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Should the MoviePass Saga Deter You from Starting A Subscription Healthcare Practice?

What does a subscription plan for frequent moviegoers have to do with a healthcare practice? A lot, if you’re considering offering a subscription plan for your patients.

A subscription model—where you charge an annual or monthly fee for a laundry list of services—can be a very powerful and profitable way to build your healthcare business.

It’s a model that, with a guaranteed cash flow, can make it easier for you to raise capital and create a long-term valuable asset. Many software, cable, internet, financial services and insurance companies have built up businesses using this format and it’s possible for healthcare professionals to do so, too. You could provide your services for a monthly fee in an arrangement that benefits both you and your patients.

But before taking the leap, you might want to consider the ongoing saga of MoviePass.

MoviePass operated pretty quietly until 2017. It tried a few pilot programs. It hired a couple of key executives. Then, after a majority stake was purchased by a publicly held firm, the company rolled out a national plan offering customers the ability to see a movie in theaters every day for the low price of $9.95 per month. Within a few months, the company reported an increase in subscribers from 200,000 to 600,000 and the prospects looked great. Shortly after, an even more economical annual subscription fee was offered.

Unfortunately, things turned south the following year. During the first eight months of 2018—and even though claiming it has increased its subscribers to more than 3 million—the company has faced a backlash due to privacy and location concerns from its mobile app, unexplained service outages, certain movies (like the new Mission Impossible) being blocked, and a major pushback from one of the country’s largest theater chains, AMC, which refused to participate in the MoviePass program (AMC has its own loyalty program).

To add fuel to the fire, the pricing model was changed. Its CEO warned that “surge pricing” could be used, and the company later hiked its monthly fee to $14.95, with a limit of three movies per month. People yelled. Some subscribers cancelled—and all of this has put significant pressure on the company’s finances.

Healthcare professionals who are thinking about starting a subscription healthcare business can learn from this! Consider these three key factors:

  1. A subscription model takes time and patience to build. During the period when you start up this venture, you will need sufficient capital to pay the bills because your cash flow will be spread over a longer period of time. Do you have enough cash in the bank? Have you arranged adequate financing that can then be reasonably paid down once cash flow turns around? Do you have any idea when this will be? What happens if, like MoviePass, things don’t go according to plan? This brings me to my next item …
  2. A subscription model needs very good forecasting. I hope you’re good with a spreadsheet because you’re going to need one. What is the most conservative forecast of patients you will add over the next two to three years (yes, it can take that long!)? How will your cash coming in be able to compensate for the cash going out? Where will your financing come into play and when does that cash go from negative to positive? If you’re not good at this stuff, be very careful and invest in a good accountant.
  3. Finally, a good subscription needs to be tested. In their defense, the MoviePass folks did test their plan back in 2011 and ran pilot programs for more than five years. AMC Theatres, however, vigorously resisted them even back then and that alone should have tipped them off to the problems they would face a few years later. You need to be very thorough in your testing. You need to make sure you’re working with a sample of patients—something you can afford—over a 12-month period just to make sure your model will work before jumping in with both feet.

A subscription model can work for many businesses, including those in the healthcare industry. Some firms—like concierge service MDVIP—are succeeding with this model and I’m betting that many healthcare practitioners will be embracing this type of service in the years to come. Just don’t make the mistakes that MoviePass has made.

To those of you on the fence about implementing a subscription model in your practices, I say this: Plan. Think. Finance appropriately. Know your numbers. Have a good advisor. Most of all, have patience. It will be a long haul. But the payback could be significant.

The views and opinions in this article are those of the author and do not necessarily reflect those of Bankers Healthcare Group. This article is for informational purposes only and is not legal or financial advice.

Gene Marks

Gene Marks is a columnist, author, CPA and small business expert. He writes daily for The Washington Post newspaper and weekly for Forbes, The Huffington Post website, Inc., Entrepreneur.com, Fox Business and Philadelphia Magazine. He also frequently appears on Fox News, MSNBC and CNBC discussing matters affecting the business community.

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