Telehealth: From Testing to Application

The organization, management and application of emerging practices such as eHealth, telehealth and telemedicine are becoming increasingly important and are gaining attention in the healthcare spotlight. Telehealth, which is the merging of healthcare and IT, is of interest because of the potential for the right companies to weave together healthcare information from primary and tertiary systems with broadband technology to create an overall healthcare information and distance treatment system capable of following the patient throughout the care cycle. With the ageing population in the developed economies, and their increasing demand for high quality health care, healthcare information systems and telehealth represent significant potential revenues, once the markets are prepared.

However, the market readiness for this technology varies greatly from country to country. Overall, while the US lags behind the European Union in the development and implementation of telehealth, homes in the US are much more likely to have broadband access than are homes in Europe. This is one reason why the largest realistic market for telehealth products and services is in the US—at this time. In Europe, several drivers have combined to encourage the development of telehealth, not the least of which are the national health systems. These provide the impetus for the efficient, cost-effective care that telehealth can encourage. However, the cost efficiencies already in place in Europe will likely also keep a strong lid on the revenue potential from telehealth. Thus, although the EU is further ahead in implementation, the US presents a larger telehealth market.

In a strategic report due out in December 2002, HBS will make a comparison of the US, Scandinavian, Australian and UK telemedicine programs, looking at the strengths and weaknesses of each. Companies must address cost analysis within their telehealth fields of interest, in order to create a viable business model; therefore the report will also examine cost analyses of some of the major fields of interest, such as home care, tele-dermatology, tele-radiology and tele-endoscopy. Finally, HBS Consulting will present a number of strategies for success that may be used by companies attempting to gain a material foothold in telehealth. Strategies will necessarily differ by country, and sometimes by region within a country.

The following table gives a brief idea of some recent country-specific developments in the field of telehealth.

Telehealth Drivers and Restraints

Both drivers and restraints vary from country to country. A paper published in July 2002 in the Journal of the American Medical Association (JAMA) says that the growth of telehealth in the US has been “relatively slow and uneven” when compared to that of the European Union, with the exception of teleradiology. But several significant barriers exist in Europe and Japan, as well as the US. Chief among these are:

· Dearth of home access in Europe to the broadband technology, such as that used in telehealth home care

· Insurers’ reluctance to reimburse for telehealth services

· Regulatory and reimbursement policies that fail to encourage innovation or greater efficiency

· Physicians’ reluctance to use “new and often inconvenient” telehealth technologies

· Fragmented supply side and the attendant barrage of incompatible devices and technologies.

In the US diagnostic and consultative teleradiology is almost universally reimbursed, without requiring direct interaction between patient and physician. By contrast, Medicare will cover consultations (non-radiology), office visits, psychotherapy and pharmacological management provided via telehealth only if the services are provided with interactive audio and video. The US healthcare system is far from satisfying that stipulation.

Hence, physicians’ traditional reluctance to change combined with a desire to protect their turf, and the insurance companies’ reluctance to reimburse at this point, mean that any market strategy used in the US must take into account the education of physicians and healthcare workers, and the need to increase their technology comfort level.

Several almost universal drivers have already been mentioned; these include:

· The need to decrease costs and increase efficiencies in national health systems, seen in part in the push to develop regional health systems

· The desire to improve healthcare services for all, especially in remote areas

· The increasing demand amongst first world populations for the latest and best in healthcare

· Increasing consolidation on the demand side, including an increase in the number of hospital Group Purchasing Organisations (GPOs) in the USA.

Due to this interaction of market forces, HBS Consulting feels that telehealth revenues will be far less than the revenues to be realised from, say Picture Archiving and Communication Systems (PACS) and Electronic Health Records (EHR). That is not to say that telehealth should be written off: eventually the huge potential efficiencies of telehealth must overcome the bureaucratic and regulatory barriers. HBS Consulting feels that some of the most promising areas of development in the field during the next 3-5 years will be:

· Home care modalities for cardiology, diabetes and dialysis management

· Tele-education, such as that relating to disease states or prescription drugs

· Tele-consultation

· Tele-endoscopy for consultation, tele-surgery and education

· Integrated hospital-wide telehealth systems that can incorporate consultation, education, storage, billing and reimbursement tracking.

Telepharmacy

One application that is growing in some countries, notably the US, is telepharmacy. This can include fax, telephone or Internet, but the end result is that the patient orders and receives medications and answers to questions, at a distance from the pharmacist. The use of telepharmacy can free up the pharmacist to deal with more complicated questions, and should also speed up service for those patients who need to go into a pharmacy for whatever reason. In addition, the Internet sites will provide education and review of a patient’s prescriptions, including warnings of drug combinations that may cause adverse reactions.

Several Web sites are already in operation, such as drugstore.com, planetrx.com and medicaledge.com. Issues of security and licensing in the US have led to the Verified Internet Pharmacy Practice Services System (VIPPS). The VIPPS seal on a site is intended to indicate that the information on the site has been reviewed and that the site is secure.

Tele-endoscopy

Endoscopy lends itself well to telehealth applications, as, with the newest cameras, images can be digitalised and therefore shared with other sites as well as viewed by more than one person in the operating theatre. Some companies are entering into alliances with other firms, with the aim of combining voice control of equipment, digital endoscopy and robotic surgery to produce a virtual operating room package. Such an offering presents the possibility of off-site consultations during surgery, improved quality of care for the patient, education for the surgeon and ultimately cost savings for the hospital. Modest quantities of such tele-endoscopy and tele-surgery packages have been sold in the US, although the installations are for the most part still viewed as test sites.

Keys to Success

Companies seriously interested in benefiting from the growing use of Telehealth need to lay the groundwork today to create a strategy with sufficient vision and flexibility to re-weave the fragmented telehealth markets into the logical extension of the current healthcare offerings. Today, the supply side of the market is highly fragmented, while the demand side continues to consolidate. The result is a market requiring a high level of IT complexity, which HBS Consulting feels will only be met by companies of intermediate to large size, with the products, pockets and power to design and market the technology needed.

However, there is still room for smaller companies. Innovative firms that create a new, viable telehealth application or service may be able to strategically enter into an alliance with a larger company, or be acquired outright, once they have established the validity of the product.

Company developments

A number of companies are breaking new ground in moving telehealth from the project stage to working applications. Following is a sample of companies and their actions in this field.