Telehealth Utilization Insights

JULY 2022

Telehealth Market – Key Insights

Normalization of Telehealth Volumes Post-COVID

With the pandemic loosening its grip, telehealth remains at levels significanly higher than pre-pandemic norms but uncertainly remains on where the "baseline" will shake out as volumes continue to decline.

Mainstream Provider and Patient Acceptance of Telehealth

Patient and provider exposure to telehealth models has been accelerated due to pandemic - leading to a favorable long-term tailwind as stakeholders become more familiar with hybrid care models and the enabling infrastructure behind it.

Reimbursement and Regulatory Issues Remain Top of Mind for Stakeholders

COVID-19 has helped break down traditional regulatory and financial barriers to for telehealth adoption, as the impact of the pandemic wanes there are concerns about the permanency of recent changes.

Sustained M&A Activity Expected to Continue

Despite public market concerns on the telehealth sector, M&A activity has sustained as a variety of healthcare stakeholders seek to expand patient/member touch points at compressed valuations compared to pandemic peaks.

Proliferation of Telehealth Models Targeting Mental and Behavioral Health

Behavioral health telehealth usage continues at elevated-levels as providers and payers leverage telehealth to address the increasing prevalence of mental health illnesses exacerbated by COVID-19

Normalization of Telehealth Volumes Post-COVID

With the pandemic loosening its grip, telehealth continues at levels significantly higher than pre-pandemic norms but uncertainty remains on where the “baseline” will shake out as volumes continue to decline.

Telehealth Utilization Continues to Decline Post-Pandemic Peaks

COVID-19 catapulted mainstream demand for telehealth but despite surging demand, steady-state volume continues to decline from historic highs in 2020.

Telehealth Percent of Total Medical Claims1

1 Fair Health NPIC database of more than 36 billion privately billed records

Key Market Drivers

  • Demand for accessible and efficient care delivery models
  • Accelerated patient and provider exposure to telehealth from the pandemic
  • Infrastructural investments by providers and payers provide long-term flexibility for hybrid care models
  • Consumer/provider preference for in-person visits
  • Uncertain long-term payment parity and reimbursement stifling widespread adoption
  • Complex cross-state licensing and credentialing requirements

Mainstream Provider and Patient Acceptance of Telehealth

Telehealth has demonstrated an ability to service the needs of a variety of healthcare stakeholders, whether providing, receiving, or paying for care, multiple stakeholders stand to gain from the long-term adoption of telehealth.

Continued Widespread Patient Adoption of Telehealth

Percent of Patients Who Plan to Utilize Telehealth Post-Pandemic1

Key Takeaways

  • Patient exposure and acceptance of telehealth has significantly changed as the pandemic highlighted the convenience and accessibility virtual options offer
  • Over 55% of patients reported that telemedicine provided equal or greater quality of care than in-person visits in 2021

Majority of Providers are Likely to Continue Utilizing Telehealth Post-Pandemic

Surveyed Provider Telehealth Usage2

1 Doximity State of Telemedicine, Second Edition
2 Optum Provider Telehealth Use and Experience Survey

Key Takeaways

  • COVID-19 forced many providers to adopt telehealth for the first time - as providers have returned to in-person care, telehealth provides a flexible option to service patient’s needs
  • 93% of providers say they are somewhat or very likely to continue telehealth use post-pandemic2
  • Top provider frustrations include quality of care provided, unrealistic patient expectations and quality of technology

Reimbursement and Regulatory Issues Remain Top of Mind

COVID-19 has helped break down traditional regulatory and financial barriers to enable telehealth adoption, despite recent state and federal efforts stakeholders are still concerned about how payment parity, temporary modality flexibilities and licensing procedures will change post-pandemic.

State Laws Requiring Insurers to Implement Payment Parity

  • Despite growing adoption of telehealth only 21 states have implemented policies requiring payment parity, raising reimbursement uncertainty in a FFS environment
  • Federal government agencies remain supportive of telehealth, Congress recently introduced a bill to extend telehealth flexibilities enabled by Medicare for two years post-pandemic
  • In response to the pandemic States have significantly broadened Medicaid telehealth flexibilities, but there are still gaps in originating site restrictions and visit modalities
  • Primary telehealth regulatory concerns are reimbursement dynamics, modality flexibilities and interstate licensing procedures

1 Manatt Telehealth Response Tracking as of June 2022

Sustained M&A Activity Expected to Continue

Despite public market concerns on the telehealth sector, M&A activity has sustained as a variety of healthcare stakeholders seek to expand patient/member touch points at less frothy valuations.

Notable Post-Pandemic M&A Activity

Date Buyer/Investor Target Name Target Overview
June 2022 SteadyMD BlocHealth Clinician licensing, credentialing and payer enrollment platform
April 2022 Recuro Health WellVia Virtual primary care and behavioral health platform
April 2022 Patient Square Capital SOC Telemed Acute care telemedicine platform
November 2021 23andMe Lemonaid Health Telemedicine and e-pharmacy platform
October 2021 Ecolent Health Vital Decisions Telemedicine company specialized in end-of-life care
October 2021 Well Health WISP Telehealth and e-pharmacy company specialized in Women’s Health
June 2021 Accolade PlushCare Virtual primary care and mental health platform
May 2021 Walmart MeMD Telehealth provider for common illnesses and behavioral needs
April 2021 Cigna MDLive Telehealth provider across a broad range of services
April 2021 Bright Health Zipnosis Telehealth software provider
March 2021 Grand Rounds Doctor on Demand Consumer-facing telehealth provider across multiple services

1 as of June 9th 2022

Key Trends

  • Significant market volatility in 2022 as public telehealth companies experienced a ~46% average price reduction year-to-date1 as valuations normalize from IPO peaks
  • Established players expected to opportunistically pursue deals that expand access points and service offerings, with a more balanced view of profitability vs. growth
  • Emerging entrants are focused on building strong inroads with high utilizing populations by targeting specific conditions (e.g., Sword Health / MSK)
  • COVID-19 has attracted new investors across healthcare disruptors (Walmart) and health plans (Cigna/Bright Health)

Proliferation of Mental and Behavioral Telehealth Models

There has been a permanent shift in how patients receive behavioral health care as telehealth utilization remains significantly higher than pre-pandemic baselines.

  • Mental health and substance use disorder visits have remained at levels significantly above pre-pandemic benchmarks, 36% of visits were delivered via telehealth from Mar21 through Aug21
  • Telehealth has played a vital role in supporting the elevated demand for behavioral healthcare – the number of psychologists reporting more patient referrals has doubled since 2020 (from 37% in 2020 to 62% in 2021)1
  • Telehealth has a significant opportunity to address rural behavioral health provider shortages, enabling access to needed care in communities – 56% of rural mental health and substance use disorder visits were delivered via telehealth from Mar21 through Aug21

Share of Outpatient Visits Delivered by Telehealth2

Share of Telehealth Visits by Mental Health Condition2

(March-August 2021)

AMB’s Investment Banking Areas of Focus

AMB focuses on healthcare niches where consumerism and fragmentation meet to disrupt traditional healthcare channels. AMB’s research-oriented approach to business development has resulted in a vast network of strategic and financial sponsor relationships that yield industry leading intelligence and optimal outcomes for our clients. We are currently most active in the following segments:

AMB Investment Banking Snapshot and Deal Team

AMB focuses on lower middle-market healthcare niches where consumerism and fragmentation meet to disrupt traditional healthcare channels. We typically advise companies with EBITDA of $5M to $20M and an average enterprise value of $100M, but will move up and down the spectrum. AMB’s research-oriented approach to business development has resulted in a vast network of strategic and financial sponsor relationships that yield industry leading intelligence and optimal outcomes for our clients.

Mikel Parker

Managing Director
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mikel.parker@ambadvisors.com

Ryan Loehr, CPA

Managing Director
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Johnny Cross

Vice President
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Mike Nisbet

Associate
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Kevin Williams

Analyst
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kevin.williams@ambadvisors.com

Max Kitchen

Analyst
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max.kitchen@ambadvisors.com

Sully Hagood

Analyst
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sully.hagood@ambadvisors.com