The Five Biggest Tradeoffs in Scaling a Telehealth Company
Founders discuss what it takes and what it costs
We know from experience that putting together the right growth roadmap is often a challenging undertaking for founders. These early decisions are often a make or break moment and carry weighty implications for the company’s future. Dealing with people's lives, patients not consumers, is a whole different game when scaling consumer telemedicine startups. We chatted with some of the best and brightest in telehealth to hear how they navigated these trade-offs and what they learned along the way.
And if you haven’t already, check out our newly developed framework for evaluating verticalized telehealth companies.
“The two things I would emphasize here are for founders to do two things: play the game on the field and solve the problems with the shortest fuse first. In terms of solving problems with the shortest fuse, the best startups do not solve all the problems at once. They solve the ones they need to in order to consistently de-risk the business and let all other fires burn. It’s difficult to let a fire burn, let alone grow, but it’s absolutely essential because it’s impossible to solve all problems simultaneously.”
—Zachariah Reitano from Ro
Tradeoff #1: Quality vs. quantity of patients
“A good rule of thumb is that if patient experience is suffering, you’re moving too fast. Scaling as quickly as possible without sacrificing patient experience is the right speed to scale at. In terms of build order, we always prefer in-house processes before outsourcing, to ensure tight feedback loops and rapid learning before scaling.”
—Pan Chaudhury from Perry Health
“Our ability to scale and grow patients really fast is a little bit capped by the fact that we want to make sure that this brand new model that we're creating actually works and serves patients really well. A lot of the women that we're treating have really expensive and dangerous co-morbidities whether that's type two diabetes, high cholesterol, anxiety, depression. So I would say my goal for the first year is actually not to have the most patients possible. It's really to make sure that our patients have the best experience and the best outcomes possible.”
—Rachel Blank from Allara
Tradeoff #2: Current vs. future reimbursement
“We decided to focus on core covered preventative services that are mandated by law under the Affordable Care Act that are a hundred percent covered for all women every single year, no matter what, whether you have a commercial plan or a Medicaid plan. And that was the basis of our clinical model. For me to build a mass market women's health care model necessitates dealing with insurance, and I decided from the get-go that centering the model around quality and access at the same time by working with insurance was just part of the equation. We've almost developed our product and clinical model through the lens of helping women hack their insurance benefits to get more out of them.”
—Carolyn Witte from Tia
“Telehealth payment parity is a big question and a big debate. I think it’s going to change state by state. I think the genie is out of the bottle, so to speak, and can't be put back in. I don't think you can roll it back, but the insurance companies are definitely fighting it. We've been conservative in some of our assumptions about that, but I think it's too soon to tell. And right now we're seeing a mix across payers and across state lines. We're now in three markets so we see different things in different states, but I think that some type of reimbursement world will hold.”
—Carolyn Witte from Tia
Tradeoff #3: Timing and sequencing of key hires
“To continue fueling efficient growth, we’ve had to prioritize what parts of the business we scale first. For example, staffing our clinical, coach, operations, and member experience teams came first, and the technology and tools needed to empower those groups to achieve their outcomes followed. Once we built the infrastructure to best serve our members, we started to focus on growing our marketing team to bring the program to more people who need it.”
—Isabelle Kenyon from Calibrate
“I think the most important decisions you have to make as a founder at the beginning are who you hire; especially when it's less than 10 people, each person has such a big impact. And I can confidently say the people I've hired for each role so far are the most incredible people and have added exponential value to the company. But I was really thoughtful about all of those hires. I spent months on a lot of them and was really picky about who I wanted. I think the most important thing, as you're thinking about growth, is really making sure you're not compromising on who you're hiring, especially at the beginning.”
—Rachel Blank from Allara
“At this point in time, we legitimately are hiring three months out. Because we know how big we're going to get. And because we've also realized that when you bring in a class of people together and train them at once, they tend to have more camaraderie and it's easier to share learnings. Because there's no more incremental work that goes into training ten people versus two people. And frankly, I think the other really, really important thing for us was that we've overspent in time and money finding the single best executive hires. We looked at what are the areas of the business that need to grow and started looking for the right person five months ahead of time, six months ahead of time.”
—Carolyn Witte from Tia
“A lot of people just do interviews. There are a lot of people that interview unbelievably well, but we have them do these unique case studies that take 10-12 hours to complete and present. That has saved us from hiring some really well intentioned candidates that would have just performed poorly for us at the end of the day. And then here's the other thing we did. We met two of the most perfect candidates within 45 minutes of each other that were really, really, really expensive hires. And we basically said, ‘We can't afford not to have them both. We're just going to take them both.’ It was three months ahead of time for one of them and it was the single best decision we probably made in the company.”
Tradeoff #4: Optimization of supply and demand
“If you think about the business we've built at Hone, we actually have a marketplace. And a lot of the marketplace is about balancing the liquidity of the supply and demand [supply being physicians and demand being patients]. We created a model that predicted for a biweekly cohort that if we sold X assessments on average, Y patients would send their assessments back which would turn into Z consults on average over that period of time. We then modelled out how many physicians we need to have every single week based upon those patients that will be coming in. We can onboard physicians pretty quickly within a month. We can train them up and they can probably be operational within a week and on their own within a month. So that's the lag we had for physicians.”
“We’ve found that not all physicians are able to make the transition into startups smoothly. Especially when coming from a clinical setting, which is slow to adapt and is much less collaborative than a startup. It’s important to identify clinicians who are truly passionate about improving the current healthcare system, willing to embrace change, and comfortable dealing with uncertainty. The right attitude is as important as someone’s clinical expertise.”
—Pan Chaudhury from Perry Health
“The biggest higher order concept for our model is how we've reinvented that canonical doctor-patient relationship to be a team-based model. More than 80% of our services are delivered by nurse practitioners. We use MDs, NPs, care coordinators, nutritionists, therapists, acupuncturists, that all work together collaboratively to manage your whole health. And we're able to provide higher quality, higher touch care, but do it at lower costs. And that's core to the scalability of the model and the way we're adjusting for labor supply shortages and empowering providers to work at the top of their license.”
—Carolyn Witte from Tia
Tradeoff #5: Degree of oversight in physician screening
“Now, there are a lot of physicians that want to get into telehealth. You have to screen obsessively. We go through a four part screening process: first round is with our head of physician operations, next it goes to my co-founder and COO, then it goes to me, and final round is with our medical director. You have to have an agreement on what is a good physician and not break it because you're trying to grow fast, because that means you just bring on subpar physicians resulting in subpar experiences and outcomes for patients.
“It's really important that we build our own PC and make sure that we are overseeing the hiring and contracting of physicians ourselves. Maintaining really strong oversight there is how we know that we're hiring top quality talent, whether that's physicians, nurse practitioners or registered dieticians.”
—Rachel Blank from Allara
Curious to learn more or swap ideas about digital health? Reach out to me at jason@primary.vc or @jasonrshuman on Twitter.