Imagine waking up with the familiar body aches, chills, and fever of the flu. You have to get dressed, trudge to the doctor, and wait in the waiting room – only to have the doctor spend a few minutes with you. Now imagine a different situation. Instead of leaving the comfort of your bed, you have access to a doctor within minutes from your smartphone or tablet. This is the world Teladoc is attempting to create.
The Current Healthcare Crisis
The U.S. healthcare system is broken. As of 2014, U.S. healthcare spending had reached $3.0 trillion per year and accounted for 17.5% of GDP.1 Additionally, the system has been struggling to adapt from a fee-for-service system to a value-based care system. Lastly, demand for healthcare practitioners outstrips supply, particularly for primary care physicians.2
Teladoc’s Business Model: Disrupting the Market
Teladoc was founded in 2002 to tackle these three issues within the healthcare industry: timely access to healthcare practitioners, the rising cost of healthcare, and quality of doctors and a patient’s experience.3 Teladoc provides patients with 24/7/365 access to board-certified physicians via Teladoc’s technology platform that can be accessed on a computer, tablet, or smartphone. These doctors can see a patient within minutes and can even prescribe prescriptions for common conditions. Not only does this model benefit the patient, but it also helps decrease overall costs for treatment by triaging patients to an overall lower cost of care environment. The video below gives a glimpse into the Teladoc model.
Teladoc’s Operating Model
To deliver on the customer promise of high-quality, low-cost, and timely access, Teladoc has adopted a unique operating model.
- Teladoc’s Customers – Lowering Cost of Care: Teladoc’s targeted customers are large employers and payors, who can offer the service to their plan subscribers. Teladoc monetizes its business by charging both a PMPM (per member per month) fee to the plan sponsor and an additional fee when a patient utilizes Teladoc. Despite the double-fee structure, given the low cost of Teladoc’s services compared to traditional healthcare providers, plan sponsors can save significantly. To date, Teladoc has taken $600 million of costs out of the healthcare system.4
- Teladoc’s Technology – Fixing Access Issues: Teladoc addresses the issues regarding access through its technology platform. Patients can request an appointment ahead of time or be instantly rerouted to an on-demand appointment.5 Furthermore, Teladoc’s technology is scalable and able to accommodate 100M members.4 Teladoc’s algorithmic platform is shown below.5
- Teladoc’s Employees – Addressing Quality of Care: Teladoc does not employ any full-time physicians; rather, it makes use of excess capacity of already practicing physicians, such as hours outside of clinic hours and physicians working part-time schedules. Teladoc also tries to address the perception of quality in terms of the amount of time spent with the patient, averaging 6.5 minutes per patient.4 Lastly, Teladoc has received two years of consecutive perfect certifications (2014 and 2015) from the National Committee for Quality Assurance.6 Clearly these measures have been successful as Teladoc has had no reported quality issues since its inception.4
Teladoc has made significant strides as the first player in the telemedicine space, adding services for behavioral health, dermatology, and tobacco cessation. Teladoc has grown to 17 million members and over 3,000 visits a day.4 However, why Teladoc has not caused as significant a disruption in healthcare is simple: a lack of awareness.
As shown below, utilization rates have been below 5% of those who have access to Teladoc.5 This low utilization rate has caused Teladoc to lose clients, including Highmark’s fully-insured clients.7
To address this issue, Teladoc has instituted welcome kits and targeted marketing on social media and smartphones for organizations that have subscribed to Teladoc.5 However, I think more needs to be done to encourage usage.
- Eliminate Legislative Barriers: One key barrier to telemedicine is legislation – only certain states allow telemedicine providers to prescribe prescriptions. Without this ability, the use of telemedicine is limited.4 Teladoc should continue to campaign to extend the reach of telemedicine.
- Generate Consumer Awareness of Cost: Given the differential in cost between a telemedicine visit and a visit to an urgent care or primary care doctor, Teladoc can impact a patient personally – namely in his wallet. One potential idea would be to partner with the health insurer or plan sponsor to include on a patient’s bill what the cost would have been had he utilized Teladoc instead.
- Profit Sharing: The last thing Teladoc could consider is changing its revenue model to mimic the healthcare industry, moving from a fee-for-service to value-based. Instead of charging a flat fee for access to Teladoc, it could move to charging a higher fee to the insurer when the service is used. This would align incentives across Teladoc and the insurer.
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- “NationalHealthAccountsHistorical.” Center for Medicare and Medicaid Services, n.d. Web. 11 Nov. 2016.
- Court, Emma. “America’s Facing a Shortage of Primary-care Doctors.” N.p., 04 Apr. 2016. Web. 11 Nov. 2016.
- “About Our Company.” – Teladoc for Members. N.p., n.d. Web. 11 Nov. 2016.
- Gorevic, Jason. “Teladoc: Keynote Speech.” HBS Healthcare Alumni Association 2016 Conference. Charles Hotel, Cambridge. 11 Nov. 2016. Lecture.
- “Teladoc Quarterly Investor Presentation.” Teladoc Quarterly Investor Presentation. Web. 11 Nov. 2016. <http://s21.q4cdn.com/672268105/files/doc_presentations/2016/TDOC-Presentation-10-25-16.vUploaded.pdf>.
- “Teladoc Receives NCQA Recertification – Press.” Teladoc Receives NCQA Recertification – Press. Teladoc, 26 June 2015. Web. 11 Nov. 2016.
- Comstock, Jonah. “Teladoc Loses $1.5M Highmark Contract, Sparks Debate on Pricing, Utilization of Telemedicine.” MobiHealthNews. N.p., 01 Dec. 2015. Web. 11 Nov. 2016. <http://www.mobihealthnews.com/47345/teladoc-loses-1-5m-highmark-contract-sparks-debate-on-pricing-utilization-of-telemedicine>.
- Cover Image: Doctor with iPad. Digital image. Telemedicine: What Should You Know? Solix, 30 June 2016. Web. 12 Nov. 2016. <http://www.solixinc.com/2016/06/30/telemedicine-what-you-should-know/>.