Battle Lines Drawn in North American Telehealth Market

North America, in particular the US, is advanced in terms of telehealth implementation compared to other major international markets. It is also littered with vendors that have seen revenues ramp up rapidly over the last five years. Changes to reimbursement in the next two years mean that many financial barriers for providers deploying telehealth will be lifted, driving further demand. To date most telehealth IT vendors and service providers have achieved success by typically focusing on one specific segment of the telehealth market and establishing a leadership position in that segment. However, this is rapidly changing.

Point-solution Leaders

For example, American Well, Teladoc Health, MDLive and Doctor On Demand have established themselves as clear leaders in the US payer-focused on-demand video consultation market. However, until relatively recently they were all very reliant on just this one market segment.

Conversely, companies such as InTouch Health, Avizia (now part of American Well), AMD Global Telemedicine and GlobalMed established leadership positions in the inpatient/emergent provider-focused market (both commercial and government), initially driven by sales of hardware (e.g. telehealth carts) and more recently, software and platforms. However, most had little business outside of these segments. Philips had also seen success in this vertical, specifically the centralised tele-ICU subsegment, a market it has largely made its own.

At the same time a plethora of specialist provider-focused telehealth service providers have also had success, again typically targeting one specific market segment. Examples include SOC Telemed, providing neurology capacity/specialist support services to health systems, and Advanced ICU Care, providing tele-ICU monitoring services to hospitals and hospital networks.

However, the last 12-to-18 months have seen this landscape start to change; specialism in one segment is no longer enough. This change is forecast to accelerate over the coming years forcing suppliers to evolve. Two key factors are driving this change of focus:

Low margins and high competition in the payer-focused on-demand telehealth market.
The demand for enterprise-scale telehealth platforms.

Low Margins in the Payer Market

The payer-focused, on-demand video consultation market has proved fruitful for American Well, Teladoc Health, MDLive and Doctor on Demand in terms of revenue growth. For example, the market leader, Teladoc Health, has seen annual revenues increase from less than USD80 million in 2015 to over USD400 million in 2018, mostly driven by its payer business. However, there are many service providers vying for a share of this market today, resulting in high levels of price competition and low margins or losses. Taking Teladoc Health again as an example, it had the highest volume of video consultations in 2018 (more than 2.6M globally, up from 1.5M in 2017) but was still not profitable.

Price pressure has consequently forced the “big four” in this segment to look elsewhere to drive a more profitable business model. All have now decoupled their physician support service business from their platform business (although some much later than others, e.g. Doctor on Demand only launched its provider-focused solution Synapse in early 2019). This means they can now sell platform solutions to healthcare providers, without forcing the provider to use the telehealth company’s physician support network. This was a key sticking point when targeting this market historically. Success has been relatively quick, with MDLive now boasting more than 20 provider customers and American Well claiming more than 160 health system partners.

However, the move has taken these suppliers out of their original niche, resulting in them now competing with those vendors that had traditionally served the provider market.

Via acquisition some have also started to target higher-acuity market segments where margins are higher. Teladoc Health recently acquired second opinion service provider Best Doctors, whereas American Well acquired inpatient/emergent vendor Avizia. International expansion has also been another strategy. Teladoc Health’s acquired Advance Medical in May 2018 and MédecinDirect in March 2019. It then followed this with the organic expansion of its direct-to-consumer services to Canada earlier this year. This has transformed the firm from a US only service provider to a company with a global footprint in less than 24 months. American Well’s acquisition of Avizia had a similar result in terms of its international expansion.

The key takeaway from the last two years is that these service providers have ambitions well beyond low-cost domestic video consultation services, meaning they’re now encroaching on market segments dominated by other players.

Enterprise Scale Telehealth

The demand for enterprise-scale telehealth is the product of the market maturing. Until recently most healthcare providers were still at the pilot, or early deployment stages in terms of their use of telehealth. Pilots and early deployments are small scale, but they are also typically focused on one specific use-case, care setting, or address one specific problem. For example, better triage of stroke victims as they arrive in the ED, reducing readmission rates for congestive heart failure patients or addressing the primary care needs of sufferers of musculoskeletal disorders (MSDs). Early deployments were often limited to one department in terms of scale and the IT solutions used were often point- solutions designed to address a single use-case or problem in question. This has been an ideal environment for many of the specialist leaders mentioned earlier to win business.

However, as providers’ understanding of telehealth has evolved, deployments have started to be more connected and a more strategic enterprise-wide vision developed. This has resulted in demand shifting from point solutions targeted at specific functions, to enterprise solutions that can be leveraged across organisations. It has also resulted in healthcare providers no longer looking for just a telehealth IT vendor, or just a telehealth physician support service provider. Often, they want both from the same supplier, or at least the flexibility to employ either where and when they see fit.

Several trends in relation to the supply base have resulted from this change:

Telehealth IT providers have started to bring physician support services in house, usually via acquisition. For those that have not made acquisitions, partnerships have been established.
Physician support service providers have decoupled their platforms from their physician support services and expanded the range of specialities serviced. For example, SOC Telemed decoupled its platform from its services earlier in 2019 and acquired behavioural health specialist JSA Health in 2018, expanding the range of specialities it addresses.
Vendors have made strategic acquisitions in order to fill gaps in their portfolios, particularly in relation to care settings served. For example, InTouch Health recently launched its new platform Solo, the product of solution integration from its legacy portfolio and those of Reach Health and TruClinic, which it acquired in 2018. Solo supports telehealth in both inpatient and virtual care applications.
Vendors have expanded the use cases of existing solutions via product evolution. For example, Philips has broadened the scope of its eCareManager solution beyond tele-ICU into other inpatient applications, such as surgical/medical support.
High-acuity solution providers have launched platforms to address telehealth in low-acuity settings. For example, AMD Global Telemedicine launched its direct-to-consumer platform OnDemand Visit; to some extent, InTouch Health’ development of Solo also mirrors this trend.

Future Winners

The below diagram illustrates these trends, highlighting the paths taken by several vendors and service providers that have reacted to changing market conditions over the last couple of years. Developments have been rapid and vendors that are currently leaders in their specific segment are unlikely to remain so over the medium term without action. Through acquisition, product development or partnerships, telehealth suppliers will ultimately need to occupy all four market quadrants in order to maintain leadership positions. Not all will be successful in this transformation and several logos are likely to disappear (largely through M&A) as the market matures.

Note: This insight was featured in the October edition of Canadian Healthcare Technology Magazine. The October edition featured several articles examining the telehealth market in North American and Canada. Click here to view the full October Edition.

Related Market Report

Signify Research will be publishing its 2019 global telehealth market report later in October 2019. Data and insight from this report has been included in this article. For further information on this report, please contact Signify Research at enquiries@signifyresearch.net.