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For other articles and previous issues click here. March 8, 2004 How
High Will Telemedicine Soar? For those who thought forecasts and predictions were simply for winter weather and spring politics, think again: The mercury appears to be rising for telemedicine. To be sure, telemedicine, as a subset of the healthcare industry, has stymied many market research experts for more than a decade. Market research for telemedicine is not a simple matter. Generally speaking, annual sales figures guide most market research, and it isn’t terribly difficult to analyze how many laptops, for example, were sold in 2003. And, based on sales figures for prior years and some assumptions about future market conditions, eventually a projected dollar amount for upcoming years can be ascertained. Alas, gauging the telemedicine market is not as transparent. The seemingly simple task of gathering telemedicine technology sales figures presents a problem as well, primarily because there are a limited number of companies for which specific sales data can be obtained. Total corporate revenues of many of the well-known medical technology vendors, such as Kodak (radiology imaging) or VTEL (videoconferencing), shadow the relatively small telemedicine products segment. Another striking (and confounding) problem is that telemedicine is more than simply one product. Telemedicine is better described as a method of distant healthcare delivery that can be accomplished by—it would seem—an infinite number of technology solutions in a variety of settings. Certainly, there are successful vendors that sell telemedicine packages and turn-key systems. However, scores of institutions pride themselves on assembling their own system solutions. Further, there are many privately owned (as opposed to publicly traded) vendors whose annual sales figures are usually proprietary and therefore hard to obtain. “The telemedicine market is ‘a mile wide,’ and that makes it difficult to pin down comprehensive spending figures,” explains Jon Linkous, executive director of the American Telemedicine Association, a nonprofit organization that has been providing information, policy development and training, and advocacy related to telemedicine for more than a decade. “The overall telemedicine market may be close to $2 billion per year, but that’s a wild guess. Tracking that spending is going to be difficult because it becomes integrated into medicine, which is what we want.” According to Linkous, the federal government alone spends approximately $275 million per year just for support for demonstration projects, which doesn’t include what the government spends reimbursing Medicare claims or providing direct services. “Total spending is going to grow exponentially every year,” Linkous says. MedMarket Diligence Releases
Telemedicine Report As confirmed in MedMarket’s report, the meanings of “telemedicine,” “e-health,” and “telehealth” are becoming synonymous in the healthcare industry, and although many writers and practitioners use the words in different contexts, there is little universal agreement on their individual meanings. As such, telemedicine may be used to describe an ever-expanding universe of activities and technologies—from the popular video-conferencing and digital radiology images to the nascent physiologic monitoring in patient homes. By some definitions, providing health information online or trading e-mails between a patient and physician can even be construed as telemedicine. To be sure, with a broader definition of telemedicine, as this report adopts, Driscoll’s analyses are not limited by any particular technology, application, or data type (video, still-image, audio clip, or printed healthcare information). MedMarket’s report divides the telemedicine market into three main segments: system, services, and users. The telemedicine system segment contains the necessary hardware, both at the remote station and base station, for a telemedicine “visit.” This includes medical equipment, monitors with telemetry equipment, video and still cameras, video processing equipment, audio equipment, computers, modems, local-area network connections, and special lighting. The telemedicine services segment is the network of communications channels. When the information leaves the point of origination—the remote or base station—it enters the communications channel, or the network. Network equipment is not considered part of the system equipment. The cost is charged back in carrier fees. The users segment is defined as the revenue generated by the telemedicine services and paid for by the users, either directly or through their insurance. These payments often contain equipment costs or rentals, network costs (Internet, phone), physician fees, nursing care fees, etc. MedMarket Diligence’s Telemedicine
Market Predictions The report also suggests that telemedicine may eventually “take us back to the days of house calls because home healthcare is one application which has shown direct cost savings.” The report adds that as the U.S. population ages and pressures of medical care costs containment increase, home care will become more important. Because home telemedicine care has proven it can increase the number of patients seen by a healthcare provider by as much as four times, it becomes a more attractive alternative to conventional home care. According to a new report from MedMarket Diligence, “This rate of development and adoption is driving a $243 million U.S. market for telemedicine products and services. By the end of 2006, the payments for telemedicine visits are expected to be near $10 billion. The proportion of total home telemedicine care visits that are telemedicine-enabled is expected to grow from approximately 10% in 2004 to 16% in 2011. The savings associated with the use of telemedicine care services is estimated to increase dramatically.” One principle reason for this massive growth of telemedicine activity is that payment for telemedicine care has never been easier. To be sure, reliable and consistent payment for telemedicine care has been a landmark hurdle for this industry; yet, with Medicaid, Medicare, and many other private payors joining the fold of reimbursement for telemedicine care, there are simply more lucrative reasons to use this technology. In addition to introductory forms of Medicare reimbursement, a handful of state Medicaid systems presently pay for telemedicine services. Although Medicaid coverage is not standardized, it has represented a precedent in validating telemedicine care to the point that private payors have followed suit and will continue to do so. Within the states, there are various limiting regulatory policies. At this point, many states’ Medicaid programs cover only teleradiology, while others pay for the full range of telemedicine care. For example, Nebraska will not reimburse for services if the provider is receiving grant money. Other states stipulate that reimbursement is made at both ends (hub and spoke sites) for telemedicine services, but only so long as a “comparable service is not available to a client within a 30-mile radius of his or her home.” Telemedicine continues to have its limitations and problems, and as such its adoption has slowed to some extent. According to MedMarket Diligence’s report, variations in the technology and procedures—specifically, unreliable compatibility and a shortage of industrywide standards and protocols—can lead to confusion among end users. This has resulted in some healthcare providers being reluctant to engage in telemedicine. MedMarket’s report also contends that telemedicine is “not as affordable, or as user-friendly, as vendors would have us believe. And, the technology is not as universally useful as practitioners want. Patient compliance and acceptance issues create barriers to the acceptance of telemedicine. Since there are few favorable financial outcomes studies, physicians are reluctant to embrace telemedicine as a cost-saving or time-saving technology.” The possibility of liability also concerns many healthcare practitioners. MedMarket finds that “there is inadequate protection under state laws and physician credentialing agencies. Interstate telemedicine practice is not allowed by several states. Furthermore, HIPAA [the Health Insurance Portability and Accountability Act] requires privacy protection under federal law, and several telemedicine systems cannot comply with these regulations.” Additional Market Perspectives One of the first efforts at gauging the telemedicine industry came in 1999 from Jacksonville, Ore.-based Feedback Research Services. Its report provided a market estimate of $172 million and specifically measured the “worldwide sales of video-based home care, telemedicine, and teleradiology systems.” This report emphasized that the market was being driven by spending on information technology, store-and-forward applications, and real-time clinical imaging systems. A more segmentally constrained approach was offered by Frost & Sullivan in 2001. This market research giant’s “U.S. Telemedicine System and Service Markets” report centered on the videoconferencing aspects of telemedicine care, approximating the market to have generated $119 million in 2000 with projected revenues of $275 million by 2007. In announcing the report, Frost & Sullivan Videoconferencing Program Leader Roopam Jain offered, “The healthcare practitioners are increasingly adopting interactive video systems to deliver enhanced access to medical services, as well as improve the quality of that care at reduced prices.” In November 2003, shortly before MedMarket Diligence’s telemedicine report, United Kingdom-based RocSearch, Ltd. published its take on the telemedicine industry from an international perspective. In Europe, where there is a predominantly socialized approach to funding healthcare expenditures, telemedicine has flourished. As such, RocSearch valued the current global industry for telemedicine at $1.5 billion. Possibly the largest estimate of the worldwide market for telemedicine was published by the Canadian government through Industry Canada. Their estimates gauged the global demand for telemedicine services in the year 2000 to be $1.125 trillion. This prediction was based on a much broader set of market segments than is traditionally analyzed, and yet still seems to be an amazingly large number for telemedicine. Beyond clinical care services, this report included peacekeeping and battlefield applications, professional backup, consumer health information, continuing professional education, and management of healthcare delivery. Industry Canada’s report is clear to point out that when the focus of the market is defined more tightly—such as through videoconferencing clinical care—product sales (and market estimates) fall short of the billion-dollar mark. Conclusion Not surprisingly, telemedicine growth—both development and utilization—is driven by healthcare inequity in the United States and abroad. The apparent disparity of healthcare access between urban and rural geographies drives communities to rebalance. In turn, competition among healthcare organizations for new patient populations makes a telemedicine connection desirable as well. Add to this stage an aging population and strained federal reimbursement, and it is no wonder that home telemedicine is growing in popularity. To be sure, the depth and breadth of telemedicine has grown faster over the past few years than any particular institution, government agency, or market research firm’s ability to classify and define. The most accurate kinds of market reports would then measure only statistics that specifically indicate telemedicine activity and product sales. The broader the definition of telemedicine, the larger the sales and revenue forecasts. Any change in the definition, of course, will skew the numbers. In other words, the accurate measurement of product and service volumes will remain the real test. — As research associate for the Telemedicine Research Center, Portland, Ore., Glenn Wachter researches for and writes content for the Telemedicine Information Exchange Web site, with specific interests in legal, political, and technological aspects of the healthcare industry. For more telemedicine market information: Feedback Research Services MedMarket Diligence, LLC Telemedicine Research Center |
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