We had high hopes and much enthusiasm that telehealth would fix the U.S. healthcare system: fewer commutes, shorter waits, less time in crowded waiting rooms, and higher value through care continuity. We expected the pandemic to be the turning point for telehealth, and telehealth companies shared that expectation, as valuations rose and investor attention followed. Several years on, many companies in the telehealth business (e.g., Optum Virtual Care, Walmart, Teladoc) have been struggling, and the promise of patient-centric, continuous care has yet to materialize. Was the rise of telehealth-centered healthcare just a temporary, pandemic-induced blip destined to collapse?
We believe there’s more to this story and to the future of telehealth. It requires a mind shift in strategy, moving away from a go-it-alone approach. The true value of telehealth can be unleashed by embracing a co-opetition strategy—through intentionally built partnerships between telehealth businesses and traditional care providers for value delivery. By supporting traditional providers with complementary care and technology services, telehealth companies can help create a high-value ecosystem while securing their own future in it.
What was missing in the strategy of telehealth companies?
Telehealth businesses commonly operate as platforms, stand-alone services that connect patients with a provider from a network of online doctors, often with a significantly shorter wait time. After the pandemic, many of these businesses found themselves competing with traditional providers, who can also provide care using telehealth technology.
However, two fundamental aspects of healthcare, trust and care continuity, render this business model fundamentally ineffective. Research shows that patients prefer their own physician and tolerate longer wait times to see them. Yet, telehealth platforms generally match you with a different provider each time. Compare that to seeing a provider you’ve visited multiple times before, who understands your medical background, lifestyle and health concerns. Yes, timeliness is critical in healthcare, but it is dominated by the need for trust. That’s why patients spend so much time and effort looking for a primary care provider with whom they can develop a deep relationship.
Telehealth businesses also struggle with care continuity, exacerbated by their inability to access patients’ complete electronic medical records. Continuity of care is particularly important for chronic conditions, which constitute a significant share of the healthcare spending and volume in the U.S. So, even if the current service model of telehealth platforms -access to a new provider with a shorter waiting time- could work for one-off urgent care visits for diseases like the flu or strong allergic reactions, this model prevents them from capturing the lion’s share of patients whose needs are not acute or episodic, but chronic and persistent. Furthermore, many chronic conditions, as well as some urgent conditions, require tests or physical examinations. A virtual consultation might be convenient, but what happens when a patient needs lab tests or imaging? Many platforms lack the ability to order them, leaving patients with an incomplete diagnosis and forcing them back into the traditional system.
Now imagine the frustration of the paying patient leaving the platform without a diagnosis, referral or arrangements to get those tests done. The assumption that stand-alone telehealth could serve as a complete replacement for all in-person care and outcompete traditional providers was flawed, ultimately leading to disappointment and failure. Telehealth is not suitable for all types of care and stand-alone telehealth becomes especially disruptive to care processes for which in-person exams will eventually be needed.
True potential of telehealth
But telehealth can deliver high value when integrated with the care ecosystem. We have exemplars: Integrated delivery networks, such as Kaiser Permanente and Intermountain Healthcare, with success stories of virtual health, reducing ER visits, using hospital resources more efficiently, keeping low-risk patients at home through remote monitoring, and managing chronic conditions like high blood pressure. When embedded within the care ecosystem, telehealth can transform the traditionally episodic and reactive care process into a proactive and continuous model, exactly the kind of healthcare necessary to fulfill the “high value-low cost care” ambitions of policymakers, providers and patients. Then the question is: can telehealth businesses take the lead in expanding this integrated technology model and thrive in the process?
Challenges of traditional providers present opportunities for telehealth businesses
Hospitals or individual providers can also provide telehealth services. In fact, they heavily relied on telehealth technologies during the pandemic. Historically, a top barrier to widespread telehealth adoption has been limited reimbursement and complex regulations for telehealth services, which were relaxed during the pandemic. Despite ongoing legislative efforts, many of these limitations are expected to be reintroduced as pandemic-related extensions expire.
While it’s doubtless that an uncertain telehealth policy environment dampens incentives, managers need to note that the value of virtual care should not be measured using traditional short-term financial metrics more suitable for the existing fee-for-service models. Instead, their real value lies in increasing the overall return on healthcare services, compatible with value-based care models that are on the rise. Share of Medicare Advantage spending through alternative payment models reached 64.3% in 2024, and CMS has ambitious goals for accountable care relationship adoption by 2030, pressuring providers to focus on these new economic incentives.
Novel payment structures introduced by the CMS further motivate this value-based care focus, which necessitates providers to utilize technology to improve care outcomes with lower costs. For instance, TEAM (Transforming Episode Accountability Model) is an alternative payment model that holds acute care hospitals accountable for the cost and quality of care in the 30 days following discharge for specific major surgeries. Post-discharge follow-up, continuous patient monitoring and timely intervention are all tasks that can be achieved efficiently with a telehealth-integrated service model. Another model, ACCESS (Advancing Chronic Care with Effective, Scalable Solutions), makes payment incentives for technology adoption especially clear. Under this model, providers will receive payments for achieving health improvements in chronic conditions, specifically through technology-integrated care delivery. ACCESS makes the role of telehealth and AI explicit and ties their value to payments. As the payment landscape increasingly turns towards value-based care, using the potential of telehealth in delivering value becomes an essential component of healthcare delivery and a strategic priority for providers.
However, most healthcare providers cannot successfully build a telehealth-integrated model by themselves. The integrated delivery networks we mentioned above have advantages by design. They are inherently well-connected, both culturally and technologically, which reduces friction in care transitions between different providers in the network. Importantly, they have the scale to allocate provider resources to telehealth-centered services and to justify large investments in virtual care. In the meantime, other hospitals struggle with provider capacity limitations and burnout.
Providing telehealth services can become a capacity-stretching necessity, creating additional operational challenges about resource allocation to different channels. To expand the benefits of integrated telehealth to traditional providers, partnerships between providers and telehealth companies will be needed. This positions traditional providers as an important emerging customer segment for telehealth businesses.
A roadmap for telehealth businesses
Telehealth businesses should recognize the growing influence of value-based payment models, which incentivize traditional providers to innovate and alter their strategic focus. Leveraging this wave, companies can drive the transition to proactive and continuous care through partnerships with hospitals.
The first opportunity for telehealth businesses lies in becoming the infrastructure and technology partners for traditional providers, who will need to increase their value/cost ratio and provide proactive, continuous care. These goals necessitate providers to use resources efficiently and invest in technologies like telehealth. Yet, building proprietary telehealth systems requires know-how, IT labor and redirecting internal resources from higher-value tasks, challenging for most providers. Telehealth companies can fill this gap, also providing flexibility in terms of cost structure through pay-per-use models. Amwell, for example, offers a range of telehealth solutions through its B2B channel, enabling the company to capture the second largest share of the telehealth market.
However, solutions offered to providers need to ensure seamless connectivity to their EHR systems. Embedding within existing systems is essential for maximizing the value they create through continuity of care and high utilization rates by clinicians. Provider burnout is a big challenge, which can easily be exacerbated if technologies create additional steps in the workflow, reducing usability and increasing resistance to adoption. Furthermore, connectivity is also essential to overcome competition from EHR providers, which are introducing their own embedded telehealth tools, as well as from alternative systems like KeyCare, that partner with EHR providers to create integrated solutions. Noticing this need, telehealth companies should continue to unify patient data across systems and providers.
Wearing the hat of a business partner, telehealth companies can fill the service and resource gap in the traditional system. Wanting to redirect clinician time to higher-value services and motivated by new payment models such as TEAM and ACCESS, traditional providers may prefer to outsource some care suitable for telehealth or other services complementary to in-person care. Intensive post-discharge follow-up, services for home-based care, and patient education are examples of complementary care needed for improved outcomes, which telehealth businesses can readily provide with existing resources. Tele-ICU enables better physician staffing by pooling provider resources and increasing access to specialists. Recently, some companies noticed the potential in virtual bedside support services, where remote nurses observe patients in the hospital, freeing up provider capacity on the hospital side.
Companies should continuously seek opportunities to leverage AI to strengthen the solutions they offer and boost their own operational efficiency. Achieving proactive and continuous care processes requires delivering much of the complementary care remotely, in-between conventional visits. Since telehealth can be especially promising for patient activities taking place outside the traditional clinic, connected devices for remote patient monitoring (RPM), such as blood pressure monitors, heart rate monitors, glucose meters and mobile health (mHealth) devices (e.g. smart watches, rings), represent great opportunities for preventive care. Yet, the large amount of data flowing from these tools needs to be processed and acted upon to create value. AI-driven tools that process patient data to detect early health decline and send alerts to providers illustrate how this data can be used to generate better outcomes. Recently, some companies have also begun utilizing AI internally to increase efficiency and reduce costs, for example by complementing their clinicians providing remote bedside services with AI.
So, perhaps the future of the telehealth sector is bright—if these opportunities are seized swiftly. Traditional providers are becoming more motivated to integrate telehealth into care processes with new payment models, but may need support with technology integration and capacity. While continuing with their direct to patient services, telehealth businesses can simultaneously become business partners of these providers and help extend the benefits of integrated telehealth beyond large integrated delivery networks. In the meantime, they also emerge as the keystone of a value-based healthcare ecosystem that is preventive, proactive, and continuous.
Embracing a co-opetition strategy, telehealth managers’ approach shouldn’t be telehealth or traditional care, but telehealth and traditional care to finally unleash the real value of telehealth businesses. Collaboration between telehealth businesses and providers might be what brings us closer to the future we have been waiting for.
Atiye Cansu Erol, Ph.D., is an assistant professor of information systems at the Johns Hopkins Carey Business School.
Junjie Luo is a Ph.D. candidate in biomedical informatics and data science at Johns Hopkins University.
Ritu Agarwal, Ph.D., is a distinguished professor of information systems and health at the Johns Hopkins Carey Business School and founding co-director of its Center for Digital Health and Artificial Intelligence.
Guodong Gao, Ph.D., is a professor of information systems at the Johns Hopkins Business School and co-director of its Center for Digital Health and Artificial Intelligence.