Telehealth and telemedicine exploded as agents of change in the wake of Covid-19. The “new normal” method of administrating healthcare digitally consequently fostered a newfound interest in the healthcare sector by investors who would have previously overlooked it. Covid-19 accelerated a shift to telehealth and telemedicine that now functions as a catalyst of change in healthcare ownership, organization, delivery and payment.
Ownership
The uniqueness of telehealth and telemedicine is in the means or method of delivery. As a preliminary matter, telehealth and telemedicine, although used interchangeably, mean different things. “Telemedicine” is defined to be “[t]he practice of medicine using electronic communication, information technology, or other means between a physician in one location, and a patient in another location, with or without an intervening health care provider.” “Telehealth,” as a broader term, encompasses telemedicine and is defined to be “[t]he use of electronic information and telecommunication technologies to support and promote long-distance clinical health care, patient and professional health-related education, public health and health administration.”
What’s unique to the practice of telehealth and telemedicine is the ability to facilitate a broader reach and access to healthcare that simultaneously maintains a level of clinical efficacy appropriate for the care provided via telehealth and telemedicine and reduces the cost of the delivery of healthcare. By addressing access and cost issues in healthcare delivery, telehealth and telemedicine increase the rate of return on investment.
Moreover, telehealth and telemedicine’s incorporation of technology and their consideration of environmental-social-governance makes them the ultimate green technology for healthcare and allows the healthcare industry to reduce its carbon footprint. The synergy of these features makes telehealth and telemedicine attractive to startups, technology companies, medical providers and venture capital and growth equity funds through their potential to create value for private equity sponsors.
Diverse investment. Venture capital funding for telehealth and telemedicine reached $788 million in just the first quarter of 2020. Not to be outdone, many other technology companies, healthcare providers and private equity firms are seeking to invest in telehealth providers or acquire telehealth companies. Teladoc’s acquisition of Livongo was one of the largest in 2020. Siemens Healthineers and Rock Health have also acquired and invested, respectively, in the telehealth and telemedicine space. These investments represent the tip of the iceberg as Wall Street and private equity sponsors focus more resources in the nascent industry. The inclusion of telehealth and telemedicine allows companies to expand the scope of medical services and focus on behavioral health, oncology, patient monitoring and even acupuncture. As these telehealth and telemedicine investments are added to portfolios, they will facilitate a business ecosystem in which telehealth and telemedicine businesses cross-pollinate with other investments within the portfolio and create more value. The added perks of telehealth and telemedicine provide new ownership and investment models unlike what the healthcare industry has previously seen.
Comprehensive service. Aetna’s Virtual Primary Care with Teladoc affirms telehealth and telemedicine’s ability to evolve into a more comprehensive suite of preventive clinical services. Telehealth and telemedicine seek to replace brick-and-mortar practices and allow patients more convenience and access to healthcare at a much lower cost than in-person services. Telehealth and telemedicine can also provide patient monitoring services on a cost-effective basis, especially for patients with debilitating or chronic diseases who can be serviced consistently without the need to travel into a medical office. That, along with the fact that Medicare is expanding the scope of services for which it will reimburse providers for telehealth and telemedicine, will continue to push the expansion of the delivery of telehealth and telemedicine services.
Organization
Although telehealth and telemedicine, as a healthcare delivery model, provide diverse and comprehensive offerings of healthcare services, they ultimately represent the delivery of healthcare via an alternate modality. As such, the typical issues that arise in the delivery of healthcare in a bricks-and-mortar practice setting also apply to telehealth and telemedicine. Telehealth and telemedicine providers must consider certain regulatory and legal factors such as the standard of care in the delivery of healthcare services via telehealth and telemedicine, the scope of practice and licensure, the prohibition on the corporate practice of medicine in those states where the doctrine applies, the practice management model, the applicability of Unfair Trade Practices Act, and the use of FDA approved medical devices.
Delivery
The 50% increase in the use of telehealth and telemedicine in 2020 is likely explained by the accessibility to healthcare services that telehealth and telemedicine provided while navigating a capricious coronavirus. From an investment perspective, telehealth and telemedicine have fashioned an innovative delivery model for healthcare services that can be scaled more quickly with fewer barriers than brick-and-mortar care settings. This is evidenced in many of the merger and acquisition deals of 2020 that created comprehensive services to clients, creating a convenient resource to access healthcare services.
Driving innovation through technology. The core of telehealth and telemedicine’s success is the deployment of technology through a fast-changing healthcare environment. The ability to deliver almost instant healthcare to patients and support access to continued care services is an added value of telehealth and telemedicine.
Consumerism. There is an increasing trend of providing clients with more healthcare options that are both convenient and cost-effective. Incorporating telehealth and telemedicine is mutually beneficial to consumers and to healthcare professionals. Through mergers and acquisitions, healthcare professionals increased their revenue streams through telehealth and telemedicine, which also cater to consumer preferences. Patients have a growing preference for “one-stop” shops. Recent mergers and acquisitions incorporating digital health services have permitted the extension into additional sectors within the healthcare industry that consequently respond to consumers’ preferences while significantly driving down costs.
Payment
Telehealth and telemedicine are driving the change in payment for healthcare services. Historically, fee-for-service reimbursement models have received harsh criticism. Now, telehealth and telemedicine have upended the fee-for-service model and instead contemplate an industry where a value-based payment model could be the preferred model. The payment benefits of telehealth and telemedicine could include a system where telemedicine reimbursement parity laws are reformed to accommodate a system that values in-person and digital healthcare services equally. Telehealth and telemedicine also create a more collaborative system, linking providers and payors more seamlessly than the healthcare system has previously seen.
Conclusion
Telehealth and telemedicine are influencing a new medical practice model that incorporates virtual health services. The unconventional mergers and acquisitions focusing on telehealth and telemedicine seek to expand the investors’ portfolios by including innovative healthcare services that will likely continue to thrive as we return to a semblance of normalcy.
The patient preference drives the growth of telehealth and telemedicine and will continue to expand as the preferred mode of delivery of healthcare for an ever-increasing number of medical conditions which can safely be provided through such medium.
Jon Henderson is based in Dallas and is chair of Polsinelli’s corporate and transactional group. Jerica Steward is a corporate associate in Dallas. Paul Squire also contributed to this article.