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The Economy & Strategies

Telehealth Takes Off

Sep 10, 2020

Large digital health provider MeMD had experienced slow and steady growth from its launch in 2010 through February of this year. Then, in March, its business accelerated dramatically — as was the case for much of the telehealth industry.

quote
The engine for growth was the COVID-19 pandemic. Since the pandemic hit these shores, the adoption rate of telehealth jumped 10 years ahead in a matter of months.
Senior Vice President and Senior Equity Research Analyst in Healthcare IT

The telehealth sector comprises a range of companies with applications and technologies deploying two-way live or streaming video, videoconferencing, and store-and-forward imaging. These more advanced approaches augment using the internet, email, text, phone, and other forms of telecommunication.

Whereas telehealth has long been used for certain mental health services in which treatment does not depend on in-person visits, and in developing countries where access to physicians and hospitals was limited, it is now taking root for a broad range of medical conditions and services.

Interactive technologies enable medical professionals to treat a wide range of ailments — including allergies, arthritis, colds and flu, sprains and strains, sore throat, diabetes, insect bites, and sports injuries — virtually, and at lower costs for all stakeholders: employers, hospitals, patients, insurance companies, and the government.

Before the pandemic, surveys showed more than three-quarters of the public wanted access to telehealth, citing its convenience, accessibility, and elimination of long commutes and crowded waiting rooms. Yet adoption in the U.S. among health care providers was slow, as capacity was ample to address in-person patient needs. The pandemic changed this paradigm: Due to the rapid and huge increase in COVID-19 patients, healthcare providers relied on telehealth to address non-urgent patient needs. “Patients who were skeptical of telehealth have now tried it and they aren’t going back,” says MeMD CEO Bill Goodwin.

The Future of Physical and Remote Care

Telehealth also could be the cure for what ails healthcare finance. The pandemic took an axe to hospital revenues, causing a plunge in the use of non-emergency services and the deferral of elective surgeries. It also gutted expense budgets, requiring hospitals to expand ICU capacity and buy extra ventilators, beds, testing materials, and personal protective equipment (PPE). Through June, hospitals sustained a combined $202.6 billion in pandemic-related losses, according to the American Hospital Association.

“The healthcare system is under huge financial duress because routine care revenues fell off a cliff at the same time that expenses skyrocketed,” says Dr. Mary Kay O’Neill, a former physician who is currently a partner and senior clinical advisor in the Total Health Management practice of employee benefits firm Mercer. Telehealth has helped reestablish routine-care revenues for hospitals at a time when they are devoting resources to treating COVID patients. In a post-COVID world, these services will provide the opportunity to reduce traditional expenses associated with in-person doctor care, helping hospitals widen profit margins.

Telehealth may prove not only to be a way to use resources more cost effectively, but to make up for a scarcity of resources. A 2019 study by the Association of American Medical Colleges predicts that there will be a shortage of close to 122,000 primary care and specialty care physicians in the U.S by 2032.

Factor in that six in ten adults have one chronic health condition and four in ten have two or more, according to the Centers for Disease Control and Prevention. Such conditions include diabetes, asthma, Crohn’s disease, obesity, and arthritis.

At present, patients with chronic health problems consume 75 percent of all healthcare expenditures, working out to an estimated $5,300 per person annually, according to the Centers for Disease Control. “Telehealth providers can serve them more cost effectively and with commensurate care,” Goodwin says.

Schoenhaus agrees. “Costs in the healthcare system have long been inflated, with a lot of it attributable to hospital services,” he explains. “The average trip to an emergency room costs about $1,400, although many ER visits involve minor ailments and injuries not requiring in-person services.”

The same inefficiency applies to scheduled appointments with doctors. “It costs about $150 to see your physician,” he says. “A virtual and remote `trip’ to a doctor is less than half this cost.”

More Growth Ahead

The increase in patient demand and projected need for more efficient, cost-effective healthcare is positioning the telehealth market for strong growth.

This anticipated expansion will likely present a range of opportunities for associated industries, as well as potential for beneficial collaborations. For example, “It would make perfect sense for a large provider to move into digital health information,” notes Dr. O’Neill.

Growth — whether organic or through acquisition — is expected in such other areas as digital health information, virtual physical therapy ventures, and businesses focusing on behavioral and mental health therapy. Startups with disruptive models like 98point6 — a provider of 24/7 on-demand, text-based primary care through a mobile app — are also altering the status quo, making healthcare not only easily accessible but available at all times, as well.

In the near term, the next wave of high growth in telehealth will involve patient-monitoring services to treat patients with chronic illnesses like diabetes and high blood pressure, according to Schoenhaus. “AI tools can remotely interpret irregularities and actively intervene to nudge the patient to take a medication or contact their doctor virtually.”

For now, pricing among telehealth providers typically is on a subscription basis — a monthly fee per member or employee. Services run the gamut from virtual appointments with doctors or nurses to discuss minor illnesses to providing prescription refills and medical test results. As providers expand into the chronic health space, this menu of services will be increasing — along with revenue potential.

Like other industry insiders, 98point6 CEO Robbie Cape foresees a dramatic broadening in the scope of telehealth services. “Specialties like dermatology will be pushed partly to primary care,” he says. “A doctor can view a close-up video of a skin lesion, analyze it with AI-powered algorithms, and determine if the patient needs to see a dermatologist, or not.” While primary care physicians already perform this service in-person, telehealth offers a more convenient and less expensive alternative, he adds.

Certainly, there are still obstacles to growth and adoption. Some patients have complained about paying for a video consultation with their doctor that used to be a free phone call. Furthermore, patients need both access to technology and knowledge of how to use it, which tend to be obstacles with older and/or less-affluent patients. And patients in those same groups are also more likely to present with the chronic conditions that could be managed efficiently and effectively by telemedicine, so there is room for further improvements in the democratization of such digital health services. But there’s little question that telehealth has moved from the fringe to the center of modern healthcare.

About the Expert

Russ Banham

Contributor, This Is Capitalism