Jan 27, 2022 - Health

The pitch: subscribe n' save on medical costs

Hand placing money in a heart piggy bank
Illustration: Aïda Amer/Axios

In recent months, subscription health care service businesses have attracted significant attention from venture capitalists, according to a recent PitchBook report.

Why it matters: Venture capitalists have been pouring money into subscription startups, including Crossover Health, Tia Clinic and Oak Street Health. Like One Medical and Forward, these companies promise to save users under the assumption that their models will save on downstream medical costs by connecting patients to more consistent care.

  • While some of these companies are focused on general primary care, others hone in on specific patient populations including women and Medicare Advantage users.
  • The factors helping to drive increased interest in the industry include patient dissatisfaction with the mainstream fee-for-service system, a growing senior population, and employer interest in comprehensive solutions.

Yes, but: Despite notable public exits and rising popularity among businesses in the sector, the report finds that few have managed to turn a profit.

  • Technology — from member engagement tools and home visits to risk-prediction models — was supposed to be these companies’ golden ticket to profitability.

The big question: Do the models actually help reduce medical spending for consumers and employers, and what is needed for them to start making money?

Where it stands: Analysts say that when it comes to subscribing and saving (and generating a profit) it’s all about scale and that ultimately, companies in the sector will need to attract more members before they can start raking in the cash.

  • “While these models represent a relatively niche sub-segment of the primary care landscape, we expect they will become more mainstream as operating models improve,” says Kaia Colban, a PitchBook emerging technology analyst.

This story first appeared in the Axios Pro Health Tech Deals newsletter. Subscribe at AxiosPro.com.

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