A friend sent me an email today with this subject: “WTF!!!” Inside was a link to this article in “Business Insider” (http://www.businessinsider.com/what-is-zocdoc-startup-tour) claiming that startup ZocDoc is worth $1 billion based on its latest $50 million round of venture capital. I told my friend not to worry, that valuation was obviously in ZocDollars. But seriously, someone paid $50 million for a small piece of this startup. Who? Why? And what’s wrong with this picture?
A bit of background: ZocDoc is one of a new breed of “HIT” startups targeting healthcare information technology. Now that social networking is saturated, housing is dead, and the marketplace is quaking like an i-banker in August (there was an earthquake in Manhattan, recall) the smart money is moving into tech. Again. This has led to a well-documented round of hand-wringing about valuation bubbles among investors. But not all of them are sitting things out. Others are battling for a piece of the economy where quality candidates still get multiple job offers: namely IT.
In this space Andreessen-Horowitz is a three hundred pound balding speed-talking gorilla (at least judging by Marc Andreessen’s recent appearance in the WSJ) and as good a proxy as any for the mindset of these investors. Andreessen is the guy who co-founded Netscape and LoudCloud, invested in Skype, Foursquare, Twitter, and Facebook, and sits on the boards of Facebook, eBay, and HP. He’s a guy you have to take seriously and he explains his reasoning clearly in this recent Wall Street Journal editorial. According to him, the problem is simple: “software is eating the world.” It’s disrupting established industries and claiming “large swathes of the economy.”
Is it really? Like I would know! As far as I can tell a toxic combination of mortgage brokers, earthquakes, and the United States Congress has taken that job. Yet there is no question that tech has toppled established industries like telecom (remember Ma Bell? me neither), newspapers, music, and many more. If you have any doubt just compare the rosy valuation of Facebook ($50 billion) with that of the Washington Post ($3 billion) and consider that the latter includes three thriving businesses in addition to the famous name news rag. History is indeed happening here.
So why has smart money like Jeff Bezos, Vinod Khosla, and Peter Thiel backed ZocDoc? Andreessen apparently isn’t in this crowd but we can examine his outspoken philosophy for clues. He states that healthcare and education are the two areas being targeted by his fund today because they’ve lagged in innovation. That may or may not be true — biotech and charter/for-profit schools have been trying to change that for years — but they are at least two parts of the economy where the dollars are still flowing. Healthcare also has another thing going for it: the electronic medical record (EMR). EMR has long been a dream of medical futurists, technocrats, and every person who has ever been asked to recall their entire medical history and scribble it on a single piece of paper in 15 minutes while sitting in their doctor’s office coughing up a lung. Today, thanks to incentives from Obama’s healthcare bill and the prodding of his outgoing CIO Vivek Kundra it’s becoming a reality. In other words, HIT is “it” today. Apparently that makes ZocDoc, with its mission of “improving healthcare,” a billion-dollar baby.
Well, maybe. It’s true that Apple briefly exceeded Exxon in valuation and Groupon was worth more than Google at its IPO, so who knows. But I do see one problem: the product. Let me explain. ZocDoc says they are improving healthcare. Then their banner ads offer to help you find a doctor. But once you click all they really offer is an online appointment book. That’s the new healthcare solution? I saw something similar demo’d back in 1997 when a tech company was recruiting on campus. It was an online appointment book for job interviews. One of the prospective job candidates in the audience raised her hand and asked if everyone who went to the website was guaranteed an interview. Good question. Nobody thought that thing was worth a billion dollars.
To be fair ZocDoc does have some traction with over 5 million appointments available from an undisclosed number of paying doctors. That’s a lot of available appointments. But I have a question for you. Do you really want the doctor with the most available appointments today? “I have a serious health problem so give me the guy who isn’t that busy?” I hope that’s not how ZocDoc hires their crack IT team. ZocDoc’s founder Cyrus Massoumi has a cute story about having to wait three days for an appointment to see a doctor after rupturing an eardrum. Ouch. But if it was that bad maybe he should have gone to the emergency room? I’m just sayin’.
My own experience with the healthcare system was starkly different. Several years ago I started experiencing some unpleasant symptoms. I went to the HMO doctor and was told I was fine without any more than basic blood-work. I went to a cardiologist and paid out of pocket to be told I was too young to have heart problems. I went to an endocrinologist who interned at Mass General and heard all about his sleep apnea. Lots of time and money spent. No problem getting appointments. Just no results. It wasn’t until I found a clinic with a three month waiting list and forked over a little more than I spent on my first motorcycle that I got a solution. In just thirty minutes my new doctor diagnosed mono, toxic mold exposure, and gluten intolerance.
Like wow, Scoobs. How is that even possible? I didn’t believe any of it until the spot mono test came back positive. Then I looked around the apartment and found a ton of mold above the HVAC unit. Two different labs confirmed it was the bad black stuff. Yet after moving to brand new mold-free digs I still felt bad, especially after eating. The nadir came one fine afternoon when I suffered an apparent heart attack. As I lay dying I called my dad (full disclosure: he’s a doctor) and had the following conversation:
Me: Dad, I’m having a heart attack! Sell my Google shares if they ever hit 500.
Dad: You bought Google?
Me: !@#$% I’m having a heart attack!
Dad: No you’re not. What did you eat for lunch?
Soup. Made, as it turns out, with VITAL WHEAT GLUTEN (hereafter known as kryptonite in my household). A genetic test and a stool sample confirmed the gluten intolerance/celiac thing. This doc was now three for three!
My takeaway from this whole experience was the obvious: never call my dad if I’m having a heart attack. But anyone whose dad was a doctor knows that much. (There are support groups for this.) My other lesson was exactly the opposite of ZocDoc’s. Basically, it’s not about getting to whatever doctor is available. It’s about getting to THE RIGHT DOCTOR FOR YOU. When I asked my miracle doctor how she made the diagnosis her answer was simple: she’d seen cases like mine before. In other words, her experience made her the right doctor for me.
And that is the core problem with ZocDoc: they treat doctors and patients as if they are all the same. Their philosophy is that doctors are commodities so just grab the first one that’s available as quick as you can like an ounce of gold on the COMEX after a Eurozone meeting. This is precisely the mentality that has been ruining healthcare as MBAs takeover HMOs and view hospitals as factories with fixed time-slots for delivering their “products” to “customers”. This sounds great to pharma companies who as Jerry Seinfeld once pointed-out view the American patient as a cardboard cutout with an open mouth waiting for pills. But it’s also precisely the depersonalization that doctors and patients detest.
Is this a good business strategy, though? Two ZocDoc founders are McKinsey alums, schooled in that most rarified air of Manhattan-based C-suite advisors. So maybe a plain ‘ole web developer like me just doesn’t get it. Yet it appears that they’ve come up with a commodity play here. And just like a guy who cornered the market on pork bellies they believe that more is better. That’s why they boast to customers about 5 million available appointments. I guess it’s kind of like McDonald’s 500 billion served? You can get the same hamburger anywhere at any time?
The accepted business strategy is exactly the opposite: build a brand by distinguishing what once was a commodity as a unique product. Nike doesn’t sell you shoes, they “market the swoosh,” which means you get to be like Mike. Perrier sells you a European experience, not the free stuff that flows from your tap. And so on. Ware-housing doctors’ hours and hawking them online treats medicine like a uniform product and flies in the face of proven brand strategies based on differentiation. You can’t distinguish yourself like that.
So that leaves us with a platform play. They are creating a market of for doctors and patients. Trouble is, what’s the platform? An appointment book? That’s the wrong platform. Look at Facebook. Everyone’s Facebook page is a reflection of who’s interesting to them. It’s unique. And it’s all built on a massive social network getting smarter every day. The same thing works for eBay, Amazon, and other successful dot-com behemoths who created a personalized system of mass e-commerce. The platform must build on unique metadata. If you are looking for a similar platform in healthcare it’s not the appointment book. It’s the EMR. Every health network, hospital, and doctor’s office must get onboard the EMR revolution now to meet new medicare reimbursement standards. This is creating a massive technology platform of highly personalized data about diagnoses, medications, and procedures which can be used to customize the healthcare experience for each consumer.
The result? Mass personalization. Using your EMR data we can find the doctor with the right experience and training for your unique medical history. This doctor will be unlike all the rest because they can best diagnose and treat your problem. This will make healthcare a better experience for you as a patient. It will also make it a better experience for the doctor because they will spend their time with patients they can treat effectively. Doctors hate seeing patients with problems they can’t fix. And now that they are mostly employed by businesses that grade them on outcomes the careful selection of caseload to match skills and experience matters more than before. Perhaps most exciting of all, in an era of rising healthcare costs and falling income, getting to the right diagnosis with fewer unnecessary diagnostics will reduce healthcare expenses without reducing services. That’s a big win for managed care, and one which does not have to come at the cost of patient care.
ZocDoc’s motto is “Get well soon.” That’s a great ambition. But the best way to accomplish it is not to run to the first doc available, but rather to get to the right doctor for you. Accuracy — not a shotgun approach. That’s why I started dxTopDoc to use the EMR to match patients and doctors. The goal is to get you to the right doctor who can solve your problem the fastest. Our prototype (called then “dxSocial”) was recognized in a national contest sponsored by Harvard Medical School and Health and Human Services and promoted by the outgoing federal CIO Vivek Kundra.
We can’t offer you five million appointments yet — but do you really need that many? Our philosophy is that you really just need one. The right one. With a lot of hard work, and a little luck, we hope to bring you that one soon. Until then, hold onto your ZocDollars 😉
dxTopDoc Founder's Blog 
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