Rethinking market maps in healthcare -- a brisk walk through chronic care management

For founders or investors, market maps are a quick and useful way to categorize startups in the vast startup universe into palatable visual buckets. It allows us to approximate insights into competitive spaces and plainly group the fragmented landscape of the healthcare startup world.?

Most market maps, though visually aesthetic like the ones generated by Crunchbase, do not categorize companies via business model/incentives categories, which muddies the core of exploring incentives misalignment in healthcare; Often, innovation for healthcare companies arrives around the business model in discovering where incentives can be realigned among the stakeholders. So how can we go about having a less superficial market map and what would that look like?

Here’s a toy example of a walk-through in chronic care management and its simplified incentives structures. We all probably know someone who has hypertension, chronic obstructive pulmonary disease, or other chronic diseases that carry a comorbidity alongside of it. In chronic patients journeys, the main stakeholders include providers, care management organizations (here we focus on third party organizations, not in-house teams), the insurers and pharmacies that dispense patient’s necessary medications.?

Likely, we’re familiar with providers, payers, and pharmacies but who are care management organizations? Briefly, they are groups of people (sometimes third party) to whom providers can outsource care coordination for patients post provider visit as they continue their full course of treatment to monitor and maintain their health. And in pairwise fashion, here’s how they fit into the incentives structure in the chronic care landscape:

1. Patient - Provider: Providers providing continuous longitudinal care can deliver services such as remote patient monitoring (RPM), remote therapeutic monitoring (RTM), or principal care management (PCM), that decrease the need for in-person care and alleviates asymmetric demand-availability burden for providers. These are often referred to as part of “telehealth” or “wrap around care” categories of healthcare in traditional market maps.
2. Provider - Care Management Orgs: Providers are able to get increased patient care capacity through outsourcing long term care to care management organizations, thereby gaining an extra source of reimbursement revenue. This is most important to small group practices or providers where resources in labor and geographical reach are limited. In turn, providers pay fees or a portion of their reimbursement revenue to the care management organization.
3. Payer - Provider: providers take care of patients needs and prevent them from re-entering the healthcare system when they have acute exacerbations of their diseases. For example, poorly managed heart disease patients may become frequent flyers in the emergency department, which incurs costs to the payers; As mentioned above, providers engage longitudinal care through RTM, RPM, and PCM care, among others, that help prevent additional healthcare cost payout by payers.?

Providers, in turn, are reimbursed by payers for these services. Largest payers who fully cover for chronic care management (CCM) are Medicare part B and C; some commercial plans partially cover CCM for patients. CMS, not noted above for simplicity, runs Medicare and is in charge of reimbursement dispensement (full coverage does not equate to full reimbursement)

1. Payer - Care Management Orgs: Care Management Organizations allow extended care services for patients with chronic diseases that includes but is not limited to booking telehealth visits with their provider, prescription refills, chart reviews, and referrals or specialized care (often referred to loosely as “care coordination”). Usually, there’s no direct financial relationship between payers and care management organizations, but they are a huge lever in helping increase the capacity of care that a single provider can manage and bringing down healthcare costs for payers.?
2. Patient - Pharmacy: not as much focused above for simplicity, as it has its own separate incentives structure loop in relationships with providers, pharmaceutical manufacturers, wholesalers and other middlemen. Pharmacies dispense medications to patients, where patients may pay a small co-pay depending on trickle down effects of negotiations on the aforementioned relationships and contracts.

Now that we have all that fun stuff, let’s map startups onto the structure above. Some quick observations:

1) We see that some startups show up in different boxes, indicating that their business model leverages multiple payment flows in the incentive structures (e.g. multiple reimbursement codes, subscription software + take rate, etc).?

2) We also can make the observation that there is a top down dollar flow in chronic care management where payers are the biggest generators of payments for providers, and are especially incentivized to overcome fragmented care to indirectly improve care outcomes. This means that companies in the space are particularly sensitive to regulatory landscape changes, which is often the case with startups servicing Medicare/Medicaid populations or organizations around these populations.?

3) Finally, spaces in backend software for payers or care management organizations have a lot more room to innovate. Whereas startups from the last few years have taken advantage of outfitting tech in the RTM/RPM and telehealth parts of the care continuum, there’s white space beginning to be filled by startups focused on the admin software for payments, staffing, billing, etc. There’s also white space in data acquisition from these software companies to engage in payment arbitrage for giving payers important patient data that help payers stratify patient risk and pricing.?

From this brief walkthrough, it may be a lot easier to have a more precise pulse on the chronic care healthcare ecosystem today. While traditional market maps are a quick and dirty way to grasp our startup landscape today, for healthcare in particular, it is worth taking a more critical look at startups mapped onto incentives structures for a less muddied view of what business models have been utilized and where white spaces in incentive alignment may lie.?

It certainly takes a little more time and definitely would not be the only way to think about startup stratification. For all startup founders/investors interested in the care management space or at large, I would love to hear feedback or any thoughts surrounding it. Let’s explore together!

Primary author of this article is Sharon Huang . Originally published on “Data Driven Investor .” ? Article co-written by ChatGPT-4 and headline image generated by DALL-E. These are purposely short articles focused on practical insights (we call it gl;dr — good length; did read). See here for other such articles. If this article had useful insights for you, comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page , with due thanks for supporting our work. All opinions expressed here are from the author(s).