Doctor booking app Zocdoc will start charging a new patient fee despite objections from some providers

Key Points
  • Zocdoc says half its current subscribers will pay the same or less under the new model.
  • The company piloted the change last year, and several doctors voiced their complaints to CNBC. 
  • Zocdoc is backed by Jeff Bezos and has been valued at $2 billion.

Zocdoc, the scheduling website used by health providers, including dentists, dermatologists and optometrists, is eliminating subscriptions in favor of a model that charges for every new patient booking, despite objections from some longtime providers.

The company sent an email to users in New York on Tuesday informing them of the first pricing model change since 2012. Zocdoc estimates that half of its participating providers in New York, where the company is based, will pay the same or less with the per-booking fee than they do now. A typical subscription charge comes to $3,600 a year per doctor.

Zocdoc said the purpose of the change is to accelerate the company's move into less-populated areas, where doctors can't see enough new patients to justify the flat fee. But the move has faced fierce resistance from physicians in the New York area who expressed their concerns to CNBC last year, when the company was piloting the new model.

They say the pricing change will be unsustainable for their practices because it's too hard to recoup the costs for every new patient, seeing as most don't make regular visits. Peter Chien, a dermatologist in New York, said he will have to pay $35 for a new patient and $80 if the person is seeing a procedural dermatology specialist. Chien told CNBC in August that his costs would go up seven-fold.

Zocdoc, which is backed by investors including Jeff Bezos and has been valued at $2 billion, delayed the rollout last year, but is now going ahead with it. Changes in New York will take effect on April 1, and current customers are allowed to keep their existing contract until it's up for renewal. The rollout will occur state by state.

Just a 'marketing' platform

"Providers who receive a greater volume of bookings from our Marketplace have benefited the most from this flat fee structure," CEO Oliver Kharraz wrote in the letter. "However, it has been a less sensible economic decision for the many providers who received fewer bookings via our Marketplace — particularly those in less densely populated rural and suburban markets or sub-specialized areas of medicine."

The booking fee will apply even if patients don't show up to their appointment. Zocdoc describes itself as a "marketing" platform for doctors to grow their practices, meaning that it doesn't offer any guarantees.

Some physicians were concerned that they could get in trouble for paying a booking fee to Zocdoc because of state and federal laws that prevent doctors from paying third parties for referrals. Kharraz said that the model complies with the law, though he said the company will stop admitting Medicare and Medicaid patients in New York "until we have affirmative confirmation that it's okay."

Here's the letter that Zocdoc sent to doctors in New York:

For the first time since 2012, Zocdoc will update its pricing for all providers in New York starting this spring. Our team will be in touch shortly with detailed information, but I first want to share some context behind this decision.

When we founded Zocdoc in 2007, we chose New York both as our headquarters and our first market to launch. I personally visited hundreds of doctors' offices across the city. I wore out the soles of multiple pairs of shoes going door to door, sharing our vision for a platform that would deliver a digital, instantly accessible healthcare experience for patients. To those of you who took an early chance on Zocdoc and everyone who has joined us since, thank you for helping make that vision a reality.

Over a decade later, I am proud of what we have built here together. In New York today, we estimate that one in five new patient-doctor relationships is established through Zocdoc. That's because thousands of providers — across independent practices and leading health systems alike — participate in Zocdoc's Marketplace. Together, we've helped millions of New Yorkers access care.

However, as we have grown, we have realized that our flat subscription fee is a financial barrier that excludes too many providers from participating in Zocdoc. Importantly, it also limits patients seeking care from finding providers.

On Zocdoc, the total number of patient bookings a provider receives varies widely, but a flat subscription fee does not account for that. Providers who receive a greater volume of bookings from our Marketplace have benefited the most from this flat fee structure. However, it has been a less sensible economic decision for the many providers who received fewer bookings via our Marketplace — particularly those in less densely populated rural and suburban markets or sub- specialized areas of medicine. The flat fee has limited our ability to sign up providers across these areas, which has hindered the development of a robust Marketplace for patients seeking care.

To lower the barrier to entry for more providers, Zocdoc's new pricing model will shift from a flat fee to one that fairly reflects the number of new patient bookings each provider receives. We estimate that half of our current participating providers in New York will pay the same or less under this new pricing model.

We have already implemented this new pricing model in five states, and the results have exceeded our expectations. In our first state, we have grown overall provider participation on Zocdoc by more than 80 percent, dramatically improving patients' choice and access to care.

These changes will take effect in New York starting on April 1, but you can remain on your current plan until your existing contract is up for renewal. You are also welcome to opt in to this

new pricing starting on April 1, if you so choose. The team here at Zocdoc will email you shortly to share personalized details for transitioning your account to this new pricing.

I recognize this is an important change for the patients and providers we serve, and I am confident that our new pricing model will benefit more providers and ultimately improve choice and access to care for patients across New York state.

Thank you again for being part of our platform. Together, we're helping New Yorkers have the healthcare experience they expect and deserve.

Oliver Kharraz, M.D. Zocdoc founder & CEO