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August 13, 2015

The problem with trying to build an 'Uber for health care'

Daily Briefing

    Dan Diamond, Executive Editor

    In the Wall Street Journal this week, Melinda Beck wrote about the growing trend of startup companies attempting to become an "Uber for health care"—essentially, a service that can provide house calls on demand.

    Melinda writes about Pager, an app co-founded by a former Uber executive; Heal, another app that serves customers in Los Angeles and San Francisco; and a half-dozen other companies that are all attempting to capture the fledgling market.

    It's a really interesting trend. It's also really speculative. And it's not clear yet whether the model will work for a mass audience.

    Especially because there's a better model already out there.

    Why the 'Uber' idea gets so much attention

    Of course, there's something incredibly appealing about having doctors on demand. It's seductive to think about a sleek, black town car pulling up to your house or office, and a physician popping out.

    An "Uber for health care" ideally mixes the best of new technology with the old house call.

    That's one reason why the concept is so catchy. (I've personally written at least two stories built around companies competing for this market; in one case, Uber itself was testing whether it could be the "Uber of health care.") Investors like Ashton Kutcher are pouring dollars into Pager and the other firms.

    But for all the talk of start-ups trying to become an "Uber," there's real question over whether any of them can pull it off at scale.

    We debated this on the new episode of the Weekly Briefing; the conversation gets started around the 1:35 mark and we go deep into the "Uber" angle around 6:45.

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    Here's an excerpt:

      Rob Lazerow: What does it mean to have an Uber of health care? Is it about having the personalized on-demand experience? Or is it about figuring [out] where there is surplus capacity in the system that can be re-allocated to people?

      Rivka Friedman: And at a cheap price, which is the other key.

    I don't want to spoil our debate, but we generally concluded that telemedicine is far more promising than the Uber model: It's easier to find spare capacity, and it's easier to scale. Insurance companies are already paying for doctors to connect with patients over iPhones and other video-capable platforms.

    Even a New York Times blog post that was on companies attempting to become "an Uber for doctor house calls" ended with the author requesting a virtual house call for her injured daughter, not an in-person one.

    Sure, a video visit with a doctor via your iPhone isn't as sexy as an "Uber for health care"; it's more like a customer service desk for your aches and pains. But it's probably more practical for patients, and it's also more realistic from a capital investment sense, too.

    Also see: Google's move to become 'Alphabet' spells big news for health care

    Why the 'Uber' model might be a flawed ambition in health care

    Consider what it takes to build a real, workable Uber of anything.

    It's incredibly cost-intensive to assemble a giant fleet of semi-independent contractors, pay them wages that ensure someone will always be available—but keep the service so cheap that customers will be willing to use it at the push of a button.

    Uber might be enjoying a massive expansion; it's also suffering massive losses, as it attempts to quickly grow.

    And while the house call is in vogue again, especially for chronically ill patients who represent a disproportionate amount of costs, there's no evidence that there are enough providers in the system to have them flit from in-person visit to visit, especially for low-acuity patients.

    Anyone with a driver's license can ostensibly be an Uber driver. Relatively few people have a medical license or NP license—and many of them won't be interested in this model to begin with.

    I was struck that in Melinda's piece, she details that doctors and nurse practitioners participating in the Uber-like startup companies generally take less than 10 house calls per day. A provider that uses American Well's telemedicine platform could theoretically do 30 or 40 calls per day from the comfort of her iPhone or laptop.

    That's not to say there isn't a market for these Uber-like services, especially if the sharing economy starts changing how all Americans work. But it might not be a mass market—especially because the house calls aren't generally covered by insurance, introduce a range of quality-control issues, and may require patients to pay $100 or more out of pocket.

    "Analysts say it’s unclear whether many of the new on-demand services will reduce costs for those chronically ill patients," Melinda writes, "or mainly make it more convenient for the healthy and wealthy to get care they could have gone without."

    On this week's episode of the Weekly Briefing: Venture capital and health care

    Listen to this week's brand new episode, where Dan, Rivka Friedman, and Rob Lazerow discuss how investors are looking at health care and why private exchanges could end up being more important than the Affordable Care Act's own public exchanges. And be sure to stay to the end, where they pick their weekly Electives—the one thing they think you should be reading or hearing about every week.

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    More from today's Daily Briefing
    1. Current ArticleThe problem with trying to build an 'Uber for health care'

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