Why Telehealth is Here to Stay

At M13, we’re deep believers in the digital transformation of the consumer healthcare market. COVID-19 has accelerated these changes—ranging from digital pharmacy adoption to primary and specialty care telehealth.

Some stats to put this acceleration into perspective:

• More than 10% of physicians in the U.S. transitioned to a fully virtual practice following the start of the pandemic.
• About 50% of all physicians report using telehealth services this year, up from 18% two years ago.
• Nearly 50% of all U.S. consumers surveyed by McKinsey reported they saw a doctor virtually this year—that’s a 4x annual increase.
  
  And now that the vaccine is here, the question is: How will this consumer healthcare market change?
  
  We believe these shifts are permanent. Just as e-commerce is still in the early innings of overall retail penetration (less than 20%), digital healthcare is in the (very) early innings of overall healthcare market penetration.
  
  We’ve highlighted more specific thoughts below on the market in 2021, but our biggest prediction is we will see the first massive consumer brands in healthcare begin to emerge built on consumer trust and the adoption of telehealth and other digital healthcare services.
  
  These are our three predictions in digital health for 2021:
  
  

Prediction #1: Telehealth incentives will become permanent and ensure adoption

Life is all about incentives. COVID-19 accelerated telehealth, but its adoption will be predicated on alignment of incentives so that digital reimbursements mirror physical visits.

I’ve witnessed this transformation firsthand as a husband to a pediatrician.

Before the pandemic, my wife held very few telehealth visits. For every 100 patients she saw in her office, she visited with two or three digitally (typically for a friend or family member). At the peak of the pandemic, however, 100% of her patient visits were virtual. She’s now reaching a stabilized state and expects 30% of primary care visits will be held virtually over the long term.

Her experience is emblematic of what primary care and specialty providers report across the country. Driven by necessity, physicians are making more telehealth options available and, in turn, patients (including seniors) are reporting positive experiences.

It’s clear that even in the early days of the pandemic, consumers adapted quickly:

• Nearly 1 out of 10 commercial insurance claims in May were for telehealth services, a 50x jump from last year.
• Medicare reported 1.7 million telehealth claims in the last week of April, a 130x increase from a year ago.
  
  According to the Centers for Medicare and Medicaid Services, Medicare accounts for 21% of healthcare spending in the U.S. Thanks to the pandemic, Medicare broadly expanded coverage in 2020, allowing doctors to see patients for more than just brief check-ins, doubled the number of covered telehealth services, and brought reimbursements in line with in-person visits. Hospitals were allowed to screen patients virtually for the first time. State Medicaid programs followed suit, approving new services and increasing reimbursements. Twenty-one states expanded telehealth services through emergency orders.
  
  However none of this matters unless the incentives stick. While a majority of doctors surveyed in August say widespread use of telemedicine won’t continue unless temporary incentives become permanent, we believe they’re here to stay particularly as compliance improves and the total burden on the healthcare system is measurably reduced.
  
  

Prediction #2: Consumers will seek out specialty care through vertical networks

Right now, there’s no efficient way for a patient to let their provider know how they’re feeling post-diagnosis or administration. Feedback loops are common in other markets—why not healthcare?

We believe the way to start is through a vertical approach to specialty care ranging from mental health (the top diagnosis for telehealth visits) to dermatology (the No. 5 diagnosis for telehealth visits), and a wide range of other areas.

Here at M13, we’re excited by the consumer response we’re seeing in:

• Mental health: In the three months following the start of the pandemic, nearly half a million Medicare enrollees had a virtual visit with a mental health provider, representing a staggering 60% of all mental health claims for the period. Taking advantage of new rules, companies like Bicycle Health are opening access to substance abuse treatment for millions of Americans.
• Specialty-care marketplaces: Musely and AIRE SkinStore created a new digital marketplace for skin care just as Brightside did for anxiety and depression treatment, Paloma Health did for hypothyroidism, and Daybreak Health did for teen therapy.
• Women’s health: As part of the tremendous growth we’re seeing in women’s health, Adyn is focused on personalized birth control recommendations, Poppy Seed Health on pregnancy and postpartum care, and Liyfe Clinic on breast cancer treatment. Kindra provides online support and customized information to accept and treat menopause.
  
  We expect that some of these platforms built around narrow use cases will expand to adjacent vertices as they build credibility, prove their effectiveness, and understand their data sets.
  
  

Prediction #3: Digital healthcare companies will find better ways to track compliance

‍As our healthcare system continues its gradual shift from fee-for-service to risk-based models, the industry’s ability to track, measure, and report compliance and outcomes will be essential. Tech companies will play an important role in:

• Tracking: For example, Hero Health offers an in-home medication manager that helps patients track—and keep on track with—their prescriptions. Patients enter their prescription regiment into the company’s app, and a pill dispenser sounds an alert and serves the proper dose at the right time.
• Compliance: M13 portfolio company Capsule makes it easier for patients to order and get medications delivered directly to their home, and built in mechanisms to increase compliance. Consumers can order medication, bill their insurance, and connect with a pharmacist all from the company’s app. As a result, Capsule has a 50% higher primary fill rate compared to conventional pharmacies; medication compliance drives fewer readmissions to hospitals, which today are strained with COVID-19 cases.
• Convenience: M13 portfolio company Heal is partnering with doctors and major insurance carriers across the country to bring back house calls. Patients on the app get on-demand access to doctors seven days a week. They can choose to have a doctor come to their home or connect with one on the company’s app.
  
  The $18.5 billion merger of Teladoc and Livongo in August is a sign of things to come. Just as e-commerce started in apparel and expanded to furniture and now into home buying, digital healthcare will see a similar expansion of services. Consumers, providers, and insurance companies will get increasingly comfortable with digital healthcare services, and technical advancements in in-home testing and remote diagnostics will only keep improving.
  
  Please come talk to us if you’re building something in digital health—you can reach me at latif@m13.co.