How Dr. Consulta is changing the Brazilian healthcare system

One of Dr. Consulta’s
clinics in Sao Paolo
Courtesy Dr.
Consulta

• Meet Dr. Consulta, a Brazil-based healthcare company
  that provides set prices for healthcare services like check-ups
  and MRIs. 
• Founded in 2011, the company has already seen 1 million
  patients through its clinics and has raised $100 million with
  plans to raise even more. 
• The company could be a model for healthcare in the US,
  which has been putting pressure on patients through higher
  out-of-pocket costs for doctor’s visits and
  prescription drugs. 

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Thomaz Srougi comes from a family of doctors — both his parents
and his brother are in the medical field. 

“I’m the ugly duckling,” Srougi, who has a finance background,
told Business Insider. But the entrepreneur didn’t stray too far
when cofounding Dr. Consulta, a Brazilian company that provides
doctor’s visits and healthcare services for set fees — no
insurance needed.

Founded in 2011, the company has already raised $100 million from
Sillicon Valley venture firms, family offices, and other global
investors, and is in the process of raising another $100
million. Already, Dr. Consulta has seen 1 million patients.
To put that into perspective, that’s 1 out of 12 people in Sao
Paulo, the largest city in Brazil. 

Healthcare in Brazil

In many ways, Brazil’s health system looks a lot different from
the US. In
1988, Brazil wrote universal healthcare into its
constitution, saying that public healthcare had to be free to all
200 million Brazilian citizens.

For the majority of Brazilians, the public system covers
everything from check-ups to hospital stays. About 26% are
covered by private health insurance, usually
provided by their employers similar to the system in the US.
On both the public and private sides, there can be issues: there
are
long waits associated with the public system, and
private health insurance costs are going up.

Dr. Consulta’s plan is to go after the remaining 150 million
Brazilians who don’t have insurance who might not want to use the
public system. 

Dr. Consulta got off the ground in 2011 by establishing a
healthcare clinic in one of the low-income neighborhoods
in Sao Paulo. Srougi and the team spent three years focusing
on the model there and have since expanded to more than 50
locations around the city. 

Because insurance isn’t a part of the picture, Dr. Consulta could
build everything on its own.

“We had the courage to do that from scratch,” Srougi said. 

Here’s how it works

Dr. Consulta founder and
CEO Thomaz Srougi
Courtesy Dr.
Consulta

All in, the company has built its own booking system, clinics,
and an electronic health record to manage patient information.

The company employs 2,000 doctors, mines its data to help
pharmaceutical companies find potential candidates for the
clinical trials they need to run, and helps with pharmacy
discounts. It’s currently running seven trials for
international pharmaceutical companies spanning issues like high
cholesterol, heart disease, diabetes, and chronic kidney
disease. More are awaiting regulatory approval to get off
the ground, with hopes to grow the clinical trial market in
Brazil.

But there are some healthcare elements the company won’t touch.

“We’re not getting into health insurance, we’re not becoming a
hospital, we’re partnering with them,” Srougi said. 

At each doctor’s office, prices for procedures are listed out.
For example, a general practitioner visit costs roughly $30 ($110
Brazilian Real), while an MRI costs roughly $128 ($500 Brazilian
Real). It’s a big difference from how prices are set in the US,
where it’s varied and you often don’t know how much you’re on the
hook for until a few months later. 

“It’s all posted almost like a McDonald’s menu,” Dr. Marc
Garnick, an oncologist at Beth Israel Deaconess Medical
Center and a professor at the Harvard School of Medicine, who’s
been advising Dr. Consulta and is an investor, told Business
Insider. 

Courtesy Dr. Consulta

The model — providing a service for a set fee — is one that
healthcare companies have been trying to move away from in an
attempt to get better healthcare outcomes at lower costs. In the
US, fee-for-service systems have often led to doctors over-using
resources (prescribing unnecessary tests or procedures) as a way
for the health system to make more money. Srougi said that’s not
the case for Dr. Consulta.  

“We twisted the incentives so doctors aren’t incentivized to
prescribe more than necessary,” Srougi said. That involves a
series of protocols embedded into Dr. Consulta’s software, which
flags when doctors are going off-book. Their compensation can be
docked if that happens too often. 

The hope is to also work with employers in Brazil to offer Dr.
Consulta as a benefit, at which point the services would be
covered by the employer on a per-member, per-month basis. Srougi
said there are currently employers competing to be part of the
pilot. 

The approach is similar to both urgent care and direct
primary care, a
small but fast-growing movement in the US of pediatricians,
family-medicine physicians, and internists — though
those services charge a monthly fee rather than by visit. 

The public-private divide

But targeting those who don’t have insurance worries some of
Brazil’s policy experts, who question the impact it’ll have on
the public health system. 

Matthew Harris, a professor at the Imperial College London’s
School of Public Health who worked for the Brazilian
healthcare system as a doctor in the 1990s, told Business Insider
that his concern is that people would feel the need to pay for
care they’d otherwise get for free, weakening the public system’s
ability’s to get a complete picture of citizens’ health. 

“When done well, it’s second to none,” Harris said about the
public health system. That said, he acknowledged, the Brazilian
system is under-funded,
meaning the system hasn’t been able to care for everyone as well
and as quickly as it does in theory, even as the government
has been contributing
more of its budget to healthcare. 

Srougi for his part sees the relationship as complementary: where
the public system falls short, Dr. Consulta can be there. 

“The public system fails to do primary care, and that’s exactly
what we’re good at,” Srougi said. “It’s beautiful on paper, but
in reality it doesn’t happen. It’s a false promise.”

The bigger issue, as Rodrigo Soares, professor of Brazilian
public policy and international and public affairs at Columbia
University sees it, is that the public system is so separate from
the private side that it can be inefficient. Those with
insurance are directed to privately operated doctor’s practices,
while those using the public system are directed to public
clinics and hospitals. That can become a problem when a person
with private insurance needs a complicated procedure that might
be better handled at a university hospital on the public system.

Courtesy Dr. Consulta

Why US investors are flocking to healthcare in Brazil

To grow Dr. Consulta, Srougi’s been coming to the US and meeting
with venture capital firms as well as private equity, mutual
funds, and hedge funds. The hope is to use those firms’ expertise
as well as their capital when expanding the company’s presence in
Sao Paulo as well as an entry into other major Brazilian cities
like Rio de Janiero and Belo Horizonte.

“We have a solid base of partners. We don’t need money for
money,” Srougi said. “We’re looking for the best product software
developers and the best skills and resources within data
analysis. Most of those funds are here and in the Valley you have
the usual suspects developing software.”

But his US investor base isn’t alone in its interest in Brazil.
In 2012, Minnesota-based UnitedHealth Group bought Amil, the

largest healthcare company in Brazil. And in 2014,

investment firm Bain Capital acquired Grupo NotreDame
Intermedica, taking the company public four years
later.  

For some of Dr. Consulta’s investors, the draw of what the
company is achieving in Brazil is in part because of where it
succeeds where the US system fails. 

“They’ve solved a lot of problems that we are constantly trying
to solve in the US,” Garnick, the Harvard School of Medicine
professor, said.

And in a lot of ways, the technology components to Dr. Consulta’s
system, as well as its model, could be applied elsewhere. 

“I don’t think of Dr. Consulta as a Brazilian company. It’s a
very universal vision to how healthcare should be deployed,” said
Neil Day, vice president of technology at Blue Bottle Coffee and
an investor in Dr. Consulta. 

Ultimately, the model could be one that the American healthcare
system takes cues from as it tries to keep a lid on
rising healthcare costs that are putting patients on the hook
for high prices that
often come as a surprise.

“The solution for the American healthcare system isn’t coming
from [the US],” Srougi said. “It’s coming from other places that
for many reasons fostered more possibilities in terms of new
types of care models.”