The business of offering consumers virtual visits with physicians is booming even as questions about the quality of care and cost effectiveness of those services remain unresolved.
American Well, a Boston-based telehealth firm, raised $81 million in December.
Dallas-based Teladoc, which offers access to doctors through voice or video, raised $50 million in September. Over the summer, San Francisco-based Doctor On Demand raised $21 million. And MDLive started the year with a $23.6 million infusion from investors. Other virtual-visit firms also benefited from the flood of investor interest. Researchers at Mercom Capital Group estimated a 300% increase in funding flowing toward established and startup virtual-visit firms.
An August 2014 Deloitte study calculated there would be 75 million virtual visits in North America in 2014 and that the potential exists for as many as 300 million visits a year. A 2014 Towers Watson survey found that 37% of employers planned to offer their workers telemedicine consultations in 2015, with another 34% planning to do so by 2017.
Investors think consumers will find virtual visits—either by phone or online video connection—more convenient, cheaper and just as effective as in-person doctor visits, particularly for relatively minor urgent-care needs. Insurers increasingly are embracing telehealth. In December, Anthem, the nation's second-largest insurer, announced that it would begin offering telehealth visits with no copay to its Medicare Advantage members in 12 states, including California, Florida and New York.
Advocates of the virtual-visit model argue that expanding access to telehealth services would reduce costs by heading off more expensive urgent care and emergency department care, and that consumers increasingly will substitute virtual visits for in-person visits so that the total amount of services will not rise. But critics question that assumption, cautioning that consumers may use telehealth in addition to traditional in-person visits, thus boosting total spending. They also worry about the quality of video and phone visits compared with in-person visits, and whether virtual care will be coordinated with patients' regular care.
“This fits into a larger initiative we're seeing of trying to provide care in a more convenient way,” said Dr. Ateev Mehrotra, an associate professor of healthcare policy at Harvard Medical School who studies telehealth.
Telehealth companies are all privately held, so financial data on them are not available. But industry observers say Teladoc, Doctor on Demand and American Well are the sector leaders. Each company boasts some big clients. Doctor on Demand counts Comcast as a partner, while American Well has contracts with Anthem and other Blue Cross plans, as well as with Oracle. Teladoc has the giant California Public Employees' Retirement System fund as a client.
Jason Gorevic, Teladoc's CEO, said that his firm's revenue has doubled in each of the past two years, and that it signed up 2.5 million new members as of Jan. 1. In December, the firm provided 50,000 visits, of which about 10% were video-based, with the rest conducted by phone.
Steve Aylward, vice president of sales for American Well, said this month at an event in Washington that his company's mobile app, which allows consumers to connect by video with a doctor through their smartphone, now has been downloaded 1.2 million times, compared with 20,000 times just a year ago.