doctor_ipad

The notion that the medical industry needs to go digital is hardly a new one. The Affordable Care Act (aka, “Obamacare”) and other recent legislation have both incentivized and mandated modernization of this critical infrastructure.

But, to date, the bulk of innovation has focused on electronic medical records (EMR), and to a lesser extent on billing and scheduling. Worse, these solutions most often exist as standalone or siloed products rather than interoperable platforms, thereby limiting their effectiveness. Topping things off, most EMRs have been flat ugly, designed without the polish and attention to user-experience that consumers have grown accustomed to in an iOS and Android world. In other words, the medical software space has room for improvement.

Y Combinator alumni drchrono has taken a somewhat novel approach to the problem by creating what it calls an “operating system for doctors.” It merges together several of these key software tools in a tablet-based solution and opens up a platform API that other developers can build on top of. This way, drchrono can connect with medical devices and share data with third-parties like hospitals and insurers. The company has also placed a heavy emphasis on interaction design, incorporating time-saving features like voice input that have been praised by busy doctors.

Today, the company announced $2.69 million in new funding, raised as a convertible note from Runa Capital, Maxfield Capital, FundersClub, Bruno Bowden, Silicon Valley Bank and Box. Inc. A number of these investors contacted the company unsolicited via AngelList, according to co-founder and CEO Michael Nusimow, including a few of the physicians currently using the product.

In addition to YC, the company previously participated in the Rock Health accelerator and received Seed funding from General Catalyst Partners, Charles River Ventures, 500 Startups, and Yuri Milner. The latest round brings the four-year-old Mountain View company’s total funding to $6.77 million.

drchrono now has 60,000 registered healthcare providers using its free billing product and another 3,000 paid subscribers. Thus far, the company has primarily targeted small practices with one to fifteen doctors and is more recently expanding its scope to larger practices with up to 50 physicians. drchrono has also digitized 3 million patient records to date, and it’s billing product processes more than $480 million in annual medical billing.

By and large, drchrono’s competition is coming from legacy, hospital-grade solutions that require the installation of millions of dollars worth of on-premise servers and which, to put it nicely, lack the appeal of a tablet-based software. drchrono won’t be running entire hospitals any time soon, but it is more than suitable for a moderate-sized private practice, often replacing pen and paper, basic spreadsheets, or decades-old software.

“Fifty percent of the work doctors do takes place after the patient leaves – documenting the visit, submitting insurance forms, etc.,” Kivatinos says. “drchrono, more than any solution on the market, minimizes that work and makes the doctors’ lives dramatically simpler.”

On the startup side, the company competes with San Francisco-based Practice Fusion which offers a free Web-based EMR and has grown to more than 112,000 users serving 81 million patients. But DrChrono stands apart for its integrated billing platform and its platform strategy, according to the company’s co-founder and COO Daniel Kivatinos.

That said, the regulatory burden facing new EMRs has grown to such a degree that it’s far less likely that the category will see entrants going forward, Nusimow says. The regulatory pressure on doctors to step into the digital age is shifting from an incentive-driven model to one that levies penalties on those who don’t take action.

“After five years it’s time to bring drchrono into the infrastructure space – good medical infrastructure is lacking,” Kivatinos says. The next step will be for drchrono to launch a healthcare app marketplace accessible to both doctors and patients, he adds.

“Our goal has always been to fix the existing healthcare system,” Nusimow says. “We are committed to ensuring that doctors have an all-inclusive platform to start a practice on, from using point-of-care tools with patients to processing medical claims.”

drchrono is targeting the relatively small market of 600,000 or so private practice physicians in America. This means that it has about 10 percent penetration with its free billing product, which has proven to be an effective customer acquisition tool, and about half-a-percent penetration with its paid OS product. That’s a tiny fraction of a tiny target, raising questions about just how profitable this space can ultimately become.

The good news, Kivatinos says, is that the product is incredibly sticky. Doctors have historically only switched their practice-level OS every 10 to 20 years. That number may shrink in the cloud and app store era, but it’s not something that they swap out monthly like a flavor-of-the-month mobile game.

There’s no doubt that the medical industry is entering a transitionary period that will see more technology adoption over a few years than has taken place in the last several decades combined. The same way BYOD and the cloud have reinvented enterprise computing, tablet, big data, and open platform architectures are set to reimagine what’s possible in healthcare. drchrono appears well positioned to capitalize on this massive shift.

[Image via Thinkstock]