By Oleg Bestsennyy, Greg Gilbert, Alex Harris, and Jennifer Rost
July 9, 2021
Update: July 9, 2021
EXECUTIVE SUMMARY 2 (2021)
Telehealth usage has surged during the COVID-19 pandemic as consumers and providers sought ways to safely access and deliver healthcare.
- In April 2020, overall telehealth utilization for office visits and outpatient care was 78 times higher than in February 2020.
- This step-change was enabled by increased consumer and provider willingness to use telehealth and regulatory changes enabling greater access and reimbursement.
- A year ago, it was estimated that up to $250 billion of US healthcare spend could potentially be shifted to virtual or virtually enabled care.
As of July 2021, telehealth utilization has stabilized at levels 38 times higher than before the pandemic.
- Consumer and provider attitudes towards telehealth have improved since the pre-COVID-19 era, but barriers such as perceptions of technology security still need to be addressed to sustain consumer and provider virtual health adoption.
- After an initial spike to more than 32 percent of office and outpatient visits occurring via telehealth in April 2020, utilization levels have largely stabilized, ranging from 13 to 17 percent across all specialties.
- This utilization reflects more than two-thirds of what we anticipated as visits that could be virtualized.
Investment in virtual care and digital health has skyrocketed, …
- … fueling further innovation and virtual healthcare models and business models are evolving and proliferating,
- with the potential to improve consumer experience/convenience, access, outcomes, and affordability.
INFOGRAPHIC 2 (2021)
DEEP DIVE 2 (2021)
Telehealth: A quarter-trillion-dollar post-COVID-19 reality?
By Oleg Bestsennyy, Greg Gilbert, Alex Harris, and Jennifer Rost
July 9, 2021
Update: July 9, 2021
Early in the COVID-19 pandemic, telehealth usage surged as consumers and providers sought ways to safely access and deliver healthcare.
In April 2020, overall telehealth utilization for office visits and outpatient care was 78 times higher than in February 2020 (Exhibit 1).
This step-change, borne out of necessity, was enabled by these factors:
- increased consumer willingness — to use telehealth,
- increased provider willingness — to use telehealth,
- regulatory changes — enabling greater access and reimbursement.
During the tragedy of the pandemic, telehealth offered a bridge to care, and now offers a chance to reinvent virtual and hybrid virtual/in-person care models, with a goal of improved healthcare access, outcomes, and affordability.
During the tragedy of the pandemic, telehealth offered a bridge to care, and now offers a chance to reinvent virtual and hybrid virtual/in-person care models, with a goal of improved healthcare access, outcomes, and affordability.
A year ago, we estimated that up to $250 billion of US healthcare spend could potentially be shifted to virtual or virtually enabled care.
Approaching this potential level of virtual health is not a foregone conclusion.
It would likely require sustained consumer and clinician adoption and accelerated redesign of care pathways to incorporate virtual modalities.
Approaching this potential level [ $ 250 billion] of virtual health is not a foregone conclusion. It would likely require sustained consumer and clinician adoption and accelerated redesign of care pathways to incorporate virtual modalities.
As of July 2021, we step back to review the progress of telehealth since the initial COVID-19 spike …
… and to assess implications for telehealth and virtual health more broadly going forward.
Our findings include the following insights:
- 1.Telehealth utilization has stabilized at levels 38X higher than before the pandemic.
- 2.Similarly, consumer and provider attitudes toward telehealth have improved since the pre-COVID-19 era.
- 3.Some regulatory changes that facilitated expanded use of telehealth have been made permanent
- 4.Investment in virtual care and digital health more broadly has skyrocketed
- 5.Virtual healthcare models and business models are evolving and proliferating
1.Telehealth utilization has stabilized at levels 38X higher than before the pandemic.
After an initial spike to more than 32 percent of office and outpatient visits occurring via telehealth in April 2020, utilization levels have largely stabilized, ranging from 13 to 17 percent across all specialties.
This utilization reflects more than two-thirds of what we anticipated as visits that could be virtualized.
After an initial spike to more than 32 percent of office and outpatient visits occurring via telehealth in April 2020, utilization levels have largely stabilized, ranging from 13 to 17 percent across all specialties.
This utilization reflects more than two-thirds of what we anticipated as visits that could be virtualized.
2.Similarly, consumer and provider attitudes toward telehealth have improved since the pre-COVID-19 era.
Perceptions and usage have dropped slightly since the peak in spring 2020.
Some barriers-such as perceptions of technology security-remain to be addressed to sustain consumer and provider virtual health adoption, and models are likely to evolve to optimize hybrid virtual and in-person care delivery.
Some barriers-such as perceptions of technology security-remain to be addressed to sustain consumer and provider virtual health adoption, and models are likely to evolve to optimize hybrid virtual and in-person care delivery.
3.Some regulatory changes that facilitated expanded use of telehealth have been made permanent
For example, the Centers for Medicare & Medicaid Services’ expansion of reimbursable telehealth codes for the 2021 physician fee schedule.
But uncertainty still exists as to the fate of other services that may lose their waiver status when the public health emergency ends.
4.Investment in virtual care and digital health more broadly has skyrocketed
Fueling further innovation, with 3X the level of venture capitalist digital health investment in 2020 than it had in 2017.
5.Virtual healthcare models and business models are evolving and proliferating
Moving from purely “virtual urgent care” to a range of services enabling longitudinal virtual care, integration of telehealth with other virtual health solutions, and hybrid virtual/in-person care models, with the potential to improve consumer experience/convenience, access, outcomes, and affordability.
Virtual healthcare models and business models are evolving and proliferating
Moving from purely “virtual urgent care” to a range of services enabling longitudinal virtual care, …
integration of telehealth with other virtual health solutions, and ..
.. hybrid virtual/in-person care models,
with the potential to improve consumer experience/convenience, access, outcomes, and affordability.
Telehealth uptake
Since the initial spike in April 2020, telehealth adoption overall has approached up to 17 percent of all outpatient/office visit claims with evaluation and management (E&M) services.
This utilization has been relatively stable since June 2020.
We are also seeing a differential uptake of telehealth depending on specialty, with the highest penetration in psychiatry (50 percent) and substance use treatment (30 percent) (Exhibit 2).
We are also seeing a differential uptake of telehealth depending on specialty, with the highest penetration in psychiatry (50 percent) and substance use treatment (30 percent)
Consumer and provider perceptions of telehealth
Our consumer research shows that consumers continue to view telehealth as an important modality for their future care needs, but-as expected-this view varies widely depending on the type of care.
Overall, consumer perception tracks closely to what we believe is possible telehealth uptake by various specialties (Exhibit 3).
Around 40 percent of surveyed consumers stated that they believe they will continue to use telehealth going forward-up from 11 percent of consumers using telehealth prior to COVID-19.
Moreover, our research shows between 40 and 60 percent of consumers express interest in a set of broader virtual health solutions, such as a “digital front door” or lower-cost virtual-first health plan.
However, a gap has historically existed between consumers’ expressed interest in digital health solutions and actual usage.
Continuing to focus on creating a seamless consumer interface, breaking down silos in care provision (across virtual and in-person) with improved data integration and insights, and proactive consumer engagement will all be important to sustaining and growing consumer use of virtual health as the pandemic wanes.
Moreover, our research shows between 40 and 60 percent of consumers express interest in a set of broader virtual health solutions, such as a “digital front door” or lower-cost virtual-first health plan.
On the provider side, 58 percent of physicians continue to view telehealth more favorably now than they did before COVID-19, though perceptions have come down slightly since September 2020 (64 percent of physicians).
As of April 2021, 84 percent of physicians were offering virtual visits and 57 percent would prefer to continue offering virtual care.
However, 54 percent would not offer virtual care at a 15 percent discount to in-person care.
Most health systems are closely monitoring reimbursement.
Those in bed capacity-constrained environments and value-based care arrangements are looking to understand whether there is scalable volume decanting or cost savings potential at equivalent quality.
Those in bed capacity-constrained environments and value-based care arrangements are looking to understand whether there is scalable volume decanting or cost savings potential at equivalent quality.
Regulatory changes
Some regulatory changes that enabled greater telehealth access during COVID-19 have been made permanent.
For example, CMS allowed telehealth coverage for a number of current procedural terminology (CPT) codes permanent in the 2021 physician fee schedule final rule.
However, other restrictions on telehealth may return to pre-COVID-19 normal when the public health emergency expires.
For example, there were several dozen additional CPT codes that CMS allowed telehealth coverage for on a temporary basis in the 2021 physician fee schedule.
In addition, a waiver for public health emergency allowed telehealth to be provided for Medicare beneficiaries outside of rural areas and from home rather than from a provider’s office.
The future of these provisions once the public health emergency ends is not yet clear.
Investor activity
Investment in virtual health continues to accelerate.
- Per Rock Health’s H1 2021 digital health funding report the total venture capital investment into the digital health space in the first half of 2021 totaled $14.7 billion,
- … which is more than all of the investment in 2020 ($14.6 billion) and nearly twice the investment in 2019 ($7.7 billion) (Exhibit 4).
- This increase would reflect an annualized investment of $25 billion to $30 billion in 2021, if this rate continues.
- In addition, total revenue of the top 60 virtual health players increased in 2020 to $5.5 billion, from around $3 billion the year before.
- As the investment into virtual health companies continues to grow at record levels, so does the pressure on the companies within the ecosystem to innovate and find winning models that will provide sustainable competitive advantage in this quickly evolving space.
This is good news for consumers and patients, as we are likely to continue seeing increased innovation in the virtual care delivery models.
The next chapter of telehealth
Telehealth appears poised to stay a robust option for care.
Strong continued uptake, favorable consumer perception, the regulatory environment, and strong investment into this space are all contributing to this rate of adoption.
We are observing a quick evolution of the space and innovation beyond the “virtual urgent care” convenience.
Innovations around virtual longitudinal care (both primary and specialty), enablement of care at home through remote patient monitoring and self-diagnostics, investment in “digital front doors,” and experimentation with hybrid “online/offline” models will bring new care models for consumers that help achieve healthcare’s “triple aim.”
In order to fully realize the potential of virtually enabled care models, both payers and providers should consider these new delivery models part of the core day-to-day value proposition to consumers across three areas:
- 1. Increasing convenience to receive routine care
- 2. Improving access, especially for behavioral health and specialty care
- 3. Improving care models and health outcomes, particularly for those with chronic conditions or in need of post-acute care support
1. Increasing convenience to receive routine care
- Integrating e-triage solutions with virtual visits to create a broader “digital front door” for healthcare that enables consumers to easily get care when they need it, through the most convenient channels, and lowers the cost of care by avoiding unnecessary ED visits
- Integrating care advocacy and telehealth solutions, as evidenced by recent M&A activity with the value proposition to make it easy for consumers to access care and find the best provider for their individual needs
- Experimenting with virtual-first health plans. The number of virtual-first health plans grew from one in 2019 to at least eight in 2020. While these products are still nascent, they offer the potential of lower premiums and greater convenience, in return for seeing a virtual primary care provider as the first point of care. These advantages are attracting increasing attention from employers, brokers, and payers
- Expanding the types of care that can be delivered virtually or near-virtually with innovations in at-home diagnostics/equipment or combining virtual care with at-home nurse visits
2. Improving access, especially for behavioral health and specialty care
- Continuing to expand the range of behavioral health offerings with potential to address provider shortages in many parts of the country. For example, 56 percent of counties in the United States are without a psychiatrist, 64 percent of counties have a shortage of mental health providers, and 70 percent of counties lack a child psychiatrist.
This kind of access may also be an opportunity to expand community, payer, and provider partnerships
- Expanding access to specialty care capacity, such as in rural areas where many specialties may not be available.
Even outside of rural areas, provider-to-provider virtual health can improve experience and quality of care by rapidly getting specialist input
3. Improving care models and health outcomes, particularly for those with chronic conditions or in need of post-acute care support
- Integrating remote monitoring and digital therapeutics with virtual visits, especially in value-based provider arrangements, where incorporating virtual health into their care models could improve patient outcomes and overall performance
- Growing hospital-at-home and post-acute care-at-home models
Remaining challenges to scale
Even with these innovations, challenges remain to be worked through to realize the full potential of virtual care.
These challenges include the following items:
- The need for better data integration and improved data flows across the various players in the ecosystem, in light of the fast proliferation of point solutions, which are overwhelming consumers, payers, and providers alike
- The need for better integration of the virtual health-related activities into day-to-day workflows of clinicians, particularly to enable hybrid care models that combine online and in-person care delivery
- Alignment of incentives for virtual health activities with the broader movement toward value-based care, to break out of the fee-for-service mentality and the worry about reimbursement parity, especially for the virtual health models that aim to reduce total cost of care
Potential exists to improve access, quality, and affordability of healthcare, plus embrace the quarter-trillion dollar economic opportunity represented by telehealth.
Collectively, industry leaders have a chance to help consumers and providers improve access and quality through the power of telehealth.
Potential exists to improve access, quality, and affordability of healthcare, plus embrace the quarter-trillion dollar economic opportunity represented by telehealth.
Update: May 29, 2020
EXECUTIVE SUMMARY 1 (2020)
The COVID-19 pandemic has led to a rapid increase in the use of telehealth, with consumer adoption rising from 11% in 2019 to 46% currently.
- Providers are seeing 50–175 times more patients via telehealth than before the pandemic.
- Pre-COVID, the total annual revenue of US telehealth players was estimated at $3 billion, with the largest vendors in the “virtual urgent care” segment.
- However, with the acceleration of consumer and provider adoption of telehealth, up to $250 billion of current US healthcare spend could potentially be virtualized.
- The shift towards telehealth has the potential to improve convenience and access to care, better patient outcomes, and a more efficient healthcare system.
- However, challenges remain, such as security, workflow integration, effectiveness compared to in-person visits, and reimbursement.
The estimates are that
- 20% of emergency room visits,
- 24% of healthcare office visits and outpatient volume, and
- 35% of regular home health attendant services could potentially be virtualized,
resulting in a potential shift of $250 billion in healthcare spend in 2020 to virtual or near-virtual care.
The estimates are that : (1) 20% of emergency room visits, (2) 24% of healthcare office visits and outpatient volume, and (3) 35% of regular home health attendant services could potentially be virtualized,
resulting in a potential shift of $250 billion in healthcare spend in 2020 to virtual or near-virtual care.
INFOGRAPHIC 1 (2020)
DEEP DIVE 1(2020)