McKinsey Analysis: Up to $250B of Healthcare Could Be Virtualized

In the face of the COVID-19 pandemic, telehealth has helped expand access to care while protecting both providers and patients. Plenty of patient care organizations around the U.S. have experienced massive surges of virtual care visits, and now, a new analysis from consulting firm McKinsey & Company predicts that the telehealth market could grow to $250 billion.

The analysis noted that providers have rapidly scaled offerings and are seeing 50 to 175x the number of patients via telehealth than they did before. Recent health system examples of this trend have been profiled by Healthcare Innovation, such as at MedStar Health, which has experienced a 500x growth in video visits.

Pre-COVID-19, according to McKinsey & Company, the total annual revenues of U.S. telehealth players were an estimated $3 billion, with the largest vendors focused in the “virtual urgent care” segment: helping consumers get on-demand instant telehealth visits with physicians (most likely, with a physician they have no relationship with). However, they added, “with the acceleration of consumer and provider adoption of telehealth and extension of telehealth beyond virtual urgent care, up to $250 billion of current U.S. healthcare spend could potentially be virtualized.”

Of the $250 billion—or 20 percent of all Medicare, Medicaid, and commercial outpatient, office and home health spend—that could potentially be virtualized, the analysts further broke it down by healthcare delivery segment. They believe that 35 percent of home health services could move to virtual, as could 24 percent of office visits/outpatient encounters, with another 9 percent moved to “near virtual,” as well as 20 percent of ED visits that can be diverted to virtual.

According to the firm’s researchers “This shift is not inevitable. It will require new ways of working for a broad set of providers, step-change improvements in information exchange, and broadening access and integration of technology. The potential impact is improved convenience and access to care, better patient outcomes, and a more efficient healthcare system. Healthcare players may consider moves now that support such a shift and improve their future position.”

More telehealth survey data is in

More data from the organization’s multiple consumer and physician surveys from this spring emphasizes how much virtual care has surged under COVID-19, as approximately seven in 10 in-person visits were cancelled due to the crisis. For example, compared to just 11 percent consumer use in 2019, 76 percent of survey respondents now indicate that they’re likely or moderately likely to use telehealth going forward, with 74 percent of telehealth users reporting high satisfaction.

Overall, health systems, independent practices, behavioral health providers, and others rapidly scaled telehealth offerings to fill the gap between need and cancelled in-person care, and are reporting 50 to 175x the number of telehealth visits pre-COVID. Additionally, the research revealed, 57 percent of providers view telehealth more favorably than they previously did before COVID-19, and 64 percent said they’re more comfortable using it.

To this end, a recent Frost & Sullivan analysis predicted that in 2020, “the telehealth market is likely to experience a tsunami of growth, resulting in a year-over-year increase of 64.3 percent.”

One key reason for this evolution, as highlighted in the McKinsey research, is that the Centers for Medicare & Medicaid Services (CMS) is temporarily approving more than 80 new telehealth-based services as well as lifting restrictions on originating site, allowing Medicare Advantage plans to conduct risk assessments via telehealth, and adding other regulatory flexibilities to increase access to virtual care.

According to the researchers, “Many of these dynamics are likely to be in place for at least the next 12 to 18 months, as concerns about COVID-19 remain until a vaccine is widely available. During this period, consumers’ preferences for care access will continue to evolve, and virtual health could become more deeply embedded into the care delivery system.”

Core telehealth challenges do still remain, though, the analysts pointed out, such as providers’ concerns about security, workflow integration, and effectiveness compared with in-person visits, along with the future for reimbursement. Similarly, there is still a gap between consumers’ interest in telehealth (76 percent) and actual usage (46 percent). Factors such as lack of awareness of telehealth offerings, education on types of care needs that could be met virtually, and understanding of insurance coverage are some of the drivers of this gap, they noted.

The report then identified five models for virtual or virtually enabled non-acute care and analyzed the full potential of healthcare volume and spend that could be delivered this way. Those models are:

• On-demand virtual urgent care as an alternative to lower acuity emergency department (ED) visits, urgent care visits, and after-hours consultations

• Virtual office visits with an established provider for consults that do not require physical exams or concurrent procedures

• Near-virtual office visits that combine virtual access to physician consults with “near home” sites for testing and immunizations, such as worksite clinics or retail clinics

• Virtual home health services that leverage virtual visits, remote monitoring, and digital patient engagement tools

• Tech-enabled home medication administration

The researchers concluded, “The window to act is now. The current crisis has demonstrated the relevance of telehealth and created an opening to modernize the care delivery system. This modernization will be achieved by embedding telehealth in the care continuum at scale. A $3 billion revenue market has the potential to grow to $250 billion. The seeds for success will be sown in the next few months during the COVID-19 crisis.”