US healthcare is being revamped by tech startups

 

Companies are entering the US market to challenge conventional healthcare. They see a huge chance to change and profit.

Royal-blue waiting rooms are seen in Cityblock Health’s permanent mid-Atlantic and Midwest sites. In certain towns, the business deploys big, refitted motor caravans in the same color. Sidewalk Labs, Google’s Urban Innovation department, founded Cityblock Health to make medical, mental, and social care more accessible. It looks like a fashionable, urban coffee shop, reflecting its Silicon Valley roots.

It is one of several physical and digital start-ups that have sprung into American healthcare. These companies aspire to modernize health care by replacing the staid, antiseptic, and sometimes difficult-to-navigate system with something more pleasant, efficient, and even spa-like. Even if comparable firms are cropping up elsewhere, the US has a unique potential since private insurance is complicated and opaque.

These firms promise to solve the nation’s healthcare problems, including cost and accessibility. Some simplify appointment-booking, speed up doctor visits, or provide access to restricted medical-technology gadgets. Many of these companies work directly with commercial and government insurance to ease the procedure for patients.

They’re seeking to tear down boundaries and attract a new, younger cohort of customers in familiar, frictionless ways. Will it work?

 

The market debut

Many modern healthcare providers have selected, simple physical settings throughout care sectors. Dental-franchise Warm woods and cool green tiles decorate Tend’s hundreds of US shops. They schedule via smartphone and provide upfront pricing. Tend suggests patients watch TV with noise-cancelling headphones during treatments and rinse at “The Brushery” for a “selfie moment”. One Medical, a membership-only urgent-care business, prioritizes same-day reservations and offers a lab. Amazon bought the business all-cash for $3.9bn (£3.07bn) in February 2023 and debuted Prime memberships at $99 (£78) in November.

Virtual startups with similar concepts are also important. They provide services on contemporary, ultra-functional online platforms and have minimalist digital aesthetics like brick-and-mortar clinics. Virtual women’s healthcare platform Maven Clinic was named one of Time’s 100 Most Influential Companies of 2023. BetterHelp, which matches patients with mental-health specialists online, made $1bn (£790m) in 2022.

Other firms aspire to bring healthcare devices home. Best Buy sells TytoCare’s “smart clinic” thermometer-otoscope-stethoscope. The FDA just approved Mosie Baby’s $129 (£102) at-home insemination kit.

Due to the size of healthcare expenditure, Dan D’Orazio, CEO of healthcare-research and consulting company Sage Growth Partners, believes there are many new privately-funded businesses. “Independent US healthcare would have a $4.3 trillion GDP. He thinks it’d be the fourth biggest in the world. “There is a truly massive amount of money spent in US healthcare.”

US healthcare’s problems provide opportunities for innovation and profit.

“It’s no secret that people avoid the dentist,” says Tend communications chief Helen Zhang. She adds that the experience “is known for surprise bills, long wait times, judgemental attitudes from clinicians and inhospitable environments” and a negative net promoter score. Zhang says Tend wants to remove the reasons people avoid the dentist and provide a “joyful experience” that would persuade them to “stop skipping their visits and reprioritize their oral health”.

 

Perfect time

The rise of virtual health start-ups is largely due to timing. Many of these firms have been present since the 2010s or before, but telehealth’s pandemic popularity accelerated customer comfort with and need for digital services.

“Telemedicine was around for 20 years, maybe longer, but probably had a 2-to-3% adoption rate pre-Covid,” adds D’Orazio. “We weren’t trained to employ that level of care, and habits are hard to change, but Covid made it happen. Telehealth would have taken six years to do what Covid achieved in six weeks.”

D’Orazio says that if virtual care obstacles were lowered, med-tech start-ups, including physical franchises that provide specialized services in attractive venues, may develop. They serve patients of various ages, but D’Orazio thinks younger generations have adapted well.

According to Dan D’Orazio, disruptors should not assume that entering healthcare would be easy.
“A lot of younger folks don’t have a primary-care doctor, and for them it’s not that big a deal,” adds. Telehealth platforms and brick-and-mortar franchisees provide choice, convenience, and flexibility. The strategy matches the target audience’s agility. If a patient moves across the nation, they may visit their virtual physician or go into the same clinic chain in New York as in Los Angeles.

 

A road to success?

As expected, start-ups have made primary and specialty care more accessible, adds D’Orazio. Many organizations have reduced patient wait times by offering walk-in appointments and rapid booking. Many patients save time by not having to submit reimbursement paperwork via complicated portals due to their direct insurance coordination.

D’Orazio warns that these achievements don’t guarantee success and sustainability. Many health IT startups, especially private-funded ones, fail.

Elizabeth Holmes’ bogus health-technology business Theranos is the most famous. Others have failed abruptly: at-home orthodontics startup Smile Direct Club closed in December 2023, leaving members “in the lurch” mid-treatment. (Tend’s creator Doug Hudson was Smile Direct Club’s CEO from 2013 to 2016, resigning before the company’s Chapter 11 bankruptcy.)

“Why I think a lot of these companies struggle is they’re tech companies, they’re not healthcare companies,” adds D’Orazio. Disruptors should not assume healthcare will be easy to enter. Medical personnel shortages and regulatory and financial issues persist. Being a glitzy corporation doesn’t excuse them from such concerns.”

He proposes a middle ground between established physicians’ offices and health systems and medical start-ups to boost profitability. “Integration is really important, and we’re starting to see that with some of these partnerships.”

Many experts believe US healthcare is ripe for change, but these start-ups won’t destroy established healthcare. These firms may help the system evolve gradually.

Professor of health-industry management David Dranove of Northwestern University’s Kellogg School of Business thinks healthcare can be improved, and if a few start-ups can succeed and fix issues, that’s excellent.

“While not every fresh concept is helpful for customers,” he continues, “the status quo is unacceptable. We learn more by encouraging experimentation and fresh ideas.”

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