"Some restaurants hate delivery apps like Grubhub and Uber Eats. So they're seeking out alternatives" CNN
"To own or not own delivery? Grocers reassess the Instacart dilemma" GroceryDive.com
These headlines are examples of how the COVID-19 induced surge in online infrastructure platforms has been a mixed blessing for incumbents in many industry sectors. Most restaurants have outsourced meal delivery capabilities rather than creating their own; many grocers have chosen not to create their own home delivery systems.
BUT...there’s a big downside to infrastructure platforms like Grubhub, Uber Eats, and Instacart. They are often seen as seizing control over the relationship with end customers, promoting their own brand, usurping the data in the transaction, and capturing disproportionate value. In short, these infrastructure platforms are viewed as competing with their own customers.
There's a comparable dynamic at play in healthcare that hasn't gotten much attention — virtual care platforms (VCPs) and their relationships with local healthcare providers. Examples of VCP companies include Amwell, Teladoc, and MDLive.
In this article we'll provide some background and then consider eight ways that VCPs potentially compete with customers. As we suggest in the title, understanding the potential for competition can be “complicated”, and we hope to shed light on a complex and increasingly important issue.
Here are a few notes on the scope of our discussion. First, we use "virtual care" as a term that is broader than, but encompasses "telehealth". Second, we emphasize potential competition from virtual care platforms, but the analysis also can and should be applied to a broader range of virtual care companies. Finally, in referring to "local care providers", we emphasize hospitals/delivery systems and physicians, but our analysis is extendable to other local clinicians.
Background
COVID-19 has greatly accelerated the adoption of virtual care. A 2020 McKinsey study estimated that $250 billion of healthcare could be virtualized.
A recent KLAS whitepaper listed many factors (p.5) that should be considered in a provider's selection of a VCP vendor. One critical element was missing: "Is your vendor competing with you?"
COVID-19 forced many care providers to make overnight decisions in their selection of a telehealth vendor. KLAS predicts that many providers will soon reexamine decisions made under pressure: "Telehealth 3.0 approaches: post-pandemic vendor consolidation and replacement forthcoming".
Virtual Care Platform Capabilities Are "Potentially" Competitive to Local Care Providers
Competition from VCPs is "potential" and will depend on many factors, for example, the breadth and depth of local provider clinical capabilities, the business models of vendors and local providers, local market conditions and competitive dynamics, and program design characteristics.
Recognizing that there is some overlap, we will describe potential for competition in eight categories:
1) Low Acuity/Episodic Care
2) Virtual Primary Care
3) Specialist Care
4) Chronic Disease Management
5) Second Opinions
6) Specialized Populations/Conditions
7) "Selling Ammunition to the Enemy"
8) Digital Front Door
Let's take a look at each of these.
1) Low Acuity/Episodic Care
The entry point of many VCPs has been low acuity/episodic care and urgent care. Common conditions treated include allergies, bronchitis, colds or flu, infections, sore throats, sinusitis, and many more.
These are conditions for which consumers might have chosen to see a local primary care provider or have made a visit to a local urgent care center.
BUT...local providers are not highly likely to be able to notice the loss of this type of business. From the POV of a health system, this might be considered loss of low margin business.
Furthermore, many local care providers lack capacity to provide timely low acuity/episodic care. The Merritt Hawkins 2017 Survey of Physician Appointment Wait Times indicated "that it now takes an average of 24 days to schedule a new patient physician appointment in 15 of the largest cities in the U.S.”.
2) Virtual Primary Care
Virtual primary care offerings increasingly are becoming available through health plans, employers, specialized primary care companies, and local care providers themselves. These programs typically incentivize or require patients to have an initial virtual contact with a nurse, chatbot, or other virtual clinician prior to an in-person visit. A recent report from Triple-Tree described the rapid evolution of a broad virtual health ecosystem.
The structure of these programs varies. Some are designed to bypass local physicians. They also can be designed to position local care providers as a first point of clinical contact. UPMC Virtual Primary Care is one example of a health system launching its own program.
3) Specialist Care
VCPs increasingly are providing care from specialist physicians and other specialty clinicians.
Some telehealth visits will be directly competitive to local specialists.
But VCP specialist availability will sometimes be seen as complementary to local specialist care, e.g.:
● Expanding access to specialist and/or sub-specialist expertise not available in a local community, particularly in rural areas.
● Providing coverage during evenings and weekends
Waiting times to see local specialists also can be lengthy. An athenahealth analysis of seven specialties found that average wait times ranged from 13.2 days in otolaryngology to 44.8 days in rheumatology.
4) Chronic Disease Management
The incidence of chronic disease is high and is increasing. One study found that 86% of healthcare spending was for patients with at least one chronic condition.
Patients with chronic conditions traditionally have been treated by local primary care and specialist clinicians. Yet, many patients are poorly managed and experience gaps in care.
VCPs and many specialized digital health companies are developing virtual chronic disease management programs. In explaining the rationale for Teladoc acquiring chronic disease management company Livongo in 2020, its CEO Jason Gorevic emphasized the potential for "cross-referrals" among their programs.
Of course, there also is potential to complement and/or supplement local provider care, especially in rural areas or in communities lacking comprehensive care.
5) Second Opinions
Many factors can motivate seeking a second opinion, including "diagnosis or treatment confirmation, dissatisfaction with a consultation, desire for more information, persistent symptoms, or treatment complications." The market for second opinions is projected to reach $7 billion by 2024, up from $2.25 billion in 2017.
One example of a VCP second opinion program was recently announced by Amwell and Cleveland Clinic: "The first-of-its-kind digital health initiative opens the door to Cleveland Clinic’s comprehensive medical expertise, with 3,500 clinical specialists in more than 550 advanced subspecialties."
Local providers could have conflicted views of second opinion programs. On the one hand, it's hard to argue against the notion that these programs can provide clinical benefit to patients. On the other hand, the economic reality is that second opinions often result in patients foregoing local procedures and/or seeking care elsewhere:
● “We have found that 28% of our second opinion consults result in a diagnosis change, while treatment plans are modified in 72% of the patient cases we review,” Peter Rasmussen, M.D., chief clinical officer with The Cleveland Clinic.
● One study found that in 34% of cases the second physician believed that the elective procedure was unnecessary.
● An analysis by second opinion provider PinnacleCare found that 41% of patients "transferred their care to a provider we recommended".
● Second opinion programs also are favored by health plans and employers. One investigation concluded that for each $1.00 spent on second opinion programs, medical costs were reduced by $2.63.
6) Specialized Populations/Conditions
Dozens of early stage companies are developing online services targeted at serving unique patient populations or conditions. Some examples: men's care (Roman), women's care (hers), "queer and trans health" (Folx Health), eating disorders (Equip), "primary care for people of color" (Spora Health) and many others.
While it's early, we believe it's likely that many of these specialized companies will be acquired by VCPs. VCPs also could also develop programs in-house.
7) "Selling Ammunition to the Enemy"
“The traditional insurance company that we were has given way to the digitally enabled platform for health we are becoming.” Anthem CEO Gail Boudreaux; March 3, 2021
VCPs sell to a wide range of customers — including local care providers, health plans, employers and others. In using the term "selling ammunition to the enemy", we suggest that VCPs could be viewed as competitors because they are arming local providers' existing competitors.
Virtual care is changing competitive dynamics across healthcare. In many markets local care providers have traditionally had a competitive relationship with health plans. Over the past decade this has become more complex.
Prior to COVID-19, many health plans were cautious about expanded reimbursement for telehealth services. They feared that increased access could result in over-utilization and increased costs.
We're observing that many health plans now are changing their stance toward telehealth — they're seeing it as an opportunity to control a strategic chokepoint for patients' access to care.
Many health insurers are expanding their virtual care offerings far beyond telehealth visits. New offerings include virtual health plans, virtual primary care, hospital-at-home services, and related services. Humana is offering a hospital-at-home program that doesn't even include local hospitals.
There's potential for local providers to view health plans' new activism as competitive. There's also potential for collaboration. Health plans can offer virtual care programs through a network of local care providers.
8) Digital Front Door
"Teladoc Health is creating a new virtual front door for consumers to access the healthcare system." Teladoc 2020 Annual 10-K Report, April 2021
In the physical world, local health systems have been at the center of healthcare delivery and data capture in their region. A painful lesson being learned is that they are not heirs apparent to a similar central, controlling role in a virtual world.
There's a lot of competition emerging to become the healthcare "digital front door".
Summary
In the title of the article we posed a question: "Do telehealth/virtual care platforms compete with local care providers?"
The answer isn't easy -- "It's complicated". There are many shades of gray and an individual care provider's POV will depend on many factors.
Will history write up VCP market entry as classic low end disruptive innovation as described by Harvard Business School Professor Clay Christensen?” VCPs entered the market by providing urgent care and low acuity primary care services, where competition was minimal and patient waiting times were long. Providers were nonchalant…until VCPs began eroding their core business through a new digital front door.
Vince Kuraitis is the principal of his own independent healthcare consulting company, Better Health Technologies, LLC. He brings 35 years' experience across 150+ healthcare and tech organizations. Thomas Wilson, Ph.D., is an epidemiologist specializing in the analysis of real-world evidence and its implications for the healthcare industry. He is the founder of the epidemiology consultant firm, Trajectory Healthcare, LLC.
