The following is part one in a four-part series examining how the growing telehealth industry is influencing healthcare delivery. This part focuses on how telehealth services are changing the delivery of care in rural America and how access to high-speed broadband internet is crucial to the adoption of telehealth. The second part explores the growth of investments in the telehealth space. The third installment is available here, and the final piece can be read here.

Toni VanderPol, family medicine/obstetrics physician at Avera St. Benedict Health Center, demonstrates how the facility's live video telehealth service works. Source: S&P Global Market Intelligence

Jason Semmler credits telemedicine with saving his life.

Semmler had a stroke in 2011 and was transported to a nearby critical access hospital in Parkston, S.D., a town of 1,500 people in the state's southeast corner. He was surprised — and relieved — to find himself under the care of a specialist 75 miles away, thanks to a broadband connection.

"I'm just damn glad it worked when it needed to," Semmler said.

Telemedicine, also called telehealth, primarily involves the remote delivery of healthcare. Services under the banner of telehealth include connecting rural emergency rooms to specialists in hospitals hundreds of miles away and providing basic consultations.

Adoption of telehealth services at inpatient facilities increased from 54% in 2014 to 85% in 2019, according to an annual survey of hospital executives from Definitive Healthcare Holdings LLC, a data analytics firm focused on healthcare providers.

Meanwhile, telehealth investments in venture funding deals for U.S.-based digital health startups that raise more than $2 million have grown more than tenfold between 2011 and 2019, according to Rock Health, a digital health investment firm.

Teladoc Health Inc., whose stock price has doubled since September 2019, is one publicly traded telemedicine and virtual health company that is catching the eye of investors.

Lisa Gill, a senior analyst for healthcare technology and distribution for J.P. Morgan, said in an interview that Teladoc's recent success shows investors are becoming more interested in telehealth.

She also believes that smaller, private telehealth companies, such as American Well Corp., Doctor on Demand Inc. and MDLIVE Inc., have the potential to go public. However, Teladoc has a five-year head start on its competition, Gill said.

Some large tech companies are increasing their presence in digital health. Apple Inc. and Alphabet Inc.'s Google LLC did not respond to S&P Global Market Intelligence's questions regarding their plans to launch telemedicine services. Amazon.com Inc. declined to comment on whether services offered through Amazon Care, an employee healthcare pilot launched in September 2019, would eventually have a public rollout.

Major telecommunications companies, such as AT&T Inc. and Verizon Communications Inc., are partnering with hospitals and healthcare providers to develop and test 5G use cases for the healthcare industry.

Some expected use cases include real-time data analytics, improved medical imaging and augmented and virtual reality training applications for medical training.

Despite ongoing regulatory hurdles, healthcare experts and industry representatives believe that telemedicine can change how modern medicine is delivered in the U.S., particularly in rural areas.

Impact on healthcare, broadband industries

Hospital closures and a lack of medical specialists are key growth drivers for telemedicine.

Since 2005, 166 rural hospitals have closed in the U.S., including 19 in 2019 — the most closures in any year during the time studied, according to ongoing research from the University of North Carolina's Cecil G. Sheps Center for Health Services Research. Furthermore, about 25% of rural hospitals are vulnerable to closures, according to a February report from the Chartis Center for Rural Health.

The patient-to-primary care physician ratio in rural areas is 39.8 physicians per 100,000 people, compared to 53.3 physicians per 100,000 in urban areas, according to the National Rural Health Association.

That workforce shortage has created opportunities in roughly half of all U.S. states for Avera eCARE LLC, a Sioux Falls, S.D.-based company that has been providing telehealth services since 1993. The team running Avera eCARE's headquarters provides 24/7 patient monitoring for hospital intensive care units, coordinates facilities' pharmacy needs and connects doctors to emergency rooms through livestreaming.

Brian Skow, Avera eCARE's medical director, said financially strapped rural facilities can use telehealth to increase their revenue by keeping patients at the facility rather than transferring them elsewhere when unable to provide the necessary services.

"It can actually pay for itself," Skow said.

Telemedicine can also support hospitals with a small staff of doctors and nurses to serve a large geographic region. Having back-up telehealth services has kept physicians at hospitals by curbing burnout, and, in some cases, has even helped health systems attract more talent, said Kelly Rhone, medical director of outreach and innovation for Avera eCARE.

The expansion of these healthcare services would not be possible without broadband connectivity. Recent upgrades to broadband infrastructure in certain parts of rural America have paved the way for fiber connections at some telehealth facilities. The connection enables enhanced bandwidth and lower latency, leading to clearer conversations and imagery with limited interruptions and buffering.

"When you're a doctor, maybe importantly, the patient, you don't want any chewing, or buffering of frames," said Mark Shlanta, CEO of SDN Communications, a broadband provider that works with Avera eCARE. "You want the full data flow to take place with as little latency as possible and then similarly, you want the bandwidth to be able to support the high-definition cameras that they use in their ERs, so that the doctors can have the best view."

When Avera eCARE first began, facilities were almost exclusively connected through copper wire. While some facilities were still reliant on copper through 2015, most facilities switched over to fiber in 2005-2006.

Horizon Health Care's De Smet, S.D., facility is one of the company's clinics using telehealth services to help connect patients with specialists across the state. Source: S&P Global Market Intelligence

Angela Steffensen, a licensed social worker and behavioral health specialist with Horizon Health Care Inc., a primary care provider with 32 community health centers across South Dakota, says a copper connection can hinder or even prevent treatment from reaching a community.

Horizon's clinics are mainly in small, rural communities, and telehealth has allowed specialists like Steffensen to reach patients who otherwise would not have those services.

Steffensen said in August 2019 that the company's facility in McIntosh, S.D., a town of about 175 people on the northern border of the state, still relies on copper, leaving her unable to effectively deliver treatment via telemedicine.

Ross Petrick, general manager of Alliance Communications Cooperative Inc, a South Dakota-based broadband provider that serves Horizon Health Care facilities, said telehealth is essential to keep rural hospitals and clinics open.

Without telehealth services, a "community could start to die," Petrick said.

Reimbursement and payment hurdles

Telehealth reimbursement can vary depending on the provider's location and the type of facility and treatment. Moreover, the three largest U.S. healthcare payers — private insurance, Medicare and Medicaid — do not offer uniform coverage of telehealth services.

Medicare might reimburse specific facilities for a specific treatment for patients in a rural area, while some patients in an urban area may not receive any coverage. Private insurers can cover different treatments but may not reimburse at the same rate as Medicare. Some states may cover different treatments at different rates than Medicare or private insurance due to their flexibility to adopt Medicaid.

"Reimbursement is the biggest issue that really impedes growth, and it's the parity for in-person to be equal to telemedicine," Skow said. "That's probably the biggest gap."

To address issues regarding adequate reimbursement for telehealth services, a handful of states have passed payment parity laws, which require payers to reimburse some telehealth services at the same or similar rates as in-person visits.

The Centers for Medicare and Medicaid Services has been opening up payment policies over the past few years. Medicare began covering remote patient monitoring for home health agencies in 2018, and in April 2019, a payment rule was finalized allowing Medicare Advantage plans to cover telehealth services.

The CMS also added three new telehealth reimbursement codes in November 2019 for physicians that provide substance use disorder treatments.

Cowen analysts said in a Feb. 24 report that "expanding Medicare coverage will lead to increased spending by providers on their telehealth capabilities, which will not only help drive utilization growth in Medicare but will likely also benefit overall telehealth utilization."

Avera St. Benedict Health Center in Parkston, S.D., uses telehealth services to provide essential care to area patients, including connecting the emergency room to specialists 75 miles away via a live video feed. Source: S&P Global Market Intelligence

Avera eCARE CEO Deanna Larson said Medicare coverage is likely to influence private insurers to also cover telehealth services.

The company has collaborated with CMS Administrator Seema Verma, U.S. Department of Health and Human Services Secretary Alex Azar and White House officials to expand coverage and address outdated legislation, some of which was written before the capabilities of telehealth technology were truly understood, Larson said.

Ateev Mehrotra, associate professor of healthcare policy and medicine at Harvard Medical School, said in an interview that telehealth reimbursement should not be opened up indiscriminately. The CMS should instead take a strategic approach and reimburse for specific services and areas that are lacking healthcare services, like rural areas and certain urban areas.

"My concern is that if we broadly expand the use of telemedicine, the care that will be received will not be in that high-value category, and much of that care will be in the low-value category. And we'll increase spending for no clinical benefits," Mehrotra said.

Even if payment policies and insurers start covering telehealth services, availability depends on access to broadband internet, which is still a challenge for patients and providers across the country.

A May 2019 report from the Annals of Internal Medicine showed that broadband penetration is 96% in urban counties, 82.7% in rural counties and 59.9% in counties with extreme access considerations — those that have fewer than 10 people per square mile. The most rural of counties that also had shortages of primary care providers and specialists like behavioral health providers had some of the worst penetration rates in the country, according to the report.

Krisda Chaiyachati, co-author of the report and medical director for the telemedicine program at Penn Medicine, an academic medical center in Philadelphia, said in an interview that access challenges in the U.S. will continue as physicians move out of rural America and the regions struggle to attract talent.

"Broadly speaking, I think we are at an access crisis, particularly in rural communities," Chaiyachati said. "You can just see, essentially, the writing on the wall that rural communities are going to have fewer and fewer providers to be able to care for them."