Describe in detail the Value Proposition that American Well would present to a clinician who was currently not practicing due to family responsibilities, illness or disability.
https://online.hbs.edu/blog/post/creating-a-value-proposition
American Well: The Doctor Will E-See You Now 9-510-061 R E V : A P R I L 2 3 , 2 0 1 4 ________________________________________________________________________________________________________________ Professor Elie Ofek and Dr. Ron Laufer, Adjunct Professor, Indiana University Kelley School of Business, prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2010, 2011, 2014 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1- 800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. E L I E O F E K R O N L A U F E R American Well: The Doctor Will E-See You Now On a crisp morning in November 2009, Ido Schoenberg was walking briskly through Boston’s Logan Airport when he spotted his brother, Roy Schoenberg, standing in line to board a flight to Washington, D.C. The two brothers, cofounders of American Well, the Online Care company, were taking a flight to Washington to deliver a presentation at the World Health Care Innovation and Technology Conference (WHIT). With the debate over health-care reform raging in Washington and with Bill Clinton as the keynote speaker, this year’s conference was sure to be a big event. As the flight lifted off, the view from the plane’s window revealed the historic Boston cityscape, where many significant events leading to the American Revolution had taken place. But as they settled in for the short 90-minute flight, Roy and Ido had a different revolution on their mind. Just three years ago, Ido and Roy founded American Well in an attempt to forever change health- care delivery and improve the way patients interact with physicians. Traditionally, patients had two primary choices when seeking medical care—to show up at an emergency room or a similar acute- care facility, or to submit themselves to the schedule of their physician, which could result in weeks of waiting for an office visit. American Well’s vision was to use the Internet and telephony to connect physicians and patients, within minutes in real time. Since its founding, the company was successful in developing the necessary technology platform, and its efforts to market the vision to major health insurance companies (also called health plan providers) in the U.S. had started to yield results. In fact, Blue Cross Blue Shield of Hawaii was the first to roll out the service earlier in the summer on a statewide basis, and so far the implementation of the platform had gone well. American Well management faced several pressing questions regarding where the company should go next. Although focusing on a nationwide rollout and adding more health insurance companies to the service would be a monumental task for any start-up company, Ido and Roy were already considering new applications for their platform. Being well aware of the first-mover advantage that American Well enjoyed, they were thinking about the next service concept, called “Team Edition.” While the service offered in Hawaii facilitated connectivity between patients and physicians, the next generation of service, if developed, would add connectivity between primary care physicians (PCPs) and specialists. Patients would no longer have to wait for weeks to see the specialist and then more time before coming back to their PCP for follow-up. Instead, Team Edition would connect the PCP and specialist instantly during the patient’s initial office or online visit. This document is authorized for use only by Kristopher Durham in Marketing in Transformative Helathcare - Fall 2021 at Wake Forest University Medical School, 2021. 510-061 American Well: The Doctor Will E-See You Now 2 Ido and Roy were also contemplating new customer segments for American Well’s platform, including hospitals, retail clinics, and pharmacies. Having been approached by a number of non-U.S. health insurers, expanding into international markets was also a possibility worth exploring. Although Roy and Ido were confident that American Well’s platform had revolutionary potential even beyond the health-care industry, they wondered: if they invested resources in new markets and product launches too early, would they undermine American Well’s opportunity to become the definitive leader in Online Care? Health-Care Delivery in the U.S. In 2009, U.S. health-care expenditures were estimated to top $2.5 trillion and were projected to reach $4.3 trillion, or $13,100 per resident, by 2018.1 This outlay represented 17.6% of gross domestic product (GDP)—a greater percentage than in any other country—and reflected the fragmentation and complexity of a system that was the subject of intense reform debate in public policy circles in 2009. Chronic diseases (e.g., cancer, diabetes, and heart disease) were leading causes of disability and caused 7 of every 10 deaths each year in the U.S.2 The prevalence of chronic disease made it a focal point for health-care providers, who were also bracing for the significant demographic shift expected to occur over the next two decades, by which time Americans over age 65 would comprise 20% of the population.3 (See Exhibits 1 and 2 for a breakdown of U.S. health spending in 2008.) Players The key players in the U.S. health-care system were patients, providers, public and private payors, and suppliers (of products such as therapeutic drugs and medical devices). Other supplier subsectors included health-care information technology (IT) providers, private equity and venture capital (VC) firms that financed health-care ventures, and academic and other institutional researchers. Providers included entities involved in delivering care, such as hospitals, nursing homes, and health clinics, as well as physicians and other health professionals. Of the approximately 5,500 hospitals providing inpatient and outpatient services, close to 90% focused on acute care, while the remainder specialized in rehabilitation, psychiatric care, and other specialties.4 Institutional providers also included nursing homes, assisted-living facilities, home-based care providers, and others. Approximately 990,000 physicians worked in the U.S., 40% of which were PCPs:5 generalist physicians who served as the first point of contact for their patients’ physical and mental health needs.6 Nonphysician providers included 2.5 million registered nurses, 74,000 physician assistants, 147,000 nurse practitioners, and others.7 Some physicians were employed by hospitals, while others ran private practices comprising one or more physicians. On average, family doctors earned $168,000 per year (about $81 per hour), registered nurses earned $67,000 ($32 per hour), and pharmacists earned $107,000 ($51 per hour).8 Delivering and Paying for Patient Care The type and quantity of care delivered to patients depended on several factors, including health insurance coverage (if any) and geographic location.9 Patients with health insurance typically had a PCP who served as their chief contact for health concerns, and who referred them to specialists (e.g., cardiologists, dermatologists, surgeons, etc.) as needed. For patients without insurance, hospital emergency rooms often served as the main source of care. There were regional shortages of some specialists (e.g., mental health, obstetrics, and gynecology); as such, the patient experience of receiving care varied between and within states. Insufficient access to care was especially problematic This document is authorized for use only by Kristopher Durham in Marketing in Transformative Helathcare - Fall 2021 at Wake Forest University Medical School, 2021. American Well: The Doctor Will E-See You Now 510-061 3 in rural areas, where provider shortages, low population density, and disproportionate reliance on self-employment and low-skill jobs—which had low rates of employer-sponsored health insurance— created barriers to care.10 The U.S. system for financing patient care was a complex web of public (federal and state) and private-sector payors. Coverage requirements, premium limits, reimbursement levels, and other constraints imposed on insurers varied by state. As of 2008, 53% of health spending was funded by private payors, including health insurance companies, individuals, and philanthropic sources.11 Health insurance companies offered several types of health plans at different price and coverage levels. Individuals with private coverage either purchased plans independently or received coverage through their employer. Most firms with 50 or more workers offered health coverage; smaller companies were less likely to do so.12 The format of employer-sponsored insurance varied, but typically involved employees paying a portion of premium payments and employers covering the rest. In 2009, the average annual premium for employer-sponsored insurance was $4,800 for individuals (17% paid by employee) and $13,400 for family coverage (27% paid by employee).13 The balance of health spending (47%) came from public payors, chiefly Medicare (federal program for Americans age 65 and over) and Medicaid (state program for eligible low-income and disabled residents), as well as the Department of Veterans Affairs (for military personnel) and SCHIP (State Children’s Health Insurance Program). In some cases, public payors did not cover the full cost of care delivery, leading providers to rely heavily on revenues from privately insured patients. (See Exhibit 3 for community hospitals’ payment-to-cost ratios from different payors from 1980 to 2007.) Patients without health insurance—about 17% of Americans under age 65—paid for care out of pocket and, in many cases, went without: one survey found that 14% of Americans did not see a doctor due to cost concerns in 2008.14 This was even true of many who had insurance, because their plans had high deductibles—the required out-of-pocket payment before insurance kicked in—or had limits to the services or dollar amount that would be covered. Health-Care IT Background American Well’s novel service model, which the company termed Online Care, came on the heels of a number of developments in the use of telecommunications and computer-based tools to collect, manage, and communicate health-care–related information and transactions. Examples included computerized decision-support and order-entry systems for physicians, electronic health or medical records (EHRs or EMRs), and tools for searching for health information (e.g., WebMD). Patients’ use of health-related websites increased through the 2000s, and by 2006, 80% of respondents to a survey of Internet users