Healthcare Technology Featured Article

July 07, 2020

$2 Trillion Telemedicine Spending in Queue


Carriers, it’s your move

The US has learned from years of costs spiraling upward that the healthcare services model needs what management consultants call process improvement. Telemedicine is one cost control process. Employing it entails skillfully moving the levers of communications technology, network infrastructure, and public policy.

Telemedicine has established a footing and generated meaningful amounts of revenue in the past decade. COVID-19 only amped-up awareness and usage. Doctors and patients, perhaps previously unfamiliar with telemedicine, now use it to varying degrees. 

Global healthcare spending was $7.8 trillion in 2017, growing at 5.7% annually, according to the World Health Organization. That places the expenditure at $10.06 trillion in 2022 based on estimates by Deloitte. The Centers for Medicare and Medicaid Services projects US healthcare spending to be 20.1% of GDP by 2025.

If telemedicine would capture one-fifth of total global healthcare spending, as our models show, it would be a $2 trillion annual business.

The glitch is that telemedicine, despite its successes, accounts for one-half of one percent (.005) of all healthcare spending. In other words, $50 billion not the $2 trillion it should be.

Telemedicine performance operates far below the revenue opportunity.

Getting to $2 trillion 

It isn’t possible to capture the $2 trillion total addressable market if telemedicine adheres to the same business practices that today generate $50 billion in revenue and 10-15% annual growth. Something transformational is necessary.

Large tier-1 carriers should have the motivation and possess the opportunity and resources to bridge the gap.

In the US, AT&T and Verizon are probably the best candidates to go after the 2 trillion telemedicine market. BT, Orange, Deutsche Telecom, and NTT, incumbent carriers on other continents, are mirror images of AT&T and Verizon, similarly qualified, and also potentially motivated.

The two principal businesses of the tier-1 carriers are wireline and wireless. Wireline, effectively landlines, is under revenue and earnings pressure and holds onto a precarious future. Wireless as it currently exists is an attractive though maturing business.

While other revenue sources, including entertainment, programming, and TV subscription bundles, generate cash flow, the long-term contribution of these enterprises to the tier-1s is uncertain. Often, the new fields pursued by the carriers are mature, overcrowded, highly competitive, and not likely big winners for the telcos.

Carriers are at their finest when new businesses they pursue represent enormous emerging opportunities, lack substantial competition, and are waiting to be dominated. We see entertainment lacking each of these characteristics, while telemedicine exhibits them all.

Tier-1 carriers have some telemedicine revenue today. Every time a doctor and patient engage in a virtual office visit using FaceTime, Zoom, or doxy.me, carrier networks are used. The business is not all incidental, though. AT&T and Verizon have telemedicine webpages, while other tier-1s have telemedicine business partnerships. While attention-getting moves, none are game-changers or transformative as a $2 trillion business would be.

Why tier-1 carriers make sense

Telemedicine is a promising opportunity where the carriers start with a decisive competitive advantage.

The largest carriers have wireline and wireless networks - the centerpiece of telemedicine, global coverage, hundreds of thousands of employees, access to capital, customers, distribution, data centers, engineers, R&D, billing, and excellent legal and regulatory experience. All have trusted brands and an incentive to add a multi-trillion-dollar business opportunity to the portfolio. If that were not sufficient, large carriers are exceptionally well managed.

Large service providers are likely to have more to offer telemedicine than any other class of company.

A good starting point

A single country or region is useful as a telemedicine jumping-off point. There may be shorter lines of logistics, similar business practices, and more manageable legal and regulatory issues.

The United States is such a jumping-off point. It accounts for close to $4 trillion in healthcare spending. Costs are skyrocketing and will top $6.2 trillion by 2028, according to The Centers for Medicare and Medicaid Services. The US is one, but not the only place to start, depending on the carrier. 

No country or region should keep any carrier headquartered elsewhere from success. Each of the large ones has global operations, networks, employees, and customers across the world. As every tier-1 puts down telemedicine stakes, partnerships will sprout everywhere and erase or backfill barriers. Then once a carrier establishes itself, the global expansion will occur. The $2 trillion promise is fulfilled. 

About: The Eastern Management Group is a global communications industry management consulting firm with offices in New York and offices in Tokyo. Over 40-years, the Eastern Management Group has advised eighty percent of the largest communications providers on new business issues. John Malone is CEO and a former AT&T executive. For more information, contact John Malone at 212-738-9402 Ext. 2201 or jmalone@easternmanagement.com or easternmanagement.com

Note: The terms telemedicine, telehealth, and connected health are often interchangeably used. This post refers to telemedicine (aka connected health), a conceptual model for health management where devices, services, or interventions are designed around the patient’s needs, and health-related data is shared in such a way that the patient can receive care in the most proactive and efficient manner possible. (Connected Health Definition Source: Caulfield BM, Donnelly SC)




Edited by Erik Linask






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