A Product Market Fit Show | Startup Podcast for Founders
00:17:36 · Pablo Srugo, AJ Loiacono
[00:17:36] S1: Aaron Powell Did you raise like right out of the gate, like as soon as you had the idea? [00:17:39] S0: So as soon as I had the idea, because in healthcare, you're going to have real costs because you have to register in states as a benefit manager or TPA. You're going to carry costs of personnel. You know, you're going to have service people, billing, finance people, et cetera. So you have real costs in your first year. So we raised uh three and a half million dollars, I think was the exact number. We closed in March of 2018. So I often say we were an operating company in healthcare, call it April. [00:18:14] S1: And what was like V1 of the product? One of the things I'm wondering is how much tech is there in this offering, in this product? Yeah.
00:18:21 · AJ Loiacono
[00:18:21] S0: Back then, not a lot. And I want to be fair, there was technology, but it wasn't ours. We were forced to license someone's claim processing platform. We were forced to license someone's prior authorization workflow tool, someone's formulary management toolset. We were outsourcing everything from reporting to printing solutions, you know, for cards. Um, so early days, the only thing that was proprietary from a technology side was how we were doing what we would call underwriting. So we would bring in claims data, look at it, understand what we could do and how we could manage this account to a lower cost. But over time, it would become an incredibly technology-focused company in the sense that at the core of our company is Judi, you know, and why are we called Judi? Judi short for adjudication, which is a fancy word for claim processing. And so adjudication, in order to do it, just to visualize it, is hundreds of administrative workflows, like eligibility, who's in and out of a plan, plan design, like financial rule sets, what's her copay or coinsurance or out-of-pocket max. It's also clinical rule sets. Can I have this medication? Did I meet the criteria therapeutically for this category, et cetera? You know, it's everything from billing to reimbursement to call center, client management, data and analytics, compliance, hundreds of work streams that in my competitors, many of them doing this stuff manually. So they'll have different systems and they stitch it together. Our vision was could we effectively create what I call a supply chain version of healthcare, like an ERP, an enterprise platform for healthcare, where all of these work streams are operating in harmony next to each other, which will reduce costs. So, you know, today, you know, we probably have about 1,600 employees, of which 500 is product and engineering.
00:20:25 · Pablo Srugo, AJ Loiacono
[00:20:25] S1: And is Oscar Health, like are these kind of like health benefits platforms, are those comparables, are those competitors, or are they kind of approaching a different piece of the market, especially like at the beginning? [00:20:35] S0: Yeah, a different piece of the market, you know, is one to be fair, is we started with pharmacy benefits. So in the UnitedHealth States, pharmacy and medical are actually administrated separately for what we call large companies. So if you're self-insured in the UnitedHealth States, if you have a thousand covered lives, which is roughly you have 500 employees, you usually double it with the dependents and you have a thousand-person plan, you're self-insured. Why do you want to be self-insured? Because your premium costs would be lower versus fully insured. You could pay your own bills effectively. And what we did is we focused on the self-insured marketplace and we started with pharmacy. It was my background, plus, I felt as if we had, I think, a very unique business proposition back to the product market fit. And so that's where we started. We would we would later expand into what I call TPA services, third-party administrator on the medical side. So again, similar product on the administrative side to pharmacy, same concept, focus on self-insured. So I go back to, you know, our competitors are CVS, Cigna UnitedHealth.
00:20:35 · AJ Loiacono, Pablo Srugo
[00:20:35] S0: Yeah, a different piece of the market, you know, is one to be fair, is we started with pharmacy benefits. So in the UnitedHealth States, pharmacy and medical are actually administrated separately for what we call large companies. So if you're self-insured in the UnitedHealth States, if you have a thousand covered lives, which is roughly you have 500 employees, you usually double it with the dependents and you have a thousand-person plan, you're self-insured. Why do you want to be self-insured? Because your premium costs would be lower versus fully insured. You could pay your own bills effectively. And what we did is we focused on the self-insured marketplace and we started with pharmacy. It was my background, plus, I felt as if we had, I think, a very unique business proposition back to the product market fit. And so that's where we started. We would we would later expand into what I call TPA services, third-party administrator on the medical side. So again, similar product on the administrative side to pharmacy, same concept, focus on self-insured. So I go back to, you know, our competitors are CVS, Cigna UnitedHealth. [00:21:50] S1: Taking back to maybe like whether it's the first customer or one of the first customers, I'm really curious as to what the value proposition was like back then, how you framed it, and how you got them. You know, to use your your product, unproven product, right? In something that you just said is so kind of uh not the sort of thing you tend to take risks with.
00:21:50 · Pablo Srugo, AJ Loiacono
[00:21:50] S1: Taking back to maybe like whether it's the first customer or one of the first customers, I'm really curious as to what the value proposition was like back then, how you framed it, and how you got them. You know, to use your your product, unproven product, right? In something that you just said is so kind of uh not the sort of thing you tend to take risks with. [00:22:07] S0: Oh well, it is people ask me all the time, like, hey, would you ever want to go back to the good old days? And you're like, never. They're like, why? And I go, Do you know how hard it is to sell healthcare? And this is your pitch. Think about it. They're like, customer asked me, how long have you been in business for? And I'm like, including this month. And they're like, Are you being funny? And you're like, no, I've been in business for three months now. Like, great. And they're like, um, tell me about your other customers. I'm like, including you? And they're like, you have no customers? And you're like, no, not really.
00:22:07 · AJ Loiacono, Pablo Srugo
[00:22:07] S0: Oh well, it is people ask me all the time, like, hey, would you ever want to go back to the good old days? And you're like, never. They're like, why? And I go, Do you know how hard it is to sell healthcare? And this is your pitch. Think about it. They're like, customer asked me, how long have you been in business for? And I'm like, including this month. And they're like, Are you being funny? And you're like, no, I've been in business for three months now. Like, great. And they're like, um, tell me about your other customers. I'm like, including you? And they're like, you have no customers? And you're like, no, not really. [00:22:42] S1: And everything you have early adopters, and I'm sure you have them here, but there isn't as as compelling of a reason to be first on this as the like the risks kind of outweigh the cost, I think, for a lot of people's minds. Because if you're first on, let's say, some AI-enabled outreach tool, it's like that's alpha. You know, you're gonna reach more, like, yeah, let's try it, let's go. Whereas with this, it's like worst case scenario is really bad, best case scenario, things work a little bit better, but yeah, I don't know. I don't know if I'm uh that's my assumption.