Like jetpacks and flying cars, telemedicine has been part of our collective vision of the future for a long time. Has that future finally arrived?
I haven’t seen any cars flying by lately, but I did gaze heavenward in July when Teladoc achieved a dreamy billion dollar IPO. While that kind of market validation is reassuring for those of us working to transform healthcare delivery, I can’t help but wonder whether investors and the media are buying into a vision of the future that won’t quite match reality.
Why am I skeptical? Because when it comes to telemedicine – unlike flying cars and jetpacks – it’s not technology holding us back. The barriers are economic. Can telemedicine make it easier for patients to get treatment and also provide a sustainable economic benefit to providers?
Telemedicine has been available since the early days of the space program. 60 years ago NASA could diagnose and treat astronauts on space flights via video consultation. Today, video is available on any smartphone or computer, people are starting to record their personal biometric data obsessively, and connectivity is ubiquitous, so it would seem that any remaining barriers to telemedicine have finally been eliminated. Then why are we not using video en masse for diagnosis and treatment?
The simple answer is that it’s still not convenient for patients or economical for providers. Unfortunately, few of those heralding the next great advance in healthcare delivery take the time to really pencil out the ROI and the value add. We’re so infatuated with sexy video screens and the novelty of telemedicine, we gloss over the cold, hard facts.
Where’s the Volume?
So let’s run the numbers.
The going price for a video consultation with a clinician runs about $40 to $50. From the consumer’s or payer’s perspective, this price is outstanding since emergency visits cost about $500 and a trip to urgent care runs about $250. Most of those visits are for minor ailments treatable by any primary care doctor or nurse practitioner. That’s why, if telemedicine was widely adopted, estimates of system-wide cost savings run as much as $25 billion.
Cost containment, however, does not a healthy market make. There’s a flip side to any exchange. Is it financially worthwhile for clinicians to perform primary care visits via video, and does the revenue model work for telemedicine businesses?
The short answer is no. Currently, most clinicians doing video visits handle about 100 to 500 a year, and the overall volume in the market is insufficient to keep clinicians working at their capacity, let alone earning the pay they would otherwise make through in-person consultations.
That reality is reflected in Teladoc’s IPO filing. A billion dollars in market capitalization notwithstanding, Teladoc’s expected revenues for the year are only around $74 million while costs are rising faster than revenue and the projected volume of customers will not make up the difference.
Although expectations around margins and profitability are generally different for emerging technology businesses, healthcare is in the throes of wrenching change to its business model. It’s unlikely that clinicians will embrace an approach that earns them even less money than they make now. It’s also hard to imagine outsourced telemedicine services like Teladoc, MDLive, American Well or Doctor-on-Demand driving growth that way, or investors continuing to back such ventures given the immense investments in marketing and infrastructure.
The Social Side of Telemedicine
Economics aside, there’s also an engagement factor to consider. Will consumers and clinicians find reasons to be drawn to telemedicine?
There’s no doubt that patients are more willing to engage with clinicians by video than they were a few years ago. Every busy parent I know likes the idea of avoiding the doctor for simple care. However, actually using video during the course of a normal hectic day is a barrier. Imagine trying to do a video call while juggling sick kids or sitting in your car. Now compare that to the ease with which you can order an Uber car or buy something on Amazon. In other industries, no thriving mobile service relies on video to conduct transactions.
And what about clinicians? Personally, I can’t imagine one 15 minute visit every four days or so providing enough activity to keep even an easy-going semi-retired healthcare professional content.
In my experience, physicians and nurse practitioners want to actively practice medicine and help patients. Their job satisfaction already wanes from struggling with crushing paperwork and cumbersome EMR data entry. Sitting in front of a row of video screens waiting for one or two visits a week would only exacerbate their dissatisfaction. Clinician satisfaction and engagement is key to any successful delivery model. Unhappy, under-paid clinicians are an anathema for change in healthcare.
The Search for a Better Answer
Instead of gazing heavenward, waiting for flying cars, let’s ground ourselves in solid economics and an understanding of what healthcare consumers and providers need to make telemedicine work.
In the next few blog posts, I want to show you how a new model for telemedicine, rooted in evidence-based care, is proving its ROI with health systems across the country. In the vision I’m going to lay out, patients get access to cost-effective, quality care in the right setting, providers are fully engaged within their workflow, and health systems get a boost to their bottom line and their market share. In the process, telemedicine starts to look a lot less like science fiction and more like another valuable convenience in our connected world.