Scaling to $500M in Revenue: ModMed CEO Daniel Cane (Part 4)

Sramana Mitra: What has driven the choices of which specialty to go on to next?

Daniel Cane: There are several factors we consider when entering a new specialty. The primary question is: where is there a large, underserved population of dissatisfied physicians?

We focus on private practices. We target specialties that are relatively resistant to hospital consolidation—areas where hospitals typically don’t dominate or acquire the kinds of specialists we serve. It’s not unheard of, but it’s rare.

We choose highly defensible segments of the market—specialties where physician productivity is critical and where time is highly valued. Our software comes at a premium; it’s not inexpensive.

We’re investing $200 million in R&D, which allows us to continuously enhance and scale the application. Because of this investment, we deliver a premium product with a premium ROI. That’s the position we aim to maintain.

We focus on higher-volume specialties. If a physician sees only 12 to 20 patients a day, software inefficiencies may not be a significant concern. They can compensate with manual processes or additional staff. But in specialties where physicians see 30, 40, or even 80 patients a day, every saved minute counts. If we can save three to six minutes per patient per day, that translates into hours of regained productivity.

We perform exceptionally well in high-volume, complex areas. Additionally, we look for strong SaaS opportunities—industries where software can create real value. My heart is drawn to oncology. However, there aren’t many private-practice oncologists unaffiliated with academic medical centers, which limits the opportunity in that field. I want to for all the right reasons, but there’s not a lot of software revenue there, so we haven’t.

Sramana Mitra: Right. My next question is the question of TAM (Total Available Market), because one case study that is coming to my mind that we have done is WebPT, which is a physiotherapy private practice, similar to your idea, but it’s a private practice. It’s very specialized and very focused on physiotherapists.

Daniel Cane: Yes, I know them well.

Sramana Mitra: They have built a standalone company just focusing on physiotherapy. So what is the role that TAM plays in your various segments? What is the minimum time that you need to want to go into a particular vertical? Then there’s also the question of maximum time, because it looks like somebody like WebPT can build an entire business on just that physiotherapy TAM.

Daniel Cane: The great part about being in health care is that there’s no shortage of physicians. Even if you focus on a specific market, like WebPT has, there’s no shortage of opportunities to expand your software services.

We take a dual approach at ModMed to grow our total addressable market (TAM). First, we expand into new specialties, and second, we offer more products within the specialties we already serve.

For example, in Q1 next year, we’re launching our ambient listening solution. This is a solution I’m incredibly excited about. From a technological perspective, we’re doing something that’s never been done before. We’re leveraging our unique unfair advantage: 650 million patient encounters stored in our cloud system. We’ve identified a portion of this data to train our AI, giving us access to eight trillion parameters of structured data.

While we’re not using all of that data, we’re utilizing a substantial amount. It’s high-quality, unbiased data, ensuring we meet all the necessary standards for AI. When we launch that, we’ll be able to charge providers in our network several hundred dollars per provider per month to subscribe to it.

This will also be available to new customers, increasing our average revenue per provider each year—a metric we’re very proud of.

This innovation significantly expands our TAM. Within our current customer base, we see over a billion dollars of potential TAM through upselling alone. While the majority of our growth comes from acquiring new customers, our small sales team is also focused on upselling to existing clients.

That said, the biggest opportunity lies in the broader market. More than 85% of providers in the specialties we serve still don’t use our application. So, there’s a tremendous amount of growth ahead of us.

This segment is part 4 in the series : Scaling to $500M in Revenue: ModMed CEO Daniel Cane
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