Will Telemedicine Re-shape Our Healthcare Industry?

Teladoc, a telemedicine company, is using digital technology to re-shape our way to receive healthcare service.

Telemedicine, defined as the use of telecommunications technology to deliver medical information or services to patients or other users at a distance from the provider, is a rapidly growing field of clinical medicine.

Many macroeconomic elements are in favor of the industry. The aging population has resulted in an increase in demand of healthcare service. In addition, the rising middle-income class also requires better healthcare service. However, there is a short supply of high quality healthcare providers globally. The imbalance of supply and demand further increase the cost of healthcare service.

The global telemedicine market is expected to grow from $16.3 billion in 2013 to $19.2 billion in 2014 and $43.4 billion in 2019 at a compound annual growth rate (CAGR) of 17.7% over the next five years.

Founded in 2002, Teladoc is the largest telemedicine company in the U.S. The company uses telephone and video conferencing to provide remote health consultation to patients around the states.

Business Model:

Teladoc is able to tackle three fundamental issues in healthcare industry: access, cost, and quality. Patients are not longer needed to wait for months to see a doctor. You are able to schedule a phone call with a premium doctor 24/7 anywhere. The Teladoc also reduces costs for patients and hospitals. For only $35 per visit (plus a one-time fee of $18 and a monthly membership fee ranging from $4.25 for an individual to $7 for a family) [1], you reduced hundreds of out-of-pocket expenses when visiting hospital / ER. Last but not the least, Teladoc employs high quality certified physicians, who has some spare times outside their normal working hours.

Users of Teladoc mainly consist of those who are under 51 years old without chronic diseases and there are 10.6 million members by Q1 of 2015. [2] In addition, Teladoc has an enterprise-focused business model and members include many worlds’ fortune companies. Many major insurance companies are also using the services to cut costs by bringing doctors and patients together outside of hospitals.


1). Technical. The telemedicine is not currently integrated into existing systems and procedures. There is a big investment need to make to build up infrastructure and reliable network.

2). Financial. Teladoc has had many years of double-digit sales growth, however, the company currently has a negative operating profit. This is primary driven by low utilization rate and volume.

3). Legal risk. There are still some legal and regulatory restrictions in some states. For example, the Texas Medical Board tried to limit access to Teladoc by requiring a face-to-face visit before physician are allowed to prescribe medication to patients. [3]

4). Service quality. The biggest concern for patients is if they will receive the same quality of service as they visit a doctor in person. There is a large liability issues in the telemedicine industry. If an error occurs during several consultation sessions, it is unclear which health professional bears responsibilities.

In The Future

The lack of market awareness has been an impediment to the growth of telemedicine among healthcare providers as well as potential patients. It is important for Teladoc to build trust between patients and physicians and attract more users to use the platform. To address liabilities issues, insurers need to be willing to underwrite these risks and providers seeking to offer remote care should acquaint themselves with relevant law. Obamacare is also another important factors for Teladoc’s recent growth. The law puts pressure on the entire healthcare system to reduce costs. Similar policy needs to continue support the future growth of telemedicine industry.

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[1] https://rockhealth.com/deconstructing-teladoc-ipo-s-1/

[2] http://www.icaia.net/en/EnRESEARCH/Silvercoverage11/707.html

[3] https://www.teladoc.com/news/2015/05/29/federal-court-rules-in-favor-of-teladoc/


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Student comments on Will Telemedicine Re-shape Our Healthcare Industry?

  1. Thank you for the informative article. With healthcare costs in the USA at 17.6% of GDP and showing no signs of slowing, innovative ways of cutting costs in healthcare are undoubtedly needed. On the surface, Teladoc undoubtedly appears to be such a solution. However, I was also wondering if Teladoc could in fact increase total healthcare costs. By lowering the barrier to a patient accessing healthcare, they will undoubtedly use it more often, and further, this will likely lead to more unnecessary investigations. One could almost argue that for many patients, the time/physical barrier to seeing a doctor in fact means that healthcare costs are lower than they otherwise would be. It is often said that in the USA, for instance, the lack of a primary care physician acting as a gateway to specialist care leads to many unnecessary appointments and tests as many patients see individual specialists as opposed to a single primary care physician who co-ordinates their care – Teladoc merely exacerbates this issue. In addition, Teladoc medical notes will likely not be linked to a patient’s other medical records; which could in turn cause a host of issues.

    Overall, therefore, I am optimistic about the future of telemedicine, however am extremely cautious of its expansion without assessing whether it actually has a positive impact on payor’s pockets and patient’s health via rigorous academic studies.

  2. I think telemedicine has a lot of potential to address some of the issues facing health care, but faces many significant challenges including those noted above. I see two areas where telemedicine can be particularly useful. The first is for rural areas that lack the necessary supply of medical professionals. Telemedicine offers people the opportunity to access care without requiring transportation to a larger city and is convenient by offering people 24/7 access to care. Second, telemedicine can help reduce the demand on health care providers for ailments that are easily treated, such as cold/flu, or that can be easily screened, such as whether an injury requires medical attention. In order to ensure people receive the same quality of treatment as an in-person visit though, telemedicine must demonstrate it offers highly trained professionals who are just as committed to their patients. In order to reduce the one-off treatments, telemedicine services such as Teladoc can partner with insurance providers or health care providers to integrate their services into the existing standard of care.

  3. I agree that telemedicine companies such as Teladoc can significantly increase access to healthcare and tackle costs. In terms of accessibility, I think that financially constrained individuals and those who live in areas with a low number of doctors per capita will especially benefit from this service. In terms of costs, I disagree with Sky’s comment that more patients using Teladoc will increase healthcare costs. I think that the reduced barrier for patients to seek healthcare will actually decrease costs by allowing conditions to be diagnosed earlier and thus lowering long-term healthcare costs. Furthermore, based on the product’s price structure, it sounds like this is a product that would primarily be used by insured patients (the $35 price point for an telemedicine appointment is similar (if not higher) than an outpatient visit using health insurance, so I think that someone with health insurance would still prefer to visit the doctor in person or call their doctor (for free) if they prefer not to travel).

    I don’t necessarily agree that Teladoc will increase the quality of care. I think that the physical distance created between the patient and the doctor may lead to difficulties finding the correct diagnosis and treatment. I would be interested to see if in the future, we will see telemedicine combined with technologies such as IBM Watson that will enable more accurate, speedy care.

  4. Fascinating article. Thanks! I actually used to work for a medical device company that was working on this very issue: Telcare makes a glucometer for people with diabetes that is connected to the cell network. Every time that individual takes a blood sugar measurement, the data is automatically recorded in a database and can also be sent immediately to a pre-designated doctor’s office, to concerned parents (if it’s a child) or to concerned children (if it’s an aging parent). The whole purpose is to do exactly what you pointed out: identify trends in blood surgar levels early on to prevent future expensive complications. But to reinforce your point about the network required to make this technology get into more hands, we spent a long time approaching three groups of people: insurance companies, doctors, and patients. This multi-pronged approach was fairly resource-intensive and was not particularly successful (at least when I worked for the company). The end goal was great — and would save a ton of lives — but the operational challenge was definitely in the execution of the roll-out.

  5. This is super interesting, although I don’t know much about the healthcare space and the intricacies between the doctor / hospital / insurance relationship, which I imagine is crucial for telemedicine to have successful rollout, I imagine this is truly the way of the future for the many reasons you discussed.

    As I think about the main issue here, which is driving user adoption, what do you think is the best way to improve this such that the company turns a profit and can scale? I see this similar to our discussion of Uber, where the success of this technology and company relies on vast user adoption and the resulting network effect. Its easy to think that you should focus on the people that can drive adoption, which would be insurance companies – I imagine a scenario where you could incorporate the tele medicine providers into the doctors’ database on different insurers websites and you can immediately make an appointment with them directly. At the same time I also imagine that the hospitals may not like this practice since to me, this technology shifts power from the Hospitals to the Drs by enabling them to access a wide variety of patients without having to go through a Hospital. I guess what I am trying to get at is, do you think this new technology benefits everyone in the system? (creates a bigger pie) or does this technology shift the distribution of the market and therefore certain parties have no reason to endorse this going forward?

  6. I actually used a telemedicine app (OneMedical) for the first time recently in order to get a doctor’s opinion without scheduling an appointment or leaving my house. I found the experience to be very friendly and easy, but unsatisfactory when it came to quality of care. Through no fault of her own, the Nurse Practitioner I was connected with was unable to diagnose my injury or offer much insight other than “you’ll need to schedule an actual doctor’s appointment to find out more.” It is an injury that will require x-ray/MRI, so there wasn’t much that could be done over a smartphone interface, but I had higher hopes they’d actually be able to tell me more about the possibilities, but I was left disappointed. That, to me, is the greatest drawback of telemedicine – the inability to run x-ray or MRI or have a doctor actually “push and pull” to find out what’s really going on. I’d be concerned about a higher rate of misdiagnosis, as well.

  7. Really great insights! I knew there existed some telemedicine apps out there, but I did not realize that they were growing so rapidly or that Teledoc had been so successful. I would be curious to understand if the pay-structure ($35 / visit) is competitive against typical walk-in clinics. Typically walk-in clinics range from $35 to $45, but you are seeing a Physician’s Assistant or a Nurse Practitioner in those cases.

    As someone who has worked at CVS Health, I have seen first-hand how the industry of telemedicine has been broached. CVS Health is looking to incorporate telemedicine into their walk-in Minute Clinics, so they are essentially combining the benefits of technology with the infrastructure piece (which you pointed out was an issue for Teledoc). As of now, they have a few pilots out in California, but patients have responded favorably to the combination of Nurse Practitioner with a Doctor via telemedicine. It also helps that the doctor can tell the nurse in real time to “check his ears” or “feel for inflamed tonsils” etc. It makes the visit more holistic. I would be interested to see how Teledoc responds as telemedicine gets more common in walk-in clinics.

  8. Very interesting article and responses. There certainly is a lot of good discussion here regarding the future of telemedicine. Between your article and the comments, many of telemedicine’s strengths and weaknesses have been identified, however, I think that there is a very bright future for telemedicine, as it drastically improves the allocation of medical intelligence and resources. The entire medical industry and education is shifting away from MDs making each decision to enabling Nurse Practitioners to assume a much greater roll within outpatient care clinics. If we begin to use our human capital efficiently, i.e. for nurse practitioners who don’t demand as high a salary as MDs, to work within their training umbrella, including in most states, prescribing medication, and reserving the MDs for more serious surgeries and diagnoses, the assets within the medical field will be more effectively distributed. This is where telemedicine comes in to – providing an additional tool to NPs or MDs for diagnosis without the burden of a hospital experience. Using the lessons from ABC accounting, this would reduce the costs on many doctor visits, increasing social welfare, by allowing the diagnoses to occur at the most cost efficient level.

  9. Great post on telemedicine! I agree with all of the benefits listed above regarding telemedicine. Especially accessibility – giving more folks access to quality healthcare is incredibly impactful. My prior venture firm looked at several telemedicine startups and struggled with adoption and costs involved with launching new geographies. It is incredibly challenging to recruit and onboard doctors and patients. Especially when Teledoc sells to corporations – how do they ensure that the HR department is properly communicating the benefits and usage behaviors of the platform to employees? It would also be interesting to look at Teledoc’s granular data – how often are consumers engaging with the app? What other verticals within medicine can they target? Mental health seems like the low-hanging fruit, but I also have concerns around the lack of face-to-face interactions for those types of medical care.

  10. This is an interesting emerging industry. A couple follow-up questions: 1) How receptive has the U.S. government been to tele-medicine? Given the government’s fixation on lowering medical costs, I would assume they would be highly supportive of this approach. 2) It seems that this model relies on excess capacity in doctor’s schedules and matches an “unused” doctor with a prospective patient. Is it the case that an unused doctor is inherently worse? Aren’t most good, successful doctors fully utilized? Also, a random unused doctor is allocated to a patient each time, how can they be sure to know the patient’s medical history and offer advice based on a holistic understanding of the patient? Does this matter?

  11. Thanks for sharing, TW! I agree with all of the risks you’ve described above. I also agree with EIOs comment about the diagnostic difficulties that come about with that type of physical distance. In particular, there are a lot of medical specialties that require real tactile skill to make a diagnosis, and when you lose the ability to actually physically examine the patient, diagnosis can get a lot harder. One of the most striking examples of this is dermatology. I’ve known a number of dermatologists who have tried to see extra patients via these new ‘tele-‘ apps, and some of them have expressed some frustration that it is impossible to distinguish between a lot of radically different things via the phone (“is that red rash an infection? is it an autoimmune disease? or is it an artifact from your iPhone?). Even in some of the less tactile fields like psychiatry, the inability to physically be in the room with the patient can make diagnosis extremely difficult. And as you mention, doctors are still just as liable for the job they do via iPhone apps as they are in a patient examining room.

  12. Thank you for this informative post. I agree, telemedicine could serve as a great bridge for patients without direct access to healthcare. To me , the biggest risk seems regulatory, as proven by companies such as Uber and AirBnB state regulation still lags behind innovation.

  13. Great Article. Telemedicine presents a massive opportunity to extend the reach of certain types of medical care to remote locations in developed and underdeveloped markets. Curious to know if Augmented Reality technology has a role to play in helping improve the quality of care delivered by doctors remotely?

  14. Very informative, thank you! I was also thinking about the insurance industry and how they view a company like Teledoc. Teledoc recently lost one health insurer relationship, Highmark, which chose not to renew its contract with Teladoc for fully insured members. Relationships with health insurers might prove to be key in securing long-term growth in addition to other issues mentioned above, such as quality of care and user adoption.

  15. I am fully in support of telemedicine and the benefits it can provide to society! However, I think the biggest issues stem from government regulation and data security issues. The government has strict patient privacy data regulations, rightfully so, but this stifles technological development. The difficulty of such companies to grow quickly means they get less funding, which leads to even less development in the space.

  16. Great post and comments. I’m also very supportive of continuing to develop telemedicine given the magnitude of benefits, especially in rural and other under-served regions. However, I see the real value-add from digital in the medical field as a means to prevent the need for the most expensive forms of healthcare, that is, emergency care. I imagine a world where digital solutions help us to live a healthy lifestyle (informaiton, data capture, motivation, reminders, routine, stickiness, etc.) but also can predict when and what type of care we need. In this situation, I could envisage a greater role for telemedicine as their would be increased data and earlier identification, enabling a greater proportion of treatments to be administered via telemedicine/homecare.

  17. Fascinating post. I’m curious what you think the future of medical training will look like in terms of quality and quantity if this trend continues. Do we see more outsourcing of schooling as well? Or do we tailor training in schools to patient care and holistic treatment while diagnosis and operation is placed in the hands of our most trusted AI/ML bots?

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