Healthcare is often the last industry to be disrupted by a new innovation. While digitalization and globalization have touched almost everything we do, our model for healthcare delivery is quaintly old-fashioned. Information often flows using paper and service delivery is almost always local.
However, with improvements in TeleHealth – including remote monitoring technologies and secure video-conferencing — there are now significant parts of the healthcare supply chain that can delivered remotely. De-linking healthcare delivery from physical location has significant implications, both for quality of care (e.g., keeping people out of hospital) and efficiency. This is both an opportunity for, and a threat to, existing provider systems like Partners Healthcare.
Today: TeleHealth as a solution to access issues
The healthcare industry has embraced TeleHealth as a solution to a pressing problem – the delivery of health services in rural areas. 20% of the US population lives in a rural area, but only 9% of the nation’s doctors practice there . For example, Nantucket Cottage Hospital is a Partners-owned hospital on Nantucket Island, a small island located 30 miles off the coast of Massachusetts . Nantucket is a popular vacation spot, but has a population of only 10,000 for most of the year. Peaks and troughs in hospital occupancy make staffing a challenge, along with the difficulty of recruiting physicians to a remote location year-round . This results in significant transport costs associated with supply of medical treatment for those on the island. TeleHealth has eased that burden in specialties like dermatology where information is shared visually.
Tomorrow: TeleHealth to match supply with demand
Thirty years ago your local pharmacy competed with the pharmacy across town. If there was only one, you probably paid a higher price for it. Now you can go on Amazon or Walmart, compare prices and have an item shipped across the country. Regional players can no longer extract margin for simply being present. Today, when a company looks for a call center location, they may entertain bids from Costa Rica, India and Romania.
But pricing in healthcare is still based on very local competitive dynamics — How big are you? How many other hospitals are there nearby? For many provider systems, the answer to these questions are big, and not many .
There are also large supply-demand imbalances within the US. Exhibit 1 shows that there is a 2.5x difference in physician density between the highest and lowest density states [Chart created from data sources 5 & 6]. Because the supply of healthcare is local, the market cannot clear efficiently.
In a world where healthcare can be delivered remotely localized supply/demand imbalances should normalize. This presents an opportunity for Partners – to expand its reach outside Massachusetts – and a potential risk – of additional competition from provider systems outside the State.
So far, Partners is taking advantage of the opportunity. In 2011, it launched a broader TeleHealth initiative and has conducted over 20,000 virtual visits [7,8]. Partners is also using TeleHealth to reduce the need to transport patients between facilities. These growing initiatives will improve its cost position and will help it stay competitive. Partners is also using the technology to increase national access to high-quality specialists, through offering e-consults for second opinions to patients outside Massachusetts. Both these uses are growing and there is growing interest from practices within Partners Healthcare to join TeleHealth programs.
Eventually: TeleHealth as an outsourced service?
But remember… the US has double the healthcare spending per capita of the average developed nation . Much of this is driven by high physician compensation, which is also approximately double the average of other developed nations . When the contrast is drawn to emerging markets, the difference becomes even starker.
Medical tourism (a.k.a. outsourcing) has existed historically for expensive procedures that can be achieved at significant discounts outside the US without compromising quality. Companies and health plans are increasingly reimbursing these procedures carried out abroad. But why constrain ourselves for high cost procedures? Why not use highly qualified medical teams in low cost hubs to conduct medical triaging, primary care visits and behavioral health consults?
What’s next for Partners Healthcare?
Partners could choose to either fight the trend (e.g., by lobbying to maintain regulations on state and foreign licensures) or embrace it. Partners could leverage its stellar reputation to support global connectivity in state and federal legislatures, expand use of remote monitoring technologies and extend its services across the US and beyond. Getting ahead of this trend could establish Partners Healthcare not only as a pre-eminent Massachusetts institution, but a global one.
Many questions remain – for Partners and for everyone in healthcare. Eighteen percent of GDP is tied up in healthcare services, largely in wages . How does a high-wage country like the US compete in a global market? Will healthcare workers be the next coal miners?
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 Roger A. Rosenblatt and L. Gary Hart, “Physicians and Rural America,” Western Journal of Medicine 173, no. 5 (2000):348-51. Accessed November 2017.
 Pam Belluck, “With Telemedicine as a Bridge, No Hospital is an Island”. New York Times, October 8th 2012. Accessed November 2017.
 The Use of Telemedicine to Address Access and Physician Workforce Shortages. American Academy of Pediatrics. July 2015. Accessed November 2017.
 CC Havinghurst, “The Provider Monopoly Problem in Healthcare” Oregan Law Review Vol 89: 847. Accessed November 2017.
 Data excerpted from Total Professionally Active Physicians, April 2017. Kaiser Family Foundation data. Accessed November 2017.
 Data excerpted from Annual Estimates of the Resident Population for the United States, Regions, States and Puerto Rico; April 1, 2010 to July 1 2016, US Census Bureau, Population division. Accessed November 2017.
 Adam Licurse, “One Hospital’s Experiments in Virtual Health Care”, Harvard Business Review, December 9th 2016. Accessed November 2017.
 Partners HealthCare continues Accountable Care Organization collaboration to deliver better care to Medicare patients. Press release, January 25th, 2017 on Partners Healthcare website, accessed November 2017
 Interview with Partners Healthcare Physician, November 15, 2017
 Organization for Economic Cooperation and Development, OECD Health Statistics 2016, June 2016. Compiled by PGPF. Accessed via Peter G Peterson Foundation website. Accessed November 2017.
 Congressional Research Service analysis of Renumeration of Health professions, OECD Health Data 2006, accessed via New York Times, “How Much Do Doctors in Other Countries Make”, July 15 2009. Accessed November 2017.
 Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group at www.cms.hhs.gov/nationalhealthexpenddata, accessed November 2017