Zocdoc’s Growing Pains￼
A few months ago, when I was researching Zocdoc in order to write about the company and otherwise inform prospective investors about it from a well-informed standpoint, I took the hands-on approach. Aside from conducting the typical internet due diligence, I downloaded the Zocdoc app onto my Android. This is a confession of sorts: prior to my professional interest in learning about this startup, my understanding of Zocdoc was severely limited. I’m happy that my job steered me that way, though… I’ve found the simplicity and the efficiency of this medical booking program to be immensely satisfying, and surprisingly effective. I now have three appointments scheduled in the coming weeks… three separate and very necessary consultations which I had been putting off for years. Amusing as it may sound, a heightened attention to my own health needs has arisen from tooling around with a cool new app on my phone.
Zocdoc works in a very user-friendly fashion. One only needs to enter their geographic location and the nature of the inquiry (whether it be a search for a new general practitioner or for a specialist like an ENT), and in a click the list of providers appears. What’s more, the optional inclusion of health insurance policy information will narrow the list to providers with whom the patient is covered. Verified user reviews of each doctor are included, and appointments are made right there in the app. And if that’s not enough, Zocdoc allows the patient to enter all the tedious background questions at home, eliminating the need to awkwardly balance the old clipboard on the knees while filling out the questionnaire in the waiting room.
The service is free for its users. It is the doctors who pay Zocdoc, as they benefit from the increased exposure to patients in need. Until recently, a flat fee of $3000 was the price of admission — a bargain for physicians who enjoyed busier practices with lower administration costs as a result. This model worked particularly well in New York City which was, at time of the company’s 2007 launch, the only place in which Zocdoc operated. The metropolis naturally provided an abundance of tech savvy individuals looking to address specific health needs, and early adopters of Zocdoc were happily booked solid.
Of course, Zocdoc was not going to remain exclusive to one city. Today, nearly half of the United States population resides within Zocdoc’s coverage area, and the momentum of this expansion continues at a relentless pace. Growth like this is vital and energizing for a young company, but it can also bring with it some complications. In this case, it’s pricing. What works for the city slicker physicians doesn’t necessarily do the trick for your rural sawbones. Providers in less populous regions couldn’t justify the $3000 annual nut to attract only a handful of new patients. The solution: at the beginning of this year, Zocdoc announced a significant change to its pricing plan. Effective July 1st, instead of the three grand, physicians pay an annual $299 licensing fee. But now there is a per-patient charge for each new Zocdoc booking, and that charge ranges from $35 to $110 depending on the doctor’s specialty. Primary care doctors, for instance, pay less than high-priced specialists.
Throughout history, every private company, university, country club, or institution of any kind that has established a significant change in operations has been met with howls of protest from those who disagree with the move, and absolute silence from those who feel indifferent. Zocdoc’s pricing scheme adjustment offered no exception to this trend. Manhattan’s NYU Langone Health and Tarrytown, New York’s ENT & Allergy Associates have stopped using the service. Some smaller practices fret that if an individual books through the app and then is a no-show at appointment time, the doctor is still on the hook for the fee. Interestingly, most of these complainers tend to tough it out and stick with the program, which says much about Zocdoc’s appeal. Overall, according to the company, the number of providers paying for inclusion in the app has risen “roughly 5%” since the new policy took effect just over two months ago. It has also held on to the “overwhelming majority” of its New York practices. At the same time, Zocdoc is paving the way for smaller outfits and less sought-after specialists to take advantage of the app’s many conveniences.
At Iron Edge, we usually like to highlight the exciting possibilities inherent in the pre-IPO companies to which we provide access. If it seems like what we present today is a departure from the usual unbridled enthusiasm, so be it. Perhaps Zocdoc will resolve its issues with the minority of disgruntled medical providers by coming up with a solution like multiple pricing options. This too shall pass! The underlying message today is that the reaction to the company’s pricing change is simply a case of growing pains. Growing pains can only take place where there is growth… and this is what truly captures our interest.
Zocdoc’s current valuation is over $2 billion. Investors include Founders Fund, Bezos Expeditions, Goldman Sachs, and many more. Iron Edge is proud to have access to shares of this company. If you would like to learn more about Zocdoc, or if you know of anybody else who would, please do not hesitate to contact us by clicking “Get in Touch” below.
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