health care on demand: four telehealth priorities for 2016

Expanding telehealth opportunities via email, video, and other technologies can improve patient satisfaction and convenience, while ensuring high-quality care is delivered at lower costs.

Consumerism, disruption, innovation, retail, transformation, big data. A new set of words is dominating the healthcare lexicon. The vocabulary reflects the fact that smartphone-connected consumers have catapulted health care into the Internet-based, on-demand economy.

Technology-driven companies typically answer consumer demand in such economies with the immediate provisioning of goods and services.3 Layered on top of existing infrastructure networks, their software ensures that consumers can make and implement purchasing decisions simply and efficiently. For example, consider web- or mobile-based decision making for AmazonFresh's same-day delivery of groceries and food from local restaurants, or Uber's app-based transportation to your doorstep from one of the now 1 million drivers in 300 cities.

In health care, telehealth and other virtual offerings are ramping up in new markets with new capabilities. These offerings are starting to displace a significant portion of low-intensity healthcare services that historically have been provided in person.

By definition, telehealth/virtual services enable remote interactions and information exchange among providers and between consumers and providers to support:

> Patient and clinician education

> Diagnosis and treatment

> Chronic disease management and monitoring

> Provider-to-provider interactions

Telehealth most frequently provides basic diagnoses, suggested therapies, and ongoing monitoring when physical examination is not warranted. In support of these services, "store and forward" technologies transmit photos, digital scans, and videos to clinicians located anywhere Internet access is available.

Up to this point, telehealth/virtual services typically have connected patients or their physicians in less populated, rural areas with experts in more populated, urban settings. But technological applications now are rapidly expanding nationwide to redefine access as "anywhere care"- wherever patients reside. For example, a device awaiting FDA approval enables parents to administer at home to their children seven different types of exams-mouth and throat, skin, heart, lungs, eye, ear, and skin-and transmit the data to their children's pediatricians.b

Telehealth and other virtual offerings are here to stay, and they demand attention from healthcare executives. It therefore is important for executives to pursue four telehealth-related priorities insoló:

> Understand the value proposition

> Commit to telehealth as a service offering

> Assess the opportunity in their markets

> Design and implement a telehealth strategy

Understand the Value Proposition

Telehealth offerings and their consumption patterns reflect society's permanently changed expectations about information and services. Information should be omnipresent 24/7; service should be available via phone, email, and video, as well as in person; consumers should be able to make choices easily; interactions and transactions should be effortless; and prices should be low.

Well-funded companies have entered the space and are going outside traditional channels to offer consumers the kind of healthcare choice, convenience, and connectivity now expected in all walks of life. As a result, telehealth is one of the five fastest-growing industries in the nation, with revenue expected to increase more than five-fold from 2014 to 2020.c

The nation's first and largest telehealth company, Teladoc, has 11.5 million members and expects to deliver more than 500,000 virtual visits in 2015.d The company reports on its website that median wait time for customers to receive a consultation is less than 10 minutes, with consultations taking about 17 minutes and resolving 92 percent of patient issues. The value proposition for consumers is clear: With consultations typically priced at $49, the company reports achieving 95 percent consumer satisfaction from providing ondemand access to physicians. For the physicians contracting with Teladoc, efficiency and productivity have contributed to an even stronger satisfaction rating of 96 percent.

The value proposition of telehealth extends to other stakeholders as well. For employers and payers, the key benefits include access, lower costs, and reduced time away from work. Virtual encounters are estimated to be one-seventh the time commitment for employees, yielding about one-seventh the cost to employers, as detailed in the exhibit on page 45.

For healthcare providers managing a population's health under a risk-based arrangement, telehealth services can reduce costs and enhance quality and customer satisfaction. App- or Internet-sawy patients may be better at checking in with their physicians through virtual care because it takes less time to do so. The expectation is that better engagement will lead to better outcomes, particularly for patients with chronic conditions.

Oakland, Calif.-based Kaiser Permanente has made telehealth a centerpiece of its efforts to improve service access and deliver high-quality care while keeping costs competitive for its 3.4 million members in Northern California. The number of virtual visits-including secure email, telephone, and video encounters-is expected to surpass the number of in-person visits in 2016. In a February 2014 article in Health Affairs, Robert Pearl, MD, CEO and president of the Permanente Medical Group, writes that telehealth is especially appealing to members who are infrequent users of health care and to those who are relatively resistant to usual outreach methods and vulnerable to untreated chronic conditions.e For such consumers, Kaiser is partnering with HealthSpot to incorporate virtual walk-in kiosks in non-healthcare settings.* Kaiser is investing about 6 percent of its revenues in technology. Overall, the 10-million-member hospital system had more than 20 million e-visits with physicians in 2014/

Reflecting the strength of telehealth's value, recent commercial insurance investments in telehealth include UnitedHealthcare's partnerships with Doctor on Demand, Optum's NowClinic®. and American Well; Cigna's partnership with MDLive; and Aetna's partnership with Teladoc. UnitedHealthcare is expected to provide telemedicine access and coverage to 20 million Americans this year.*1 This level of investment is remarkable in that, until recently, a key question about telehealth services was whether insurers would cover them.

Payment parity for in-person and telehealth visits is increasing rapidly nationwide. As of Oct. t, 2015, 29 states plus Washington, D.C.. had adopted comprehensive legislation requiring reimbursement parity by private insurers, and similar legislation is proposed in seven other states.1 A bipartisan federal bill under consideration by Congress, the Medicare Telehealth Parity Act (H.R. 2948, 2015), proposes to expand the providers whose services are covered to include certain allied professions, the types of services that are covered, and locations where services are offered. The act also would establish coverage for remote patient monitoring for certain chronic conditions.

Commit to Telehealth as a Service Offering

Some form of telehealth will be a critical element of the mix or portal of service offerings from hospitals and health systems. The key is to think of the organization's services as a whole, including community-based urgent care, primary care, home care, outpatient care, inpatient care, telehealth care, and other forms as shown in the exhibit below. Different consumer segments will want to engage in services in different ways. Offering a variety of access alternatives will draw more traffic to the organization and increase the hospital's relevance to consumers.

"Capturing lives"-developing effective ongoing strategies for increasing the number of individuals a health system serves-is important whether the organization is working under fee-for-service or value-based arrangements. A high-quality first-touch strategy gets people in the door physically or virtually.

Low-intensity services such as routine sick visits constitute a relatively low portion of overall hospital revenue. However, such services represent a high volume of healthcare needs and, as such, are extremely important in the context of the overall portal of offerings. Hospitals can strengthen ties with existing patients and gain new patients by serving routine care needs seamlessly, integrating virtual and in-person options, and making interactions as smooth and effortless as possible. And if services meet or exceed consumer quality and cost expectations, organizations position themselves to retain loyalty as expectations change. The overall value proposition of telehealth for healthcare organizations is high.

For example, five-hospital MultiCare Health System in the Tacoma, Wash., area, has integrated virtual visits into its obstetrical (OB) care offerings. Through the OB CareConnect(TM) program, the patient and physician choose the OB care that most closely matches the woman's personal needs, preferences, and lifestyle. Options are as follows:

> Traditional OB care, which includes 14 standard, in-office prenatal visits (often chosen by first-time mothers)

> Group OB visits, which mix in-person physician visits with nurse practitioner-led group visits (often chosen by second-time and stay-athome mothers)

> Virtual OB visits, which combine obstetrician visits with virtual nurse practitioner visits (often chosen by working mothers)

MultiCare was one of the first health systems to partner with a video - visit provider to offer consumers direct access to telehealth through the MultiCare website. In partnership with Doctor on Demand, MultiCare now offers consumers a free first video visit with a board-certified physician as part of its first-touch strategy in many specialty areas.

How ready is your organization to offer telehealth services?

Assess the Opportunity

As recommended with all new offerings, hospitals and health systems should build a fact base of foundational information. This step involves identification and assessment, using quantitative and qualitative means, of the following items.

Existing organizational telehealth capabilities. Required capabilities include a strong primary care network and ambulatory footprint; welldeveloped care coordination protocols; deep understanding of the customer base; information systems that can provide seamless virtual offerings or interface with technology companies offering such services; and strong brand recognition in the consumer, payer, and employer communities.

Current consumer preferences and behaviors in the market. Key considerations here include regionspecific patterns in consumers' paths to making purchasing decisions, pricing sensitivity, and prevailing attitudes toward virtual access to health information and care.

Leading telehealth vendors. Efforts here focus on identification of key vendors, the products/ services they offer, and which vendors are gaining traction.

Current telehealth activity. The assessment should examine provider, payer, and employer telehealth activity in the local, regional, and national markets, including partnerships that exist with third-party technology and service providers, and with employers.

Payment and regulatory environment. The organization should assess federal (Medicare), state (Medicaid), and commercial arrangements and regulations.

Develop and Implement the Telehealth Strategy

Based on the findings of this assessment phase, the organization can develop a strategic vision for its use of telehealth and virtual applications and the projected roles of payers, employers, clinicians, and consumers. This effort should include the following steps.

Formulate a telehealth strategy, identifying areas of strategic focus. Whichever services are offered, the focus of the organization's strategic value proposition should be the importance of telehealth to maintaining and attracting patients and to developing a differentiated offering.

As a core part of strategy development, a care services plan can identify which telehealth services will be offered, the vendors or clinician groups that will provide the services, and how the services will be delivered. Additional elements in a thorough plan include the guidelines and protocols for service delivery; technology features (for example, equipment used to measure physiologic parameters or instruments to view the patient); and the relationships with employers, other health facilities, payers, and vendors that must be established to sustain the telehealth program)

Success will depend on having the right care infrastructure and technology in place-particularly the ability to use a single, patient-specific electronic medical record (EMR) that contains every service provided to the patient. Consumers value having all their information in one place and not having to duplicate previously provided data. A provider that can deploy a virtual visit strategy linked to its EMR can gain first- mover/ first-touch advantage to downstream referrals to primary and specialty care and ancillary lab and imaging services.

Many hospitals and health systems will want to partner with other entities, particularly vendors that have strong telehealth capabilities and infrastructure. Because telehealth solutions are not one-size-fits-all, multiple partnerships may be essential. Brand strength, clinical reputation, and scale create opportunities for partnerships with technology providers. Clinical expertise in hospitals and health systems creates opportunity for growth in provider-to-provider telehealth offerings.

Pursuing two or three telehealth offerings is best, with expansion into other areas occurring as the first offerings take hold. Telehealth for chronic disease management will be particularly important as capabilities evolve from a primary care emphasis.

Build clinician participation. Telehealth strategies will be implemented by clinicians, so a sustainable partnership with the organization's employed physicians and nurses will be critical, except where clinician services are purchased or obtained through a vendor or health system partnership. High-quality organizations with top-notch clinicians will enjoy compelling advantages in the virtual space. Consumers will compare hospital- and health-system-driven telehealth advantages with primaiy care models put forward by retailers and other entities.

Some health systems are starting to consider using midlevel nurse practitioners in employed physicians' offices for their tele-visit offerings in states where regulations allow the use of such practitioners either independently or under the direction of a physician. If a second opinion is needed, the patient will have access to a physician. Other organizations offer telehealth only to existing patients because they believe they can best improve care quality and reduce risk if they have a record of the patient's history.

In a recent survey of primary care physicians, more than 70 percent of respondents identified virtual visits as appropriate for medication management and prescription renewal, minor urgent care, birth control counseling, chronic condition management, behavioral health, and follow up after hospital discharge.k

Subject to state regulations, the scope of services offered by the organization must be founded on core clinical strengths. Once services are identified, physicians and other clinicians should be equipped with telemedicine standards and practice guidelines reviewed and approved by their leadership. The American Telemedicine Association is one source of practice guidelines, with telehealth applications including primary and urgent care, mental health services, dermatology, and other areas.1

Financial arrangements must work for both the organization and its employed physicians. To date, telehealth typically has been revenuepositive or revenue-neutral for physicians because organizations have been giving physicians incentives to participate in virtual offerings by basing compensation on work relative value units (wRVUs) and crediting physicians with wRVUs for an office visit whether the service is provided virtually or in person.

With a busy in-person practice, physicians might see two or three patients per hour. Through virtual encounters, however, physicians may be able to see four to five patients per hour-often during the hours most convenient for patients, such as early mornings, late afternoons, and evenings. A physician with a mix of virtual and in-person patients may generate 30 to 30 percent more wRVUs, despite uneven demand for virtual consults on any one day.

Under traditional fee-for-service arrangements and in states where payment parity has not yet been required, such financial arrangements have not been sustainable for hospitals and health systems. As payment parity increases and as the organization moves to value-based arrangements, telehealth will be a critical element in improving the efficiency of service delivery. Large health systems are looking at telehealth as a way to lower their overall cost of care as they ready themselves to accept risk and bundled payments.

All organizations should find a resource level that ensures that physicians can efficiently and effectively diagnose and recommend treatment based on the patient's condition, thereby maintaining patient safety and care quality at the lowest cost. Use of virtual technology in lieu of in-person care can accomplish this goal.

Evaluate the operational and financial impact of a telehealth strategy. As care evolves from an inpatient-centric to an ambulatory- and virtualcentric model, health systems will need to reconfigure their delivery systems and capacity. This effort likely will lead to downsizing acute hospital capacity, expanding and rationalizing their ambulatory footprint, and investing significantly in telehealth.

For example, St. Louis-based Mercy Hospital recently opened the world's first virtual care center, housing the nation's largest single-hub electronic intensive care unit, and a center for telemedicine innovation.m Described as a "hospital without beds," the $54 million center is projected to handle more than 3 million virtual visits during the next five years. Having invested more than $300 million in virtual capabilities since 3006, Mercy will use this latest investment to provide telehealth in its existing geographic service areas and also can explore the option of forming partnerships with other health systems to leverage its infrastructure investments through joint ventures.

As care and payment systems change, a telehealth strategy will have many moving and interconnected parts. Understanding "virtual economics" and assessing the financial implications are essential for all hospitals and health systems at this time. Insight into the direction of key financial levers under fee-for-service and risk arrangements is helpful.

The exhibit on page 50 identifies five of telehealth's financial drivers and their likely net positive or negative impact under fee-for-service and full-risk arrangements. Under fee-forservice payment, increased virtual visit utilization, typically in the $4o-$45 range, adds revenue, notwithstanding cannibalization of in-person visits, as described later. Peremployee-per-month (PEPM) fees paid by self-insured employers that have direct contracts with hospitals and health systems increase revenue under FFS and full risk. Virtual visits are an expense under full risk, albeit a smaller one than an in-person visit.

In terms of capturing or defending patient downstream value, virtual visits provide a positive financial value under both payment arrangements.

Under fcc for service, when higher-revenuegenerating in-person visits in clinics, emergency departments, and urgent care centers are substituted with lower-revenue-generating virtual services, the resulting utilization shift yields a net negative financial impact. Under full risk, however, the use of virtual services instead of in-person visits reduces expenses, thus improving savings and yielding a net positive financial impact.

Virtual health visits are a key means for reducing avoidable admissions and réadmissions. Virtual visits help providers better manage the health of populations, reducing avoidable réadmissions and admissions by ensuring patients receive requisite care in home or ambulatory settings.

In terms of primary care panel size, the financial impact of virtual offerings is positive under both payment systems. Virtual services allow physicians and nurse practitioners to see more patients than they could using an in-person-only model.

Virtual vendor expenses, including one-time start-up fees and ongoing implementation fees, have a negative financial impact under both payment arrangements. In the early stages of telehealth implementation, most health systems will need help from vendors to provide physician coverage for immediate launch and after-hours care, so expenses related to this coverage also yield a negative impact under both payment systems.

A close look at these drivers will help organizations assess potential implications of telehealth, including the effects on market share, patient utilization, and cost/revenue given the potential for different payment models in the future.

Because the goal of a telehealth program is to retain current customers and attract new ones, the cost of inaction is an important part of a financial analysis. If a hospital or health system does not develop a telehealth program, it risks losing patients to competitors that deploy virtual models that redirect consumers to their delivery systems. A comprehensive financial analysis compares telehealth investment and noninvestment scenarios, with the latter representing the status quo. Under the investment scenario, the provider develops a differentiated virtual strategy that retains current patients and brings new patients into the system. Dollars and volume related to each driver should be estimated for a high-level analysis of the impact of the organization's selected telehealth strategies.

Develop an execution roadmap. An execution roadmap identifies specific implementation requirements for each telehealth offering. Go-to-market planning determines the steps required to gain acceptance of the services being offered to consumers and employers. For example, a strategy to use telehealth to expand primary care access requires identification of physicians or nurses who will participate, definition of specific scope of services offered by which dates, and evaluation of potential technology and other partners.

The execution roadmap should be accompanied by a thorough communication plan that outlines the rationale for the telehealth strategy, the support and participation required from staff and clinicians, the expected impacts on the organization, and the likely timeline for strategy execution.

The Key Success Factor (or a Telehealth Strategy

During the next decade, hospitals will be challenged to simultaneously support multiple delivery models and payment structures, while integrating rapidly changing technology. Organizational agility (i.e., the ability to nimbly operate current business while simultaneously preparing for changing/new conditions) will be required." Nowhere is this more evident than in the virtual/ telehealth space, where new services emerge daily. Yet competitive differentiation for the future is achievable only through sustainable brand recognition built on having the very best clinicians and services in the nation. Financial wherewithal and scale will enable hospitals to participate in telehealth in a way that delivers significant value to consumers and other purchasers, and strategic benefit to the organization. *

AT A GLANCE

> Consumers who are accustomed to on-demand, virtual services are looking for more convenient ways to access health care.

> Giving patients the opportunity to connect with physicians remotely can promote higher patient satisfaction and engagement.

> Telehealth options may have a high start-up cost, but that cost is likely well-justified by the potential to enhance quality, outcomes, and customer attraction and satisfaction/ retention over the long term.

a. Jaconi, M.p "The 'On-Demand Economy' Is Revolutionizing Consumer Behavior-Here's How," Business Insider, July 13,2014.

b. Baum, S.r "TytoCare Sees Opportunity to Bust Open Pediatric Teleheafth Market," MedCityNews, Oct. 6, 2015.

c. Winfrey, G., "The 5 Fastest-Growing Industries in the U.S.," Inc., March 18,2015.

d. "Teledoc Announces Second Quarter 2015 Results," Teladoc, Aug. 12,2015.

e. Pearl, R., "Kaiser Permanente Northern California: Current Experiences with Internet, Mobile, and Video Technologies," Health Affairs, February 2014.

f. "Kaiser Permanente + HealthSpot Pilot," Kaiser Permanente, 2015.

g. Stempniak, M., "Chief of $60B Megasystem Dives into His Vision of Health Care's Futur e" H&HN Daily, Oct. 8,2015.

h. Japsen, B., "UnitedHealth Widens Telehealth Coverage to Millions of Americans.'' Forbes, May 5,2015.

i. "State Telemedicine Gaps Analysis,'' American Telemedicine Association.

j. Burgiss, S.G., "Telehealth Technical Assistance Manual " National Rural Health Association, 2006.

k. Modahl, M., Meinke, S., "Telehealth Index: 2015 Physician Survey"American Well, June2015.

l. "Telemedicine Practice Guidelines," American Telemedicine Association.

m. "Mercy Opens World's First Virtual Care Center," Mercy Hospital, Sept. 21,2015.

n. Krakovsky, M., "Charles O'Reilly: Why Some Companies Seem to Last Forever," Stanford Business Magazine, May 31,2013.

About the authors

Mark E. Grube is managing director, Kaufman, Hall & Associates, LLC, Skokie, III., and a member of HFMA's First Illinois Chapter ([email protected]).

Kenneth Kauiman is chair, Kaufman, Hall & Associates, LLC, Skokie, III., and a member of HFMA's First Illinois Chapter ([email protected]).

Dan Clarín is vice president, Kaufman, Hall & Associates, LLC, Skokie, III. ([email protected]).

Jason O'Riordan is vice president, Kaufman, Hall & Associates, LLC, Skokie, III., and a member of HFMA's First Illinois Chapter ([email protected]).

The authors wish to thank Jonathan Gali, senior associate, Kaufman, Hall & Associates, for his research assistance.