has faced a number of legal battles around the world. Health care could bring a number of new challenges. In its IPO prospectus, Uber acknowledges that, "as we expand our offerings in new areas, such as non-emergency medical transportation, we may be subject to additional health care-related federal and state laws and regulations." Uber's acceptance of this fact is reflected by their recent move to hire Lamis Hossain, former assistant general counsel of McKesson's health unit, as its new legal director—putting someone with health-care related experience front-and-center on its legal team.

    3. Uber's other biggest barrier in the space will be rival Lyft (but wheelchair-accessible vehicles could help)

      Regulatory and legal issues won't be the only challenge for Uber in making greater inroads in health care. They'll also have to beat rival Lyft—which has also set its sights on the medical transport market. Lyft already has partnerships with nine health care systems, including high-profile affiliations with 141-hospital system Ascension and Denver Health. They've also announced multiple high-profile partnerships with payers, like Blue Cross Blue Shield and Humana, as well as major tech companies.

      See what Lyft wants to do in health care

      Uber's been trying to edge them out. This past December, Uber announced that it had poached Dan Trigub, formerly Lyft's regional VP of health care, to join its own health care team. Trigub said he jumped ship because of Uber's "passion, commitment, and dedication to the product." He said, "Our aging, at-risk and low-income populations, among others, deserve greater access to transportation during the times they need it most."

      One huge advantage Uber has over Lyft? Its expansion of wheelchair-accessible rides. Uber teamed up last year with MV Transportation, a national third-party transportation provider, to bring the company's wheelchair-accessible cars and drivers onto Uber's platform. They claim patients can now get picked up in a wheelchair-accessible car in 15 minutes or less for trips in major cities like New York City, Boston, Philadelphia, Washington DC, Chicago, and Toronto. Uber is subsidizing the rides so they're priced similarly to UberX rides.

      A few months ago, Uber also partnered with Ambuluz, an on-demand ambulance provider, to include them on Uber Health's API. UCHealth, a health system in Colorado, attests that this has given them more flexibility in ordering rides based on a patient's acuity. "By having the ability to order a sedan, Ambulette or an ambulance from a single web portal or an app, our facilities will be able to more efficiently manage transportation needs, improving the overall experience and care of our patients," said UCHealth Chief Innovation Officer Dr. Richard Zane. Uber has also expanded Uber Assist, which allows riders to be connected to drivers who have had additional third-party training to be able to provide patients extra support.

      Lyft has some wheelchair-accessible options in limited markets, but nowhere close to the same offerings. Given that around 20% of non-emergency transport riders need wheelchair-assistance, this could give Uber a huge leg up. That being said, there's plenty of pie for the companies to share. Non-emergency medical transport is a $3 billion market, and the size of the total medical transportation services market is expected to reach $42 billion by 2024.

    4. Uber Health is only one small part of Uber's overall revenue-making plans  

      These barriers are likely why Uber isn't betting on health alone to increase their revenue. Uber Health is certainly one of Uber's strongest bets to increase revenue—but it's not the only one. It's also betting on other projects, like Uber Eats—which has grown into a $1.5 billion business—as well as Uber Freight for freight delivery; drone delivery; e-bikes; e-scooters, and many other side endeavors. As the Atlantic summarizes, Uber is trying to sell itself as "a platform for workers who want to move things—be it people, food or freight," so "what Amazon is for products, Uber could be for…work."

      However, if the reimbursement landscape for medical ridesharing continues to advance, it's possible that Uber Health could become a bigger part of the company's plans. Several states like Texas are currently considering bills that would broadly expand reimbursement for Uber and Lyft rides for Medicare patients. Given recent research that has estimated large cost savings for both states and the federal health system by expanding medical ride sharing—in the order of $537 million annually—support for expanded reimbursement could continue (and make health care ­even more appealing for the company).

    5. Transporting patients may only be the start of Uber's efforts in health care

      Aaron Crowell, Uber's former head of health, said that the company sees many opportunities in health care beyond just rides. He said Uber is considering using its drivers for prescription delivery, as well as to transport durable medical equipment, and potentially even offer home care. However, these efforts may still be a ways off. "There are lots of opportunities to impact and provide better access to care outside of just transportation," Crowell said, "But that's what we're focused on primarily right now."

    Learn more

    To learn more about what your hospital or health system can do to address transportation barriers, view our blog posts, "Four lessons on reducing no-show rates with hospital-provided transportation" and "Four ways hospitals can provide transportation assistance to drive access improvements."

    Then, to learn more about what another major tech company—Amazon—is planning in health care, make sure you join our newly-announced webconference on Wednesday June 5th at 3 ET, What ‘Amazon health care’ could look like in 5 years.

    Register Now

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