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Report: Telehealth Is Changing How Healthcare Is Organized and Funded

Polsinelli's latest white paper dives into the impact of the now widely adopted technology.

Telemedicine has become ubiquitous over the last couple of years, and the pandemic has catalyzed advancing access to healthcare. But the adoption of new technology means new challenges for owners, funders, and providers. 

A new white paper from co-author Jonathan Henderson, a Dallas-based shareholder at Polsinelli, chair of the firm’s national Corporate and Transactional Practice Group, and co-lead of the firm’s Health Care M+A Practice, aims to help answer some of those questions. 

Telehealth and telemedicine don’t require a brick-and-mortar presence, which reduces healthcare delivery costs while maintaining efficacy and quality. With lower costs, the rate of return on investment in telehealth increases. The practice also eliminates the need to travel, meaning a smaller carbon footprint and improved environmental-social-governance factors. These traits make the industry attractive for startups, technology companies, existing providers, and private equity. 

And the proof is in the pudding. Direct investment venture capital funding for telehealth and telemedicine reached $788 million in the first quarter of 2020, and there are many other sources of financing for these providers as well. In October, telehealth mammoth Teladoc acquired Livongo, a diabetes remote monitoring company. The $18.5 billion cash and stock deal was one of the most significant acquisitions of the year. Other investments are connected to some of the biggest names in the corporate world. Amazon, Microsoft, Cigna, Aetna, and Walgreens are all making investments into telehealth platforms, and San Francisco venture capital firm Rock Health invested $9.4 billion in digital health startups last year. “These investments represent the tip of the iceberg as Wall Street and private equity sponsors focus more resources in the nascent industry,” the paper reads. 

Local companies are serving as attractive targets as well. Last year, local specialist telehealth company Access Physicians was acquired by SOC Telemed. The company is now run by Access’ founder and is the largest provider of remote specialist consults in the country. TimelyMD, a Fort Worth-based telehealth company that partners with colleges and universities to provide services, is also attractive. “They would be a logical acquisition target for a handful of different companies, but one would be Teladoc or some other technology company that would be interested in having organic growth into a new vertical.”

As investment continues, the models are moving beyond urgent care and providing behavioral health, oncology, and patient monitoring. The impact of consumerism is in effect. These added services extend the abilities of traditional healthcare and increase convenience for patients. The technology is allowing flexibility for providers as well. “On the provider side, there is sharing economy concept that’s playing out,” Henderson says. “A lot of the telemedicine physician workforce are doctors that have capacity in their day, so the workforce is developed like Airbnb for providers to expand their utilization.” These added perks provide new ownership and investment models that haven’t been seen in the industry before. 

Telehealth is also changing how we pay for healthcare, acting as a catalyst for how we pay for healthcare. Fee-for-service payment models incentivize unnecessary or costly care, contributing to the rise in healthcare costs, which are nearing 20 percent of the national GDP. Telehealth has upended that model because the providers cannot run a different lab or test that may not be needed and push the model closer to a value-based care model. 

The law is changing as well. During the pandemic, many states passed parity laws that reimbursed providers as much for a telehealth visit as it would for an office visit without any procedures. While these laws haven’t been made permanent, the ubiquitous adoption of the technology makes it likely. 

Telehealth is the present and future, but it isn’t just a lucrative investment. It expands access, reduces barriers for patients and providers, and improves the continuity of care. “If I am a health system, and I am fully integrated, then offering telehealth services as another component is necessary now,” Henderson says. 

Read the whole paper here