Sep 18
2020
Risk-Based Pricing Should Be the Future for SaaS in a Post-COVID World
By Blake Marggraff, CEO, CareSignal.
If you’re in the healthcare technology sector, you already know that business has been booming. Five years ago, the industry was valued at $125 billion. Now, COVID-19 is fueling the fire as health systems invest heavily in technology to care for patients remotely.
Industry growth isn’t slowing down anytime soon, either: With a compound annual growth rate of 13.2%, the healthcare tech market size is expected to balloon to $297 billion by 2022.
Healthcare SaaS companies and those investing in them are invigorated by this growth — and they’re capitalizing on opportunities to solve new problems created by the pandemic.
In parallel with healthcare tech innovation, healthcare itself is also experiencing a shift. The incumbent health systems and payers, representing trillions of dollars in revenue, are shifting away from the old-school fee-for-service economics and into value-based care models. As COVID-related financial pressures on health systems and payers mount, more healthcare organizations will move toward risk-based models to ensure long-term sustainability. This trend was already underway pre-COVID; now, it’s become almost necessary to succeed financially.
According to data from both HFMA and Numerof & Associates, the risk appetite is only going to grow stronger in healthcare. Healthcare SaaS companies can expect that this demand for risk will trickle down, and healthcare organizations will demand more risk from their SaaS partners.
Taking on more risk can do a lot to drive growth for healthcare SaaS companies — especially in light of COVID-19. And with the rapid growth projections in healthcare tech overall, it’s clear there’s a lot to gain for companies that can align their value with risk-based business models.
Risk-based pricing models are the responsible (and lucrative) choice for healthcare SaaS companies today
When a recent study compared clinical and financial outcomes for patients involved in value-based care models to those in fee-for-service models, it found that risk-based contracts achieved their stated goals of providing better services at lower costs. Risk-based pricing models are working for healthcare, as they put a heavier focus on value for patients. Similarly, healthcare SaaS companies can be rewarded for taking on more risk.
What’s more, as businesses across the country teeter on the brink of bankruptcy, it seems at best inappropriate for healthcare SaaS providers with little to no overhead to shy away from a share of the risk involved in financial contracts. Especially with the growth in healthcare tech, rapidly growing healthcare SaaS companies likely have the cash on hand — or access to venture capital — to enable a smooth transition to risk-based pricing models and better serve their enterprise customers.
But that doesn’t mean risk adoption is a form of charity — not by a long shot. For healthcare SaaS companies, risk can produce rewards and fuel growth in a few ways: