The Dual-Funnel Problem Facing Virtual Care Solutions
A consistent challenge we see across many B2B focused virtual care and digital health companies is the need to build two effective funnels to unlock revenue.
The first funnel is the sales funnel that most people think about. This is the process of bringing on a new customer – whether that be a health system, an employer, a health plan. The problem is that these contracts only give a company access to these patients and a contractual mechanism for payment. The real unlock for revenue growth is building an effective funnel of referrals/adoption so that patients use their service.
Both of these steps are challenging. Often companies can focus on the sales funnel without giving the required focus to the adoption funnel until it is too late. This can have the effect of pushing back revenue and/or loss of momentum with a potential flow of patients/users that can be hard to recover from.
Let’s take a look at this process from top to bottom!
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Sales is challenging enough in healthcare. There are huge volumes of solutions bombarding the same prospects for the same budgets. Take Company A for example. Company A has to prospect, network and run lead gen campaigns to open up new opportunities with prospective customers. Once Company A gets a foot in the door, it needs to run a tight multi-stakeholder sales process to sign an enterprise contract.
That’s just the surface level process. Under the hood, there are several additional hurdles to overcome:
Security Reviews: Company A now needs to pass numerous security gauntlets and accreditations (thankfully this gets marginally easier for future iterations beyond the first rep). These are expensive and a big time-suck. This is especially true for Company A because it’s managing cash.
Evidence: There is an unspoken gating function that solutions need to have evidence to be taken seriously in the first place – evidence of impact on health outcomes, evidence of improvement vs standard of care, evidence of downstream cost savings. This varies on a case-by-case basis. It’s hard for Company A to know what the milestone is that it needs to work towards to unlock this.
Contracting. Master Service Agreements (MSAs), Business Associate Agreement (BAAs), Statements of Work (SOWs). All of these boring acronyms represent contracts that need to be executed to launch these partnerships. These are all done on the customer’s timeline. They have an in-house legal team, Company A does not. There is a real risk that Company A will run out of runway waiting to complete this process. A downstream impact of this is that enterprise customers become reluctant to try out these emerging solutions in the future.
Ok success – Company A has got through this process and inked a deal. Time to crack open the champagne!!
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…Hold on a second, as mentioned earlier; Company A now realizes that what it actually has is a contract that allows it to serve patients and receive payment for these services. There are no guarantees. If Company A can’t serve patients it won’t get paid.
This is where the second funnel comes into play. Company A now needs to build a funnel to a) identify eligible patients, b) engage them, c) convert them; and d) serve those patients (and meet the service threshold needed to trigger billing and recognize revenue for that patient). Company A’s revenue is contingent on all these steps taking place.
What does all this mean?
It means the hard work doesn’t stop when a contract is signed. Signing the contract only gives B2B virtual care / digital health solutions access to patients. Typically, the company needs to figure out how to serve these patients. This is what it actually gets paid for.
Two Real-Life Examples:
Health Plan / Employer: Company A has signed a contract that gives it access to 1 million covered lives. Company A has trouble driving adoption of its solutions from patients who have access to this covered service. It ends up serving 10 patients from that population of 1 million. Company only gets paid for the 10 patients it serves.
Health System: Company A gets paid FFS (or VBC) for eligible patients it serves. 1000 patients a week who are eligible for the service come to the health system. Providers often forget about the service and only refer 10 patients to the company per month. Company A is only able to contact 8 of the 10 patients. Of the 8 contacted patients, 2 opt not to proceed with the service. 6 of the patients start service. 3 of the 6 patients don’t reach the billing trigger/ milestone for the company to get paid for providing the service. Company only gets paid for 3 patients.
In summary, it’s a tough road for companies to succeed in offering B2B virtual care/ digital health services but it’s not impossible.
Some high level steps to take to ensure you are set up for success:
1. Make sure you are having enough volume of sales conversations at the top of the sales funnel. More conversations = more opportunities and quicker iteration on product and sales pitch.
2. Sales can be slow/complex. Give yourself multiple shots on goal and try not to be too reliant on one key person at an account; or at a broader level, on one key deal (easier said than done!!)
3. Have an effective launch/ account management strategy in place to run this second funnel and ensure you are converting access to patients into revenue. This second piece is critical and probably worth a post of its own.
