The telehealth market is experiencing explosive growth with a total addressable annual market size today of $30 billion. Venture funding in telehealth, including mobile and digital health, has reached record levels with $4.2 billion in funding across nearly 300 deals in 2015 alone, according to Rock Health. While these are staggering numbers, we are also noting telehealth’s disruptive potential to rapidly change more traditional segments of the healthcare market, such as mental health.
A Massive Market Ripe for Disruption
The mental health market is ideal for telehealth adoption because of the ability to improve access, lower cost, and reduce stigma and other usage barriers. Based on the millions of individuals that seek outpatient care for such conditions, some industry sources claim the total addressable market for telehealth within mental health could be as large as $24.2 billion over time. According to the National Medical Expenditures Survey of 2012, the U.S. spends $1.1 trillion annually treating chronic disease, with mental health ranking fourth in total spending, behind cancer. Mental health impacts approximately 100 million Americans and results in an estimated $200 billion in lost earnings every year from reduced productivity and higher absenteeism according to The American Journal of Psychiatry. Despite these alarming figures, the National Alliance on Mental Health estimates that nearly 85% of individuals with mental health issues are never treated, primarily because of the aforementioned issues around cost, access, and stigma. Advancements in telehealth are creating a number of innovative approaches to address this traditional market and provide cost effective and safe ways to engage individuals with mental health issues.
An Early Market With A Variety of Approaches
Various telehealth care and support models are gaining traction in mental health. Some have a direct-to-consumer model while others focus on employers and health plans. Mental health conditions are complex and require a variety of treatment plans, engagement touch points, and personal interaction to be successful in a virtual environment. Today, conditions addressed via telehealth include depression, social anxiety, and relationship therapy with human interactions delivered virtually by therapists, psychiatrists, or non-licensed coaches or mentors utilizing Cognitive Behavioral Therapy (CBT) techniques. A variety of payment models exist in the market including monthly subscriptions for consumers and per–member, per-month plans with most offering access to supportive web-based content libraries and other resources.
Skeptics may say that it is challenging to introduce technology into a market where intimate face-to-face encounters with a trained professional are the norm. The jury is still out but it is worth noting that not all service providers in this market are seeking to displace face-to-face encounters, rather some use technology to evaluate mental health risk and direct the patient to the appropriate bricks and mortar access point. Regardless of the model used, we see telehealth providers combating this issue by gathering individual patient data to make more prescriptive and effective decisions for each individual patient. By collecting claims data, human resource department information, and even health risk assessment results, these providers can better identify higher-risk individuals and select appropriate treatment paths.
Barriers to Adoption Remain A Factor
A number of issues in the mental health market are confronting telehealth adoption. At the top of the list are trust, consumer expectations, and replicability of the intimate face-to-face therapist experience. While it can be difficult to build trust with a professional that you’ve never met, there are a number of web-based resources and social media websites that provide encouragement and dispel the stigma and myths around virtual mental health encounters. For instance, Social Anxiety Support is an online resource that allows users to pose questions and provide answers to topics such as, “Has anyone tried Talkspace.com?”. Recruiting quality therapists can also be a challenge as billable rates may be lower via telehealth and virtual encounters can be a turn off to practicing professionals.
Perhaps the biggest barrier of all is reimbursement, which could stall widespread adoption. Even the most common form of telehealth, virtual physician visits, are just beginning to gain reimbursement traction. Teladoc, a leader in the market, was initially stalled with health plans but instead found momentum with employers in its early years. We believe that despite the clear benefits of using telehealth in the mental health market, reimbursement will lag behind more general medical care provided by Teladoc and its contemporaries.
Even as reimbursement begins to take shape in this market there will be lingering questions about the efficacy and return on investment of virtual mental health treatment. Given the present challenges, perhaps in the near-term a winning model is a hybrid approach where face-to-face encounters are augmented by a network of virtual therapists as part of comprehensive or stepdown treatment.
TripleTree expects traditional segments of the healthcare market to increasingly embrace telehealth with mental health being a prime candidate for adoption as barriers such as reimbursement dissipate and quality offerings become more attractive to consumers, employers, and health plans. While mental health will lag more general medical care such as virtual physician visits, we are tracking a number of interesting companies in this space with a few select examples being Cobalt Therapeutics (acquired by Magellan Health), Joyable, Lyra Health, M3 Clinician, mystrength, Pacifica, and Talkspace. Given the growing demand for well-architected telehealth providers across all segments of healthcare, we are enthusiastic that the future leaders in this market have significant potential to bend the mental health cost curve and make quality care more affordable and accessible in the years to come. We look forward to watching this nascent market develop.
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