Five Key Trends Driving the Continued Growth of Telemedicine in 2016

Telemedicine is a critical component of the healthcare industry. Value-based healthcare serves as a mechanism to generate additional revenue, reduce costs, and enhance patient satisfaction. Over the past decade, one of the most significant transformations in healthcare has been the rapid growth of telemedicine, which has seen widespread adoption across many sectors.

Driven by powerful economic, social, and political forces, telemedicine is rapidly capturing market share, most notably in response to the growing consumer demand for more affordable and accessible healthcare. These forces are propelling the growth of healthcare providers, compelling them to adapt their business models to the evolving healthcare market.

Meanwhile, we need to correct the misconception that telemedicine imposes significant financial burdens or relies on substantial subsidies. Intelligent health systems can provide guidance for establishing sustainable telemedicine programs, generating revenue while not only reducing costs but also improving patient care and satisfaction. Research conducted by the American Telemedicine Association indicates that telemedicine can save money for patients, providers, and payers. Compared with traditional healthcare practices, a prominent advantage of telemedicine is its ability to reduce the frequency of hospital visits and the time spent by patients.

The global telemedicine market is projected to expand at a compound annual growth rate (CAGR) of 14.3% in 2020, ultimately reaching $36.2 billion, compared with $14.3 billion in 2014. Although the growing demand for convenience and innovation—where personalized healthcare experiences may be the most significant factor—is driving this growth, other forces are also at play.



These five major trends will drive the continued growth of telemedicine in 2016 and the transformation of healthcare services:

1. Increase in Medical Reimbursement Rates

Although inadequate reimbursement has long been considered a major barrier to the implementation of telemedicine, current changes are continuously driving its expansion. Taxpayers are finally beginning to recognize what many healthcare institutions have already realized: that telemedicine can reduce costs and improve patient satisfaction.

Private insurers and government payers will continue to expand telehealth coverage, driven by consumers’ growing familiarity with the technology and increasing demand for remote care services. Some health plans have already begun supporting telehealth benefits, recognizing that value-based healthcare can improve patient experience and deliver significant cost savings. On the government front, 2016 will see expanded telehealth coverage across more Medicare programs and Medicare Advantage plans.

Although reimbursement remains a primary barrier to the implementation of telemedicine, newly enacted laws governing telehealth services have begun to take effect at the state level and will be fully implemented in these states in 2016. Similarly, providers are increasingly open to exploring payment models that go beyond traditional fee-for-service reimbursement mechanisms, and these initiatives are expected to continue growing in 2016. For example, such arrangements may be established through inter-organizational contracts, with patients willing to pay for these convenient and valuable services.

For private insurers, the call to use virtual medical consultations for minors’ health issues to reduce costs is growing stronger. For example, in January 2014, Cigna began reimbursing customers for telemedicine services through MDLIVE, a telehealth company. In April 2015, UnitedHealthcare announced that self-funded employer clients would receive virtual care as a value-added service, with coverage expanding to individual plans and more businesses in 2016. Looking ahead, UnitedHealth predicts that nearly 20 million members will have access to telemedicine services through its three network partners.

Telemedicine has been widely adopted under government health insurance programs over the past two decades. Although Medicare currently covers telemedicine services only for patients in rural areas, the government’s telemedicine initiatives are poised for rapid expansion starting in 2016. The Department of Veterans Affairs has recently broadened its use of telemedicine to enhance patient consultation services.

2. Growth in International Exchange

In 2016, more U.S. hospitals and healthcare providers will establish connections with overseas medical institutions to disseminate American expertise in healthcare. These cross-border partnerships will benefit more patients, generate additional revenue, and help strengthen the influence of international brands. According to a survey by the American Medical Association, more than 200 academic medical centers in the United States are already providing video-based consultation services in other parts of the world. Although many of these initiatives are still pilot programs, 2016 will witness their maturation and commercialization, as they represent a win-win situation for participants in both countries.

In many countries, including China, the growing purchasing power of the middle class is enabling more patients to access better treatments and opportunities to seek care from Western medical centers. We have observed both for-profit and non-profit models in international telemedicine, focusing on collaborations with hospitals and organizations in the developing world to expand healthcare accessibility, or providing commercial health services to clients in areas with concentrated national wealth.

3. State Governments Take the Lead

The Leading Role of U.S. State Governments in the Expansion of Telemedicine. According to a study by a health policy research center, during the 2015 legislative session, 42 states enacted and implemented more than 200 pieces of telemedicine-related legislation. Currently, 29 U.S. states and the District of Columbia have enacted laws requiring health insurance plans to cover telemedicine services. In 2016, as state legislatures pass bills related to telemedicine-based services, we expect to see more legislation supporting coverage under health insurance programs.

Although state legislators are leading the charge to integrate telemedicine into the healthcare system, the Centers for Medicare & Medicaid Services is considering expanding Medicare coverage. A bill passed by the U.S. House of Representatives would help cover the costs of physicians providing telemedicine services, regardless of the beneficiary’s location.

4. The Rise of Retail Clinics and Telehealth Centers

A recent Towers Watson study found that over 35% of employers offering health benefits provide telemedicine services, with an additional 12% planning to add these services within the next two years. Other research indicates that nearly 70% of employers will offer telemedicine services in 2017, thereby benefiting employees. The growth of national cross-state telemedicine companies such as MDLIVE and Teladoc, now a publicly traded company, which provide healthcare services tailored to the specific needs of employers and other groups, reflects the demand for these services.

Furthermore, consumers are increasingly willing to visit retail medical clinics and pay a premium for the convenience and multiple benefits of telemedicine services when such care is not covered by their insurance plans. CVS Health and Walgreens have publicly announced plans to integrate core components of telemedicine infrastructure and position them strategically.

5. More Healthcare Institutions Leverage Technology to Enhance Services and Reduce Costs

2016 Will Be the Year of Telemedicine and ACOs. With the emergence of Accountable Care Organizations (ACOs), the number of Medicare beneficiaries has been growing from last year to this year, and early signs indicate that the number of ACO beneficiaries may continue to increase in 2016. These organizations present an ideal pathway for the development of telemedicine.

Although the Centers for Medicare & Medicaid Services (CMS) offers substantial cost-saving incentives modeled after shared savings payments, only 27% of Accountable Care Organizations (ACOs) achieved sufficient savings last year to qualify for these rewards. Meanwhile, according to a recent study, only 20% of ACOs utilize telemedicine services. We believe that in 2016, the broad demand for meeting incentive metrics, coupled with low qualification rates, will drive more widespread adoption of telemedicine.

Compiled by: Chen Kun

Responsible Editor: Zhang Nan