In partnership with J.D. Power, Merchant Medicine will soon release some ground-breaking research on consumer telehealth. But to help put this in perspective, consider these words from an article posted on the K@W Network from the Wharton School at the University of Pennsylvania called “Why Amazon’s ‘1-Click’ Ordering was a game changer:”
September 12, 2017, marked the end of an era as the patent expired for Amazon’s “1-Click” button for ordering. The idea that consumers could enter in their billing, shipping and payment information just once and then simply click a button to buy something going forward was unheard of when Amazon secured the patent in 1999, and it represented a breakthrough for the idea of hassle-free online shopping.
A year after it secured the 1-Click patent, Amazon expanded its business to include Amazon Marketplace, a platform for third-party buyers and sellers to sell new or used products. The database of consumer information that 1-Click provided was critical for Amazon at that stage, according to Thomas Jeitschko, professor and associate dean for graduate studies at Michigan State University, whose areas of expertise include intellectual property.
“Once they opened up and became a platform and a marketplace instead of being a reseller of books, it became important for people doing business at either end of Amazon to know that they had this large database that they would be able to give access to a large number of customers literally with one click,” said Jeitschko. “That helped Amazon’s growth in the broader retailing sphere where others had trouble catching up or gaining a foothold.” 
The point is that Amazon created a breakthrough in hassle-free online shopping. Our research showed there are many gaps to realizing this same simple goal of hassle-free consumer telehealth. The majority of organizations we surveyed are leaving the consumer confused and the opportunity missed. But someone is going to figure this out at scale with top-tier customer experience scores, just like Amazon figured out on-line shopping at scale.
At the same time, we confirmed that most of the organizations promoting telehealth are seeing very low volumes when compared to their scale. So they are likely spending on the “me too” hope that it will eventually work out.
Along with customer experience, consumer telehealth is a key theme at our next strategy symposium in January. As part of the symposium agenda, the operations dyad team from MultiCare’s Virtual Health group will be discussing their consumer telehealth journey. These innovative leaders will talk about how to integrate with urgent care, utilize internal assets, and drive top-box consumer experience.
Our latest research was originally conceived following a “consumer telemedicine” vendor bake-off project (request for proposal or RFP) for an integrated delivery network (IDN). The health insurance plan side of the IDN was getting its own product, and the health system side was invited to share input. Oddly, the health system’s providers would not be staffing the telehealth platform, despite employing many thousands and having the capacity to do so.
There was also a lack of market share data on “top leaders” when putting together the vendor invitation list. It was a little bit like inviting a random set of urgent care operators to present their story without first looking at their unit scale and partnerships in comparison to other operators. The vendors could basically tout their measures without any third-party vetting. Much like when Merchant Medicine started tracking retail clinics in 2007, there continues to be a lot of hype and press releases about growth and transactions, but no one seems to have a handle on actual underlying data.
Merchant Medicine worked with J.D. Power in early 2018 to co-develop a study for end-consumer satisfaction with telehealth services an individual could access, basically a replacement for an urgent care visit. Their proprietary work publishes in November 2019. We are delighted to be able to work with them to produce a first-ever independent consumer perspective on telehealth. Now decision makers have two important information assets available to them:
Consumer Perspective. J.D. Power’s telehealth study provides a Voice of the Customer around telehealth providers and platforms. This creates a satisfaction index on patient experiences with the various vendors, i.e. what products are best from a consumer view. Consumers are evaluating their experience with platforms like Teladoc and American Well, or health plans like Anthem and Cigna, for example. Health systems are not going to be a profiled segment in their research due to very low volumes and hence not a large enough survey panel sample.
Market Perspective. Merchant Medicine’s research is organized by segment market share and by how the platform intersects with a “brand” market share (e.g. “what is the relative market share of vendor X with the top health plans”). For each of the various segments we capture the underlying technology, online details, technical performance, and so on.
The following summarizes the Direct to Consumer (D2C), health plans and health system segments included in the study. These are the largest players in the U.S. by market share measures.
Check out our Study Abstract. (https://www.merchantmedicine.com/s/MM-Telehealth-Research-Abstract-2019-08-30-_public.pdf)
The telemedicine industry has been around for decades. The first telemedicine encounters are said to be teleradiology exchanges in the 1950s. Point-to-point video exchanges between doctors began to emerge in the 1960s and 1970s. The American Telemedicine Association was formed in 1993, nearly a decade before the Internet came of age. Teladoc launched its platform in 2005; Zipnosis launched in 2008; Doctor on Demand came along in 2014. In the last few years, telemedicine has increasingly become available directly to consumers. In fact, about the same time the retail clinic industry was maturing, the first direct-to-consumer telehealth platforms began to emerge.
As far as patient excitement and use of telemedicine, the headlines would have you believe the world is getting flipped upside down. “Global telemedicine market to eclipse $130B by 2025”, or about 5-8x the size of the urgent care market. Yet total health expenditures in the US alone will be well over $3.3 trillion in 2020. That $130B for telehealth is a rounding error, and it includes tele-ICU, tele-stroke, behavioral health, every x-ray that is remotely read, physician to physician consults, diabetic retinopathy exams, and so on.
The Volume Challenge
The following is a CMS executive summary from November 15, 2018. Telehealth is doing well in some segments and age categories, but this sets the broader picture.
An analysis of Medicare fee for service (FFS) data for 2016 found that almost 90,000 Medicare FFS beneficiaries utilized just over 275,000 telehealth services. This represents a small fraction of the total Medicare FFS population—only one-quarter of a percent (0.25%) of the more than 35 million FFS Medicare beneficiaries included in the analysis. It is important to note, however, that Medicare claims used as the basis for this analysis only capture services reported and paid as telehealth services. For example, Medicare claims data for telehealth services does not capture certain other technology-based services that are not considered telehealth services under the law (e.g., remote cardiac monitoring), and services that are not separately billable (e.g., provider-to-provider consults).
The data analysis found that if only one percent of Medicare’s face-to-face encounters were instead provided by telehealth, it would result in a thirteen-fold increase in telehealth delivery of health care within the program. The claims analysis identified just over 243 million in-person office or outpatient visits and almost 100 million in-person hospital and nursing facility consultations. Additionally, almost 15 million in-person mental health evaluations and therapy sessions were received by Medicare FFS beneficiaries. The analysis also found that Medicare FFS beneficiaries received approximately one million face-to-face encounters for services that target chronic disease and behavior modification, such as smoking cessation, intensive behavioral therapy for cardiovascular disease or diabetes self-management. Such services are already on the Medicare telehealth list.
To sort out the direct-to-consumer market, we start by looking at patient encounters using telehealth for acute episodic illnesses and other low-acuity problems, what we call the urgent care scope. The red flag is that in this space no one brags about patient volumes.
Filtering the signal for the noise is important. A recent headline “Cleveland Clinic provided 46K telehealth visits in 2018” needs a bit more vetting. This number includes something like 70 specialties. As one of the largest and well-respected healthcare organizations in the U.S., doing somewhere north of $8 billion in Medicare revenue and 500,000 Medicare ED visits last year – that’s all they’ve been able to convert? And how much money was spent on infrastructure and people to deliver that?
There is an over-capacity of providers aiming their services at this space, particularly in urban and suburban areas.
First among those providers are retail clinic operators, with a total of just under 2,000 locations in the U.S. There are those owned by retailers, such as CVS/Aetna and Kroger. And there are those owned by health systems but operated out of popular retail chains like Walgreens, Meijer, Jewel Osco and Safeway. CVS and Walgreens have more app downloads – both come in at 10M+ each - than the D2C operators and come with an integrated consumer telehealth option.
Urgent care centers own an even larger piece of this pie. There are about four times as many urgent care centers as retail clinics in the United States. Their scope of services is wider, including the treatment of injuries like lacerations and broken bones.
Added to this capacity for treating acute episodic illnesses are pediatric offices that offer walk-in services for specific chief complaints, such as sore throats, ear pain and other common issues. You can also add primary care on demand offerings and employer on-site clinics to the capacity equation.
Using our market sizing methodology, very likely there are too many providers chasing too few visits in this space. Add to this equation an issue that plagued retail clinics early on: consumer acceptance. Healthcare for many is very personal. Seeing a doctor on a smart phone or computer for the first time is no small thing. An acceptance factor appears to be at play in the consumer telemedicine space, only adding to the barriers to growth.
Finally, there is also some question as to whether consumer-facing telehealth services are not replacing urgent care visits, but instead increasing overall utilization. A recent study, “Direct-To-Consumer Telehealth May Increase Access To Care But Does Not Decrease Spending,” pointed out there may be a certain number of visits that were not seeking care. This is unique in that utilization is increasing due to convenience.
Direct to Consumer 2.0 – The Economics
We anticipate most health systems and health plans will go through a “phase 2” of their telehealth offering, if they haven’t already. The vision for delivering routine healthcare via digital modes is attractive to everyone. But fixing unnecessary ED visits, unnecessary admissions and readmissions, and driving down prescription drug prices are where the real money is going.
The strategic thinkers at organizations like Kaiser Permanente, United Healthcare, and Humana aren’t becoming telehealth firms, they are investing in home health and ambulatory assets. Telehealth is a tactical extension, not a stand-alone strategy. Meanwhile, Aetna/CVS, Cigna, the Blue Cross Blue Shield plans and other groups – all enterprise players with tremendous market reach – continue to deliver similar telehealth vendor “bolt on” solutions.
First, a few questions that get asked:
If you are a health insurance plan, what is the purpose of adding a telemedicine benefit? Do you really want to deliver healthcare to patients, or is this "checking the box" for brokers? Why not go in with a strong health system that can deliver the same product, and create an integrated experience for members?
If you are a health system, do you use yours or someone else’s providers? Is the visit chart coming out of the telehealth platform integrated into your enterprise chart? Is the telehealth offering solid enough to be written into a commercial or Medicare Advantage plan product, and serve as a zero-cost platform to engage more patients?
In any case, do you need 24/7/365 service in all 50 states for what is loosely an urgent care visit replacement? Do you want to compete with yourself with a service that might result in diverting patients to other venues?
Simple financial review gets closer to telehealth decisions. For example, what if your organization was an employer with 5,000 employees. That means 10,000 or more members in the plan. Does it make financial sense to “bolt on” a telehealth product to replace some urgent care type visits? Shocked that the result of that scenario on a P&L can be $1,000 per visit?
Another scenario is where a health system has tasked the ambulatory team to “stand up” a virtual visit option. Here the leadership would determine how many centers and the size of the annual population they will serve. Next, figure staffing capacity and use a realistic utilization target. The result will be how many visits per day and the sunk cost on labor. Finally, outline the buy-versus-rent options for your telehealth platform. Given the patient volume issues mentioned above, rent is probably going to be a better call if you aren’t confident in the hockey stick forecasts.
In either of the above scenarios, a critical decision is to decide whether to use your employed providers (money already spent!), or use an add-on panel that comes with the vendor platform. Don’t readily accept that you need 24/7/365 nationwide coverage.
Telehealth as an Urgent Care Center Extension
One final question that comes up all the time, especially among larger urgent care operators, is whether telehealth can act as an extension of traditional brick-and-mortar urgent care. A sophisticated decision maker might look at this question with a selection and scoring process with upwards of a hundred-plus variables. But we typically start with high-level questions, and create a vision for how this fits with your organization’s strategy, brand vision, patient segments, and so on. You still need to do detailed homework on IT security, product lifecycle, vendor fit (do they also compete with you), and the like, but you have to start with some basics:
Did we define in writing the journey map that members/patients are to experience, or dive into vendor selection?
Do we know what the vendor's Customer Experience scores look like, and is the methodology consistent with your internal model?
Should the telehealth platform actually include on-demand tele-psych and other specialties, going around a primary care function?
How do the providers rate working with the product, or will they quit on us?
Does this consumer-facing telehealth solution best report into in the hospital, ambulatory or medical group, or somewhere else?
Do we have a realistic P&L: volumes, net revenue, operating margin, referrals, etc. targets? Based on what actual real-world example?
Are we building for 80-plus percent of the need, or aiming for perfection?
Keep the Amazon model in mind and look to minimal-cost services and top-tier CX to win.