Gamification Hits Healthcare as Startups Vie for Cash and Partners

Would working out at the gym be easier if you earned cash every time you hopped on the treadmill? Boston-based startup GymPact is betting that millions of Americans will answer that question with a resounding “yes,” and at least some members of the VC community agree. The startup uses GPS to track how much time its users spend at the gym, then gives them cash for fulfilling their workout goals—money that comes from GymPact members who pay the company if they fail to exercise as promised. GymPact just closed an $850,000 seed round led by, an early-stage investment fund founded by Polaris Venture Partners veteran Mike Hirshland.

GymPact is one of dozens of startups seeking to capitalize on the gamification of healthcare—the explosion of interest in using technology and social media to make adopting healthy habits fun for consumers. And it’s not just small, independent companies that want to get in on the action. Virtually every major health insurer, including UnitedHealth Group (NYSE: UNH) and BlueCross BlueShield, has some sort of initiative under way to incorporate game-based programs into its offerings.

“It’s about taking the concepts that have made the gaming industry extremely successful and using them to engage consumers differently,” says Bob Plourde, VP of innovation and R&D for United.

The trend is being driven by a growing enthusiasm for games in general. In May, United released a survey in which 70 percent of respondents said video games that require body movements to control activity on the screen can complement traditional exercise. More than 50 percent said physically demanding games would encourage them to be more active. A March survey by Towers Watson and the National Business Group on Health revealed that 60 percent of employers plan to include online games as part of their health initiatives for employees by the end of 2013. And the University of California at San Diego has a major effort underway to research the use of social media and mobile technology to improve health behaviors.

As the entrants into this growing field increase, however, so does the challenge of finding a business model that works. Several startups in health gamification are still trying to figure out how to bring in sustainable revenue streams. Others have forged early partnerships with health insurers—a strategy that some experts say can give them a leg up over their rivals. “A partnership can be a huge boost for a startup, not only to get revenue up front, but to get users fast,” says Halle Tecco, CEO of Rock Health, a San Francisco- and Boston-based healthcare accelerator, which has incubated several gamification startups.

Virtually every player in the health gamification field has a strong focus on fitness—and all of the companies are trying different methods for making exercise fun. Rock Health portfolio company HealthRally, for example lets users collect financial rewards from friends and family if they meet certain goals, such as completing a 5K. New York-based Fitocracy is a social network where fitness fanatics can track their workouts, challenge friends to exercise “duels,” and earn public recognition for meeting health goals. And San Francisco-based Keas helps employers develop websites where their workers can earn badges, points, and other recognition for exercising and express support for coworkers who adopt healthy habits.

EveryMove CEO Russell Benaroya

Some of the new approaches to gamification have grabbed the attention of large insurers. In May, Seattle-based EveryMove raised $2.6 million, much of which came from BlueCross BlueShield Venture Partners and two regional Blue plans. The company has worked with Premera Blue Cross in the Pacific Northwest to test its platform, which offers online and mobile tools that allow members to turn healthy lifestyle choices into financial rewards.

Founder and CEO Russell Benaroya likens EveryMove to a mileage points plan. Health plans, large employers, or health-related brands will be able to award points to their customers based on whatever health goals they want to promote. If general fitness is the overall goal, for example, a health plan might give 60 points to a member who gardens for three hours, or 150 points to one who completes a triathlon. Members who earn a certain number of points could receive discounts, say, on their annual health plan premiums. During the beta, users are receiving gift cards from a regional drugstore, a golf training franchise, a bike shop, and other health-related retailers.

Benaroya believes such tangible rewards are crucial to keeping consumers interested in improving their health. “It’s hard to keep engagement up over time,” he says. “Health is a process, and process by definition takes time.” What’s the trick to achieving long-term engagement? “Subtle, unexpected rewards that are integrated into the fabric of how somebody already lives their life,” he contends.

Many people in the healthcare industry refer to the ability to keep consumers interested over the long run as “stickiness”—and most say it’s their biggest challenge. That’s why some health plans have brought the gamification effort in-house. Boston-based Healthrageous was incubated at the Center for Connected Health, a division of Partners HealthCare. The company makes devices that collect data such as blood pressure and weight from health plan members, which the plan can then use to tailor health-improvement plans to individual members.

“Only 9 percent of people who download health apps are still using them in the second month,” says Healthrageous CEO Rick Lee. “There’s a significant dropoff in stickiness due to the fact that it’s just not personal enough.”

The company has since spun out of Partners, raised $8.5 million, and is preparing to close a Series B in July, Lee says. Healthrageous has signed contracts with five large health plans to run pilot tests of programs that focus on encouraging healthy eating, exercise, and good sleep habits. Plans that sign on with Healthrageous are incentivizing their members with rewards ranging from gift cards, extra paid time off, or contributions to health savings accounts held by people who have high deductibles.

Healthrageous has run several trials to track stickiness. In 2007, the company tested its wireless blood pressure cuff with employees of Hopkinton, MA-based tech giant EMC. Participants had to test their blood pressure a few times a week and go online to look at the results and get tips and rewards for improving their health. Only seven out of 202 participants dropped out of the program, Lee says. “That was perceived to be extraordinarily sticky,” he says.

Two years later, the company replicated the results across seven Boston-based employers. In addition, Healthrageous showed that 32 percent of EMC participants achieved a clinically meaningful improvement in their blood pressure, as did 30 percent of participants in the second trial.

Lee says that large insurers are primarily concerned about encouraging good habits in their least healthy members—not in people who are already pre-disposed to exercise and eat right. “They’re not motivated to incentivize a marathon runner to run faster marathons,” he says. “They’re much more focused on type 2 diabetics that are predominantly obese and that are costing thousands of dollars a year in medical expenses. That’s where the financial pain exists in the population.”

UnitedHealth also has several studies under way to measure the impact of gamification on its least healthy members. In one study, for example, the company has given Xboxes to adolescents who are obese and deemed to be on a path to diabetes. United also gave them several games and Microsoft’s Kinect device, which allows players to use body movements to control the games.

“We’re looking to measure whether this helps kids become healthier,” Plourde says. “Does it actually get them moving when historically they weren’t? Or does it potentially become a deterrent? We can’t show any results yet.”

Chris Cartter, general manager of Healthways (NASDAQ: HWAY) subsidiary MeYou Health in Boston, says his company is similarly interested in measuring the degree to which consumers maintain an interest in their health if it’s fun for them to do so. “The core question is, does engagement have a measurable effect?” he says. But Healthways is hoping to broaden its reach beyond just members with chronic illnesses. MeYou Health markets Daily Challenge, a program that rewards members for completing one small health-related task per day, such as “take the salt shaker off your kitchen table,” or “swing an imaginary hula hoop 10 times to the right, then 10 times to the left.” Users can connect with their friends for support on Facebook and Twitter, and win rewards typically seen in videogames, such as tokens that can be used to “unlock” premium health-related content.

Cartter says 75 percent of users are still participating in the program after 30 days, and 30 percent are still engaged after a year. MeYou Health is now piloting the program with five different groups, including a large employer and Blue Shield of California, Cartter says. The company is trying to prove that its program produces a significant return on investment, in the form of reduced absenteeism and other measurable metrics. MeYou Health just finished enrolling 1,500 people into a controlled clinical trial to measure the effectiveness of Daily Challenge, Cartter says.

One advantage of being part of a larger health organization like Healthways is access to both capital and a built-in customer base. MeYou Health, for example, has enrolled 230,000 people in Daily Challenge and has support from its parent company to measure the results of the program and develop other products.

Some independent startups are slowly catching on, including Fitocracy, which has 450,000 members, co-founder and CEO Brian Wang says. But its creators admit they’re not entirely sure how they’re going to make money in the business of gamifying health care. “Revenue is not a huge focus right now,” Wang says. The company does take some advertising and it offers a $5-a-month premium membership, he says, but most members participate for free. “Our core strategy has to be about building a huge and awesome platform,” he says.

GymPact nabbed 43,000 sign-ups purely through word of mouth, founder and CEO Yifan Zhang says, but she recognizes the importance of finding partners to fuel the company’s revenue growth. GymPact currently takes a small cut of the rewards it pays to members who exercise. The company is now working with a handful of health plans to set up pilots, including Harvard Pilgrim Health Care.

“We definitely need to find a way to work with insurers and employers,” Zhang says. “They are looking for ways to incentivize their members to exercise.”

Healthways’ Cartter predicts the most successful business models will be the ones that derive revenues from health industry players—not directly from consumers. That will require startups to prove they’re offering something truly valuable.

“The primary goal is to engage people in their everyday health and wellness, but they’re not going to be the payers,” he says. “What, then, is your ability to measure that engagement and correlate it to meaningful metrics that a payer is going to pay for, whether it’s a health plan, an employer, a health system, or a hospital system?”

No doubt, there’s still plenty of room for partnering in the health gamification sector. United’s Plourde says his company is paying close attention to the plethora of startups, and it may consider forming deals with some of them down the line to boost its internal programs.

“We know there’s a lot of good thinking out there,” he says. “We’re trying to create a platform that will allow us to tap into that and bring it into this whole ecosystem of health gamification.”

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6 responses to “Gamification Hits Healthcare as Startups Vie for Cash and Partners”

  1. Alexei Levit says:

    Wow it would be great if I got paid every time I went to the gym. If the startup building that Rock The Post is in had a gym and had this process life would be healthier! 

  2. JaneM says:

    There is a definitely something fishy going on with Cartter’s (MeYouHealth) claim that “30% are still engaged after a year” considering at this year’s Game Developer Conference they indicated that only 1% made it past the first 100 days. 

    • Bill says:

      Hi Jane, are you referring to Michael Kim’s talk at GDC 2012 in the Games for Change track? Unfortunately, Michael misquoted the data that I shared with him. I created 5 slides for him but he probably only had room to show the one with a screen grab of Daily Challenge. 

      I’ll try to clarify things. At that time, 1,730 members had completed their challenge every single day for 100+ days. That is the 1% of our population that Michael was probably referring to. Check out the attached slide. 

      Chris Cartter was referring to engagement, not streaking mechanics. We define engagement as completing any one of the following four metrics each week: 1. Visit MeYou Health website, 2. Compete a challenge, 3. Read a challenge email or reminder, or 4. Encourage other members. 

  3. Papharmacy Shasek says:

    We are a startup that has its mission to be a catalyst for integrating business models like this into an entire geographic community. We harness the least active individuals, their wellness challenge and reluctance to exercise to the physician prescribing exercise – then providing the menu of tools for compliance – exactly like GymPact. Contact us to join the PA Pharmacy initiative

  4. JaneM says:

    Yup, that was the one. Michael didn’t misquote it then but Chris is lumping in these other actions, got it. 

    Thanks for the clarification. Can you share how much the 2nd “Complete a Challenge” metric accounts for out of the 30%?

    • Bill Sabram says:

      I’d be happy to talk with you about this sometime. Completing a challenge is just one of the data metrics that make up our engagement model. Michael’s misquote about our members with 100+ day streaking mechanics has confused this thread. Speaking in person or on the phone is awesome. – Bill Sabram