- COVID-19-related changes to healthcare are knocking down telehealth roadblocks and spurring accelerated growth in the already promising telehealth sector.
- As consumers and providers gain experience with this form of care delivery, their comfort and adoption will rise, fueling a sustainable increase in demand.
- Recent developments highlight the importance of innovative B2C and B2B business models and the significant opportunity for technology and business services companies serving the healthcare sector.
The Dawning of a New Day for Telehealth
For the promising telehealth sector, this may finally be its moment in the sun. Recent developments, spurred in part by the COVID-19 health crisis, are creating a favorable backdrop to propel the telehealth industry forward. With evolving delivery models and growing momentum, telehealth is an industry to watch—today more than ever before. In this article, Harris Williams senior professionals from our Healthcare & Life Sciences (HCLS), Consumer, and Technology, Media & Telecom (TMT) Groups explore the developments that make the growing telehealth industry a compelling investment area.
Falling Barriers and Favorable Tailwinds are Pushing Telehealth Forward
Global telehealth was estimated to be a $5.6 billion market in 2019.1 Several trends are helping to fuel a pre-COVID-19 forecast of 24% CAGR from 2019 to 2025: an expansion of telehealth reimbursement, growing provider and consumer interest, pressure on corporations to reduce employee healthcare spending, and strengthening technology infrastructure.2
Now, COVID-19-related changes are knocking down roadblocks and spurring accelerated growth in the sector. In an attempt to increase the supply of healthcare services and provide more people with access to medical treatment without leaving their home, the U.S. government has paved the way for accelerated telehealth adoption. Medicare has expanded telehealth visit reimbursement coverage beyond limited-access rural communities and has increased reimbursement to equal that of an in-person visit. Private insurers are following suit.
Furthermore, U.S. Health and Human Services has encouraged discretion in collecting copays so that cost is not a barrier to care during the pandemic. “This copay waiver is especially important to parts of the population that often don’t seek healthcare because of out-of-pocket cost,” notes Whit Knier, a managing director in the HCLS Group. “A lower or waived copay for a virtual visit could significantly increase demand, while improving care.”
The U.S. government also lifted the requirement that providers conduct an initial in-person exam before electronically prescribing a controlled substance. In particular, this boosts the use of telehealth in the psychological and behavioral health sectors. Licensing is easing up, too. State-specific medical licenses restrict doctors from practicing across state lines. Such interstate restrictions have been barriers to achieving the benefits of scale for telehealth providers. However, with surging demand for care in the COVID-19 environment, the U.S. government temporarily waived this restriction, inclusive of telehealth services. Private insurers are at the ready, expediting the practitioner credentialing and enrollment process to provide health plan approval for telehealth reimbursement.
The pandemic-related easing of restrictions is driving a surge in consumer uptake. The University of Pittsburgh Medical Center’s (UPMC) ambulatory care telehealth platform saw visit volume in one 48-hour period equal the telemedicine visits performed in all of 2019.3 The 180,000 telehealth claims to Blue Cross Blue Shield of Massachusetts in March 2020 represented a 3600% increase over February, and a 5100% increase over the monthly average for 2019.4
Many of the above changes are in place only through the health crisis. However, Dan Linsalata, a director in the TMT Group, points out that there is a strong possibility that the experience gained through the temporary lifting of some or all of these restrictions could incent permanent policy and regulatory change. “Both the public and private sector have adapted very quickly to make high-quality telehealth accessible during the COVID-19 pandemic. The industry is experiencing the benefits of that effort and, most important, patients are receiving the care they need.”
There are other indications that telehealth momentum will continue. Many of the growing number of telehealth visits are from first-time users heeding the stay-at-home restrictions. Telehealth has historically fought a consumer perception that a virtual visit has less clinical value than an in-person visit. But studies show that once telehealth is used the first time, satisfaction is generally high and propensity to use it a second time is strong. This would indicate that recurring usage is likely and participation will grow going forward.
Corey Benjamin, a managing director in the Consumer Group, is optimistic. “We’ve already seen some providers embrace virtual visits in specialty areas that are not commonly thought feasible for telehealth, such as dermatology assessments or physical therapy injury evaluations and treatment,” he said. “Even if providers only use telehealth selectively for certain procedures once the health crisis subsides, it could be an economically efficient way to level-load volumes across locations and improve overall clinic-level economics.”
The Rise of Innovative Delivery Models
Most people are familiar with the business-to-consumer (B2C) telehealth model offered through health plans and employers, but recent developments also highlight the importance of business-to-business (B2B) models.
Teladoc Health, which provides telehealth by partnering with employers, hospitals, health systems and insurers in 130 countries, is an example of a B2C telehealth company. A similar model is AmWell, which provides a telehealth platform that includes the ability for individuals to directly enroll, receive access to 24/7 virtual medical consults and pay out of pocket or through a participating insurance plan.
The success of third-party telehealth providers such as these is largely driven by the size of the network on the platform. “Telehealth platforms have to have a critical mass of physicians, nurse practitioners, and other care providers commensurate with patient volume,” says Knier. “In the COVID-19 environment, a shortage of staffing to keep up with the burst in demand has resulted in some long virtual waiting room times.”
Some healthcare systems are choosing to subscribe to or acquire a telehealth platform and staff it with their own care providers to see patients within their network or practice. Providers are seeing advantages from this model. For instance, fewer in-person visits frees office staff to proactively reach out to “lost patients” who, for example, did not make follow-up appointments or schedule preventive care visits. This increases overall throughput and ultimately improves health outcomes.
Innovative B2B partnerships are also emerging as hospitals, provider organizations, other care facilities and health-related businesses contract with telehealth services for specialized support. For example, a rural hospital may contract for remote consultations from a specialist in a major metro area several hours away. A provider organization may contract with behavioral or psychological health specialists to provide mental health services to patients within their system. Assisted living, skilled nursing and other care facilities are also using telehealth to amplify their clinical care.
LifeStance, for example, offers a range of outpatient behavioral health services, delivered both in-person and through telehealth. ChenMed uses telehealth to supplement care delivery to moderate and low-income seniors. And, in a novel partnership, MDLive recently joined efforts with Walgreens to provide telehealth services through the Walgreens app to users in 25 states.
The rise in telehealth utilization is creating significant opportunities for technology and business services companies serving the healthcare sector. Companies with existing platforms have the opportunity to move into telehealth. Therapy Brands, for instance, was founded through the consolidation of several leading software tools delivering practice management and clinical documentation capabilities to a wide variety of mental and behavioral health specialists. The company has strategically expanded into a comprehensive suite of solutions to help doctors run their practices, including billing, credit card processing, and revenue cycle services. Ramping up existing infrastructure to offer a telehealth platform to practitioners is a natural extension, and highlights how technology vendors can leverage existing footprints to ride the current tailwinds in telehealth. Therapy Brands experienced a 4300% spike in usage of its telehealth platform in one week due to COVID-19.
“The telehealth wave also has a ripple effect, providing revenue growth opportunities for providers of adjacent services,” adds Linsalata. “For example, telehealth momentum can drive growth in services such as provider credentialing, procurement and contract management services or compliance software and services.”
Benjamin believes telehealth will grow in importance to investors in the consumer healthcare arena. “The evolution of this technology and its associated models is really interesting and will have added importance in consumer healthcare going forward. Post-COVID-19, I expect investors will be increasingly focused on providers’ technology capabilities and their ability to offer telehealth services, either when in-person visits aren’t an option, or simply as another means to deliver care in a convenient and efficient manner.”
A New Day
Due to the COVID-19 crisis, the already-growing teleheath sector is receiving a substantial thrust forward through inherent roadblocks. As consumers and providers gain experience with this form of care delivery, their comfort and adoption will rise. This sustainable increase in demand, coupled with recent, real-life examples of telehealth’s critical value proposition for all constituents, will support ongoing innovation and novel opportunities for investment in the sector.
Published May 2020