American Well: The Doctor Will E-See You Now
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Professor Elie Ofek and Dr. Ron Laufer, Adjunct Professor, Indiana University Kelley School of Business, prepared this case. HBS cases are
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effective or ineffective management.
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E L I E O F E K
R O N L A U F E R
American Well: The Doctor Will E-See You Now
On a crisp morning in November 2009, Ido Schoenberg was walking
iskly through Boston’s
Logan Airport when he spotted his
other, Roy Schoenberg, standing in line to board a flight to
Washington, D.C. The two
others, cofounders of American Well, the Online Care company, were
taking a flight to Washington to deliver a presentation at the World Health Care Innovation and
Technology Conference (WHIT). With the debate over health-care reform raging in Washington and
with Bill Clinton as the keynote speaker, this year’s conference was sure to be a big event. As the
flight lifted off, the view from the plane’s window revealed the historic Boston cityscape, where many
significant events leading to the American Revolution had taken place. But as they settled in for the
short 90-minute flight, Roy and Ido had a different revolution on their mind.
Just three years ago, Ido and Roy founded American Well in an attempt to forever change health-
care delivery and improve the way patients interact with physicians. Traditionally, patients had two
primary choices when seeking medical care—to show up at an emergency room or a similar acute-
care facility, or to submit themselves to the schedule of their physician, which could result in weeks
of waiting for an office visit. American Well’s vision was to use the Internet and telephony to connect
physicians and patients, within minutes in real time. Since its founding, the company was successful
in developing the necessary technology platform, and its efforts to market the vision to major health
insurance companies (also called health plan providers) in the U.S. had started to yield results. In
fact, Blue Cross Blue Shield of Hawaii was the first to roll out the service earlier in the summer on a
statewide basis, and so far the implementation of the platform had gone well.
American Well management faced several pressing questions regarding where the company
should go next. Although focusing on a nationwide rollout and adding more health insurance
companies to the service would be a monumental task for any start-up company, Ido and Roy were
already considering new applications for their platform. Being well aware of the first-mover
advantage that American Well enjoyed, they were thinking about the next service concept, called
“Team Edition.” While the service offered in Hawaii facilitated connectivity between patients and
physicians, the next generation of service, if developed, would add connectivity between primary
care physicians (PCPs) and specialists. Patients would no longer have to wait for weeks to see the
specialist and then more time before coming back to their PCP for follow-up. Instead, Team Edition
would connect the PCP and specialist instantly during the patient’s initial office or online visit.
This document is authorized for use only by Kristopher Durham in Marketing in Transformative Helathcare - Fall 2021 at Wake Forest University Medical School, 2021.
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Ido and Roy were also contemplating new customer segments for American Well’s platform,
including hospitals, retail clinics, and pharmacies. Having been approached by a number of non-U.S.
health insurers, expanding into international markets was also a possibility worth exploring.
Although Roy and Ido were confident that American Well’s platform had revolutionary potential
even beyond the health-care industry, they wondered: if they invested resources in new markets and
product launches too early, would they undermine American Well’s opportunity to become the
definitive leader in Online Care?
Health-Care Delivery in the U.S.
In 2009, U.S. health-care expenditures were estimated to top $2.5 trillion and were projected to
each $4.3 trillion, or $13,100 per resident, by XXXXXXXXXXThis outlay represented 17.6% of gross domestic
product (GDP)—a greater percentage than in any other country—and reflected the fragmentation and
complexity of a system that was the subject of intense reform debate in public policy circles in 2009.
Chronic diseases (e.g., cancer, diabetes, and heart disease) were leading causes of disability and
caused 7 of every 10 deaths each year in the U.S.2 The prevalence of chronic disease made it a focal
point for health-care providers, who were also
acing for the significant demographic shift expected
to occur over the next two decades, by which time Americans over age 65 would comprise 20% of the
population.3 (See Exhibits 1 and 2 for a
eakdown of U.S. health spending in 2008.)
Players
The key players in the U.S. health-care system were patients, providers, public and private payors,
and suppliers (of products such as therapeutic drugs and medical devices). Other supplier subsectors
included health-care information technology (IT) providers, private equity and venture capital (VC)
firms that financed health-care ventures, and academic and other institutional researchers.
Providers included entities involved in delivering care, such as hospitals, nursing homes, and
health clinics, as well as physicians and other health professionals. Of the approximately 5,500
hospitals providing inpatient and outpatient services, close to 90% focused on acute care, while the
emainder specialized in rehabilitation, psychiatric care, and other specialties.4 Institutional providers
also included nursing homes, assisted-living facilities, home-based care providers, and others.
Approximately 990,000 physicians worked in the U.S., 40% of which were PCPs:5 generalist
physicians who served as the first point of contact for their patients’ physical and mental health
needs.6 Nonphysician providers included 2.5 million registered nurses, 74,000 physician assistants,
147,000 nurse practitioners, and others.7 Some physicians were employed by hospitals, while others
an private practices comprising one or more physicians. On average, family doctors earned $168,000
per year (about $81 per hour), registered nurses earned $67,000 ($32 per hour), and pharmacists
earned $107,000 ($51 per hour).8
Delivering and Paying for Patient Care
The type and quantity of care delivered to patients depended on several factors, including health
insurance coverage (if any) and geographic location.9 Patients with health insurance typically had a
PCP who served as their chief contact for health concerns, and who refe
ed them to specialists (e.g.,
cardiologists, dermatologists, surgeons, etc.) as needed. For patients without insurance, hospital
emergency rooms often served as the main source of care. There were regional shortages of some
specialists (e.g., mental health, obstetrics, and gynecology); as such, the patient experience of
eceiving care varied between and within states. Insufficient access to care was especially problematic
This document is authorized for use only by Kristopher Durham in Marketing in Transformative Helathcare - Fall 2021 at Wake Forest University Medical School, 2021.
American Well: The Doctor Will E-See You Now XXXXXXXXXX
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in rural areas, where provider shortages, low population density, and disproportionate reliance on
self-employment and low-skill jobs—which had low rates of employer-sponsored health insurance—
created ba
iers to care.10
The U.S. system for financing patient care was a complex web of public (federal and state) and
private-sector payors. Coverage requirements, premium limits, reimbursement levels, and other
constraints imposed on insurers varied by state. As of 2008, 53% of health spending was funded by
private payors, including health insurance companies, individuals, and philanthropic sources.11
Health insurance companies offered several types of health plans at different price and coverage
levels. Individuals with private coverage either purchased plans independently or received coverage
through their employer. Most firms with 50 or more workers offered health coverage; smaller
companies were less likely to do so.12 The format of employer-sponsored insurance varied, but
typically involved employees paying a portion of premium payments and employers covering the
est. In 2009, the average annual premium for employer-sponsored insurance was $4,800 for
individuals (17% paid by employee) and $13,400 for family coverage (27% paid by employee).13
The balance of health spending (47%) came from public payors, chiefly Medicare (federal program
for Americans age 65 and over) and Medicaid (state program for eligible low-income and disabled
esidents), as well as the Department of Veterans Affairs (for military personnel) and SCHIP (State
Children’s Health Insurance Program). In some cases, public payors did not cover the full cost of care
delivery, leading providers to rely heavily on revenues from privately insured patients. (See Exhibit 3
for community hospitals’ payment-to-cost ratios from different payors from 1980 to 2007.)
Patients without health insurance—about 17% of Americans under age 65—paid for care out of
pocket and, in many cases, went without: one survey found that 14% of Americans did not see a
doctor due to cost concerns in XXXXXXXXXXThis was even true of many who had insurance, because their
plans had high deductibles—the required out-of-pocket payment before insurance kicked in—or had
limits to the services or dollar amount that would be covered.
Health-Care IT Background
American Well’s novel service model, which the company termed Online Care, came on the heels
of a number of developments in the use of telecommunications and computer-based tools to collect,
manage, and communicate health-care–related information and transactions. Examples included
computerized decision-support and order-entry systems for physicians, electronic health or medical
ecords (EHRs or EMRs), and tools for searching for health information (e.g., WebMD). Patients’ use
of health-related websites increased through the 2000s, and by 2006, 80% of respondents to a survey
of Internet users