While it is still early to speculate about life after COVID-19, investor questions revolve around what is the future of telehealth and what will telehealth look like once the pandemic is over. To answer some of these questions, Credit Suisse https://www.credit-suisse.com analysts have provided a recap on the telehealth industry pre-COVID, on what changed during COVID, and what the likely path will be going forward.
The phrase the “Genie is Out of the Bottle” in the context of the telehealth industry has come up in every telehealth-related industry/expert call or meeting, Credit Suisse has hosted over the past few weeks. However, the jury is still out on the magnitude of the long term implications on increased consumer awareness and adoption and which industry stakeholders stand to benefit the most.
It will be up to policymakers, payers, and providers to determine if the changes made to telehealth policy in light of COVID-19 outweigh the potential concerns, if they should remain permanently, and if telemedicine helps enable accessible and quality healthcare. Either way, it is almost inevitable that the use of telehealth post COVID-19 is likely to settle down at a higher level relative to pre-COVID with some industry experts pegging the figure at 25-35% higher.
While telehealth is not new, regulatory hurdles exist as to how much healthcare providers can be paid for telehealth versus in-person visits. As the COVID-19 pandemic evolved, the federal government, most states, and most health insurance carriers scrambled to expand access to telehealth, removing regulatory and administrative hurdles, eliminating co-pays and cost sharing, and even distributing funding to build out communities’ telemedicine related infrastructure.
Post pandemic policies and regulations will affect telehealth, as to how much healthcare providers can be paid for telehealth versus in-person visits. While CMS waivers will end once the public emergency is over, lawmakers now have a reason to consider more permanent regulatory changes given telehealth’s effectiveness to treat patients in this pandemic.
However, from a federal government perspective, some of the regulations are set by statute. As a result, CMS will not be able to make subsequent permanent changes through a regulatory process. This means that to make any substantive changes, permanent changes will have to go through the formal rulemaking process which could mean it may not be until 2022 that broad new uses of telehealth would be formally allowed.
Analysts do not see the use of non-HIPAA-compliant technologies staying once the pandemic is over. The use of non-HIPAA compliant technologies might be used for quick visits demanded by the pandemic, but they don’t integrate well with a health system’s telemedicine infrastructure. The non-HIPAA compliant technologies won’t likely be an option when the emergency passes and some of the old rules and regulations come back into play.
Separately, coverage parity and payment parity for telehealth across all insurers would help increase access for patients and incentivize providers to offer these services, though it would also increase spending. Insurers are likely to push back on components that make reimbursement possible to include the facility fee in reimbursement for a telehealth encounter.
With respect to in-state licensure requirements for telehealth, the analysts think that the in state licensure requirements for telehealth will enable sooner or later all states to likely to waive this requirement as 31 states are already part of the Interstate Medical Licensure Compact.
When not mandated by the state, many health insurers voluntarily address telemedicine in their response to COVID-19 by focusing on reducing or eliminating cost sharing, broadening coverage of telemedicine, and expanding in-network telemedicine providers.
Several telehealth vendors including TDOC have highlighted the fact that waiving co-pays have had a favorable impact on telehealth utilization and member satisfaction. Some insurers recently have extended the cost sharing waivers beyond their initial deadline (some extending through year-end.)
In 2020, the incremental expenses incurred by health insurers by waiving cost-sharing for telehealth and coronavirus tests/treatments etc. is expected to be more than offset by the benefit related to the cancellation of elective surgeries and other in-person provider/physician visits which will give them additional financial flexibility.
Additionally, as more hospitals and physicians start to offer virtual care services with some of them extending to on demand services for their patients, it remains to be seen how the payer and employer markets for telemedicine will be impacted.
Some industry consultants believe it can become confusing for the consumer when their employer or payer as well as their own physician offer telehealth services. However, most physician practices are not going to be able to offer 24/7 telehealth services. As a result, employers are likely to continue to offer telehealth as a benefit, but at some point that benefit will intersect with the physician-offered virtual care.
In sizing the market opportunity, based on our analysis of ambulatory visits data from CDC, we estimate a potential synchronous provider-to-patient telehealth visits opportunity to be around 330-340 million. We have not yet seen any reliable data around how many comparable virtual visits were conducted in 2019, or the current run-rate.
However, based on our conversations with industry stakeholders and telehealth experts, we estimate there were around 10 million comparable visits in 2019, implying a penetration of less than 3% last year. Further based on our analysis of in-person and telehealth visit details disclosed by Phreesia and researchers at Harvard University, analysts estimate roughly 32-33 million virtual visits have already been conducted during COVID through mid-May.
Interestingly, while in-person visit trends have seen some recovery in recent weeks, telehealth visit trends have been relatively stable but below the peak in April. Our analysis of both potential market and total visits during COVID doesn’t capture virtual care opportunities in several other market areas: a) synchronous physician-to-physician or physician-to-specialist telehealth, b) remote patient monitoring (including virtual home healthcare), c) some of the asynchronous virtual care, and d) a significant mental health market which is currently unaddressed.
Additionally, while a recent McKinsey study notes that up to $250 billion of current U.S healthcare spend could potentially be virtualized, we see sizing the addressable virtual market opportunity in terms of revenue a little challenging because of the following reasons (a) some of the potential increase in ambulatory visit penetration would mean employees/members use of telehealth services already provided by their employers/payers may not necessarily result in a dollar for dollar increase in revenue for telehealth players, b) while currently at parity with in-person visits, telehealth reimbursement would likely settle down at a relatively lower rate, and c) telehealth contracts with providers are not necessarily driven by the actual payment a provider receives from the payer.
According to data tracked by IQVIA, private telehealth platforms are being utilized most followed closely by Zoom. In terms of preference, Zoom actually leads private platforms slightly. Separately, Twilio, a leading cloud communications platform, recently announced that their programmable video will power the new native telehealth offering from EPIC.
Separately, Doxy.me seems to have captured a significant share among physicians who quickly wanted to transition to virtual care during the pandemic. Change Healthcare recently unveiled their offerings that combine industry standard APIs, software solutions and hardware bundles. This helps telehealth platform vendors and healthcare providers rapidly deploy virtual care services.
Additionally Optum has continued to make their way into the telehealth industry, and recent reports are that the company is in talks to acquire AbleTo, a tele-behavioral company. Microsoft Teams are also making a push in telehealth by enabling secure collaboration and communications with chat, video, voice, and healthcare tools in a single hub that supports compliance with HIPAA, HITECH and more.
For more information and to provide feedback, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.