Health IT, Hospitals, Startups

B2B2C or direct to consumer: Which telemedicine model will win?

Looking over the year’s telemedicine deals, it seems like investors are hedging their bets. Although […]

Looking over the year’s telemedicine deals, it seems like investors are hedging their bets. Although tools supported by employer plans have dominated, direct to consumer models are proving attractive too, as are more specialized business to business services. I spoke with a handful of investors to get their perspectives.

Based on their feedback, the consensus favors business to business to consumer solutions demonstrated by companies like TelaDoc and MD Live. Telemedicine provided through employer wellness funds makes sense to investors. It offers a way for employers to save money on unnecessary emergency room visits. Staff can access these video consults either through kiosks àla HealthSpot or from a smartphone or computer without missing work. But it’s the future that’s intriguing.

Some factors that could swing the balance in the coming years rest on the physicians’ comfort level with this technology. Along with the ability to attract and keep more board certified physicians or successfully get reimbursement, how does the physician come across to the patient on the other side of the computer, mobile device, etc? Are they smiling? Are they comfortable with the technology? How effective are they at directing patients or another medical professional with the patient in using Bluetooth devices to get specific readings? How is data from the session integrated into the patient’s EHR?

There have also been some barriers impeding growth. Ezra Mehlman of Health Enterprise Partners pointed out that the inability to grow small businesses has historically posed a big barrier to entry in the market. “Regulations that impede interstate consults have made it very complicated for small businesses to grow, although the regulatory environment has been changing. Also, it’s hard for companies to pay physicians enough to take video calls from home and a lack of a compelling revenue models to interest physicians.”

Here is an overview of some of the telemedicine models and services that investors highlighted.

Business to business to consumer

Cambia Health Solutions, Rob Coppedge, senior vice president, strategic investment and corporate development

“B2b models such as Teladoc and MD Live have rightly attracted considerable attention. However, the increasingly “retailization” of the market via high deductible plans, HSAs, defined contribution and generational shifts, should increasingly change this dynamic and we will see more individuals optimizing for convenience and access outside of the context of their insurance provider’s network as a means to moderate costs.”

Health Enterprise Partners, Ezra Mehlman, vice president

“The data we have seen suggests that when a company plan, self-insured employer or hospital is picking up the bill, utilization [of telemedicine] is higher…I think there is a higher willingness for patients to use the service when it is no skin off their back.”

Direct to consumer

Skip Fleshman, Asset Management Ventures partner supports this model as a backer of HealthTap. Factors like the caliber of doctors it has been able to attract is a significant point going in its favor, said Fleshman. “Where the rubber meets the road is what kind of physicians will you attract? That is where models like HealthTap make more sense.”

And yet, he wonders how much consumers will be willing to pay from their own pocket. Although some companies have focused on providing second opinions for diagnoses that require surgery or a complex treatment regimen like cancer, Fleshman says most people trust their doctors.

Some big names have gotten behind direct to consumer models, specifically Doctor Phil’s Doctor on Demand, which recently added Richard Branson, the founder of Virgin group, as an investor.

Coppedge: “In the long run as attitudes shift and individuals become more accountable for their own health (the analogy would be a car owner being responsible for their own maintenance) we think we will see some big winners emerge in the D to C space, at least for primary and urgent care. This trend may be accelerated in places like New York City, San Francisco, Los Angeles, Seattle and Portland but it may take five to 15 years for most of the country,” he said. “The winners when the D to C opportunity really emerges may not be the high-profile venture-backed companies making headlines today but rather the folks who already have strong consumer healthcare brands like Walgreens, CVS, Walmart, WebMd, J&J and the some of the leading and well-regarded health systems.”

Mehlman said the direct to consumer space makes sense as part of a concierge service for primary care and may prove an attractive option as consumers face higher deductibles. On the other hand, it depends on how they value the perceived benefit from this service. Would they prefer to spend their money on healthcare or allocate it on sexier options?

Specialty areas

Telepsychiatry and teledermatology are a couple of examples of telemedicine specialties that have gained more acceptance. These companies are split between services offered to and through providers and direct to consumers. 1DocWay provides its telepsychiatry service through psychiatric hospitals supported by physician networks and works within the reimbursement parameters of Medicare and Medicaid.  Teledermatology companies such as Iagnosis’ Dermatologists on Call have relied more on the direct to consumer market. In addition to the convenience factor, embarrassment is a strong motivator for this care delivery approach, particularly when it involves a rash associated with a sexually transmitted disease.

Another area where telemedicine is provided through a hospital is interpretation services for non-English speakers. Mehlman pointed to InDemand Interpreting, a company backed by Health Enterprise Partners. Interpreters work from video call centers and offer services in more than 13 languages, as well as signing for deaf patients.

Provider based solutions

Hospitals and health systems such as University of Pittsburgh Medical Center and Mayo Clinic are offering video consults with patients. Although the consensus is that it’s early days to determine how successful this approach will be, it raises some interesting questions about the directions it will take, such as specialty areas. Several institutions are already providing telemedicine services to other hospitals through teleICU and telestroke. It also will be interesting to see whether patients put more trust in services originating from hospitals, rather than a vendor in the long-term.

[Featured photo from Flickr User Lauren Mcdonald]

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