Patients wait an average of 24 days to schedule an appointment with a doctor in U.S. cities. This is a 30% jump from 2014 and has been driven by doctor shortages, aging baby boomers, and greater insurance penetration (thanks to the Affordable Care Act). In Boston, the average wait time was 52 days to schedule an appointment with specialists like cardiologists, orthopedic surgeons, or gynecologists. In 2007, ZocDoc was born to improve access to healthcare.
How does ZocDoc create value?
ZocDoc is a two-sided digital platform that allows patients to search and view the available appointment times of doctors online and book them instantly. The ZocDoc platform allows patients to search based on the doctor’s specialty, location, insurance coverage, and profile reviews. Appointment booking is not just online but also via iOS and Android apps. Doctors, in turn, can choose to be listed on ZocDoc and allow the platform to access and integrate with their digital calendars so that their updated calendars can be viewed by patients in real-time. ZocDoc is essentially a Yelp for doctors with the features of OpenTable.
Therefore, ZocDoc has created value for both patients and doctors:
- Enabling patients to book doctor appointments within 24 hours: wasting less time in visiting a doctor could mean early detection and cure for patients and lower healthcare expenses.
- Increasing doctor utilization: while doctors are often booked for weeks, their utilization is 60-70% because of last-minute cancellations and no-shows. By helping doctors see patients whenever they’re available, ZocDoc allows them to distribute their fixed costs over more patients.
- Reducing administrative costs for doctors: ZocDoc’s insurance checker helps doctors pre-verify a patient’s health insurance. Because administrative processes such as getting insurance information from patients are time-consuming and constitute ~15% of healthcare expenses, ZocDoc improves profitability for doctors.
How does ZocDoc capture value?
ZocDoc is valued at over $2B. It does not charge any fee from the patients. Instead, it charges $3,000 annually from listed doctors. As of August 2015, ZocDoc had over 49,000 listed doctors. That translates to revenues of $147M in 2015. ZocDoc offers its services across the U.S., covering 60% of the U.S. population. Analysts estimate that the company has been profitable in all markets it has been operating in since 2013.
Apart from charging listing fees from doctors, ZocDoc captures value in two other ways:
- B2B vertical: In June 2014, ZocDoc launched a premium service that employers can offer their employees, called ZocDoc for Business. This was ZocDoc’s first offering for employers, whose names include Foursquare, Gilt, IAC, Jefferies, NASDAQ OMX, and Quirky.
- Advertising by doctors: In November 2017, ZocDoc introduced sponsored results, a feature that allows doctors to increase their visibility to patients – similar to sponsored results on Google.
How did ZocDoc scale?
ZocDoc was able to overcome the “chicken-and-egg problem” of multi-sided platforms through a strategy that many of us followed in the class simulation – it gave the platform free to patients and charged doctors (more over time) as patients on the platform increased. Today, ZocDoc’s platform has reached over 6M patients. ZocDoc’s strategy succeeded and it was able to scale because it took advantage of the high indirect / cross-side network effects in this market.
More doctors on the platform will attract more patients because they can then find a doctor of their choice / in their insurance network / close by easily. More patients on the platform will attract more doctors because they can then improve utilization and reach more patients. Therefore, by offering the platform free to patients, ZocDoc attracted them and once the platform had patients, the doctors came aboard with a willingness to pay, and so on the cycle continues.
How does ZocDoc build a defensible platform?
When ZocDoc launched, it was one of select few multi-sided platforms for patients and doctors. Today, ZocDoc’s competitors include DocASAP, One Medical, DocPlannr, Doctoralia, Kyruus etc., each of which has tried to differentiate its product through unique platform features. For example, Kyruus allows patients to book appointments on the doctor’s own website as well if the patient wants. Therefore, ZocDoc will face increased competition in the future and because of the nature of the service, there be high-multi homing as well – doctors will cross-list on multiple platforms and patients will also book through whichever platform they prefer.
To protect its user base, ZocDoc must try to incentivize doctors (especially the highly rated ones) to exclusively list on its platform. Building the strongest doctor coverage in specific geographies could also serve as a defensible barrier in those geographies. Additionally, ZocDoc will need to build more value-added services, such as the insurance checker, to raise the switching costs for both doctors and patients.
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