Telehealth Isn't Dead, It's Just Evolving

Written by Liz Yuhas

Note: As of this article's publication, with only a handful of days remaining in 2024, we are still confronting the looming “telehealth cliff.” COVID-era flexibilities and expanded Medicare coverage are set to expire, posing significant challenges. Although a temporary joint rule issued last month by the DEA and HHS allows the prescribing of controlled substances via telehealth through the end of 2025, the Medicare originating site requirements are poised to revert to their pre-COVID restrictions unless Congress intervenes. This rollback would severely limit telehealth access for most Medicare patients. Congress is looking to add telehealth measures into a year-end government funding bill.

April 2024 was not just a tumultuous month for telehealth – for some, it was the scariest month in its history. A series of events triggered a wave of concern with one major question: is telehealth… dead? We were on the verge of announcing our investment in Backpack Healthcare at PACE Healthcare Capital , which sits right in the middle of telehealth. I needed to rationalize all of this – how can we be so bullish on a telehealth company while there were so many public indicators of telehealth falling apart?

Let us go back on what happened in April. On April 5, two stalwart, public telehealth companies, Amwell and Teladoc, made headlines. The NYSE notified Amwell that it was at risk of delisting. At its height in 2020, Amwell had a market cap of nearly $6B, but is now trading at around $120M.

On the same day, Teladoc’s CEO, Jason Gorevic, stepped down. Teladoc had struggled after the stock fell 22% in February, and their visit volume decreased by 11% year-over-year. Even BetterHelp, Teledoc’s direct-to-consumer teletherapy service, isn’t growing. Paying users were down -14.5% in Q2 YoY, and revenue for therapy services down -9.2% in the same period.

Then, two weeks later, on April 24, Optum announced the shutdown of Optum Virtual Care. Another week later, Walmart Health announced the closure of all its offerings, including Walmart Health Virtual Care.?

It felt like a telehealth blood bath.

These events triggered a wave of articles proclaiming the death of telehealth. Beyond the sensational headlines, many analyses concluded that it’s only the death of stand-alone telehealth or Telehealth 1.0. However, the message was clear: telehealth as a modality is becoming commoditized.

There is consensus amongst industry veterans that this is not bad news (or at least, not that bad), and seeing value in telehealth isn’t contradictory to what’s happening. Instead, this news is telling us three major things.

1.???? Telehealth and Virtual Care are Here to Stay. Telehealth and virtual care are not just passing trends, but permanent fixtures in the healthcare landscape. This is not just my opinion, but a fact supported by three key constituents: providers, payers, and probably most importantly, patients.

An ONC study published in 2023 found that in 2021, 87% of office-based physicians used telehealth. This means that many telehealth providers are the same providers who work in the office. In the same study, 90% of providers reported they could provide similar quality care via telehealth as in person.

Moreover, in a Wheel survey, 64% of clinicians preferred virtual-only or hybrid work. Providers like telehealth.

For payers and employers, telehealth is a balance. Introducing telehealth can increase utilization but used appropriately can lower the total cost of care. For example, Walmart maintains a strong relationship with Included Health, a care navigation and virtual care company, for their employees. In 2023, they reported demonstrating an 11% reduction in total cost of care.

However, the biggest driver of virtual care is patient demand. There are many reports that substantiate what feels intuitive at this point: patients will continue to use telehealth for speed and convenience.? This may seem counterintuitive given the decrease in telehealth utilization recently, but this is just a reversal to the new normal, which is significantly higher usage than prior to the pandemic. Telehealth demand has decreased significantly from its peak, but is still up from before the pandemic, and it has stabilized. FAIR Health tracks telehealth usage; over the first 4 months of 2024, telehealth remained between 4.7 and 4.8% of all claim lines, indicating the decline is ending.

2.???? Telehealth, as a stand-alone platform, has fully matured. Telehealth, or the use synchronous audio and video to deliver healthcare, has existed for years. Due to regulatory and reimbursement limitations, it remained a small part of the care delivery strategy prior to the pandemic. During the pandemic, legislators broke down regulatory barriers allowing many providers and patients to use telehealth for the first time. As the tide of pandemic necessity receded, we saw some usage taper off as well, but we also saw significant growth from prior to the pandemic remain. This process created a rapid maturation of the telehealth market, driving use case and technology optimization along the way. The receding of the peak pandemic demand to a more stable place reveals where telehealth is saturated and where growth opportunity still exists. Stand-alone care delivery is the mature side of the market; we’re not seeing significant growth in these areas, only the post pandemic constriction, causing these businesses to start experiencing the same issues their underlying care delivery business, regardless of modality, experiences.

Annette Kenney , a healthcare executive, and former Chief Strategy Officer of Endeavor Health, describes it well: “Recent shutdowns highlight the challenges with the business model for stand-alone telehealth solutions, particularly those focused on primary care and low-acuity urgent care. These shutdowns indicate more challenges in primary and low-acuity urgent care than telehealth. Achieving profitability on a stand-alone basis is difficult due to high infrastructure costs and relatively low reimbursement.”

This sentiment is echoed across many in the industry. Robin Glass, CEO of Included Health, who has seen a lot of success recently, co-wrote in an article in STAT ?that said: "What is in trouble are the aftermarket telehealth solutions that largely function as a virtual extension of our siloed, fragmented health care system.”

Stand-alone, disconnected urgent-care style telehealth provides value, but more value is created when it’s connected to a larger care organization. This is why we’re seeing large valuations from companies like KeyCare, who provide telehealth for healthcare systems and tie in directly to the care delivery team. Yes, you want to see to a provider, but you also want your usual provider to know about that care episode and to be handed off to a proper specialist, or even better, you just want to see your usual provider virtually.

3.???? The next wave of innovation in virtual care is about optimization. Telehealth has been used as a hammer, and care delivery as all nails, especially during the pandemic. But as the market continues to evolve, it’s clear that care delivery isn’t a bunch of nails, and instead of we need a toolkit of a variety of tools, both virtual and in person. That toolkit will allow us to use telehealth strategically, as well as other virtual care modalities and in person care all collaboratively.

Here are three promising areas of continued growth we see in this space:

1.???? Mental Health. There is a growing body of evidence that, when done right, virtual therapy is as effective as in-person treatment, across a variety of indication[1]. In fact both providers and patients have valued the many benefits of virtual therapy through the COVID pandemic, such that a majority of mental health sessions are still taking place virtually Behavioral telehealth can break down barriers?for those who have historically had difficulty accessing care. Connecting via telehealth improves the timely delivery of care by providing more flexible options for scheduling, greater access by connecting patients with providers that could otherwise be remote - both addressing the need of find the right specialist regardless of location, and also supporting patients in rural areas.

2.???? From Telehealth to Integrated Virtual Health. Telehealth is one aspect of virtual care, but there are many more. For instance, asynchronous chat, like Bright.md (who was acquired by 98point6) provides. Asynchronous chat allows a patient, with a low acuity issue, message providers; those providers respond, diagnose, and treat as time allows. Think text messaging and FaceTime: we use them for different things, but we need both. Same with these modalities. Then there are diagnostic tools like Warby Parker’s virtual vision test as tool in the toolbox of virtual care. The ability to take a diagnostic test virtually, at home, on your own time saves time and money. Many patients would appreciate this in instances of routine tests, like eye exams.

Moving into this new era of integrated, virtual care and omnichannel engagement creates a need for new infrastructure, and I’m excited about it. Omnichannel, which is engaging patients through more than one channel such as email, text, telehealth, and in person, requires new capabilities for healthcare providers. They need to be able to seamlessly identify a patient across all tech platforms that are points of communication with the patient, aggregate all data into a single source to create a holistic view of the patient, and more if you want that experience to be truly seamless.

When I talked to a technology leader at a large, integrated care delivery organization, she highlighted that consumers expect a multimodal approach to engagement with businesses, including healthcare – digital must be part of the experience. However, this is challenging in healthcare due to legacy systems. And Annette Kenney agrees, stating we must “re-envision the entire experience from the patient and care team perspective.”

There has been a lot of activity in the customer relationship management (CRM), patient engagement, and telehealth infrastructure space that fit this bill. Investors and care delivery executives are paying attention to the new need and advancements coming to market. Wheel pivoted from a telehealth urgent care staffing company to a robust platform for virtual care earlier this year. They raised their Series C $150M in 2022. ?Providence Health launched Praia Health in April. Praia is a platform to centralize holistic patient data better and create a more seamless digital health experience for patients, and they raised an oversubscribed $20M round.

The continued focus on creating an optimized patient experience, including various virtual health modalities, creates new opportunities for different care delivery models and technologies to flourish.

4.???? The Raise of the Specialists – Specialty care was one of the first areas where telehealth existed and was the main use case before the pandemic. And for good reason: specialists are scarce, and if they can deliver care virtually, they become more accessible, especially in rural areas.

But the increase in virtual care tooling and telehealth adoption has allowed a new breed of specialist care to develop. Telehealth-first specialty care delivery and care navigation organizations have taken full advantage of all the benefits of virtual care to grow and expand beyond the four walls of pre-pandemic days.

It reminds me of the move of the ecommerce boom; prior to ecommerce, you had big box stores and specialty brick and mortar stores. If I wanted to buy yarn, I had a few options: Walmart sells some, and I likely had a local yarn store in my city, if I lived in a city, that could sell me yarn. But beyond that my reach was limited. But the digital world allows us to access resources that aren’t “nearby”; this creates a dynamic where a business that couldn’t be sustained physically due to a limited number of consumers in the immediate area can now reach millions of people. And those people had limited options before, but now have many more.

For specialists, a highly specialized care delivery organization allows for highly specialized care delivery. This includes tech built for them, like the EMR; care pathways and administrative workflows that are repeatedly optimized for them; and patients get better care.

We’ve seen many specialties care delivery and care navigation organizations grow quickly with these dynamics. Take for example Thyme Care’s recent $95M raise. The dynamics listed above are especially true in high-touch, complex specialty care, such as cancer care. And by partnering with larger care delivery organizations that are brick and mortar, they can fit into that integrated care delivery while still being entirely virtual first.

Despite the recent market pullback and closures by major telehealth players, it's clear that telehealth is here to stay. And beyond that, virtual care can create a better future for healthcare delivery. The challenges stand-alone telehealth companies face highlight the need for integrated, multimodal approaches that leverage the strengths of virtual care to improve accessibility, efficiency, and outcomes.

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[1] Telehealth for Treatment of Serious Mental Illness and Substance Use Disorders: An Evidence-based Resource Guide Series from SAMSHA. Released in 2021