Telehealth could grow to a $250B revenue opportunity post-COVID-19: analysis

virtual visit
An analysis by McKinsey estimates that 20% of all emergency room visits could potentially be avoided via virtual urgent care offerings and 24% of healthcare office visits and outpatient volume could be delivered virtually. (AndreyPopov/GettyImages)

With the acceleration of consumer and provider adoption of telehealth, a quarter of a trillion dollars in current U.S. healthcare spend could be done virtually, according to a new report.

During the COVID-19 pandemic, consumer adoption of telehealth has skyrocketed, from 11% of U.S. consumers using telehealth in 2019 to 46% of consumers now using telehealth to replace canceled healthcare visit, according to consulting firm McKinsey & Company's COVID-19 consumer survey conducted in April.

McKinsey's survey also found that about 76% of consumers say they are highly or moderately likely to use telehealth in the future. Seventy-four percent of people who had used telehealth reported high satisfaction.

Research

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Health systems, independent practices, behavioral health providers, and other healthcare organizations rapidly scaled telehealth offerings to fill the gap between need and canceled in-person care. Providers are ready for the shift to virtual care: 57% view telehealth more favorably than they did before COVID-19 and 64% are more comfortable using it, according to McKinsey's recent provider surveys.

Pre-COVID-19, the total annual revenues of U.S. telehealth players were an estimated $3 billion, with the largest vendors focused on virtual urgent care.

Telehealth is now poised to take a bigger share of the healthcare market as McKinsey estimates that up to $250 billion, or 20% of all Medicare, Medicaid, and commercial outpatient, office, and home health spend could be done virtually.

The consulting firm looked at anonymized claims data representative of commercial, Medicare, and Medicaid utilization.

RELATED: Teladoc anticipates Q1 revenue to reach $180M boosted by surge in telehealth visits

The company's claims-based analysis suggests that approximately 20% of all emergency room visits could potentially be avoided via virtual urgent care offerings, 24% of healthcare office visits and outpatient volume could be delivered virtually, and an additional 9% “near-virtually.”

Up to 35% of regular home health attendant services could be virtualized, and 2% of all outpatient volume could be shifted to the home setting, with tech-enabled medication administration.

Many of the dynamics that have helped to expand telehealth adoption are likely to be in place for at least the next 12 to 18 months, as concerns about COVID-19 remain until a vaccine is widely available.

Going forward, telehealth can increase access to necessary care in areas with shortages, such as behavioral health, improve the patient experience, and improve health outcomes, McKinsey reported.

Providers and patients are concerned that recent federal and state policies expanding access to telehealth will be rolled back once the emergency period ends.

Industry groups, including the College of Healthcare Information Management Executives (CHIME), are calling on lawmakers to ensure the changes enacted by Congress and the administration become permanent.

McKinsey's research indicates providers’ concerns about telehealth include security, workflow integration, effectiveness compared with in-person visits, and the future for reimbursement.

RELATED: As COVID-19 isolates patients, telehealth becomes lifeline for behavioral health

"We call on Medicare and all other insurers to continue to fund telehealth programs and work collaboratively on coverage and coding to lessen provider burden. We cannot go back to pre-COVID telehealth; instead, we must go forward. Patients will demand it and providers will expect it," CHIME CEO and President Russell Branzell said in a recent statement.

Telehealth also is drawing bipartisan support. Senator Marsha Blackburn, R-Tenn., urged Congress to "continue to support this expansion and codify the administration’s changes to support the health needs of the American people," in a recent news release.

Rep. Robin Kelly, D-Illinois, is introducing a bill directing HHS Secretary Alex Azar to oversee a telehealth study looking at the technology's impact on health and costs, Politico reported in its newsletter today.

Taking advantage of the telehealth opportunity

Healthcare providers and payers will need to take action to ensure the full potential of telehealth is realized after the crisis has passed, according to McKinsey.

There continue to be challenges as providers cite concerns about telehealth include security, workflow integration, effectiveness compared with in-person visits, and the future for reimbursement. There also is a gap between consumers’ interest in telehealth (76%) and actual usage (46%). Factors such as lack of awareness of telehealth offerings and understanding of insurance coverage are some of the drivers of this gap.

"The current crisis has demonstrated the relevance of telehealth and created an opening to modernize the care delivery system," McKinsey consultants wrote. "Healthcare systems that come out ahead will be those who act decisively, invest to build capabilities at scale, work hard to rewire the care delivery model, and deliver distinctive high-quality care to consumers." 

RELATED: Poll: Medicare Advantage members are taking to telehealth

McKinsey outlined steps industry stakeholders should take to drive the growth of telehealth.

Payers: Health plans should look to optimize provider networks and accelerate value-based contracting to incentivize telehealth. Align incentives for using telehealth, particularly for chronic patients, with the shift to risk-based payment models.

Payers also should build virtual health into new product designs to meet changing consumer preferences, This new design may include virtual-first networks, digital front-door features (for example, e-triage), seamless “plug-and-play” capabilities to offer innovative digital solutions, and benefit coverage for at-home diagnostic kits.

Health systems: Hospitals and health systems should accelerate the development of an overall consumer-integrated “front door." Consider what the integrated product will initially cover beyond what currently exists and integrate with what may have been put in place in response to COVID-19, for example, e-triage, scheduling, clinic visits, record access.

Providers also should build the capabilities and incentives of the provider workforce to support virtual care, including, workflow design, centralized scheduling, and continuing education. And, health systems need to take steps to measure the value of virtual care by quantifying clinical outcomes, access improvement, and patient/provider satisfaction. Include the potential value from telehealth when contracting with payers for risk models to manage chronic patients, McKinsey said.

Investors and health technology firms: These players also can support the new reality of expanded telehealth services. Technology firms should consider developing scenarios on how virtual health will evolve and when, including how usage evolved post-COVID-19, based on expected consumer preferences, reimbursement, CMS and other regulations.

Investors also should develop potential options and define investment strategies based on the expected virtual health future. For example, combinations of existing players/platforms, linkages between in-person and virtual care offerings and create sustainable value. Investors and technology companies also can identify the assets and capabilities to implement these options, including specific assets or capabilities to best enable the play, and business models that will deliver attractive returns.

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