Tech First Doesn’t Mean Compliance Second

Compliance-and-tech-startups

andros is an NCQA certified CVO. Getting this certification required a significant investment and over a year of hard work from our amazing team led by Dr. Garry Choy (Chief Medical and Compliance Officer) and Sam Meyer (Chief Technology Officer)!

andros, like Zenefits and many other health-tech companies, provides a tech solution to mission-critical business processes that have for an eternity been done manually. But being a tech-first solution doesn’t mean that compliance to healthcare-industry standards and regulations is a second priority.

A few months after starting andros, I had the opportunity to meet with Eric Schneiderman, the Attorney General for the State of New York. We talked about startups and compliance; at this point, AirBnB was in the midst of a drawn-out struggle with the state compliance office. The AG’s point was clear: just because we’re a tech company and we do things “differently,” this doesn’t mean compliance with legal and regulatory frameworks can be ignored. This experience has helped us to develop a perspective that makes compliance central to our mission.

Trade offs

Unlike companies like Zenefits, we made an early decision to invest heavily in compliance and submitted for certification from the NCQA, one of most rigorous regulators in our industry.

This was a big investment that may have come at the cost of early growth. After David Sacks’ “Compliance is oxygen” email, this idea of investing in compliance sounded like an easy choice. But a few years ago, when “growth at all costs” was the mantra throughout startup land, it was a hard sell to investors and a challenge for us with limited funding from a handful of angel investors. In spite of these constraints, we created a dedicated team to work on the certification process for close to a year. We invested countless hours and also made a significant financial investment into development, process engineering and consulting services.

Compliance is an opportunity

Instead of inventing ways to get around compliance (I’m looking at you, Macro!), we chose to make compliance a core competency and central to our mission. We leveraged the certification process for competitive advantage — many of our legacy competitors have not made the same investment, and we now have a leg up. Other competitors waited 15+ years to become certified, and we did it less than three years after starting the company. Now we publish our audit scores so that our clients can see for themselves the high standards of compliance that we maintain.

Compliance also became part of our pitch to investors. We made it a central part of our strategic plan for the next 12 months. In doing so, we attracted investors with Bowery Capital and Primary Ventures who are strategically minded and focused on the long game.

Takeaway for founders in regulated industries

Tech companies intersect with real-world businesses and hopefully have a huge impact on how industry functions. Therefore, industry regulations need to be thoroughly understood before we decide upon a strategy for dealing with them. In some cases, you may need to fight the system; in others, it may be more advantageous to comply. But it’s never a good idea to try to sneak around the system or fall into the mistake of thinking that “all regulation and government involvement is bad.” Understand the non-market forces, and talk with government actors to understand the logic in the regulation.

At andros, we maintain the mantra: “Think outside the box, but inside the framework.” Not only have we innovated our way to credentialing at 10X the rate of industry standards — we’ve also made compliance a built-in feature of our platform. If my team and I had followed tech-startup trends, we would have shrugged off compliance as an unnecessary formality; if we had followed healthcare-industry trends, we would have fallen prey to the belief that young companies cannot achieve the highest level of compliance. Luckily, we thought outside the box on both of these, and we paved new ground and set new standards, which not only benefit our company but also our clients and their patients and providers.

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