A startup that raised $175 million to fix primary and urgent care is still struggling with what its CEO called the 'most complex' problem in healthcare

Eren Bali Carbon Health CEO

Summary List Placement

Some of healthcare’s problems are so complex that even the most well-funded startups struggle to fix them.

Carbon Health cofounder and CEO Eren Bali found out as much as his company tried to make prices for doctor’s visits, routine procedures like blood tests, and comparative prices for diagnostic tools like MRIs and x-rays transparent for patients, a feat that sounded simple at first but quickly ballooned into a much larger, systemic problem.

In a Twitter thread posted on December 27, Bali ran through the challenges he and his team had identified in trying to create a menu of sorts for different procedures and treatments for Carbon Health patients.

In the end, he ultimately said the fix lies with insurance companies — not healthcare providers — to fix the way patients and clinics are expected to pay for healthcare in the United States.

“The problem is on the payer side,” Bali told Business Insider. “The payer systems are old and antiquated, and that’s opaque to providers. We are doing all we can on the provider side.”

Read more: $1.5 billion digital-health startup Ro wants to be your online doctor. Here’s how its coronavirus response rooted in rapid at-home testing fits into the new unicorn’s long-term strategy.

Calculating prices ahead of visits proved difficult

Carbon Health serves a wide variety of patients with its urgent and primary care services. It offers booking through an app, and also added virtual visits to any patient seeking care but hesitant or unable to go into one of its physical clinics.

Ideally, Bali said, Carbon would be able to show patients the costs of these services upfront so that the doctor and patient can decide on the best course of treatment together, but hasn’t made as much progress as he would like.

Some relatively new healthcare entrants like Walmart have similar ambitions in making shopping for healthcare just as easy as shopping for groceries. Patients can find Walmart’s cash prices online, such as a primary care visit that costs $40.

Carbon Health has developed a system that works well for patients without insurance, Bali said, because pricing is more straightforward. It created a data analysis tool that looks at different inputs such as existing conditions, Carbon’s cost of service, and other factors to provide an up-front cost to uninsured patients, Bali said. For example, Carbon charges uninsured patients $195 for a primary care sick visit and $69 for a virtual visit, according to its website.

But it was when that same system was trained for patients with insurance that things started to unravel, Bali said. The calculated costs for patients with similar backgrounds, insurance plans, and symptoms only matched 40% of the time, Bali said.

“We can’t explain the difference,” Bali said.

Insurance companies are built on out-dated systems

Part of the variance can be explained by how complex insurance plans are, Bali said. Each plan is essentially unique to the individual that has it, and coverage can range widely even among similar plans offered by the same insurance company.

That’s not something that even the most sophisticated data analytics model can fix, Bali explained. If healthcare providers like Carbon want to tell patients how much they can expect to pay for a visit and associated procedures, insurance companies need to update how they bill both patients and providers.

“It’s driven around the inadequate system,” Angela Miles, head of revenue cycle at Carbon Health, told Business Insider. “We need to rebuild that from a payer standpoint to get to a more modern standpoint.”

More complexity leads to increased costs

Startups like Oscar Health are already attempting to bring insurance companies into a more modern model, Bali said, but larger companies have yet to shift in a meaningful way.

Those that do change, albeit in a more superficial way, actually make the problem worse by making it even more complicated, Bali said, because the added complexity adds time, which adds costs.

“A lot of work that goes towards decreasing healthcare costs is making the system more complicated,” Bali said. “My theory is that things that drive increased cost in healthcare is due to increasing complexity because you can’t be transparent and compete on price.”

SEE ALSO: The founder of a healthcare venture fund that just raised $200 million shares why she wants to back founders that are building businesses for their communities

Join the conversation about this story »

NOW WATCH: Warren Buffett lives in a modest house that’s worth .001% of his total wealth

Related Articles

$1.5 billion digital-health startup Ro wants to be your online doctor. Here's how its coronavirus response rooted in rapid at-home testing fits into the new unicorn's long-term strategy.

Summary List PlacementRo, a hot digital health startup best known for selling generic Viagra, is taking another big step in expanding its healthcare ambitions.
Ro is teaming up with computer vision startup Gauss to offer at-home rapid COVID-19 antigen tests that provide results in 15 minutes, the companies announced Wednesday. The test is still awaiting emergency clearance from the US Food and Drug Administration. Ro doesn’t take insurance and declined to say how much it’ll charge for the test. 
The launch comes just a month after Ro announced it acquired Workpath, a startup that allows hospitals and clinics to send phlebotomists into patients’ homes to perform routine blood tests, furthering its goals to expand beyond its initial suite of mail-order pharmaceuticals for conditions such as hair loss or erectile dysfunction.
Ro’s aggressive moves into all parts of healthcare come at a pivotal moment for the industry, which has been upended by the coronavirus pandemic. Unlike hospitals or clinics, Ro’s virtual care model combined with its network of real-world pharmacies and logistics makes it poised to tackle distribution for rapid tests and eventually vaccines, cofounder and CEO Zachariah Reitano told Business Insider.
“Right now there are two things universally needed in healthcare: access to the vaccine and easy access to rapid testing,” Reitano said. “We have the technology and the infrastructure to distribute tests to patients across the country, and we have the unique capability to facilitate a connection to a doctor if it requires a prescription to get the test. We can mail it to them and guide them through the next steps. Not many other companies can do that.”
Read more: The 26 billion-dollar startups to watch that are revolutionizing healthcare in 2021
Ro’s ambitions extend well beyond telemedicine
Ro started with a modest proposal: patients could virtually meet with a care provider and get generic prescription medications for conditions like hair loss or erectile dysfunction sent to their homes for a nominal fee.
Nearly four years later and the startup has skyrocketed to a $1.5 billion valuation while aggressively adding new products and services for its growing group of patients. 
When the coronavirus pandemic took root, companies like Ro and its competitor Hims added new patients as doctors’ offices shuttered and people remained hesitant to venture out to a nearby pharmacy, Reitano said. The virtual care model and easy shipping appeared tailor-made for a pandemic that left most Americans house-bound.
“Growth isn’t a problem right now,” Reitano said. “We’re going to expand and add services to try and keep up with the demand of the country.”
At present, that means building specifically for the coronavirus pandemic, Reitano said. The Gauss partnership is the first step in what Reitano said was his company’s responsibility in lowering transmission rates and saving peoples’ lives.
Reitano also said Ro is interested in helping with vaccine distribution, but declined to discuss the plans.
Ro’s future lies in testing
A more ambitious future for Ro could rely heavily on building a network of traditional healthcare services instead of relying on the partnership model it’s worked on in the past, repeat healthcare founder and investor Nikhil Krishnan said.
The ability to control pricing and cut out middlemen is key to the company’s long-term success because it relies on patients paying cash for services instead of working with insurance plans. The lower Ro’s costs, the lower it can keep prices.
“Lab testing, depending on how it’s structured, can be really expensive to outsource so it makes sense to bring it in-house at some point,” Krishnan said. “Ro has been pretty ahead of the curve in bringing those pieces of the value chain in-house.”
Part of the appeal of launching an at-home COVID-19 test is that Ro can substantially cut costs of currently available at-home tests that retail for between $100 and $150 per testing kit. 
“We’d like to put pressure on the market and bring the prices down across the board,” Reitano said.
To stay competitive, Ro wants to play a bigger role in its customers’ lives but needs more patient data to be effective. For instance, by offering lab tests and screenings from Workpath, it can help treat a larger variety of conditions through telemedicine and eventually in-person, Reitano said.
Krishnan said Ro is building an experience for patients in the real world after establishing a relationship with them online. Testing, and to some extent screening, can help companies like Ro gather more information on patients and better compete with physical healthcare practices.
“I don’t know if there’s necessarily a right way to strike a partnership, but I definitely think a lot of the telemedicine companies will have to figure out how to get this information eventually,” Krishnan said.
Reitano said he is eager to expand into other forms of testing with the goal of becoming what he calls a “fully integrated” primary care provider that can host virtual visits and ship a host of medications directly to patients while freeing up in-person care for those patients that truly need it.
“It’s just the beginning of us for testing,” Reitano said.SEE ALSO: 2 former Sequoia VCs just raised $500 million for their firm’s second fund. Here’s how they plan to spend the funds.
Join the conversation about this story » NOW WATCH: Why electric planes haven’t taken off yet

How the growth of the urgent care industry business model is changing the healthcare market in 2021

Summary List Placement
Urgent care centers are convenient, on-demand care outlets similar to walk-in retail clinics, but  are equipped to treat more serious ailments, including fractures, sprains, and wounds.
Urgent care centers can serve as a first step in the patient journey as well by referring patients to follow-up appointments or ERs.
Do you work in the Healthcare industry? Get business insights on the latest tech innovations, market trends, and your competitors with data-driven research.

What are urgent care clinics?
Urgent care centers are convenient, on-demand care outlets similar to walk-in retail clinics, but rather than treating low-acuity conditions such as bronchitis and minor infections, urgent care clinics are equipped to treat more serious ailments, including fractures, sprains, and wounds. They also offer services like blood tests, stitching, and X-rays.
Urgent care centers can serve as a first step in the patient journey as well by referring patients to follow-up appointments or ERs. Though they should not be used for life-threatening emergencies, urgent care clinics provide easy access to quality healthcare for times when your primary care doctor is unavailable.
The urgent care market & business model
According to Consumer Reports, the number of urgent care facilities increased from 6,400 in 2014 to 8,100 in 2018, with another 500 to 600 expected to open. Some 24/7 urgent care centers function like satellite emergency rooms, and incur similar healthcare costs, while other centers simply charge copays.

Generally speaking, an urgent care visit is a money-saver for patients. A 2016 study in the Annals of Emergency Medicine found that ER treatment costs were about 10 times more (an average of about $2,200) than in an urgent care center (about $168) — even for patients with the same diagnosis. 
Because of the overlap urgent care centers have with family medicine and emergency medicine, they are typically staffed accordingly with at least one medical physician or specialist, as well as a physician assistant, nurse practitioner, or radiologist available to see patients any time the facility is open.
Urgent care staffing models
Henry Schein Medical cites three major urgent care center staffing models:

Physician Only: The most expensive model that uses no mid-level practitioners. However, it could be the most cost effective options for new centers building their patient base.
Mixed Model: A balance of physicians, physician assistants, and nurse practitioners for centers increasing in patient volume.
Mid-Level Model: Centers staffed entirely by mid-level staff. This option is suitable for low acuity cases, but may not be equipped to handle more complex patient needs.

Top Urgent Care Providers & Companies
Urgent care clinics aren’t necessarily run by traditional hospitals or health systems. In fact, 61% of urgent care clinics in Massachusetts are owned by non-hospital urgent care chains, per a 2018 Massachusetts Health Policy Commission report.
Some of the largest US urgent care operators include:

American Family Care
City MD
Concentra
Fast Med
GoHealth
HCA CareNow
MedPost
NextCare
Patient First
U.S. Healthworks

Urgent care industry trends & statistics 
Interest in the on-demand, affordable care of urgent care clinics—particularly amid the coronavirus pandemic—has been growing rapidly. According to the Urgent Care Association (UCA), the total number of urgent care centers in the U.S. reached 8,774 in November 2018 — up eight percent from 8,125 in 2017.
Laurel Stoimenoff, PT, CHC, CEO of UCA, says that urgent care clinics handle about 89 million patient visits each year, which includes more than 29% of all primary care visits in the US, and nearly 15% of all outpatient physician visits.
And nearly all of those visits are more convenient and affordable than a trip to the ER; the UCA’s 2018 Benchmarking Report found that more than 70% of patients waited less than 20 minutes to see a provider at an urgent care center, and nearly 94% were seen in less than 30 minutes. Overall, 85% of urgent care centers patients are taken care of in under an hour.
“Urgent care centers play an increasingly vital role in the continuum of care, providing services for a wide array of patients who may be unable to see a primary care physician for various reasons, including simply not yet affiliating with one,” said Stoimenoff.
Consumer demand for hyper-convenient care has reached a fever pitch, especially among younger cohorts. Nearly one-quarter of millennials haven’t visited a primary care physician (PCP) in five years or more, with about one-third saying that going to get a physical isn’t convenient, per a 2019 Harmony Healthcare IT survey. That’s why we’re seeing more younger patients opt for medical care as well as walk-in appointments for real-time needs such as covid testing.
Interested in more related Digital Health research?
In addition to urgent care, Insider Intelligence publishes a wealth of research reports, charts, forecasts, and analysis of the Digital Health industry. You can learn more about accessing all of this content here. 
And here are some related Digital Health reports that might interest you:

The Digital Health Ecosystem, which explores the key trends driving digital transformation in healthcare and what we expect to see in the year ahead.

Big Tech in Healthcare, which looks at how Alphabet, Amazon, Apple, and Microsoft are moving into the healthcare space.

The Digital Therapeutics Explainer, which explores the drivers lighting a fire under the DTx market, identifies the leading DTx market players, and unpacks the varied ways vendors reach their intended audiences. 

Join the conversation about this story »

A healthcare startup serving LGBTQIA+ patients just raised $25 million, and its growth reveals a key area of opportunity for other primary care startups

Summary List PlacementPrimary care, and healthcare more broadly, is largely one-size-fits-all in the US. 
A growing group of entrepreneurs and investors are trying to dismantle it and rebuild a more equitable healthcare system in its wake.
One such startup is Folx, a consumer healthcare startup for LGBTQIA+ patients, although there are tens more startups hoping to build trust among other long-neglected and underserved communities of patients. 
On Tuesday, Folx announced it raised $25 million in Series A funding from Bessemer Venture Partners, Polaris Partners, Define Ventures, and Red Antler. 
Although Folx is launching with direct-mail hormone replacement therapy treatments for transgender patients, founder and CEO A.G. Breitenstein told Business Insider of her long-term goals to unseat traditional care avenues for the LGBTQIA+ community, which is often discriminated against in traditional primary care settings. In the coming years, Breitenstein sees Folx drastically expanding the conditions it is able to treat through telemedicine in addition to expanding into owned-and-operated in-person clinics across the country.
“Discrimination is newly legal,” Breitenstein said of the Trump administration’s retraction of protections for transgender patients. “It allowed providers to discriminate against our community. Care has always been unstable for them, but we can be there for them and that’s what we’re here for.” 
Read more: This startup’s pricing model based on health insurer data was wrong almost half the time, and it reveals a huge challenge to reshaping healthcare
Startups like Folx want to reimagine the US healthcare system based on overcoming patients’ negative experiences, and that means building new models that don’t rely on the current network of doctors and clinics. 
“Our big takeaway is that other groups have underestimated the immense market size for advances in healthcare for distinct populations,” Bessemer Ventures Partners investor Morgan Cheatham told Business Insider. “We’re more bullish than ever that these niches aren’t so niche.”
That could contribute to a boon of highly specialized care startups, Cheatham said, in addition to those like his latest investment, Folx, that are already seeing growth among target populations. In fact, he said niche care could become the default for all primary care in the United States after the massive inequities were unearthed during the coronavirus pandemic.
Underserved patients need new healthcare solutions
Since 2014, highly targeted healthcare companies like Folx have collectively raised more than $1 billion, according to Pitchbook data.
The future of primary care could look like Cityblock Health, a $1 billion startup serving primarily low-income communities by addressing external factors like access to reliable transportation and clean drinking water as part of its holistic healthcare model. Its goal is to offset medical costs by addressing those factors, leading to better long-term health in the community. 
Until recently, investors didn’t consider these external factors, now commonly referred to as the “social determinants of health,” as a key area of cost reduction and innovation, one investor told Business Insider. It took a pandemic, and the cracks in the system it illuminated, to prove the environmental aspects of many Americans’ health. Now, it is an area of top investment for VCs going into 2021.
The future could also look like Oak Street Health, a more traditional primary care clinic model for elderly patients on Medicare, or ChenMed, for seniors with complex chronic conditions that need to be actively monitored by doctors. Oak Street went public in August, giving an air of legitimacy to the growing eldercare space.
Startups like One Medical have a broad-strokes approach to primary care but tend to focus primarily on city-dwelling young professionals with a subscription-based payment model and perks like cucumber water in waiting rooms. Village MD is another primary care startup with a broad appeal that works with physicians to provide care and has in-person clinics in select Walgreens locations. Those companies’ successes, however, have helped paved the way for tech-enabled challengers to grow while serving other groups that aren’t able to afford or access care through their networks.
Read more: Meet the 8 primary-care companies building a new future for medicine during the pandemic
Of more interest to Cheatham and other VCs are the communities that don’t yet have tailormade healthcare solutions. He pointed to communities like recent immigrants, undocumented individuals, low-income communities, and even racial or ethnic-specific groups as developments he is hoping for in primary care. 
“The One Medicals of the world focus on the upper end of that income spectrum, but there’s a lot of work to do on the other end,” Cheatham said, referring to the membership-based primary care model primarily targeted at healthy, working-age upper-middle-class patients.
Healthcare equity will have to come from outside
Getting patients to trust upstarts, a monumental task in healthcare broadly, still remains a challenge for the community-based care companies. Winning them over requires an entirely new perspective on medical care and clinic experience, Breitenstein said, even if that perspective comes from someone largely outside the existing system.
That approach involves lots of educational materials, Breitenstein said, so that patients know of and are able to adjust to complications from medications and make informed decisions about their own courses of treatment. 
That “informed consent” model differs from traditional symptom-based care in that it is more proactive and takes more stock of a patient’s lifestyle and goals, Breitenstein said, all in an effort to win patients’ trust.
“The paradigm shift around informed consent model of care, where you come to us and tell us what your goals are so we can help educate and guide you through the healthcare system, it’s informative and empowering,” Cheatham said, adding that he sees the model moving into other aspects of healthcare in the future.
Breitenstein has big ambitions for Folx and believes the market opportunity is large enough to support its growth. Beyond adding new capabilities like STI testing and mental health visits, she sees Folx expanding into in-person clinics across the country that could eventually include surgery centers for gender confirmation surgeries. She also has an eye on family planning and fertility, an already booming market with several startups serving heterosexual couples.SEE ALSO: SIGN UP HERE: Hear from healthcare’s biggest VCs on the future of digital health, biotech, and startups
Join the conversation about this story » NOW WATCH: What candy corn is actually made of

Responses

Your email address will not be published. Required fields are marked *

Receive the latest news

Subscribe To Our Weekly Newsletter

Get notified about chronicles from TreatMyBrand directly in your inbox