Views on Telehealth & the Market

Recently, Credit Suisse https://www.credit-suisse.com hosted Tom Meier, Vice President of Market Solutions, and Carl McDonald, Senior VP, Treasurer and Finance Division at Health Care Service Corporation (HCSC) https://www.hcsc.com at a small group investor dinner meeting in Chicago.

HCSC offers virtual visits powered by MDLive https://www.mdlive.com, which is a fully integrated solution launched three years ago with HCSC as the largest population on the MDLive platform. A recent HCSC internal analysis of HCSC’s telehealth program showed that participating group employers saved more than $15 million in savings which translates to $0.39 PEPM.

Before selecting MDLive, HCSC evaluated all major telehealth vendors. The company was impressed with MDLive’s capabilities and thought that the company would be a good complement to their existing platform. Also, MDLive was willing to put their technology in the hands of HCSC’s contracted providers as opposed to other vendors who wanted HCSC’s providers to join their network.

About 85% of HCSC’s members who use virtual visits have avoided more expensive care such as going to urgent care or to emergency rooms. This has resulted in lowering overall medical costs by 17% for virtual visit users than for non-virtual visits users. Adjusting to the relatively healthier telehealth population, the actual savings on costs was about 1%.

Since the program was launched two years ago, HCSC members took part in 181K virtual consultations. In 2018, the top five conditions utilizing virtual visits were acute sinusitis, acute upper respiratory infection, urinary tract infection, acute bronchitis, and acute pharyngitis. Other growing populations within telehealth include tele-dermatology, primary care etc.

While the majority of HCSC’s clients are now already offering telehealth for basic medical conditions, the company continues to see increased interest from employer clients to expand telehealth to behavioral care from both the mental health and substance abuse perspective. The company charges a different fee schedule for telebehavioral visits, depending on the service offered which can range from $150 to $200 per claim.

HCSC management was questioned on the telehealth utilization rate. Some of HCSC’s employers have reported telehealth utilization rates to be as high as 20% while for some employers, the utilization rate has been as low as 1%.

The company has seen the utilization rate relatively lower among its fully-insured clients because of the lack of outreach or promotion from employers. HCSC believes they can push the utilization rate to the double digits range. The company believes that if they can’t get to higher utilization rates, employers may start pushing back on the model as it doesn’t make sense for the company to keep paying administration fees without any ROI.

HCSC believes there are two factors such as engagement and utilization that can make a virtual care program succeed or fail. It is very important to make members aware of the virtual care that is available since a number of employees don’t even know that they have the benefit, which may be affecting the use of virtual care.

Earlier this year, HCSC via its venture capital arm “HCSC Ventures”, partnered with global primary care provider Sanitas USA to open medical centers in Texas starting in 2020. Initially, ten “Advanced Primary Care Medical Centers” will be opened in the Dallas and Houston markets via a Joint Venture of Sanitas (the majority Owner).

The Sanitas-HCSC venture will evaluate future expansion in the five state region where HCSC owns Blues plans on a market-by-market basis. The centers will offer primary care, urgent care, and include laboratory and diagnostic imaging services.

The facilities will open January 1, 2020 and some of the facilities will be open 365 days a year. The company believes that it could take 2-3 years in order to properly measure if the clinics will be successful or not.

HCSC is having a very strong year financially with the underwriting gain trending well ahead of expectation. The company experienced a 2018 commercial cost trend of 4.6% and for 2019, the company is currently projecting a commercial cost trend of 4.2%. The year to year decrease driven by continuing decline in inpatient utilization (down about 2%).

HCSC has seen a decline in Medicare Advantage (MA) membership for the last two years, but expects to grow their MA business by double digits in 2020 due to improvement in their strategic positioning in Texas. Overall according to HCSC, MA continues to be a competitive market.

The company’s Medicaid enrollment is up 10% this year, but the company only has a Medicaid presence in three states with only two states having any meaningful Medicaid enrollment. The company has not seen much impact on their Medicaid enrollment from the population churning from Medicaid to commercial or from the public charge rule which would expand the government’s role to treat legal immigrants who are not citizens as public charges.

For more information or to provide feedback email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.

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