Happy 4th of July weekend, and before we get started, I hope everyone is staying safe and healthy. If you want to follow along with more digital health developments and haven’t subscribed yet:
And with that, let’s dive into it.
Over the past decade, it’s felt like telemedicine has gone through the hype cycle multiple times, with the technology being both heralded as a cure-all for ballooning healthcare costs and dismissed as a less reliable alternative to clinic visits. But in the last few months, with the COVID-19 pandemic making in-person visits all but impossible for a period of time, telemedicine adoption has skyrocketed, and the rate of adoption has been astounding — the percentage of consumers using telemedicine has quadrupled since last year, and the total volume of patients being seen virtually has increased by 50-175 times (source). There may not be another example in history of the healthcare system adopting a technology so quickly.
With these remarkable developments, the conversation has shifted to ask whether telemedicine adoption is temporary or here to stay. Fortunately, to think that it is temporary would be to miss the forest for the trees — the pandemic was merely the catalyst for an inevitable trend. Telemedicine adoption was bound to increase over time because no stakeholders strongly oppose the change, unlike other healthcare reforms (e.g. drug pricing, single payer). On the contrary, if you focus on the fundamentals, all key parties have the potential to benefit — including consumers, providers, and payers. Here’s why.
Consumers
As with most healthcare trends, consumers are relatively disenfranchised in this conversation, and their opinions hold the least weight out of the 3 parties. Without provider adoption and payer support, consumer excitement about telemedicine would be insufficient; with the two, consumer interest might even be unnecessary. Nevertheless, to facilitate adoption, it is important for consumers to at least be open to the idea of telemedicine, and there are signs this is increasingly the case. A recent McKinsey survey found that 76% of consumers are interested in using telemedicine in the future, and a Morning Consult survey found that 52% of seniors on Medicare were comfortable using telemedicine. Importantly, 91% of seniors who had used telemedicine before had a favorable experience and 78% planned to do so again. With consumers open to the idea, adoption will largely be decided by providers and payers and their calculus regarding the technology.
Providers
For providers, the thought process around telemedicine is driven by a few key questions: (1) is it effective? (2) do the long-term financials make sense? and (3) can the short-term investment be justified? Regarding the first point, although there is substantial variability in the quality of evidence supporting telemedicine across different indications, the prevailing belief in the medical community is that telemedicine is effective at improving clinical outcomes and largely equivalent to in-person care when used (source 1, source 2, source 3). The evidence has started to make its way into medical guidelines as well, with the Federation of State Medical Boards publishing a “Model Policy for the Appropriate Use of Telemedicine Technologies” in 2014. Potential lingering concerns with efficacy are not a big barrier to provider adoption.
The long-term financials of telemedicine have been a sticking point for providers to date, due to poor insurance coverage of virtual visits and procedures. Historically, public and private payers have been rather restrictive with telemedicine coverage, both with the types of procedures covered and the reimbursement rates. However, with proper coverage of virtual services, telemedicine actually has the potential to improve the bottom line for providers and practices, by broadening their patient base to include anyone in the state (or even anyone in the country, with licensing waivers which we’ll discuss later). Once payers and regulators unlock proper coverage of telemedicine, the long-term financials can become an incentive for provider adoption, rather than a drawback.
Since the long-term cost story hasn’t made sense to date, providers haven’t been able to justify the required short-term investment either. This includes a couple of things — setting up the HIPAA-compliant tech infrastructure to support virtual patient interaction, training staff on the tech and special considerations for virtual care, and integrating virtual visits into established clinic workflows and systems. The activation energy that comes with this short-term investment is precisely why the pandemic has been such an effective catalyst for provider adoption. With in-person visits suspended across the country, virtual visits, despite poor insurance coverage, became a critical source of revenue and helped justify the upfront costs.
Payers / Regulatory
The first, and arguably most impactful, step for payers and regulators to take to support telemedicine adoption is to increase coverage and reimbursement rates for virtual care. CMS has led the charge here, by releasing a groundbreaking guidance on Mar 17 that drastically increased the number of virtual services covered under Medicare. In addition, Medicare lifted rules that previously required patients to live in rural areas for telemedicine to be covered, and broadened coverage of audio-only virtual visits. Furthermore, Medicare released a toolkit to facilitate state-level adoption of telemedicine through Medicaid and CHIP.
State governments across the country have taken the cue and begun increasing coverage for telemedicine as well. Medicaid programs in 46 states have expanded the scope of covered procedures, and 38 states have established payment parity for at least some virtual services. Some states have gone a step further by strong-arming coverage from commercial payers as well. Massachusetts, for example, has mandated that all commercial and self-insurance plans must cover medically necessary virtual services.
Beyond expanding coverage, state and national regulators have eased other barriers to telemedicine adoption as well, including licensure requirements for providers and HIPAA enforcement for virtual visit technology. As of last week, 49 state medical boards have passed temporary waivers allowing patients to receive virtual care from licensed, out-of-state providers. While the primary goal of the waivers may be to increase access to care for patients during the pandemic, they will also broaden the patient base for providers, increasing their potential revenue and making telemedicine adoption more appealing. HHS also announced that they will exercise enforcement discretion and waive penalties for providers using non-HIPAA compliant services for virtual care. Since investing in proper tech is a key part of the initial barrier to telemedicine usage, this waiver will further lower the bar for provider adoption.
One important caveat is that most of the regulatory changes I’ve mentioned are temporary and tied to the COVID-19 public health emergency declaration. Once we look at the fundamentals, however, it is easy to see why many of these temporary changes may become permanent. At the end of the day, the biggest decision making factor for payers (and regulators by proxy) is cost, and telemedicine comes with the potential for substantial cost savings. Virtual consultations can help reduce utilization and the need for follow-up visits in the long-run, since patient concerns can be addressed faster and triaged better. Telemedicine can allow patients to receive hospital services in the home instead, with virtual monitoring, reducing the major cost driver of inpatient care. Telepsychiatry can give patients better access to behavioral health treatments earlier, lowering the risk of long-term complications.
In addition to the cost benefits, regulators have to weigh the political calculus as well. It is promising that telemedicine legislation has remained bipartisan despite broader political polarization, with the latest Senate bill sponsored by 2 Democrats and 2 Republicans. Interestingly, the public support angle may be the place where consumers can have the biggest impact; even if they can’t directly influence provider and payer adoption, overwhelming public support for telemedicine could lead to adoption driven by top-down regulatory change.
Although the pandemic has been a remarkably efficient catalyst for telemedicine adoption, the fundamentals point towards an inevitable trend of increased usage and acceptance. It is a rare example of a win-win technology for all parties involved, and it is self-reinforcing — broader coverage of virtual services will incentivize provider adoption, increasing consumer usage, satisfaction, and political support. While most of the regulatory changes from the past few months are temporary as of today, don’t let that distract you from the broader trends — the age of telemedicine is here, and it is here to stay.
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