How Zocdoc broke regulatory ground as an online healthcare resource

CASE STUDY

How Zocdoc broke regulatory ground as an online healthcare resource

Read time: 10 min

Close-up of a stethoscope on a desk. (source: Getty Images)

Overview

The idea seems brilliantly simple: Create a digital health marketplace to connect doctors and patients online and streamline access to care.

Brilliant? Yes. Simple? No.

In 2007, when the Zocdoc cofounders came up with this concept, it was game changing. And in practice, by breaking new ground in the highly regulated healthcare industry, it was also fraught with legal and logistical complexity.

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Making the right moves

By 2016, to accelerate growth and expand access to care, Zocdoc wanted to shift its business model from flat-fee subscriptions to variable pricing (charging providers per patient booking). But the change risked violating the federal Anti-Kickback Statute – which could have forced the company to exclude Medicare and Medicaid patients, among others, from its services.

McDermott helped Zocdoc design a compliant pricing structure and secured two favorable Advisory Opinions from the HHS Office of Inspector General that validated the model and protected it from regulatory scrutiny.

This proactive legal strategy enabled Zocdoc to expand its provider network and patient access while maintaining compliance. The bottom line? When you make the right moves, legal complexity can become competitive advantage and fuel mission-driven business growth.

10+

years of McDermott-Zocdoc partnership

Advisory Opinions from the OIG

shared vision of healthcare innovation

It was critical to Zocdoc’s mission, and to its business, to continue to serve all patients seeking care.

Full Story

From regulatory risk to business win

The situation: Digital health revolution, company evolution

As an innovator, Zocdoc faced the early challenge of establishing practical, compliant privacy practices for both the services it provides to patients (its consumer users) and the services it provides on behalf of healthcare providers (its customers). McDermott’s privacy and data security team helped Zocdoc develop, implement, and update this dual-facing model.

With that foundation firmly in place, Zocdoc achieved brand recognition and significant revenue by 2015. However, its business model – based on a flat annual subscription fee for providers – limited Zocdoc’s business growth. The one-size-fits-all fee meant that some providers saw tremendous value, and others saw too little value, given the naturally unequal distribution of patient demand and bookings. This inequality also led to high churn, with many providers who received too few bookings – based on their specialty or geography – leaving the platform almost as quickly as Zocdoc could onboard new ones.

Limitations of the business model also constrained the supply of care and options for patients: Fewer providers on Zocdoc meant fewer options for patients seeking easily accessible care on their own timelines.

The challenge: Overcome regulatory uncertainty to keep serving all patients

Our objective: Build a legal launchpad for Zocdoc

The outcome: Business game-changer

Zocdoc worked closely with McDermott’s healthcare regulatory team to design an AKS-compliant pricing model that balanced innovation with defensibility. Embracing a creative mindset and a business and legal collaboration, the teams came together for whiteboarding sessions and iterative legal analysis that focused on what was possible, not what was proscribed.

A key part of this process was customized risk calibration. The McDermott team didn’t just identify general regulatory risks, it helped Zocdoc understand how those risks applied to its business, and which ones demanded proactive regulatory engagement.

Underlying this approach was McDermott’s sophisticated understanding of the regulatory environment, the policy purposes behind that environment, and how to structure a first-of-its-kind variable pricing model and supporting legal arguments to pass muster. All of their efforts were focused on how best to address the regulatory issues, and then advocate for the new model, to achieve Zocdoc’s business objectives.

The result was a favorable AO from the OIG in 2019, followed by a second one in 2023. These opinions validated Zocdoc’s new variable model and protected it from future regulatory scrutiny under the AKS. After changing its pricing structure accordingly, Zocdoc expanded its provider network, reaching underserved communities, improving patient access to care, reducing healthcare costs, and propelling the company’s growth and profitability.

With that groundwork laid, the model proved resilient when it faced qui tam claims in court. In response to the challenge, a McDermott litigation team coordinated with Zocdoc’s long-standing healthcare regulatory team to mount a robust defense, securing a complete victory – dismissal with prejudice.

Ultimately, the court’s ruling vindicated Zocdoc’s new variable model and set a powerful precedent: that proactively seeking and following an AO can serve as a strong defense. It affirmed Zocdoc and McDermott’s strategic foresight in pursuing regulatory clarity before scaling a novel business model – and demonstrated the strength of a legal partnership that spans both advisory and litigation excellence.

Key takeaways

Legal strategy = business game changer

Zocdoc’s growth demonstrates how a proactive, business-minded legal strategy can drive innovation.

By embedding McDermott’s counsel into its business planning – from early brainstorming to regulatory submissions and courtroom defense – Zocdoc turned legal complexity into a competitive advantage. The partnership enabled Zocdoc to evolve from a startup into a profitable, mission-driven platform that now serves a broader, more diverse patient population and puts providers’ access to modern technology on more equal footing with that of other industries.

Cross-practice collaboration = business strength

McDermott’s ability to integrate regulatory foresight, litigation strength, and risk calibration ensured not only that Zocdoc could innovate within the law – but that it could defend that innovation when challenged.

As Zocdoc expands its offerings and impact, it does so on a foundation of legal clarity, strategic foresight, and trusted partnership.

Outside counsel = business growth

As Zocdoc continues to find ways to break through barriers in creating a more efficient and well-functioning US healthcare system – whether through services such as its Zo AI Phone Assistant, telehealth services, or policy advocacy – McDermott remains a critical partner.

The firm continues to help Zocdoc navigate ambiguity, anticipate regulatory shifts, and shape the future of digital healthcare.

The McDermott difference

Beyond regulatory wins, McDermott’s stature as a health law powerhouse played a pivotal role in helping Zocdoc build trust and buy-in with its healthcare provider customers. As Zocdoc transitioned them to the new variable model, McDermott’s deep credibility in the healthcare legal community reassured providers and their legal teams that the model was not just innovative, but firmly grounded in legal precedent.