How does Doctor On Demand make money?

Doctor On Demand charges a flat $40 fee, then takes 25% of each visit

One of the most interesting advances in healthtech, and there have been many, has been the sector known as telemedicine. To put it simply, the companies in this space allow patients to visit their doctor, via video chat, without ever having to leave the house.

Now, there are many benefits to this. Obviously it saves the patient the time it would take to travel to a doctors office. It also acts as a huge benefit to those who are disabled and would have a hard time making the trip. And it saves money for the patients, who are asked to pay lower fees than they would for a normal visit,  as well as their employers who cover their healthcare.

Not only is this proving to be an exceedingly popular sector for patients, but among investors too, as telemedicine company raised a total of $285 million in 2014, according to from Rock Health's 2014 Year in Review Funding Report.

One of the companies in this space is Doctor On Demand, a healthcare service that provides video visits with board-certified physicians, psychologists, and lactation consultants on a patient's smartphone, tablet or computer. All the patients have to do is download the app, provide a list of their symptoms and they will be instantly connected to a board-certified doctor in their state or they can schedule an appointment with any provider for later. Doctor On Demand treats patients through their employers (for example Comcast is one customer), health plans, or patients can use the service 

So how does the company make money? By charging a flat fee per visit.

Patients connect to physicians using video visits, with each one costing $40 for a 15-minute appointment. If the call goes over the allotted time, patients have the ability to pay another $40 for the same amount of time. Patients can pay for the visit with their Health Care Spending Account (HSA), Flexible Spending Account (FSA), or credit card. Doctors can also write prescriptions for patients when appropriate, which will be covered by the patient's insurance plan.

There are no other fees or costs and providers receive the majority of the fees: out of that $40, the physician gets $30. In other words, Doctor On Demand takes 25% of the the cost of each visit.

Doctor On Demand only gets paid when someone uses its services. With its employer customers, 25 percent to 30 percent of employees typically utilize the service every year. Nearly all of its revenue comes from patient care, company spokesman Seth Lasser, VP of Marketing, told me. 

The company’s other revenue stream is a newer line of business, where it provides its software to health systems, where their providers treat their own patients. In those cases it charges the health systems a low per-provider 
fee.

The model that Doctor On Demand uses is different from legacy telemedicine providers, Lasser said.

Those companies charge employers a "Per Employee, Per Month" (PEPM) fee, typically $1 per PEPM. For a company of 100,000 employees, for example, this is a $1.2 million annual cost. Legacy telemedicine providers generate 80% of their revenue from PEPM and other fees, and the rest from providing patient care. At their typical utilization rate of  1% or  2%, a visit will cost $200, when the PEPM is factored in. That is five times what a visit on Doctor On Demand costs. 

Founded in 2012, Doctor on Demand has raised a total of  $24 million in funding, most recently raising a $21 million round in August. Investors in the company include Venrock, Shasta Ventures, Sir Richard Branson, Andreessen Horowitz, Google Ventures and Lerer Ventures.

On February 12th, Vator will be holding its first ever Splash Health event in Oakland, where speakers such as Tom Lee, Founder & CEO of One Medical, and Ryan Howard, Founder & CEO of Practice Fusion, will be talking about the state of the healthtech space, and where they think it is going (get your tickets here).