Telemedicine is having its moment in the sun, but brick-and-mortar providers have lost far more business than their virtual counterparts have gained. The AHA estimated that hospitals would lose more than $200B from March to June as an unprecedented decline of in-person visits has left providers of all sizes fighting for their survival:

 

They also project an additional $120B in losses before the end of the year. Telemedicine has been a helpful stop gap for patients, but it has also been critical for providers who have used it to replace lost revenue as insurers reimburse for a growing list of virtual options. Unfortunately, many of these visits are still reimbursed at lower rates and are less profitable than traditional face-to-face visits, casting doubt on the sustainability of current adoption levels.

Delivering care in the most appropriate setting is essential to rationalizing US healthcare costs. The right setting is a spectrum from asynchronous communication to remote patient monitoring (RPM) to video visits to in-person visits and everything in between. The recent surge in telemedicine adoption has pushed us in the right direction, but it has been at the expense of the brick-and-mortar providers that fill an irreplaceable role. Telemedicine can become a competitive advantage for providers, but not until it makes financial sense. For that to happen, providers need a new suite of tools and an operating system focused on outcomes and efficiency.

The US healthcare system is still designed for in-person care despite recent measures to improve telemedicine reimbursement

CMS Administrator Seema Verma has expressed support for permanently expanding access to telehealth services after the COVID-19 public health emergency resolves, including expanding reimbursement. So far CMS has led the charge. The CARES Act and Emergency Appropriations Bill have made it easier for telehealth providers, including hospital systems, to bill for reimbursement by removing certain restrictions, but these are temporary modifications and waivers brought about by necessity. For telemedicine to really take off, we need to plan for what happens post-COVID.

Hospitals are systems of enormous fixed costs that are best leveraged in a fee-for-service environment by performing as many in-person visits as possible along with all the associated follow up care. This continues to be the case during the slow march to fee-for-value. Despite the push to reimburse for telemedicine at parity, those in-person visits still deliver more revenue and are more profitable than telemedicine visits. They also frequently result in additional diagnostic testing and fees that are foregone when a visit is done remotely. The hospital business model is to leverage their fixed costs as much as possible by getting paid on a usage basis. Remote visits run counter to that strategy. From a purely financial perspective, we should expect providers to encourage more face-to-face visits.

Economics aside, providers need to believe they can deliver the same level of care remotely as they can in-person*. The reality is that the diagnostic toolbox is diminished over video and if providers don’t believe they can provide the same standard of care in a virtual setting we should expect them to push for face-to-face appointments. With rising demand for telemedicine, providers need a new set of tools to deliver remote care effectively and efficiently.

The post-COVID environment will look very different for providers competing for patients

Unfortunately for providers, converting all their patients back to face-to-face visits isn’t an option. When patients feel comfortable visiting their doctor again, there will be stiff competition between providers because patient volume represents a path back to profitability under the legacy business model. Patients are demanding telemedicine visits and the providers that can offer them will win more volume. It was already happening pre-COVID where companies like Ro, Thirty Madison, and Nurx are building huge businesses by moving traditional visits online, starting in consumer pay and insurance-light indications. Now the appetite for telemedicine has reached the masses and will continue expanding in the realm of broad-based primary care and outpatient treatment:

 

At the same time, overall provider capacity will decline as independent provider practices and hospitals with smaller balance sheets go out of business. There may be a demand shortage today, but we will eventually transition back to being supply-constrained.

While providers have an immediate need to increase the number of in-person visits, they are increasingly interested in becoming less financially dependent on patient volume. This is a recipe for business model change and the adoption of the technologies to enable it. Conventional wisdom in health IT is not to change provider workflow if you’re looking for adoption, but the workflow has changed with telemedicine becoming a major channel. Now is the time to capitalize on that willingness to change.

Telemedicine can be a competitive advantage for providers looking to gain leverage on existing infrastructure and increase financial stability

In the short term, hospitals will compete to increase in-person visit volumes back to pre-COVID levels and beyond to generate revenue and return to breakeven (and maybe even profitability). Leaning into the telemedicine trend to offer high quality virtual care that profitably increases capacity can turn telemedicine into a competitive advantage for providers. But how do providers deliver care through a channel that is inherently less profitable without the traditional diagnostic tools at their disposal?

One place to start is by adopting a new set of tools to better understand patients remotely and in a way that doesn’t happen during in-person visits. If patients shared a record of continuously collected behavioral and health data, like what Evidation Health offers to its more than 4 million members, it would deliver incredible insight into patient health (disclosure: B Capital is an investor in Evidation). High frequency, low fidelity data can be just as informative as low frequency, high fidelity data. Or if patients shared a complete medical history regardless of where the data resides, like the one Particle Health makes available, telemedicine providers would have a better medical history than most clinicians do during face-to-face visits. The rapidly declining cost of sensors capable of producing medical-grade measurements also means that we’re quickly approaching the point where RPM is viable for all patients, not just the sickest ones. The integration of those sensors into everyday devices, like the Apple Watch, will create more complete records with increased retention. These and other existing solutions can help providers understand patients better when they can’t be there in-person, a critical element to successfully offering remote care.

But physicians still need to integrate this new information into a diagnosis and a treatment plan, something EHR systems aren’t equipped to do. The EHR is a system of record being used as a system of engagement by providers managing patient care and it’s incapable of making use of all the inputs that can be gathered. How would an EHR record a continuous stream of data from multiple sensors over months or years from a single patient and make it actionable? How about from hundreds of thousands of patients? EHRs aren’t built to capture or analyze those inputs and are instead optimized for fee-for-service billing. It’s well past time that we had a new operating system for healthcare that integrates these disparate data sets and telemedicine is the perfect place to start because with these inputs physicians can make better decisions and hospitals can improve the economics of offering telemedicine.

An operating system that ingests patient data streams, makes them actionable, and integrates into the telemedicine channel would allow physicians to finally offer more data-driven healthcare. This benefits patients but could also be financially transformative for providers who could profitably offer the telemedicine visits that are in such high demand. Ingesting and analyzing this data gives a more complete traditional medical history and fills in the gaps between visits with new sources of information. That means new visits can be triaged, automated, and delivered more efficiently. Some visits can be done asynchronously, others via video, and, yes, some should be done in-person. In other words, we can start to deliver care in the most appropriate setting and begin to rationalize the time and cost for each visit.

As visit volumes rise, providers will transition from being demand-constrained back to being supply-constrained, where they’ve traditionally operated. Profitable and efficient virtual visits would let hospitals amortize their enormous fixed costs over a larger population. That means better use of the physical infrastructure for highly profitable procedures and better use of the virtual infrastructure for a broader range of patients. Not only can providers make virtual visits profitable, they can eliminate the opportunity cost of using their fixed costs for low reimbursement and low profit visits.

Optimizing for telemedicine means optimizing for outcomes

We are still in the early stages of defining virtual care delivery and we can build the infrastructure necessary to deliver that care effectively. To succeed at telemedicine, and at value-based care, providers need tools that allow them to deliver care in the right setting and optimize for patient outcomes. This new way of providing remote care can increase capacity, revenue, and profitability — benefits that could transfer to in-person visits too.

The combination of rising demand for telemedicine, the availability of new health data streams, and accessible traditional health data has created the opportunity to transform the way care is delivered remotely. Most of this technology already exists, but paradigm shifts are pulled through by demand, not pushed through by supply. The enormous surge in telemedicine demand can be the force necessary to pull through the infrastructure changes required­ to deliver better care at lower costs.

* In a recent interview, Paul Martino, the co-founder of VillageMD, stated that the rule of thumb is that the value of an in-person visit is about two times that which can be done via telemedicine