Jerry Maguire’s Healthcare Business Model

Yes, I know, anything and everything is now being marketed “as a service.”  And healthcare actually already is a service. But how do you pay for it?  That’s changed a great deal in the last 100 years and even more in the last 5 years.  Small town doctors, what we used to call a “GP” (General Practitioner) were paid with whatever the patient could give them. Money was first, of course, but if they chose to do so, the town doctor could accept fresh grown fruit, baked goods, livestock…whatever the patients could pay.  My how that has changed.

 

twitterpic

 

And it continues to change. As of today, my family has joined a “concierge” practice.  My primary care physician announced earlier this year that he was changing his practice to the concierge model. What that means is that we will pay a “membership fee” to become members of his practice, and then all other normal charges (usually tests & procedures) will be billed to my insurance.  I was skeptical at first, and am still skeptical to a certain extent, but I’m coming around.

 

But here’s what’s interesting.  My doctor currently has 5,000 patients. Five thousand!  Let’s do some math. There are about 280 work days in a year, assuming he never takes a day off or is out sick or updates his education.  Yeah, you did that math, too?  ~18 patients per day on average. OK, now do some more math: his office is open 830-5 less 1 hour for lunch, so 7.5 hours a day for 18 patients gives him 41 minutes per patient, which of course assumes he works every single minute of each day, never takes a break (except lunch) and is with a patient at all times. And that further assumes that the average visits per year for every patient is one visit. Right.

 

During our information session today, he confessed that he has tried the “industry standard” 6 minutes per patient routine, and just cannot do it. So our math that we did above is all wrong.  That’s why he’s choosing to move to this new model, in which he will have 600 patients.  That’s right, he’s firing 4,400 patients customers, and charging the 600 who signed up first (he said there’s a HUGE waiting list) a quarterly fee to be a member.  In other words, we’re paying a regular fee to have access to his services. Before he even opens his new practice location on Jan 1, 2015, he will have predictable revenue of nearly $1M/year.  Cash. Up front. Anything that’s normally billed to insurance will still be billed to insurance, so that $1M ARR is his baseline.  How’s that for a business model?

 

So here’s my thought: could you, as a tech startup SaaS provider, fire 88% of your customers?  Could you then charge the remaining 12% a premium?  What if you promised them instant access to direct, in person or phone support 24/7? What if you could guarantee every single customer a 90 minute meeting twice a year to do nothing but discuss their needs?

 

Don’t answer those yet.  First, let’s get back to a point I made earlier, that my doctor announced this change and now has a huge waiting list.  This is basic supply and demand based on excellent customer service. I love my doctor. He’s fantastic. He knows me and my wife and my kids.  Do your customers love you like that? Or, better yet, do you know your customers like my doctor knows me? OK, sorry, don’t answer that.  Do you know your customers as well as my doc knows about me and my family?  If not, why not?  How could you get to know your customers so well that they would voluntarily line up to pay more for your service?

 

I know, I know. Crazy. Fewer customers. Give them better service.  Charge them more. Sounds like Jerry Maguire, startup doctor, has written a letter to my doctor. But that’s where healthcare is going…today: Jerry Maguire’s Healthcare Business Model.  Where is the high tech industry going tomorrow?

What do you think?