Day 82 — Business Model Exploration: Payers

Ahh, the holy grail. Getting reimbursed for a digital health product. It’s the gold at the end of the rainbow. Many health tech founders aspire to tap into it, few succeed.

How the heck do we get there?

I spent today trying to find out. I didn’t get very far.

What are “Payers”?

The US healthcare system is immensely complex. But payers is a fancy word for health insurance company (they “pay” for health services).

Private vs. Public Insurance

I found private health insurance coverage was more prevalent than public coverage, covering 68.0 and 34.1 percent of the population. Employment-based insurance was the most common subtype of private health insurance (source: US Census Bureau).

Around 50% of pediatric care is delivered through Medicaid (i.e., public insurance). That makes public insurance a really attractive target option. The challenge is that each state runs its own Medicaid program, so we will need to individually work with state programs to make this a reality.

Paths to Revenue with Payers

The clearest path to revenue with payers is to prove our outcomes. Ideally things that drive costs for payers. For type 1 diabetes, this means health outcomes (e.g., lowering A1C, driving down Emergency Department visits, etc.). It possibly could include user engagement and satisfaction, though these are weaker metrics.

Here’s an example.

I shared this earlier this week but it warrants sharing again:

Getting reimbursement is a long road. And one that’s still pretty unproven in digital health. The pre-requisite for all of this is that our product actually does what it says it’s going to do — i.e., improve outcomes for kids. And until we have a product, we’re probably not getting very far.

Making Some Progress

I did find 3 useful things today:

  1. The Medicaid Transformation Project. A collective of health systems focused on improving outcomes for things like behavioral health and reducing ED visits. There are a bunch of private solutions being tested through this program that we can learn from.
  2. Anthem Digital Innovation Competition. I submitted an application to this competition. While unlikely we’ll get through, it would be a great opportunity to better understand the payer landscape.
  3. gBeta Medtech Accelerator. This is a 7-week education program where we would have the opportunity to work with payers. It could be a really interesting learning opportunity.

In Other News…PBMs compete for digital health

Pharmacy Benefit Managers (PBMs) are an interesting opportunity I found while doing my research today. Express Scripts and CVS Caremark each have launched interesting programs to source digital health products and offer them on their marketplace to employers. It seems like this could be a much quicker path to market, as the proof point is probably as much around user satisfaction as proven outcomes.

What Now?

Well, I’m a bit disappointed in my progress today. I just didn’t have the focus I hoped to have to dive into this activity, and it’s such a big topic it just seems a little insurmountable.

At the end of the day, I’m more convinced than ever we just need to build a really great product that solves a problem and helps our users. If we do that well, we’ll have opportunities to pursue opportunities like this. The key will be nailing down the outcomes we aim to move and tailoring the product and our studies to them.

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Bob Weishar

Bob Weishar

Startup founder surviving in his parent’s basement.