I had the good fortune of participating in an executive management program on ‘Disruptive Innovation’ at Harvard Business School (HBS), taught by Dr. Clayton Christensen, ‘the world’s most influential business thinker’, founder of strategy consulting firm Innosight, and the Kim B. Clark Professor of Business Administration at Harvard Business School. This is a case study on ‘disruptive innovation in healthcare’ that has culminated from my contribution to this program.
HealthTap (www.healthtap.com) was founded by Ron Gutman from Stanford Business School, in 2010 to create an Uber like concierge service for patients tired of waiting for a doctor’s appointment, or needing a second opinion. Health Tap comprises an interactive free service where people can ask healthcare relevant questions and expect an answer from one of HealthTaps’s 100,000 US licensed doctors  who are peer reviewed and can also be rated by patients based on their experience. The doctors are paid on a per consult basis, not unlike Uber drivers. Their mission is “to help people live healthier, longer and happier lives”. The Health Tap web site gets over 7.5 MM unique visitors every month, and has served over 100 MM patients.
Health Tap also offers a premium subscription at $ 99 a month for unlimited online interactions with its doctors within minutes to hours, to drive revenues, on a B2C and recently a service called ‘Health Compass’ on a B2B basis targeting large employers. They have raised $ 35 MM in venture capital funding from well-known VC firms in the valley including Mohr Davidow Ventures, Khosla Ventures, Mayfield Fund, and Asset Management Ventures, and counts Doctor On Demand, Teladoc, and MDLIVe, as its competitors.
HealthTap’s Market Penetration Strategy targeting Patients (B2P)
Job to be done (JTBD) : “Getting help from Doctor’s answering my health questions and the option to consult with them on demand, or at short notice, anytime, anywhere, and from any device” is the job to be done.
Today, most patients have to rely on content from websites like WebMD to answer their health questions, or go thru the daunting process of scheduling an appointment with a doctor to ask and answer health questions typically when they have an ailment. Most primary care physicians (PCPs) in the country are overloaded and typically have less than 10 minutes with a patient to diagnose, triage and offer a treatment which is sub-optimal from a patient’s perspective.
HealthTap offers patients the ability to have their questions answered for free by qualified doctors and then, the ability to consult with these same doctors for a reasonable fee for simple ailments, without the hassle of scheduling appointments or taking time off from work for a doctor’s visit. HealthTap has the world’s largest repository of doctor-created and -curated content . HealthTap is squarely focused on addressing the needs of specific segments of patients who are challenged by waiting times to see a doctor in an office setting including:
- Pregnant mothers or mothers with small children
- Busy executives or road warriors who do not have the time to schedule an appointment for a doctor’s visit during a work week, and also need healthcare consultations when they are traveling domestic or internationally.
- Disabled, chronically ill adults and senior citizens for whom an office visit to the doctor is a struggle
- Hypochondriacs who are looking for a second opinion
HealthTap provides a free Q&A service as a ‘loss leader’ to its patient population to build credibility and brand equity, to then entice them to try out the paid premium service at $ 99/month with an additional $ 10/month for every family member. The ability to have a licensed physician answer medical questions and rate them based on their answers is a key differentiator from a patient’s perspective. Further, the ability to consult with these physicians anytime, from any location via any device, without the hassle of securing appointments and then waiting days or weeks to see the doctor, while taking time off from work, is an unmet need that HealthTap provides a solution to, at a very competitive price and a compelling customer experience.
This deliberate market penetration strategy delivers a low-end disruption of the status quo targeted specifically at patients, executives, working mothers and seniors who want to avoid the hassle of a doctor’s visit if possible.
HealthTap’s Total Addressable Market (TAM) Opportunity
It is estimated that the cost of doctor’s visits in the US is more than $ 500 Bn per year,  more than a third of which are for routine and simple ailments like common cold, sore throat, itches and rashes, that can be diagnosed and treated via virtual health care options like tele-medicine and concierge services such as Health Tap. Assuming 30% penetration of the market amounts to a total addressable market of around $ 150 Bn annually for services like Health Tap.
It is estimated that in 2015, almost 15 MM patients engaged with a doctor online that represents a 50% growth over two years . The virtual healthcare market in projected to generate revenues of $ 3.5 Bn by 2022, which HealthTap appears to be well positioned to exploit.
While accurate revenue estimates are not available, securing 10,000 patients on the $ 1,200 annual premium subscription drives revenues of $ 12 MM per year, which appears very feasible, with projected growth rates of 50-100% per year. It is estimated that extending this model to large employers would enable them to drive 3-5 X revenues going forward.
HealthTap’s Emergent Strategy – Targeting Companies and their Employees (B2B2P)
HealthTap’s market penetration strategy focused on delivering a core platform that enables patients to ask questions from doctors and then have these questions answered with the ability to further consult with the doctor and secure answers, checklists etc specific to their ailment.
This involves relatively high fixed costs in terms of building the software and the knowledge management platform, as well as marketing the service to, and acquiring doctors (over 100,000 at this time) who will take the time to respond to questions, and offer consults for a fee.
They realized early on that their ‘performance defining component for the modular job to be done’ was the ability of actual doctors to respond to questions from patients. They acquired a competitor called the Avvo Network that enabled them to tap into this network of 15-20 K doctors and delivered huge credibility and brand equity. Ensuring that they appreciate these doctors for the services they provide thru recognition while ensuring healthy competition between them has also served them well.
Given the relative challenges and costs acquiring one patient at a time and driving a modest revenue and profit per patient, HealthTap’s founders have recently decided to create and test a new B2B2P business model and profit formula that would enable them to offer and plug in their network of physicians to meet the needs of large corporate employers with thousands of employees .
Not only would this offer economies of scale and scope for HealthTap and drive large revenue streams leveraging its B2P platform for an incremental cost of customer acquisition, it would also enable them to drive higher gross and net margins given the relatively low variable cost of engaging with these employees.
HealthTap now offers this new service called ‘HealthTap Compass’ with tele-medicine/tele-health and concierge services, targeted squarely at large employers with insurance plans who want to reduce time off from their employees with minor ailments, which lowers treatment costs while improving employee productivity.
Within Compass, employees (patients) will be able to instant message or video-conference with specialists from the HealthTap network for free. HealthTap’s physicians can now prescribe medications for employees, order lab tests, interpret the results, and write referrals for local in-network specialists, as well as offer patients a centralized and comprehensive treatment plan .
Employees (patients) will also have access to HealthTap’s RateRx database, a physician crowd-sourced medication reference library that lets users search for a specific condition and then analyze and compare a list of which medications most providers prescribe for treatment. HealthTap’s Compass application also serves up appointment reminders, medication reminders, via the Apple Watch or their mobile devices (both iOS and Android) and patient-specific chronic disease management educational materials [4,5].
HealthTap has secured its first B2B2P customer in Flextronics, the hi-tech consumer electronics manufacturer with over 200,000 employees across 100 office locations in 30 countries .
Summary and Conclusion
HealthTap offers a fascinating case study of ‘low cost disruption’ re: the treatment of patients with minor ailments who want to avoid the hassle of seeing doctors, by having their questions answered or consults for a reasonable fee. Given the modular structure of the healthcare delivery process, HealthTap has virtualized the ‘performance defining component’ via its tele-health+ knowledge management platform that it has monetized thru its concierge services to penetrate the market for end consumers (patients).
Over time, HealthTap has appraised (emergent strategy) a far bigger opportunity to leverage this platform with a B2B2P business and profit model, and is offering its network of physicians, its tele-health platform and concierge services to large employers with health plans, to drive new and significant profitable revenue streams that deliver measurable value thru higher employee productivity at a lower per employee cost of care delivery for employers.
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Disclaimer: The perspective and views expressed in this Blog post are my own and do not represent those of my current or previous employers.
1. ‘HealthTap Reaches Major Milestone In Virtual Care Expansion’, Laura Lorenzetti, Forbes magazine, March 29th, 2016.
2. ‘HealthTap’s Video Chatting Doctors Want to End Your WebMD Meltdowns’, Issie Lapowsky, Wired Magazine, July 30th, 2014
3. ‘Skip the waiting room by visiting Doctors virtually’, Shalene Gupta, Fortune Magazine, November 6th, 2014
4. ‘HealthTap enters the Employee Wellness Market’, Lt. Dan, HIStalk Connect, October 1st, 2015.
5. Interview with Sean Mehra, Head of Product Development at HealthTap by Clutch, September 30th, 2015.
6. ‘Six Steps to put Christensen’s ‘Jobs-to-be-Done’ Theory into Practice’, Stephen Wunker, CMO Network on Forbes.com, February 7th, 2012.
‘What is Disruptive Innovation?‘, Dr. Clayton Christensen, Michael E. Raynor and Rory McDonald, Harvard Business Review (HBR), December 2015 issue.
‘Will Disruptive Innovations cure Healthcare?‘, Dr. Clayton Christensen, Richard M. J. Bohmer and John Kenagy, Harvard Business Review (HBR), September-October 2000 issue.
‘The Innovator’s Prescription – A Disruptive Solution for Healthcare‘ by Dr. Clayton Christensen, Jerome H. Grossman and Jason Hwang, McGraw Hill, 2009.