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Zocdoc CEO Oliver Kharraz on why 2017’s health-care uncertainty is a good thing

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Zocdoc CEO Oliver Kharraz on why 2017’s health-care uncertainty is a good thing

The startup Zocdoc began with a simple, brutally incisive idea: that patients should be able to schedule doctors’ appointments easily online.

It was prompted by a co-founder of the company, who’d had the opposite experience after rupturing his eardrum, and discovered his not-so-positive experience was much more the norm.

Doctors, too, were losing out when patients canceled at the last minute, failed to show up or rescheduled appointments.

Having to wait several months to see the doctor is “completely unacceptable when you’re sick or in pain,” said Chief Executive Oliver Kharraz, a Zocdoc co-founder. And for doctors, he said, if “a time slot passes, if they haven’t seen a patient, they cannot sell this again and cannot use their time in any way. It’s a massive, massive problem for our health-care system.”

Kharraz, who comes from a long line of doctors, practiced as an intensive-care physician in Germany. But he also has a background in entrepreneurship, founding an online company — his first startup — after high school. Seeking a return to business, he joined McKinsey & Co. and later left McKinsey to start Zocdoc in 2007.

Zocdoc, which was valued at $1.8 billion as of its last funding round, in August 2015, says that more than 6 million patients use the platform each month. It plans to release new products this year, Kharraz said.

No matter what changes are on the horizon, there’s a “fundamental need patients have to get help with a broken system,” he said. “Obsolete systems get in the way of good care.”

Kharraz spoke by phone with MarketWatch from Zocdoc’s New York City headquarters about whether an IPO is in Zocdoc’s future, what President-elect Donald Trump means for health care and why all the sector’s uncertainty is actually a good thing.

Below is an edited version of the conversation.

MarketWatch: Nobody really know what will happen under a Trump presidency, but everyone has an opinion. What are your thoughts?

Oliver Kharraz: Structurally, obviously there’s a good amount of uncertainty. I for one think that uncertainty can be an incredible strategic advantage. The interesting thing about uncertainty is it tends to freeze out those that are more timid; they sideline themselves. That means the ones who have the courage to lead can take the lead at a much lower cost than they would normally.

When we started the company, it was right before the 2008 financial crisis was playing out. People said, ‘This is going to fail,’ just because of the timing. It became a huge advantage and gave us a lead on would-be competitors. The same is now true of Zocdoc, our clients, hospitals and health-care companies, who now have the chance to pull ahead of competitors.

‘The interesting thing about uncertainty is it tends to freeze out those that are more timid; they sideline themselves.- That means the ones who have the courage to lead can take the lead at a much lower cost than they would normally.’

Olivier Kharraz, founder of Zocdoc

The patient is going to play a more important role. Making sure that you cater to their incremental levels of responsibility and risk and choice is going to be the smart option. There might be increased competition for patients that are economically attractive to these health systems. It seems like an opportunity to capture them, if you’re a health system in a leadership role versus one that’s weak at heart. I relish the opportunity to work with our clients to help them benefit from that uncertainty.

Read: Health savings accounts are a crown jewel of ‘Trump care’

MW: There’s been a lot of talk about shifting to value-based care, under which payment would theoretically be based on the quality of care, rather than the services used. How could this new system play out across health-care subsectors? Do you think it will harm doctors, as some critics believe?

O.K.: I think value-based care is, first of all, a little bit of an unknown, in terms of the shape it will actually take.

There’s a new administration coming in. It’s unclear whether trends will continue, whether the final shape will be different and at what pace it will settle. I think value-based care at its core can obviously mean doctors are paid for what they were trained to do in the first place, which is help patients be healthy. I think if the conversation around it is fair, it will be broadly embraced.

Here’s what Trump means for health care

(1:41)

President-elect Donald Trump’s vow to “repeal and replace” the Affordable Care Act has created uncertainty in the health-care sector. Here’s what Trump’s policies mean for the future of health care.

The problem is that the tools and infrastructure required are different from what used to be used in fee-for-service. They will need online scheduling, reminders and referrals. [Doctors] don’t want people to lose sight of them once they’ve interacted with them on a transactional basis in their office. The way that health care is practiced, and the tools and infrastructure needed, will change.

Related: What to expect from HHS Secretary nominee and Obamacare opponent Tom Price

MW: That sounds like a really good opportunity for Zocdoc.

O.K.: I believe so. Obviously Zocdoc has grown under a fee-for-service environment. But I do believe that we go much deeper than one heath care model or the other, because what we’re trying to solve is ultimately the patient’s problem.

The patient ultimately doesn’t care how health care is paid for. They care about solving their problems and becoming healthy or staying healthy.

To the extent that value-based care is trying to address patient problems, I do think we have high relevancy right now.

See more: Here’s what we know so far about President-elect Trump’s post-Obamacare health plan

MW: Zocdoc allows patients to make doctor’s appointments based on availability. Doesn’t that discourage loyalty to one doctor?

O.K.: Empirically, that turns out not to be the case. Seventy-five percent-plus of the time, patients go back to see the same doctor. There’s a natural relationship that emerges. We also strengthen the way the platform is designed, because we want the patient to have that ongoing relationship.

It used to be that doctors had relationships with patients, they knew who these patients were. Since then, from the doctor’s perspective, we were treated in a fairly transactional way, with not a lot of continuity. The success of Zocdoc is a reversal of that. We actually enable doctors to have a more proactive, positive relationship with their patients. They don’t have to play scheduling over the phone with assistants, but take advantage of last-minute cancellations. They get regular care in the process and just stay healthier.

Read: American health care has been messed up for a long time

Beyond just the business case that’s strong for providers, this is something that fundamentally changes the way patients interact with them. It’s a new way to engage that really puts the patient at the center.

MW: Do you have any plans for an IPO, or interest in it?

O.K.: As you know, we are a private company, so we don’t really comment on that. I could tell you I spend my time thinking about how to build a great business, and really none of it thinking about an IPO.

‘I spend my time thinking about how to build a great business, and really none of it thinking about an IPO.’

Oliver Kharraz

MW: What about plans to expand to other areas, such as comparing prices of doctor’s visits?

O.K.: This could in the long run certainly be one of the areas patients need help on. Here, my prediction is we will see more competition to make it easy for patients to actually use these insurance products they bought on these exchanges. We’re seeing the beginnings of that.

Actual price shopping will come, but I don’t know if I see it as a 2017 trend quite yet. But on the road, it’s certainly going to happen.

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