Health IT, Startups

Why did HealthSpot fail? The telemedicine industry weighs in

So far, attempts to reach HealthSpot CEO Steve Cashman have been unsuccessful, so we haven’t heard the company’s explanation for why it failed. It’s left to others to speculate.

healthspot kiosk

In the wake of the news that HealthSpot has ceased operations, the kiosk-based telehealth service provider is remaining mum, but others in the industry remain bullish on video consults.

So far, attempts to reach HealthSpot CEO Steve Cashman have been unsuccessful, so we haven’t heard the company’s explanation for why it failed. Similarly, key backer Xerox did not respond to a request for comment.

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It’s left to others to speculate.

Was HealthSpot mismanaged? Were freestanding kiosks too expensive, 1990s technology in a world of 2010s smartphones? Did HealthSpot pick the wrong revenue model? Opinions vary.

What’s known is that, according to CrunchBase, HealthSpot brought in $43.8 million in venture capital and debt financing between July 2011 and January 2015, yet that still wasn’t enough to remain viable.

“That was a lot of money to raise for this stage of a company,” said Skip Fleshman, a partner with digital health investment firm Asset Management Ventures, Palo Alto, California. “Silicon Valley investors typically don’t back ideas and teams like this.”

None of the top management at HealthSpot had any prior specific experience in telemedicine, though COO Bruce Roberts has a strong background in applying technology to care delivery. That said, Silicon Valley’s record in picking winners in healthcare has been spotty at best.

It does remain surprising that a well-funded telehealth company could not make a go of it. “Everything else is just growth, growth, growth,” said Gary Capistrant, senior director of public policy at the American Telemedicine Association. “All indication is that utilization of telehealth tools is increasing.”

Capistrant said he had no inside information about what may have brought down HealthSpot, but did say that there still is a “lot of experimentation going on” regarding pricing, technology and marketing models.

Competitors are not exactly celebrating the failure of HealthSpot. “I am actually not happy at all about the demise of HealthSpot,” said Dr. Roy Schoenberg, CEO of American Well. He lauded the company for demonstrating through its partnerships with the likes of Rite Aid, Cleveland Clinic and others that there is value in remote care.

Jason Gorevic, CEO of telemedicine company Teladoc, expressed his belief that there are three critical elements to success in this industry segment: the technology platform, clinical capabilities and consumer engagement. “Consumer engagement is hard to do,” Gorevic said. This is where HealthSpot may have fallen down.

Teladoc has two revenue streams: a per-member, per-month fee it charges its partners, plus a per-visit fee. “Because we have both of those revenue sources, we can pour that money back into our customers.”

Also, Teladoc is purely a software company, so it doesn’t have the overhead associated with building and delivering kiosks.

Schoenberg, for one, does not believe the kiosks were HealthSpot’s Achilles’ Heel, since AmericanWell also offers a kiosk option. “Our kiosks have actually been a very fast-growing part of the business,” he said.

A bigger issue, according to Schoenberg, is that HealthSpot required patients and providers to pre-arrange appointments; it was not truly telemedicine on demand. “You actually have to build a lot of administration around it,” he said.

Stephanie Baum contributed to this story.

Photo: HealthSpot