The Doctor Will Skype You Now
As many of us have spent the last few months taking virtual meetings from our home office, buying groceries from our phones while standing in our kitchens, and having video happy hours from our living rooms, it has become clear that we can do almost anything virtually, including consulting with a healthcare provider.
While telemedicine is not new—virtual clinical services have been around since the ’90s—COVID-19 has certainly accelerated its adoption, with over one billion virtual care interactions expected in 2020[1]. At its core, telehealth is well-designed for social distancing and, with relaxed state regulations and more broadly available payment terms, we think the widespread use of telemedicine is here to stay.
Before the pandemic, Global Market Insights projected the telehealth market would grow at a rate of 19.1% YoY from 2018 to 2025. We believe the once secondary or even tertiary use of telemedicine will soon become primary, and any future attempts to roll back the restrictions loosened due to COVID-19 will likely be met with intense pressure from consumers, companies, and officials who have seen the benefits of its use. It will be very difficult to put the telehealth genie back in the bottle.
New Exemptions, New Expectations
In light of the serious challenges the COVID-19 pandemic presented for our healthcare system, the U.S. Department of Health and Human Services (HHS) approved the use of telehealth services as part of the Coronavirus Preparedness and Response Supplemental Appropriations Act.
This legislation waived Medicare payment requirements and made a new group of recipients eligible for remote care. Providers were granted the ability to charge the same rate for telehealth services as in-person medical services, and other exemptions were also added, including some HIPAA exceptions for doctors using Facetime or Skype to speak with patients.
Medicare can also now bill for virtual care when a patient is in their home. Before COVID-19, the same patient would have been ineligible for telemedicine reimbursement unless they were in an approved care facility, like a hospital or nursing home. We are talking about the same patient concerns, same level of service, and same care—yet different rules for different times. These designations of location—rural versus urban, in-home versus in-facility, in-state versus crossing state borders—are due to concerns about HIPPA compliance, licensing, and billing. But should red tape really restrict access to care for patients who need it?
Despite the benefits HIPPA regulations attempt to provide for patients and the protections they may afford, privacy and control over personal data is an evolving issue. Pure privacy does not exist for a person who engages in modern society. With the exception of those taking extreme measures to stay “off the grid,” we all exchange some level of privacy for convenience or free services, like GPS directions, access to information online, or even just using a credit card. Most conscious consumers acknowledge this dynamic.
No one is advocating for a patient data free-for-all, but this new environment is giving patients the choice to engage in virtual care through platforms they deem trustworthy, accepting still stringent but perhaps less-than-HIPPA-compliant privacy policies to get the care they need. The adoption rates for this reflect that patients are willing to make the tradeoff. Many healthcare consumers, providers, and regulators have adjusted their expectations.
Those wary of changes in the telemedicine sector are quick to note that the new rules open up potential loopholes for fraud. As a result, telemedicine billing practices are under heightened scrutiny. The regulatory changes created an industry-wide need for an altered supporting ecosystem—one that includes updated processes for revenue cycle management, authorization, identification, credentialing, payment, and reimbursement. This shift is creating new opportunities for companies with healthcare back-office solutions that can be value-additive to telemedicine vendors.
Telehealth Companies Continued to Perform Well in Pandemic
Through our group’s extensive work with telehealth businesses and our relationships with investors in the space, we have had a front-row seat for the industry’s evolution. We have witnessed firsthand the improvements in the delivery of service and care provided by telehealth companies, as well as the increased efficiency, accuracy, and transparency in how consumers are billed.
Investors continue to show strong interest in the space, and the current environment has only underscored their desire to back great management teams with proven telehealth and virtual health services platforms.
As relaxed regulations have presented new opportunities for the delivery of telemedicine, notable telehealth companies have scaled their workforces to increase the utilization of their services and have subsequently benefited in topline growth and increased share price.
As of mid-April, Teladoc’s daily patient volume was more than twice that of the entire first week of March. The Company’s Q1 utilization grew by 70% compared to Q1 2019. It has more than doubled its workforce and noticed a significant uptick in utilization by 18-to 30-year-old males, a group that previously showed minimal adoption.
Both AmWell and 98Point6 have closed financing rounds since March and continue to perform well in the current environment. AmWell saw a 650% surge in Washington state as COVID-19 spread through the region, and had to accelerate infrastructure improvements for their systems to cope with the demand.
While about 10% of new patients are COVID-19 related, there have been surges in all types of ailments, especially behavioral health and dermatology. Amid the current state of public markets, Teladoc’s stock price is up over 136% year-to-date[5] and MDLIVE experienced a 72% increase in month-over-month visit volume in April, with behavioral health being a strong driver in the increase. AmWell even filed for an IPO on June 4th, which could price in September.
Sustained Structural Growth
This pandemic has resulted in a horrific human toll—we have not lost sight of that. It has also made us rethink privacy, safety, and convenience in all aspects of our lives, including healthcare services. It has challenged healthcare and government institutions to become a bit more practical about the delivery of medical treatment.
This crisis has propelled telehealth into the mainstream, and a concerted effort by healthcare providers, insurance companies, the federal government, and individuals to manage the COVID-19 pandemic has put telehealth in a prime position for growth going forward.
Our team is focused on providing nuanced advisory services for companies and investors who believe, as we do, in the future of telehealth. For more information and analysis of the space, view our full Telehealth Industry Report here. Please do not hesitate to reach out to our team using our contact information below.
Kevin Cable
Managing Director
kcable@cascadiacapital.com
(206) 696-7922
Adam Stormoen
Managing Director
astormoen@cascadiacapital.com
(612) 720-8136
Vitaliy Marchenko
Vice President
vmarchenko@cascadiacapital.com
(253) 314-3143
Novan Le
Vice President
nle@cascadiacapital.com
(206) 436-2510
Sources:
(1) Forrester Research
(2) Telehealth by the Numbers: a) Healthcare Dive, b) Forrester Research, c) Federal Communications Commission, d) Global Market Insights
(3) America’s Primary Care Shortage: a) Altrius, b) Association of American Medical Colleges
(4) Global Telehealth Market: Global Market Insights, a) Healthcare IT News, b) The Mercury News, c) Forrester Research
(5) CapitalIQ as of 6/24/2020