Healthcare is a tough industry for startups. Aside from its well-known risk aversion and regulation, the industry has complex sets of players, demands perfection, and dislikes iterative approaches that can cause confusion.
Yet, even in difficult circumstances, startups can thrive. Arrive Health, for example, has created an increasingly popular way for physicians to look up what a patient will pay out of pocket for different drugs – including co-pay, co-insurance, and other costs. That helps to guide doctors’ prescribing behavior when the drugs are essentially substitutable. Arrive Health’s story provides an example of how to navigate startup challenges.
The core idea behind the firm seems intuitively appealing. As Arrive’s Health’s CEO, Kyle Kiser, says in an interview for this piece, “This is the only part of our economy where somebody is making a purchasing decision on your behalf and neither of you knows what it will cost until you’re asked to pay for it. That’s ultimately the problem we’re trying to solve.”
But healthcare’s complexity can make even simple problems hard to address. In Arrive Health’s case, doctors wouldn’t use such a system if the data in it wasn’t extensive and reliable. However, owners of the pricing data – typically health plans and their pharmacy benefit managers – wouldn’t share the data if the system wasn’t going to be used. And owners of the electronic medical records that doctors relied on weren’t interested in showing this information if there was neither good data nor solid usage. It was a three-sided chicken-and-egg problem.
Lesson One: Pick a Stakeholder. Because healthcare is such a fragmented, multi-stakeholder industry, startups often struggle to align the dominos so that success with one triggers follow-through with others. But Arrive Health had the advantage of being incubated within UC Health in Denver. If physicians at UC Health were enthusiastic about the premise, it would have enough influence with owners of pricing data and IT systems to enable change. Arrive Health focused hard on making the system compelling for doctors, and then demand from the health system enabled other stakeholders to get on board.
The company looked hard at what specific challenges it could solve for doctors. It sought to reduce callbacks, in which a pharmacy or patient calls a doctor to request if it’s OK to change a prescription to a cheaper drug. It wanted to minimize abandonment, in which patients never fill a prescription possibly due to its high cost. And it wanted to tackle non-adherence with prescribed therapies, because patients are economizing. Simultaneously, it developed design criteria for successful accomplishment of those jobs to be done. Kiser says, “It needed to be fewer clicks, not more. It needed to be easier, not harder. And it had to be right all the time.”
Lesson Two: Use Regulation to Your Advantage. While regulation can inhibit change, it can also accelerate it. In Arrive Health’s case, Medicare changed its rules in 2021 to require that Medicare Advantage Part D plans offer “a real-time drug benefit tool.” Kiser says, “That really did help. We’ve yet to see the full impact, but they’ve extended the real-time benefit capability not just to the doctor at the point of care but also to patients.” In healthcare, regulatory changes can unleash disruption.
Lesson Three: Experiment. Healthcare stakeholders dislike experimentation – they value efficiency, reliability, and accuracy. But iteration is as important to a healthcare start-up as it is in other sectors. Kiser recounts, “It’s usually hard to get access to physicians’ systems and patient data. But in the early days, we could go to the Anschutz campus in Denver or Aurora and get feedback from users. We could sit down with them and understand what they were trying to do. We would then drive back to the office, make changes that day, and do it again the next day. Even now, we still use many of those places as testing grounds and learning laboratories as we build new capabilities.”
Lesson Four: Chart the Growth Path. While initial success is valuable, growth for start-ups often lies in tackling adjacent markets. Arrive Health is actively considering these. For example, Kiser notes that “This is one of the few places where technology actually reduced consumer choice. When you had a paper slip, you could go wherever you wanted. We adopted e-prescribing, and consumer choice went away. There’s opportunity in leveraging new technologies to re-introduce consumer choice at the point of care and throughout the patient experience. We could get to the point where we’re delegating authority to a patient or their device, then they can route the prescription further to a pharmacy in a competitive market.”
The barriers to innovative start-ups in healthcare may not be shrinking, but firms are finding ways around them. Arrive Health’s story illustrates that customer-focus, strategic choice, early proving grounds, and future vision can succeed in bringing change even where market forces conspire against it.