A use-case analysis for marketplaces in healthcare
Uber has revolutionised intra-city travel - disrupted a decades-old industry to empower the user and at the same time, by expanding the market many times over, has created millions of new jobs. Startups across industries have been trying to replicate the Uber model, and have met with a mixed bag of successes and failures.
Successful aggregator models have one common theme - they are indispensable for both the supply and the demand. For instance, Airbnb is very successful because while it provides home owners a chance to utilise their existing ‘inventory’, it also provides the user with a unique discovery/experience at an affordable price.
Healthcare marketplaces mostly have three set of offerings:
- Doctor consultations
- Diagnostic tests
1) Doctor consultations
Practo has been the clear winner in this space, especially after their acquisition of Qikwell. Let us look at the value proposition for both the user and the doctor:
For the user: When I look for a doctor in Bengaluru, I do not have the same expectations that I have when I look for restaurants on Zomato. I am open to trying out new cuisines and new venues (that is precisely why I go to Zomato). When it comes to doctors, I do not want to take any chances and book the ‘best’ one.
Now ‘best’ is a very subjective word, and you do have ‘doctor ratings’, but the jury is split on the correlation between user ratings and a doctor’s credibility. Mostly because, rating is more of an instantaneous reaction post your consultation, whereas the accuracy of the diagnosis and the effectiveness of the medication, will take time to reflect. Also ratings are more driven by user-experience, which may not be the best way to judge a doctor.
That being said, majority of doctor visits are non-critical in nature. Hence, a doctor with good reviews will most likely not disappoint you!
Also, if you only partner with the ‘most popular’ doctors in each locality, once all their slots are booked, is it not better to offer the next user at least some option for a consultation than none? Besides ratings, coupled with qualification and experience, seems to be the best you can do, at least for now!
For the doctor: Sure most of them do want a patient management tool to drive efficiencies and increase engagement with the patient, and if that brings in more patients, the better it is!
Online consultations also help them make the most of their limited time and expand their reach to other geographies which they previously had no access to. But fundamentally, a practitioner would want to move more of their patients to be direct walk-in’s, to insulate their patients from being ‘poached’ by ‘other doctors nearby’.
The tendency to curtail repeat online bookings is also validated from the fact that some doctors do offer lower consultation charges if you book directly versus when booked via Practo. And, if the interest of one of your key stakeholders doesn't align with yours, that’s not the ideal recipe for long term value creation
The localised (static) nature of both the supply and the demand is probably the reason why the doctor is motivated to move their online patients to offline clients, and that differs substantially from the supply-side behaviour at Airbnb (demand side mobility), and at Uber (both supply and demand side mobility)
2) Diagnostic tests:
From a bird’s eye, you would see a huge, highly fragmented industry, a perfect recipe for marketplaces to disrupt. But careful analysis would reveal that more than 98 percent of these centres operate without the NABL or the CAP accreditation, potentially implying that these centres might not operate with the highest standards, and hence questioning the accuracy of the reports.
So just a price-discovery portal would have little to worry about. But if you enable users to book appointments, it will be tough to partner with the uncertified labs due to concerns about the accuracy of the report. This narrows down the supply to less than 15-20 certified, labs with half of them housed in hospitals for whom diagnostics is not their core focus.
Also, monopolistic and oligopolistic businesses leave little room for margin negotiation and are vulnerable to sudden cartel induced squeezes from the supply side. This is why most travel aggregators like Cleartrip, Yatra, Makemytrip, etc., have started to shift their focus from flight bookings (<10 airlines) and focus on the fragmented hotel booking market (>100,000 hotels)
Let’s further delve into the discovery aspect of the diagnostic industry:
Successful discovery platforms (for example, Just Dial, OLX) have a common theme - the end product (that is being searched for) has little standardisation and is highly subjective.
- A 2014 MacBook Pro owned by Mr. A could command a substantially higher/lower value than a 2014 MacBook Pro owned by Mr. B. Hence, there is a lot of value a used marketplace like OLX could bring in.
- A Pizza at Restaurant A can be substantially different than a Pizza at Restaurant B. Hence, there is lot of value a food discovery platform like Zomato could bring in.
In the diagnostic industry, the tests and packages are a standard feature. And once quality is assured, there is little to difference between a Thyroid Profile test at an SRL laboratory and at a Dr. Lal Pathlabs. Thus, the only value in a diagnostic discovery tool is in price-discovery, which does hold some value for the user, but with little monetisation possibilities for the aggregator.
The product here is completely standardised, and the possible advantages a marketplace can bring in are:
- Convenience - Connecting your neighbourhood pharmacy to you
- Pricing - Discounts
- Discover generic (cheaper) alternates
Regulations aside, here again the localised nature of both the supply and the demand, puts the pharmacies at a risk of margin cannibalisation in their existing business (assuming that the user does not pay a convenience fee for medicine delivery, and so the pharmacy has to share a commission with the marketplace). So, unless the scale substantially increases and the partner pharmacy is able to grab the market share of other pharmacies nearby to an extent that the existing margin cannibalisation is countered by higher volumes, the partner pharmacy will see little benefit from the association. Also, if the delivery is managed by the pharmacy, they will try and move the users from online to offline.
But is it not the case with every marketplace, where the supply side would try and move the users away from the marketplace? Not really!
Marketplaces like Airbnb, Uber, Ola, OYO thrive on the mobility of the user, where the supply side stands to gain immensely to be associated with the aggregators (also explained above).
So are all companies focusing on the offline to online segment doomed? Not at all! Startups focusing on bringing small business online have much to look forward to. But in the healthcare industry, where quality becomes paramount, and given the trust deficit we generally share, it will be difficult for marketplaces to partner with businesses/individuals that actually need them.
Aggregators rarely create value (at least not in the first few months). They mostly eliminate a couple of layers in the food chain, pass on a percentage to the customer in discounts and keep the rest as commission. In the beginning, it is always a zero-sum game, that is if a marketplace has to make money, either the end-user will have to pay extra or someone in the existing value chain will lose (or both).
But we as a society have rarely paid for convenience, more so for un-skilled jobs. For instance, we might be willing to pay extra for doctor visits or lab tests at home, but will be very much averse to pay for delivery of groceries, food or medicines.
So, unlike in US where it is a norm, asking the user to pay extra for convenience would be a major behavioural change, implying that for an aggregator to make money, someone in the existing chain will have to lose.
Now, in the healthcare industry, the doctor has a very strong horizontal control over the market. Any disruption by a marketplace in even the diagnostics and pharmacy market, is bound to affect the doctor. This disruption is similar to that faced by the auto-rickshaw driver (because of Ola/Uber). Unlike the relationship of the user with the driver, which is just to help them reach from point A to point B, the relationship with the doctor is much more deep and intricate. It’s a relationship which involves a lot of trust and frequent touch points.
While it took time for the auto-drivers to accept the new world order (a few of them are still fighting it), it will be exponentially more difficult to affect a similar change to a stakeholder who controls the transaction.
One-stop shop for all your healthcare needs:
The utopian dream is to have e-prescriptions during your doctor consultation, extract the list of tests and medicines prescribed, get lab tests at home, reports shared online with the doctor for a virtual consultation, and medicines then confirmed and delivered at home, with pill-reminders set to ensure that you do not miss a dosage.
No matter how noble the concept sounds, this seems like a very distant reality. As explained above, almost every single stakeholder required to partner with the marketplace to achieve such a vision, has been structured to operate against the best interests of such an ecosystem.
Also, the three verticals - Doctor Consultations, Diagnostics and Pharmacies though correlated, have completely different operational dynamics. Attempting to solve all three at once, will be similar to running three different startups simultaneously - not advisable!
An analogy would be Myntra getting into the laundry business because it sells a lot of clothes!
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)