Carbon Health is a healthcare provider whose mission is to make great healthcare accessible to everyone. They were founded on a unique omnichannel technology that connects patients and providers into a seamless care experience. The omnichannel model has been an overwhelming success, with Carbon Health recording 39,734 percent growth over the past three years. They are not stopping there, aiming to become the largest primary care provider in the United States by 2025.
In one of our previous emails, a reader asked us to dive into the nitty-gritty of how Carbon Health makes money. And we love getting down to the details like that! So that’s what we’re going to do today.
Carbon Health makes money predominantly from patient fees, some of which are paid directly to Carbon Health by Medicare. Co-branded clinics pay a portion of their revenue to Carbon Health for use of the omnichannel technology. Moreover, software acquisitions provide revenue through customer subscription fees.
Business Model of Carbon Health
While Carbon Health describes itself as a primary health care provider, its competitive advantage is its unique and proprietary omnichannel technology. They can only provide quality care at a low cost through this software which puts the patient at the center of the healthcare network.
The Carbon Health platform builds the structures around the patients to allow the free flow of information to deliver care at a time and place that is convenient for them. This health care model was the motivation for the name Carbon Health, as the central node (the patient) and satellite nodes (health care providers) look very similar to a carbon molecule.
The Carbon Health software creates a frictionless connection between the patient’s physical contact points such as clinics and pop-up sites, virtual care applications, and in-home devices that manage chronic illnesses. The software supports the full range of needs, including urgent, episodic, preventative, and chronic care for the patient.
For example, a patient may have a video visit with a doctor and then attend a Carbon Health mini-clinics for a blood test, organize a continuous glucose monitor at a nearby wellness clinic, and follow up on all of the results with their doctor virtually.
This technology enables Carbon Health to undertake the strategy of operational excellence and to focus on being the lowest-cost provider in the industry. The software radically reduces both the time and cost involved in patient care by removing or automating many of the burdensome administrative tasks from the healthcare process.
For example, it has reduced the time it takes a doctor to complete practice notes from several hours, usually completed at the end of a long day, to around half an hour. It also enables greater consistency in the quality of service and links larger providers with regional and local services. As the founder Eren Bali describes it, they aim to be the Starbucks of the health sector, both in terms of distribution model and brand loyalty.
Patient data is immediately shared across health care providers in the network making communication radically more efficient, and creating a store of information that can be used, through machine learning, to assist both that patient, and future patients with similar symptoms or conditions.
The Carbon platform has also been designed for maximum data ingestion and usage, enabling analytics and machine learning to improve clinical efficiency continually. Such tasks include diagnosis, where Bali has estimated that the software can pinpoint a correct diagnosis for a patient with 90 percent accuracy.
With the strategy of operational efficiency, Carbon Health keeps costs low and, in turn, can maintain low prices to ensure its mission of affordable health care. However, an issue with co-branded clinics arose when some chose to increase prices and thus their profits. These clinics saw the Carbon Health software as a premium innovation and a reason to increase their prices. This was directly in conflict with the Carbon Health mission. As a result, a decision has been made to focus on ownership of assets to maintain control over prices.
While Carbon Health’s business model is based on its unique technology, it also recognizes the advantages of having a physical “bricks and mortar” business to improve quality of care and reduce marketing costs. As Bali states in an interview with Forbes:
“I was passionately opinionated that without physical locations, there’s no great healthcare.”
The physical clinics operate as storefronts and effective marketing tools to drive organic traffic. In some locations, 95% of Carbon Health patients are from word-of-mouth or walk-bys, which have minimal marketing costs.
How Does Carbon Health Make Money?
Carbon Health has four main revenue sources, being:
- Fees from Medicare
- Fees from patients
- Fees from co-branded clinics
- Subscription fees of acquired technology providers.
Carbon Health charges fees for all of its primary health care services. Carbon Health receives the treatment fees directly from Medicare for those patients covered by Medicare.
If the costs of treatment exceed the Medicare payment, the patient must pay the gap directly to the service provider and then seek reimbursement if possible from their health insurance company.
Depending on the health insurance help received by the patient, these fees may be paid directly to Carbon Health by the patient or via their health insurance company.
Carbon Health intends to keep prices as low as possible to ensure the inclusion and accessibility of its services to everyone. At this time, they have been successful in charging only the approved Medicare rate for all of its services.
Co-branded Clinic Fees
Carbon Health also provides omnichannel technology to other independent clinics, which become co-branded services. It delivers a full-service technology platform for these clinics, including electronic health records, a full-blown EHR system, telehealth tools, prescription fulfillment, payments, and scheduling.
Carbon Health makes money from this arrangement by collecting a portion of the clinic’s revenue in technology fees. The difficulty with this arrangement is that Carbon Health has no control over the prices being charged to the patients, diluting the ability to achieve its mission of affordable health care.
For this reason, the company is reducing a focus on this revenue, prioritizing the establishment of company-owned facilities instead.
These providers will be integrated with the Carbon Health platform, but until then have a customer base who are paying subscription fees for the use of their services.
Carbon Health now owns them, so these fees form part of the Carbon Health revenue model.
A Volume Business
Even by keeping costs to a minimum, a strategy of low prices means that Carbon Health makes money through volume of service delivery. Financial sustainability relies on gaining small amounts of profit over large volumes of people. In addition, delivering low-cost and quality health care requires continued and substantial investments in R&D.
Carbon Health is making heavy investments in new technology and products to differentiate and expand its services. Such large investments can only be profitable if employed over a large network. For these reasons, Carbon Health makes its money by growing its customer base.
As Bali has stated in Inc 5000:
“To make things more affordable for people you can’t just bet on making the components more efficient. You have to bet on scale.”
To this end, it is the goal of Carbon Health to grow as quickly as possible. It is undertaking an acquisition strategy to expand its services rapidly and spread the technology’s costs over a national base.
They are purchasing physical clinics as well as providers of device-driven disease management. Carbon Health services are available to more than three-quarters of United States residents with their current assets.
Their goal, though, is to have 1,500 clinics in operation across the United States by 2025, which would place a Carbon Health clinic within 10 minutes of access to a majority of the U.S. population. They are currently opening around two clinics a week in existing and new markets.
Carbon Health Funding, Valuation & Revenue
Carbon Health is supported by 41 investors, including individuals, angel investors, investment companies, and wealth management firms. To support expansion, it has undertaken nine rounds of fundraising. The latest funds of $350M were raised in July 2021, bringing their total financial input to $522.5M.
The latest influx of capital brings Carbon Health’s valuation to $3.3 billion.
Being a private company, Carbon Health does not have to disclose its quarterly or annual revenue figures. The company has declined to disclose its revenue results up to the current time. The only hint provided about revenue performance is that Bali has stated in Forbes the revenue in the first quarter of 2021 surpassed their total revenue for 2020.
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Is Carbon Health Profitable?
Carbon Health is a modern, tech-enabled primary care provider. Its people-centered approach has helped it attract patients and build a sustainable business that is profitable.
Carbon Health is currently a private company with limited information about revenue, costs, and profit. However, as the founder Eren Bali reports in Forbes, he intends it to become an independent public company in early 2022.
This will make the financial statement for the company more readily available. Until such time, we can judge profitability from the statement made in mid-July 2021, where Bali indicated that all clinics are to achieve a 25 to 35% EBITDA margin.
In July 2021, he stated that this profit margin is already being achieved in several longer-standing clinics and will be replicated across each new clinic.
Conclusion: How Does Carbon Health Make Money
So, that’s all for now. We hope this was helpful for you to understand how Carbon Health makes money and why its business model is so unique. Now that you’ve got a better understanding of how their business model works, we can’t wait to see where your curiosity takes you next.
If you have any questions, though, don’t be afraid to reach out and ask, we’ll be sure to respond. Did you find this helpful? If so, we’d love for you to give us a share. After all, it took us a lot of time to write this.
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