Telemedicine Technology Unwrapped 

Broadly available technology

Telemedicine's basic requirements include secure access to broadband internet, a video platform acting as the interface between the healthcare providers and the patients, and a dedicated software.

• Video platforms are usually home computers or app-enabled smartphones.
• Telemedicine software may allow providers to import new patient’s data into Electronic Health Records (EHR).

Peripherals

Today's technology incorporates data from peripheral devices, such as remote patient monitoring (RPM) devices, to collect and transmit health information to the physician.

• Digital stethoscopes transmit heart and lung sounds to remote providers.
• High definition videocameras, called dermascopes, allow for detailed visualization of skin problems, while otoscope cameras send clear pictures of the nose, throat and ear.

Patient privacy

Telemedicine services must guarantee privacy for patients’ personal health data. Today, housing digital data on third-party remote servers may be more secure than locale servers.

• In the U.S. patient data protection requires telemedicine providers to be compliant with Health Insurance Portability and Accountability Act (HIPAA).
• Applications such as Skype or WhatsApp are not HIPAA-compliant.

The Pandemic Has Pushed Telemedicine Into The Future

COVID-19: the unexpected catalyst

COVID pandemic forced healthcare institutions and regulatory bodies to adopt telemedicine as an effective way to limit the viral spread.

• The American Medical Association (AMA) released telemedicine specific guidelines.
• The U.S. government expanded reimbursement coverage and lifted regulatory restrictions.

Unprecedented adoption in the wake of coronavirus

As the COVID-19 spread around the world, The Centers for Medicare & Medicaid Services (CMS) temporarily expanded its reimbursement coverage for telemedicine.

CMS approved more than 80 new telemedicine services, waived geographic restrictions and included telephone consultations.

• CMS is paying telemedicine services at the same rate of in-person visits.

Is the use of telemedicine already fading?

During the COVID, the number of in-person visits dropped dramatically, mirroring a spike in virtual visits. As lockdown is being lifted, in-person visits are seeing a gradual recovery, but still represent a fraction compared to pre-COVID levels.

• In-person visits have seen a rebound in mid-June, after a decrease of nearly 60% from February to mid-March but are still one-third lower than what they were before the pandemic.
• U.S. consumers using telemedicine passed from 11% in 2019 to 46% in May 2020.

Building Foundations For Long-term Growth

In the midst of a major change

The main barriers to telemedicine adoption include the regulatory & reimbursement hurdles, the lack of proper IT infrastructure, lack of awareness and concerns about reliability and effectiveness.

• Only 18% of physicians used telemedicine in 2018.
• Insurers paid roughly 20% to 50% less for virtual visits than in-patient visits.

New membership subscriptions are spiking

Telemedicine companies have seen a surge in both members and visits, particularly through March and April. The huge uptick in virtual visits could be extraordinary and tied to the emergency created by the virus. However, membership subscriptions usually are long-term contracts.

• During Q1, Teladoc, leading provider of telemedicine services, reported U.S. membership subscriptions up 61% YoY, while U.S. members with visit-feeonly access rose 89% YoY.

Permanent reimbursement expansion: the next catalyst

The healthcare industry has called on health officials to make permanent the favorable payment conditions set during the COVID-19 outbreak. Reimbursement expansion is necessary to incentivize providers to invest in telemedicine infrastructure and keep patients using it for low-acuity and emergency visits.

• CMS has already issued a proposed rule to make permanent some of the temporary provisions, starting January 1, 2021.

New Investment Opportunities On The Horizon

New companies are filing for an IPO

Telemedicine companies are seeing increased investors' interest. Teladoc has been so far the main listed pure player in the U.S. but more companies are going public.

• One Medical went public on January 31.
• Ping An Good Doctor was one of the biggest Hong Kong IPOs of 2018.
• Amwell is exploring an IPO, currently scheduled for September.
• Oak Street Health has just filed for a $100mn IPO.

Telemedicine was originally designed for emergency care

Most telemedicine players are not intended to replace the primary care physician. They are mainly focused on behavioral and emergency care, cannot order laboratory tests or dispense prescription drugs. Patients don’t receive ongoing care with the same person through the illness as a random doctor is assigned every time.

• Teladoc and Amwell offer a 10 minutes remote conversation with a random doctor, who cannot dispense prescription drugs or order tests to confirm a diagnosis.

New business models are emerging

Telemedicine has been focused on low-acuity urgent care but has still a lot of opportunities for expansion, such as follow-up for surgery and cancer therapy, although in-person visits will still be needed.

• Teladoc and Amwell provide virtual-first primary care but other companies, such as One Medical, are exploring a hybrid business model, that mixes telemedicine and office visits.

A Hybrid Business Model

Primary care is ripe for disruption

Primary care consumers are dissatisfied with their experience. Long waiting times for appointments, short visits, uninviting offices, as well as limited access to specialists have led to innovative primary care solutions.

• Physicians are paid on a fee-for-service basis, incentivizing them to enroll as many patients as possible to maximize their income.
• In 2019 Mayo Clinic reported that over 50% of primary care physicians showed burnout symptoms.

One Medical changes the way primary care is delivered

One Medical is a membership-based primary care provider. Through an app, members can text their physician, schedule same-day appointments in more than 70 locations around U.S., get video visits 24/7, renew prescriptions, and be treated in comfortable, uncrowded settings.

• The fee structure encourages patients to use their services leading to more preventative care.

A value-added service for both members and physicians

Electronic business model creates value for patients, physicians and employers. The company pays its doctors an annual salary, removing the incentives for clinical volume and improving the quality of care. Technology allows physicians to focus on meaningful work and increase productivity.

• Electronic health record (EHR) facilitates 44% of administrative tasks.
• One Medical has been shown to lower employer medical costs by 8% or more.

Catalysts

• Permanent reimbursement expansion. CMS issued a proposed rule to make permanent some of the temporary provisions set during the pandemic, starting January 1, 2021.
• Increased adoption. During the pandemic, physicians and patients have experienced firsthand the benefits of telemedicine, forcing them to test the technology and acknowledge its potential.
• Surge of IPOs. The increase in public companies will help boost visibility to consumers and partners.

Risks

• Physicians’ capacity. Telemedicine providers may not have enough clinical staff to offer remote care.
• Infrastructure, resources and training. Switching to telemedicine requires both the appropriate IT infrastructure and expertise.
• 2020 elections. Several presidential candidates are pushing for a public insurance option. If people start to sign up with the government, some companies might stop offering health insurance to their employees.