A startup promised to make health care ‘refreshingly simple.’ Building the business has been anything but

SAN FRANCISCO — The first thing you see when you enter Lemonaid Health’s offices is a dazzling bright yellow accent wall. Doctors work at desks clustered together in an open-plan office, ducking into smaller offices to conduct video visits with patients.

The engineering, design, and data science teams sit just steps away. Hanging from a standing coat rack is a king’s crown, like the kind found in a child’s dress-up drawer, that employees wear proudly on their work anniversary.

The space, in other words, has the look and feel of an up-and-coming tech startup — and that’s by design.

Lemonaid is part of a new wave of telemedicine businesses that allow patients to skip the traditional office visit and instead chat online with a doctor to get birth control or prescription drugs to treat simple conditions, like urinary tract infections and erectile dysfunction. The idea is to rethink the way health care works, at least in some respects.

But here in one of the Bay Area’s latest outposts of “disruption,” smart ideas have also run headlong into unforeseen realities. Murky state regulations have slowed Lemonaid’s ability to grow as quickly as it would like. Patients desperate for medication have tried to deceive the company’s doctors about their symptoms.

And state-level infectious disease agencies and public health departments have made clear they don’t accept certain information by email — forcing Lemonaid, a tech-savvy startup, to acquire a fax machine.

None of that is to say Lemonaid isn’t a hot commodity. With high-profile investors and a growing customer base, it’s seeking to build a sleek and stylish e-commerce business that rivals the likes of eyeglasses seller Warby Parker and shoe retailer Zappos.

“We are trying to create an experience that is more similar to an experience that you would be used to in other industries,” said Paul Johnson, Lemonaid’s CEO and co-founder, who got his start selling sports equipment and pet supplies online in his native U.K.

Lemonaid is also trying fiercely to carve out market share. The company has rankled competitors by filing complaints about their business practices that one rival CEO described as nitpicky and unwarranted.

Lemonaid charges patients $25 out of pocket for a virtual doctor’s visit that takes place via chat message, phone call, or video chat. The consultation takes place within two hours after patients submit an online form.

The most popular request is for birth control prescriptions — sought largely by millennial women — but the company is also seeing growing interest among older patients seeking medication for 10 other conditions, including high cholesterol and hair loss. Lemonaid’s doctors also order four types of lab tests, including for sexually transmitted diseases.

That expanding menu of services has generated more than 100,000 patient visits, many of them repeats by the same patients, since Lemonaid launched in 2014. (Its name emerged as a winner after company staffers surveyed San Francisco workers picking up lunch at food trucks. The moniker has since inspired a company slogan: “Health care. Refreshingly simple.”)

Drug makers are taking notice: The corporate venture arms of Novartis and the British generic drug maker Hikma Pharmaceuticals last year led an investment round that poured $11 million into the company. The startup now estimates its valuation at $60 million and is starting to test the fundraising waters as it considers when to raise more money.

Pharmaceutical industry sales reps have also approached Lemonaid, but it’s declined to take meetings with them. The reason? The company prefers to let its doctors use internal software to provide prescribing recommendations based on clinical guidelines and the doctors’ own judgments, Johnson said. (Lemonaid has three full-time primary care physicians, who are based in its San Francisco office.)

Because each state regulates telemedicine differently, Lemonaid cannot simply launch its services nationally. So far, it operates in just 18 states — meaning that the company is blocked off from nearly 40 percent of the U.S. population.

Expanding into a new state is a long and costly process: The company must pay to get its doctors licensed with the local medical board. It has to seek a business license from the local secretary of state. And it also has to decipher each state’s regulations, many of which were written years ago, to determine if it needs to tweak its practice model. In states like Ohio and New Jersey, for instance, it requires consultations be conducted by video.

For now, the company has de-prioritized expanding into states with small populations, Byzantine or unfriendly telemedicine regulations, and long distances away from the Pacific Time Zone, where the company’s doctors work during standard business hours.

“Probably the hardest thing is the speed at which we’ve been able to expand geographically — and so that’s something that we want to try and address and hopefully speed up,” Johnson said.

Patients themselves have presented another unexpectedly thorny challenge. Sometimes, they try to conduct visits while behind the wheel — prompting Lemonaid’s concerned doctors to urge them to pull over.

Even more alarmingly, patients try to deceive Lemonaid’s doctors about their symptoms. When patients report symptoms that are too complex to handle via telemedicine, Lemonaid doctors refund their money and urge them to see a doctor in person. But patients who don’t want or aren’t able to do that will sometimes try Lemonaid again, creating a new account or visiting again from the same account to try to report less serious symptoms, according to chief clinical officer Dr. Davis Liu.

Liu, who leads Lemonaid’s team of doctors, joined the company 2.5 years ago. At the time, it was operating in just one state (California) and offering just one service (birth control). But Liu saw an opportunity to “increase access and quality,” he said.

He had previously spent 15 years as a family doctor at the health system Kaiser Permanente, which has a reputation for being nimble and forward-thinking. Back at Kaiser, he said, a workday might involve seeing 30 patients.

Nowadays? More often than not, he’ll conduct 100 patient visits in a single day.

The business model being tested by Lemonaid and its competitors comes with some significant risks, experts say.

Unlike other web services, there’s little room for making mistakes or being slow to respond when patients are seeking medical care. “It’s not like when your photo sharing app goes down for three hours, and it sucks but it’s OK,” said Andy Weissman, a managing partner at Union Square Ventures, which is an investor in Nurx, a Lemonaid competitor that offers services for birth control and the HIV prevention pill.

And if even one company in a sea of good actors cuts corners in a way that harms patients, “it will taint the market,” said Geoffrey Clapp, a serial health tech entrepreneur with no ties to Lemonaid or its competitors.

Clapp also pointed to unanswered questions about what might be missed, like detection of conditions like hypertension that don’t present obvious symptoms, when patients make fewer trips to a traditional doctor’s office.

But Clapp is bullish on the model, in part because of the direction it seems to be headed: toward a partly automated system in which a physician might handle your first prescription for a UTI, but an artificial intelligence would handle your fourth one.

“Theoretically, in the doctor shortage, that should free them up to do things that they went to school and took on half a million in debt for,” Clapp mused. “They didn’t do that to say: ‘Take a little more amoxicillin.’”

Until last November, Lemonaid’s offices were in the corner of a tour bus depot, in an industrial corridor in San Francisco’s South of Market neighborhood. On several occasions, carbon monoxide appeared to be leaking from the tour buses, so the Lemonaid team had to evacuate.

But last year’s fundraising round made possible an office upgrade for Lemonaid’s staff, now totaling 26. Now they work out of a building in the southeastern corner of San Francisco’s bustling financial district.

Lemonaid appears eager to box out its rivals. In complaints filed with a handful of state medical boards, it has alleged that some competitors and their affiliated physicians are breaking rules — improperly using online survey forms to steer patients towards certain answers, or blurring the lines governing which type of corporate entities can practice medicine.

Hans Gangeskar — the CEO of rival Nurx, a target of the complaints — strenuously denied that his company was doing anything wrong. He said Nurx’s lawyers are working on responding to the complaints.

Gangeskar sees Lemonaid’s complaints as a dirty tactic to try to clear the field of competitors. “The thing that gets me here is it’s not creating a constructive dialogue in the industry about how things should be,” he said.

Ian Van Every, Lemonaid’s president and co-founder, declined to comment on any complaints that may have been filed under his name, citing advice from attorneys. But in general, he said, “We think everybody should be encouraged to have transparent conversations with state medical boards, because we all benefit when we know what the regulations are and operate within them.”