One Medical is a prime example of a digital technology disrupting a traditional industry.
The process of receiving healthcare has always been very cumbersome and is generally a terrible customer experience. Especially when you are sick, you do not want to be dealing with calling to make an appointment, traveling whatever distance to the doctor’s office, idling in the waiting room for the inevitable delay after delay, and then get hit with a shockingly large bill. It not only is such a terrible experience but also the bad taste left in people’s mouths about their past experiences tend to steer them away from wanting to go to the doctor at all and can often lead people to not getting the preventative or early enough care that they need.
One Medical has been a winner in digital innovation because they were able to disrupt this healthcare industry. I define a winner in digital innovation as those who use digital technology to create more coordination of different parties and information between them to create benefits such as more efficiency, convenience and access. One Medical checks all those boxes for me.
One Medical’s major product offering is their digital health technology platform that gives people 24/7 access to digital health care services. Coupled with 70+ doctor office locations (Onemedical.com, 2020), they provide the blended and seamless online and offline experience for its consumers, allowing them to use the technology to organize their healthcare information (such as managing lab results and prescriptions) but easily schedule time at convenient locations for in-person visits.
While the process before was cumbersome, now with One Medical, a patient could just easily log into the app and immediately reach a healthcare provider – through text or even a video call – to talk through their current ailments and next steps. Without even having to leave their home, they can be prescribed a treatment without having to drudge out to a faraway doctor’s office. The human centric design of their technology brings some life into this industry that has been seen in the past as relatively cold, impersonal and impossible to manage.
But what has been particularly interesting to follow in One Medical’s story is how they were able to incentivize more than just the patients to buy into this technology. Its business model is fascinating because it is purposefully built to align the incentives of each party in the healthcare industry.
Similar to other technology (or software as a service) businesses – but unlike the typical healthcare providers in the past – One Medical charges an annual membership. This simple fee structure therefore encourages patients to use its technology and providers for more preventative care earlier in sickness – leading to hopefully a healthier patient base.
While One Medical tried in the beginning to go direct to consumer, the company found that the membership fee was hard to stomach by their average consumer and instead pivoted to have employers pay for this service as a benefit. In return, employers are now able to have a healthcare product that their employees actually want to have, data from One Medical on likely outcomes of their employee population and a generally healthier employee base. And you can see this in the results too – with emergency visits reduced by 41% and employer healthcare costs lowered by 8%+ (Forbes.com, 2020). With a 97% retention rate and 6,000 enterprise clients (Forbes.com, 2020), this strategy is clearly working and resonating with employers.
The company also pays its doctors an annual salary, which is also different from others in the industry who are paid on a visit basis. This payment structure incentivizes doctors to not churn through patients, but really make sure the patients at least feel like they are getting the most high quality care. One Medical is also able to cut down on administrative costs for providers given its technology program, allowing for not just less cash costs, but also less time and headache focused on the more menial tasks.
What I have always found troublesome with digital innovation is that even with an amazing digital product, it can be difficult to motivate the different parties to adopt it because it could be costly and their incentives are generally not aligned. While it may have taken One Medical some time and pivots to get there, their current business model both creates and captures value for each of the different parties.