Examining the limitations of the current telehealth market

Six months into 2024, the United States telehealth industry looks markedly different from the height of the COVID-19 pandemic in 2020. After reaching unprecedented heights, telehealth adoption and usage have leveled out, leaving stakeholders to contend with varying needs.

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According to Sanjula Jain, PhD, senior vice president of market strategy and chief research officer at Trilliant Health, telehealth’s trajectory is not necessarily surprising — if you have been following the data.  

“What we see is that when you compare, let's say, Q3 of 2023 relative to Q2 2020, so using the pandemic as a starting point, we see that [telehealth] volumes are about 54.7 percent lower than that peak,” she said in a new episode of the Healthcare Strategies podcast. “That's giving some context for the rate of decline... I think the thing that has changed is, and you and I have talked about this for years now, but we're now seeing the convergence of these data trends that have been playing out for some time in terms of limited demand.”

In the episode, Jain discusses how the factors driving telehealth adoption and use have evolved, creating new contours for a more limited market.

UNDERSTANDING TELEHEALTH’S RISE AND FALL

Telehealth adoption and utilization can be traced alongside the ebbs and flows of the COVID-19 pandemic. Trilliant Health data shows that telehealth use peaked in the second quarter (Q2) of 2020, along with novel coronavirus cases.

The data insights garnered from the company’s national all-payer claims database reveal that telehealth volumes fell by 54.7 percent from their peak in Q2 2020 to the third quarter (Q3) of 2023 when COVID-19 cases were also far lower than the pandemic’s peak.

“So, we really saw that the spike happened when there was a moment in time, in the pandemic, that was what I would call forced adoption,” Jain said. “And what I mean by forced adoption is the fact that most people were locked down at home. They were not going into the office. The medical community was basically encouraging individuals to stay away from hospital medical care settings and basically stay home… And then as things started opening back up and loosening up, we started to see this tapering, which reflects, kind of, what I see in the data as when Americans were given a choice, they tended to opt back for in-person care.”

And it's not just the enduring preference for in-person care. Jain also believes that telehealth’s clinical utility came into question as COVID-19 cases fell. While it became increasingly apparent that telehealth is well-suited for some types of care, it is not as effective for others.

For instance, Jain noted that low-acuity behavioral healthcare has remained a sustained driver of telehealth utilization, with telebehavioral healthcare use rising from 41.4 percent in the first quarter (Q1) of 2020 to 67 percent in Q3 2023, according to Trilliant data.

Epic Research shows that the same cannot be said for other specialties, such as orthopedics and ophthalmology.

Additionally, the decline of telehealth use over the course of the pandemic calls into question the concept of payment parity — a much-lauded policy action among telehealth proponents. 

Amid the forced adoption of telehealth during the COVID-19 pandemic, several states adopted payment parity laws. These laws require private payers to pay the same reimbursement rate for services delivered via telehealth as they would for services delivered in person.

However, Jain contends that a typical office visit can differ widely between telehealth and in-person care. For instance, patients seeing their primary care physician in person could receive laboratory or other ancillary services while in the office, whereas those seeing their physician virtually would have to make different appointments for any services outside a routine primary care assessment. 

Under parity laws, physicians would receive the same amount for both visits, even though “the total economic value of that primary care visit is actually greater in office for that use case,” Jain said.

“When you take away the forced adoption, what actually makes sense clinically and financially [for telehealth utilization]? How much can you really do clinically?” she added.

In answering that question, it has become increasingly clear that telehealth is not a one-to-one replacement for in-person care. Rather, healthcare providers must consider the appropriateness of telehealth before implementing it for a particular use case.

The fact that telehealth use cannot be a one-size-fits-all approach is redefining the market's contours, which, according to Jain, is smaller than people want to believe.

“I think some of the discussion that's happening in the industry is people saying, ‘Oh, it's just the early phase, and we're not mature, or we have to focus on the policy, the reimbursement,’” she said. “To me, these are all excuses and justifications.”

Instead, digital health and telehealth stakeholders must be more realistic about the market opportunity and reach for a particular product line. Jain believes that thinking about the telehealth market in accordance with clinical application can help stakeholders identify market opportunities.

“There are just very few things that telehealth is good for,” she said. “And I think what's explaining a lot of this decline is that there's only just so many things you could use it for.”

RESPONDING TO THE NARROWING MARKET

In a competitive landscape, the cream tends to rise to the top. According to Jain, in the jostling digital healthcare arena, the companies most likely to succeed are those recalibrating their strategy by responding to current demand rather than hoped-for demand.

“I think that it's really hard for the industry to grapple with facts sometimes,” she said. “I think we have this idea of hope. Hope is not a strategy. We think something should be X, and it makes sense. But the data, for all the reasons we've already talked about, doesn't support that.”

Following the data and pivoting their strategy will be crucial for digital healthcare stakeholders. Not only do virtual care providers need to understand the factors continuing to drive the rate of change, but they also need to understand the parameters of the 2024 market, which look very different from those in 2020, Jain noted.

“I think it's going to be interesting to see how the industry processes this and the extent to which it changes their views of the telehealth industry,” she added. “And I think some will get there faster than others.”

As virtual care stakeholders better understand the bounds of the market, it also becomes vital to think of telehealth as a tool rather than a care delivery mechanism that will usurp in-person care. Jain emphasized that the value of a piece of technology includes the environment within which it is being implemented, which means the technology will only be useful if it is integrated seamlessly into workflows and the people using it are comfortable and enthusiastic about it.

Making technology decisions through this lens of value can help healthcare stakeholders contextualize their telehealth strategy.

“Sure, patients love it, [but] is it the right thing for patients? What do the physicians think who are actually delivering the care to patients?” Jain noted. “It's a push and pull.”

She further likened it to online grocery shopping. While some people may love getting their groceries online, others may prefer to go to the store in person and check the produce themselves.

Thus, it is dangerous for virtual care stakeholders to allow their hopes and market assumptions to drive strategy. Instead, Jain believes they need to examine the data, glean insights into who is still using telehealth and why, and objectively investigate barriers to adoption.

“At the end of the day, incentives matter, and reimbursement matters, and how the system is designed [matters]…you don't just drop in a tool and expect that it's going to change everything,” she said. “Right?”