TECHNOLOGY

Telemedicine: A $17B Market Opportunity

JUN 9

In last week’s blog, we discussed the value that clinics bring to the healthcare industry by supporting a lower cost of care in a more convenient setting. Telemedicine, or the use of technology to deliver healthcare from one site to another to improve a patient’s clinical health status, is another alternative care delivery model outside of the traditional hospital setting that is gaining traction in the market as illustrated by the following:

UnitedHealth Group to Expand Coverage for Virtual Care Provider Visits: Currently, self-funded employer customers of United have access to a network of virtual care physicians through partnerships with Doctor On Demand, Optum’s NowClinic, and American Well. In 2016, United plans to expand coverage to employer-sponsored and individual plan participants, bringing coverage from ~1M members to well over 20M commercial members.

Teladoc Files for IPO: Teladoc, the first and largest telehealth provider in the nation, filed their S-1 registration statement following tremendous growth in 2014, with 298,000 visits (up from 127,000 in 2013) and $44M in revenue (up from $20M in 2013). The company is projecting 500,000 visits in 2015 and values their market opportunity at $17B.

Legislative Action to Expand Telemedicine Coverage for Veterans: According to the Department of Veterans Affairs, more than 690,000 Veterans were served by its telehealth programs in fiscal year 2014. This number is poised for growth with the introduction of the Veterans E-Health and Telemedicine Support Act of 2015 to Congress, which would eliminate telemedicine restrictions that require both the provider and patient to be present in a federally-owned facility. Veterans have increasingly utilized telemedicine for mental health services, including treatment of post-traumatic stress disorder.

Telemedicine provides patients with access to convenient, affordable, and high-quality healthcare that can dramatically reduce healthcare costs by serving them in lower-cost care settings. In addition to providing treatment for mental health disorders, telemedicine enables providers to evaluate, diagnose, and treat patients experiencing a wide array of conditions from respiratory infections and smoking cessation to dermatological and chronic conditions. Numerous healthcare constituents are realizing the value proposition telemedicine provides:

  • Patients: Telemedicine serves a broad cross section of patients across all payer segments. Coverage of commercially insured patients expanded just last month when Minnesota joined 26 other states by enacting a telemedicine parity law, requiring health plans to cover and reimburse telemedicine the same way and at the same cost as in-person service. Telemedicine coverage is also provided to Medicare patients and accounts for less than 0.02% of total Medicare reimbursement; however, the American Telemedicine Association is actively working with CMS to expand coverage. Medicaid patients receive varying degrees of coverage across the 48 states that have mandated some form of coverage for telemedicine services.
 
  • Payers: Cigna, Aetna, and numerous other health plans offer access to telehealth services similar to UnitedHealth Group. Not only are payers realizing the cost benefits of offering such services, but they are also using telehealth services to combat the difficulties of providing quality healthcare options for members living in rural areas.
 
  • Employers: Telemedicine provides employers with a unique option to offer employees a convenient, low-cost alternative to healthcare. The Teladoc filing showcases a large employer client with 150,000 members that has generated a 9.0x ROI based on average savings of $1,157 per employee receiving care through the telehealth platform.
 

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Despite the growth and popularity of telemedicine, the delivery model has been and is being challenged in some states. Teladoc suspended operations in Arkansas and Idaho after the board of medicine in each state concluded Teladoc’s business model did not satisfy certain legal requirements for their physicians to prescribe medications. The Texas Medical Board took a similar stance in April; however, a federal judge issued an injunction to the Texas Medical Board’s revised rule at the end of May, allowing Teladoc to continue offering services until the matter is resolved during trial. The injunction represents the sixth occasion in which the courts have sided with Teladoc against the Texas Medical Board in the past four years.

TripleTree believes that in any nascent market, like telemedicine, adoption can be challenging until its value is validated by market leaders. We believe that telemedicine is reaching an inflection point and the slow adopters may be left behind. In the coming years, telemedicine may develop into one of the more preferred delivery models as it satisfies consumers’ increased demand and desire for greater choice and convenience while at the same time helping to solve the nation’s shortage of primary care physicians. We are intrigued by the potential market opportunity and are curious to know what you think.

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Nick Wardell