Federal rules forcing hospitals and insurers to post rates for medical procedures have taken effect, but the data’s so messy that a crop of new startups is rushing in to make a business out of parsing it for whoever is willing to pay.
Silicon Valley venture funds Andreessen Horowitz and Yosemite, the cancer-focused fund launched by Steve Jobs’ son Reed Jobs, are backing the small but growing group of companies eager to sift through complex pricing data to help patients and employers and payers looking to strike better deals.
Dual rules handed down in recent years by the Department of Health and Human Services force hospitals and health insurers to post prices and cost estimates for certain medical procedures. Similarly, the No Surprises Act, which protects patients against surprise out-of-network bills, took effect in 2022.
“Most hospitals now are complying at least in part with the actual rules [but] there’s very few that [are at] full 100% compliance,” said Loren Adler, an associate director at Brookings Institution’s Center on Health Policy. Even when they’re compliant, there’s little incentive for hospitals to make the data easily accessible for patients. Insurers often do post cost calculators on their sites, because it saves them money when patients choose the least expensive services. Still, those tools are not always easy to navigate, especially for the less tech savvy.
That’s where the startups think they can help, whether by analyzing public databases, calling insurers and providers to assemble their own pricing estimates, or customizing dispute letters to help patients fight exorbitant bills.
Among them is Turquoise Health, a San Diego startup that raised $30 million earlier this year to sell a price transparency search tool to employers, payers and consumers. Adams Street Partners led the latest funding round, with participation from Andreessen Horowitz and Yosemite. Much of the data Turquoise crunches comes from large pricing and cost estimate databases, which “really need to be a lot more consumer friendly,” and don’t often include hidden facility or professional fees, said Carol Skenes, a principal strategist at Turquoise. “How can we take this information to help lower the cost of care and give patients the option of choice they don’t have?”
Competition is heating up. Seattle-based startup Cascade raised $1.7 million from AlleyCorp to launch a generative AI tool guiding consumers through cost and quality searches, as well as technology tools that payers and providers can use to churn through data.
DoNotPay, a subscription-based company that aims to help people negotiate parking tickets and eliminate redundant payments, unveiled a new GPT-4 based AI tool this year standardizing procedure pricing data and drafting letters patients can send to hospitals to dispute high charges, or bills that aren’t itemized. The company raised $24 million two years ago, and was previously backed by investors from Andreessen Horowitz and Peter Thiel’s Founders Fund.
CEO Joshua Browder said DoNotPay began developing the hospital pricing tool after an employee cut their hand and received a surprise medical bill. So far the company has offered the feature to several hundred people, and auto-generated letters have helped fight hundreds of medical bills that exceeded their estimates, often for emergency department visits. The company sells $18 subscriptions to a bundle of its cost-saving services, which include the medical bill tool.
The federal No Surprises Act protects insured patients against bills received for unknowingly being treated by out-of-network providers who typically charge more than in-network ones, as well as uninsured patients against bills that are substantially higher than providers’ good-faith estimates for cost. The act’s introduction collided with the release of sophisticated new generative AI tools that can analyze the pricing data hospitals post, creating an opportunity for startups like DoNotPay, Browder said.
With generative AI, “small businesses like ours can have the same technology as the Microsofts and the Googles of the world…the law was the first step, and technology improving was the second.”
As they launch new products and raise capital, these startups are still searching for viable, long-term business models that would keep users coming back. But until hospitals and payers clean up the data, they’re taking a bet that demand for technology that distills massive machine-readable files into useful cost estimates will buoy their businesses.
Browder said monetizing the medical pricing feature has been challenging: It’s a hard sell to get patients to pay for a medical bill tool by itself, monthly, when they don’t need pricing data that often.
“It’s very transactional and episodic which means unfortunately people don’t go to the emergency room every month. It’s not like Expedia where everyone wants to book flights…..it’s very difficult to build a continuous business.”
“The only way to be successful is to have it as part of a bundle of other services,” he said.
It’s also not clear yet how much pricing data impacts patients’ behavior, especially when they might not have much choice about where to go and which procedures to get, Brookings Institution’s Adler said. It’s more likely that the pricing data is more useful for employers as they negotiate large-scale contracts for employees.
“The average person doesn’t really want to shop for health care,” Adler said. “They want to just do what their doctor tells them.”
Read More at STAT.
