Article
Telemedicine beyond COVID-19
Telemedicine stood out to be one of the few industries that benefited from the unprecedented worldwide lockdown due to coronavirus during the first half of 2020.
July 27, 2020
As life gradually returns to normal, many people wonder if the global surge of telemedicine adoption and usage during the pandemic will last once the virus is contained. While it is always tricky to predict the velocity of consumer behavior change, we explore the idea of “telemedicine as virtual primary care” and consider whether the accelerated digitalization telemedicine brought to the healthcare triage system could turn out to be ubiquitous, efficient, and structural.
Convenience and positive user experience driving early adoption
We often do not appreciate the opportunity cost of visiting a doctor in a clinic. According to research in The American Journal of Managed Care in 2015, for a 20-minute consultation with a physician in the U.S., a patient has to spend on average 37 minutes on travel and 64 minutes on waiting at the physician’s office.2
The potential benefit of convenience sounds obvious, yet the adoption of telemedicine consultations only started to take off when smart phones became widely available as the usage of images and videos significantly increased the effectiveness of diagnostics and improved patients’ overall virtual consultation experience. Both academic research and industry leaders have published high satisfaction rates among telemedicine users, praising improved outcome, ease of use, low cost, increased communication and decreased travel time.3
According to a research by Harvard Medical School, the use of telemedicine among large commercially insured population climbed from 0.02 visits per 1,000 members in 2005 to 6.57 visits in 2017.4
Global spike in usage further driving awareness
Amid the outbreak of COVID in China early 2020, Ping An Good Doctor, Alibaba Health and We Doctor, the local leaders in telemedicine, witnessed a rapid rise in usage. Ping An Good Doctor received 1.11 billion visits in total and the number of newly registered users grew 10 times5, and the total active users of Alibaba’s healthcare channel reached 390 million in the first quarter of 20206. With 1,500 in-house doctors, Ping An Good Doctor was also able to offer free of charge telemedicine services to support the people most in need amid the crisis.
As the pandemic spread to the U.S., Teladoc saw total visits exceeding 2 million in the first quarter of 2020, representing nearly 90% growth year-on-year, of which 60% were first time users seeking to check potential COVID symptoms, followed by dermatology and mental health consultations.7
As usage rose, awareness of the benefits of telemedicine spread through word of mouth, media and social media channels, creating a circular effect.
The crisis might trigger a tipping point in deregulation
Policy makers have long held a skeptical view on granting telemedicine the same status as face-to-face consultations, on concerns around misdiagnosis or inappropriate drug prescription, to name a few. Even today, in many states in the U.S., telemedicine consultations are not reimbursed at the same rate as clinical visits. In Japan, online consultation is not permitted for first-time physician visits, and it was not until September 2019 that the Chinese government issued guidelines on including telemedicine reimbursements in the national insurance scheme.
These restrictions were swiftly lifted on either a permanent or temporary basis during the pandemic. Notably in the U.S., CMS expanded the coverage of Medicare to telemedicine from March 2020, and the Japanese government temporarily allowed first-time consultations to be carried out online.
We believe this experience will prompt policy makers to take a more serious and proactive approach to integrating telemedicine into the broader healthcare system and fully realize its potential of containing healthcare cost yet without compromising patient satisfaction. As a starting point, savings from lower fixed cost overheads and the reduced administrative burden for physicians’ offices is already a sizeable area to tackle. Ultimately it is likely that such savings may be passed onto patients in the form of lower co-pay and lower deductibles, hence more affordable healthcare.
From acute care to “virtual primary care”
In the last decade, the shortage of primary care physicians in the U.S. has driven up the time that a patient needs to wait to schedule an appointment. A 2017 survey found that on average there is a 24 day waiting time for patients in the U.S. to schedule a new physician appointment in a large city.8 In contrast, the average waiting time for an online consultation is typically fewer than 10 minutes. Therefore, the use of virtual care is an obvious substitute for a face-to-face visit particularly for patients with a more urgent condition. However, we now are seeing an exciting evolution from this initial purpose of use.
Virtual behavioral health has grown rapidly in recent years because the lengthy and recurring nature of the disease makes it particularly suitable for an online format. Major players now offer unlimited monthly mental health online consultation packages that include text, audio or video and have received very positive feedback. The opportunity seems considerable, since the healthcare market for mental health disorders is approximately $24 billion in the U.S. alone and online penetration is still low.
Figure 1. Total addressable market for current and potential telehealth conditions
Another promising field is the combination of remote monitoring and telemedicine to create better preventive care. Innovations such as remote diabetes and cardiac management have proven to be safe, time-saving and cost-effective solutions with high patient satisfaction.9 The democratization of these solutions could prove highly beneficial considering that a large cohort of the global population suffers from long-term chronic diseases. The situation in the U.S. is alarming, as nearly one in three adults do not have primary care physician, while 60% of the population had at least one chronic condition throughout their lives.10 11
Virtual Primary Care (VPC) is a comprehensive offering encompassing urgent care, behavioral health, mental health, chronic disease management or other specialty cares such as pediatric telehealth offering – a tailored solution for each consumer at different stages of their life.
Some innovative offerings are already available on the market. For example, MDLive launched a virtual primary care platform to improve patient access, in partnership with Cigna in January 2020.
"The MDLIVE virtual primary care platform will help health plans and health systems shift from reactive care to proactive and predictive health management and care. Our collaboration with Cigna reflects our combined commitment to launch the next generation healthcare experience that starts online,"
- said Rich Berner, Chief Executive Officer of MDLIVE.12
Doctor On Demand, another leading telemedicine provider in the U.S., partnered with Humana to create a new health plan that puts virtual primary care at the centre of care, with significantly lower monthly premiums.
"If you’re trying to take care of the 300 million-plus people in the United States, you’ve got to use a virtual front door to get there,"
- said Hill Ferguson, Chief Executive Officer of Doctor on Demand.13
At the other end of the spectrum, VPC platforms could provide the best smart referral system for patients in need by connecting with a specialty centers of excellence from around the country, not limited by the patient’s proximity. This would require the platform to integrate itself into the broader community healthcare system. Then by creating healthy loop in data exchange and analyses, the VPC provider would be able to offer better “population health” and ultimately lower primary care cost.
We think it is a plausible idea that VPC could establish longitudinal relationships between a patient and a virtual primary care doctor, with the patient’s electronic medial record, appointments and payment history all accessible from one place.
Who will be the winner?
In any consumer facing online businesses, traffic is the primordial condition for success, and online VPC would be no different. When and if virtual primary care indeed becomes the future access point of mass community care, we would assume the winner should possess a strong consumer brand name that inspires trust and reliability, built on a frictionless user experience.
The VPC platform should also ensure its interoperability with the rest of healthcare IT system and the fluid exchanges of data while respecting data privacy under different regulation requirements. Therefore, we believe companies that are “digital and cloud native” should have an advantage.
Last but not least, the winner should have strong distribution capability into the different stakeholders of the healthcare system, i.e. employers (in the case of U.S.), payers, providers, and consumers.
Digital Health
Digitalization is revolutionizing the health care sector: with research and development contributing to breakthroughs that would previously have been unimaginable, it has the potential to markedly improve the quality of medical services and curb rising costs. Digital health is one of the fastest-growing segments in health care.
Applicability worldwide under different healthcare systems
The U.S. healthcare system is somehow unique as most of the countries in the world today are under “single payer + hybrid (private and/or public) provider” payment model. However, we believe that the VPC model is equally valid to countries that have single payer systems or limited face-to-face primary care services, such as China, where primary care physicians are in short supply. In the case of Japan, where the majority of the clinics are still operating on a paper and fax basis, telemedicine is empowering the clinics to leapfrog directly to the digital world with “SaaS Electronic Medical Records”, bypassing the on-premise EMR solutions.
On the provider side, we begin to see more and more public and private healthcare systems providers start to engage proactively in conversations with major telemedicine providers either in a quasi-outsourcing model, or in technology-licensing model.
Conclusion
Healthcare is traditionally a local and fragmented industry, constrained by the need of physical proximity between the patient and the provider. Primary care, which serves as the starting point of a patient’s entry into the healthcare system, enjoys limited economies of scale. Virtual primary care shows promising signs of introducing scalability into an old industry by redefining the concept of distance and reducing the administrative burden on physicians, without mentioning the possibility to lowered fixed cost overheads of operating a bricks and mortar clinic.
We believe the telemedicine and the vision of comprehensive virtual care could fundamentally reshape the current landscape of healthcare system and provide a singular way to connect and care for patients that is both convenient and efficient.
Risks
- No capital protection: investors may lose part or all of their investment in this product.
- Political developments concerning the health care sector could have a significant adverse impact on the Digital Health sector.
- Exposure to small and mid caps can result in higher short-term volatility and may carry liquidity risk.
- As the fund focuses on highly innovative companies, volatility can be significantly elevated.
- Equity markets can be volatile, especially in the short term.
1 https://www.cnbc.com/2020/03/23/teladoc-health-ceo-on-verge-of-a-new-era-for-virtual-health-care.html, last accessed 18 June 2020
2 Kevin NR, Amalavoyal VC, John E, Marnie B, Ateev M. Opportunity Costs of Ambulatory Medical Care in the United States. AJMC, 2015
3 Clemens SK, Nicole K, Blanca R, Lan T, Jackeline V and Matthew B, Telehealth and patient satisfaction: A Systematic Review and Narrative Analysis. BMJ, 2017
4 Barnett ML, Ray KN, Souza J, Mehrotra A. Trends in Telemedicine Use in a Large Commercially Insured Population, 2005-2017. JAMA. 2018;320(20):2147–2149. doi:10.1001/jama.2018.12354
5 https://www.prnewswire.com/news-releases/ping-an-good-doctor-issues-2019-sustainable-development-report-platform-visits-hit-1-11-billion-during-epidemic-301005828.html, last accessed 18 June, 2020
6 Conversation with Alibaba Health management, June 2020
7 Teladoc 1Q20, earnings call, 29 April, 2020
8 https://www.merritthawkins.com/news-and-insights/thought-leadership/survey/survey-of-physician-appointment-wait-times/, last accessed 18 June, 2020
9 Xu T, Pujara S, Sutton S, Rhee M. Telemedicine in the Management of Type 1 Diabetes. Prev Chronic Dis. 2018;15:E13. Published 2018 Jan 25. doi:10.5888/pcd15.170168
10 Accenture Digital Health Consumer Survey, 2019
11 http://www.fightchronicdisease.org/sites/default/files/TL221_final.pdf, last accessed 18 June, 2020
12 https://www.mdlive.com/mdlive-launches-virtual-primary-care-platform-to-improve-patient-access/, last accessed 18 June, 2020
13 https://medcitynews.com/2019/04/humana-and-doctor-on-demand-launch-new-virtual-primary-care-health-plan/?rf=1, last accessed 18 June, 2020
IMPORTANT INFORMATION
The individual companies referenced above are merely for illustrative purpose only and should not be construed as any investment recommendation or solicitation of an offer to buy or sell any securities.