At the beginning of 2020, 0.1% of all medical visits each week were conducted via telemedicine. By late April, the height of COVID-19's first wave in the US, that number had increased to nearly 14%. In our final episode focusing on health and wellness tech, we're joined by Dr. Janine Knudsen, a primary care doctor at Bellevue Hospital in New York City, and Activant Capital founder and partner Steve Sarracino to discuss advancements in telehealth brought on by the pandemic. Plus, PitchBook Analyst Kaia Colban—who covers health and wellness technology for both enterprise and retail spaces—highlights some of the challenges that still exist within telemedicine and what its future might hold.

Explore more of Season 2 and subscribe to get new episodes of "In Visible Capital" every Tuesday on Apple Podcasts, Spotify, Google Podcasts or wherever you listen. For inquiries, please contact us at podcast@pitchbook.com.

Transcript

Janine Knudsen: A lot of times, we have vendors come to us and say, "Look at our product, it's so easy to implement." And then we just say, "Oh, you have no idea." We really—it is a long process to get from signing on to a specific vendor or software to truly getting it on the ground. 

Lee Gibbs: Welcome back to "In Visible Capital." In this season, we're diving into emerging technologies to explore how those technologies are being leveraged during the COVID-19 pandemic. 

I'm your host, Lee Gibbs. As someone whose job it is to stay up to date on industry trends, I work closely with PitchBook research analysts and industry professionals to understand drivers across private and public capital markets. For our final episode in the health and wellness space, we'll be discussing recent advancements in telemedicine, also known as telehealth, brought on by COVID-19. We'll look at some of the challenges that are still present and explore what the future might hold for the space. 

To help set the stage, we're welcoming back Kaia Colban, our Health and Wellness emerging tech research analyst who's been paying close attention to the telemedicine space. 

Kaia Colban: Telehealth, which is another name for telemedicine, is an area within health tech that focuses on treating patients remotely. So instead of having to go to the doctor's office and sit down with them and see them one on one, you're able to contact them over the phone, over a video chat, or connect with them through a remote patient monitoring device—and that would be some type of tool that enables the doctor to view you or specific biometrics in order to determine how to best treat any sickness or illnesses you may have. 

Lee: At the height of COVID, the United States saw a drastic uptick in demand for telehealth visits. According to a report from the Commonwealth Fund, in the beginning of 2020, around 0.1% of all medical visits in a given week were conducted via telemedicine. By late April, that number rose to nearly 14%. 

Janine: For providers ... it has been, I feel like we've aged 10 years and six months. Both the technology has improved rapidly and the uptake of it, but also, like, our DNA has aged because it has been really difficult. I mean, it's like learning a totally new skill set, very rapidly, under fire. 

Lee: Janine Knudsen is a primary care doctor at Bellevue Hospital in New York City. Until recently, she also served as a medical director in the New York City Office of Population Health. 

Janine: In that role, I got pulled into serving as the co-lead to developing telehealth interventions at the height of the COVID pandemic. So we were doing everything from implementing video visits and ambulatory care and outpatient to trying to come up with a tele-ICU model or doing tele-dermatology, e-consult connections, quite a few projects. And in that time, I think I learned a lot about what it takes to get telehealth initiatives off the ground, not just at one clinic or one practice, but on a system level. Initially, I think we approach telehealth is just a new vehicle to provide the care we normally provide in the way that we normally provide it. But we're learning that to provide telehealth requires actually a new set of skills, a new way of doing things, like a totally new approach. Tech is probably 10% or 20% of what we were solving for, and the other 80% was the people side of things, the workflows, the staffing, the training and the patient side. And that was the hardest nut to crack, I think of all. 

Lee: To avoid overwhelming hospitals with a high number of patients, the pandemic did spur some swift policy changes that enabled the expansion of telemedicine to help keep people at home. 

Kaia: We saw the government take away a lot of regulations that were previously limiting the impact that telemedicine could have. For example, there were regulations surrounding where specific physicians could practice or which insurance companies and governmental programs will reimburse for telemedicine care, and those regulations have become a lot looser. In cities where COVID-19 had a huge outbreak and doctors were swamped, there was doctors in other states, other locations that could then swoop in through telemedicine and provide additional care. You also saw with a lot of remote patient-monitoring tools, which are used in telemedicine, you could have doctors gain access to specific information about the patient, such as their temperature or how frequently they are coughing, without having to once again expose themselves to the patient's illnesses or giving up the hospital bed. So I think COVID-19 definitely increased the ability for people to get treated through a telemedicine. 

Janine: Expanding access through telehealth has been the biggest benefit. Many of our patients are essential workers; they work in supermarkets or for the MTA (Metropolitan Transportation Authority) or in health care as someone's health aide. And they used to have to take a whole day or a half-day off of work just to come to clinic, so they'd miss appointments or it would eat into their paycheck or make their lives hard. And now they can take these telehealth visits from work or from home. Another population of mind that I think has really benefited is the homebound population. It gives patients better access to the health care system, but it also gives the system better access to patients. We can proactively reach out to them better through telehealth and triage their needs better. 

Lee: Increased access is just one of many benefits that telehealth solutions can offer. But as Dr. Knudsen pointed out, technology is only one small piece of the puzzle. 

Janine: I think the biggest learning is to create that space for innovation in health care, which I'm sure, you know, many people listening to this will just know how much red tape there is in health care, how many regulations that you need to be mindful of when you're implementing anything. It gets in the way of a lot of larger systems wanting to adopt new technology. A lot of times we have vendors come to us and say, "Look at our product. It's so easy to implement." And then we just say, "Oh, you have no idea." We really—it is a long process to get from signing on to a specific vendor or software to truly getting it on the ground. 

Janine: One specific example, and probably the biggest project that I worked on was on implementing video visits. Technically, everyone probably knows how to FaceTime, but we had to find HIPAA (Health Insurance Portability and Accountability Act) compliant software that our system was comfortable with; we had to come up with workflows; we had to train our staff and also train our patients on how to use it. And it was not a smooth ride. I think, for no health system did that go super smoothly and for us, it definitely didn't. Like if I take a lot of time to try to troubleshoot and figure out a video visit with one patient, that's two other patients I'm not helping in that hour that I could have called. And that's exactly what happened to me in clinic this morning. I had, I think, eight or nine patients booked and I really wanted to get a video visit done with one of them because she was feeling fairly depressed and really needed a lot of encouragement. And I just thought that having that virtual face-to-face encounter would really help her trust me and my recommendations and just have a better treatment relationship. And so I just I took the extra 20 minutes to troubleshoot the video and make it work. But then those were two patients that I then had to apologize to for running late over the phone—we did phone visits with the others. And if I had to do that every single time we implemented a new technology, I would be so burned out by the end. So we really need to make what we offered to clinicians easy for them to implement, already thought out and already tested, and for the workflows to be pretty tight. 

Lee: So despite innovative offerings on the technology side, our health care systems continue to face logistical challenges and how that technology gets utilized. Still, with more patients and physicians now discovering the benefits and possibilities around telehealth, tech providers are experiencing accelerated growth. 

Kaia: So a lot of telemedicine providers simply connect the patient to a hospital; they don't hire their own physicians, but they're just the technological platform. So we saw these companies gain a lot more deals. They were signing on a lot more companies, increasing their revenues, and a lot of them were able to successfully raise very large VC rounds. 

Lee: According to PitchBook, companies tracked in the virtual health segment globally raised $1.1billion in venture funding in Q3 of 2020, a roughly 67% increase from the first quarter. 

Kaia: Many startups recently gained huge traction and even some IPOs across the board, most notably Amwell, which IPO'ed very recently. And we also saw the merger of the Livongo and Teladoc, two companies that were both previously public. We expect to see increasing acquisitions among these large players, acquiring the smaller firms, and then also many firms to be raising later stage VC deals. 

Steve Sarracino: What COVID has done is probably shortened what could have taken 40 years to maybe 20 or 30. Now, technology has not changed in the last six months, but mindsets have. 

Lee Gibbs: Steve Sarracino is a founder and partner at Activant Capital, a private investment firm based out of Connecticut. 

Steve: So companies that were less willing to adopt technology-oriented solutions to big problems are now much more willing to have those discussions and much more open to actually paying for things that are working. We're focused on what we call "commerce infrastructure," and that's generally software and technology that enables businesses and consumers to buy and sell goods and services in a more tech-forward way. We're a little bit of the later stage firm, so we called growth equity. We're writing kind of $20 million to $40 million checks into businesses that are hyperscaling. And they really turn the corner on growth where they're growing really 100% or more. The business models working and the capital we invest is funding, hiring, go-to-market expansion and, of course, product expansion. 

Lee: In October 2020, Activant co-lead a $118 million Series E for Seattle-based startup 98point6, who makes a text-based primary care app. 

Steve: 98point6 is basically a primary care physician in your pocket. And when we look at what's going on in the primary care market, that's one of the most inefficient parts of the health care stack. You have to go into a clinic and they tend to be the gatekeeper to get to other specialists. And as investors in, what we call commerce infrastructure, we knew there was a way beyond just typical telemedicine to give people access directly to doctors in a more efficient manner. And interestingly, 98point6, it's vertically integrated. So they have their own doctors. These are world-class doctors. They're getting paid very well. And the primary care market as a graduating medical student or out of residency, it's a difficult market right now, given where health care has gone. And so they're paying well. You're spending three to four days behind screens helping manage patients, and then you're spending a day, maybe two, in a clinic. So for the doctors, it's an outstanding opportunity. But for the patients, what really blew us away, 98point6, is that the utilization rates were five to six times out of telemedicine, out of the gate. So rather than the traditional telemedicine industry which is all about driving utilization down because their revenue is fixed, 98point6 wants to drive utilization up as high as possible. You know, 70% of primary care issues you can diagnose either over text or you can video through the app. So things like you have a rash or a UTI or want birth control pills or what have you, it's very efficient. It lowers costs for the companies that use it. So, for instance, the self-insurers use 98point6, but also as a consumer, it's $10-$12 a month and you don't get charged significantly more each time you use it. And so having something in your pocket that's asynchronous, you can text, and you know, "Hey, I'm having this issue." You put the phone down and get back to it. You can schedule time with a physician to talk to them. It changes the way you're going to interact with the physician. It's already paid for, you don't have to schedule it, you can do it while you're at work and it's very efficient. And that's why we're so excited about it. 

Lee: As Steve pointed out, the potential cost saving for patients under a model like this are significant and could be a more affordable way to extend health care access to vulnerable populations. But Dr. Knudsen explains that cost is not the only barrier to creating an equitable health care solution. 

Janine: You can't leave anyone behind. Our job is to be there for all patients, no matter what their ability. And so we really, I think, for every project that we implemented, we're asking those questions about access and equity to make sure we were reaching everyone. 

Janine: There's one actually enormous problem that has come up in every single intervention we've done that just hasn't been solved for a while and that's language differences. I mean, at health and hospitals, we—oof, I'm going to get this wrong—I think we have more than 100 languages that patients speak. Our patients just come from everywhere. And our current video visit software does not allow for the integration of interpreter services. When a patient sends a message back in the patient portal and it's not in English, we have to reject it. I'm sure not every provider is doing it. They're trying to be patient-centered, but it's a medical-legal issue. 

Lee: Beyond language and other cultural challenges is something many of us in the modern world take for granted: access to broadband. 

Kaia: So one of the great things about telemedicine is that it can enable people who live in rural areas very far away from a doctor's office or maybe close to a primary care provider, but very far from a specialty provider to access high-quality doctors who have expertise in specific areas. But when you get to too rural an area, there's the risk of not having Wi-Fi. Are they able to get the devices in the first place? You know, is it going to take days to ship it to them? When you're looking at developing countries, the ability to use telemedicine becomes a lot more complicated, largely due to Wi-Fi. And then you also have people on ships in the U.S. Coast Guard who are trying to use telemedicine to connect to doctors while they're out at sea. But are they able to connect to the platform? You know, if other areas of technology improve, that'll increase the potential market size of telemedicine. 

Steve: It's hard for us as investors to really push the envelope on broadband rollout. But it's coming in most places, and we've seen some really neat solutions, by the way, that involve, you know, getting broadband to rural areas with balloons and blimps and other ways. So there's a lot of really smart people working on these problems, which always makes me feel really optimistic in these interesting times we're in right now. 

Lee: There's another segment within telehealth where broadband access could also be crucial to growth. 

Kaia: I think remote monitoring devices are also gaining a lot of traction, especially those used in tandem with telehealth. We also see a lot of biometric companies that were previously consumer-focused now start to become remote patient monitoring devices. 

Lee: Remote patient monitoring devices use digital technology to collect medical data from an individual and electronically transmit that information to a health care provider for assessment and monitoring. 

Janine: Remote patient monitoring was a hot topic pre-COVID and now has really picked up steam because it's the way, potentially, to send someone home from an emergency room visit so that they can recuperate at home, but keep a close eye on them so that if they decompensate, we can bring them back in really quickly. Thankfully, that's like a very linear thing. If their oxygen level drops, you give them a call and you get them back in. It gets a little bit more complicated with blood pressure monitoring and diabetes glucose monitoring, which I think are the two other big areas, mostly because there's so much more to just giving out the technology and how and telling the patient to use it. There's telling them the time of the day, having them monitor the things they did in their life that may have affected their measurements. You know, did you eat a big salty meal the day before? Did you have a fight with your spouse before you checked your blood pressure? Like, you know, what were you eating? What kind of carbohydrates did you eat in the seven days before your blood sugars went through the roof? So the tech currently doesn't necessarily capture all of that. There's something important about a patient just being able to see their data and understand what they're doing. But then there's also that next step of transferring all that information to the clinic side, to the providers. How do they quickly absorb all that information? It's hard to sift through, like all the glucometer readings, I spent a lot of time on the phone with my patients, having them say, you know, "At this time my sugar was [this]." If I got a big dump of that information, I may still have to walk them through all of it because to really understand how they checked it, if it was correct, etc. 

So, you know, solving for that piece of like what information really gets transferred to the provider and how is helpful. 

Kaia: User experience is key when creating a successful telemedicine company. And this is a trend we don't just see in telemedicine, but you see everywhere when you're creating consumer platforms. Patients want to use platforms that are easy to use. They need to be able to understand it. They don't want to have to overcome a huge learning curve, especially when you look at who the people using these technologies might be. They might be elderly who aren't super accustomed to technology, and they need to be able to learn how to use this without getting frustrated. With remote patient monitoring tools, you need things that are simple, that are elegant, that are sleek. The patient enjoys wearing nothing that's too bulky. You know, we now see watches and we see headphones that can take your blood pressure. We see rings that are stylish and making a device or platform that the consumer wants to use is really key to success in this industry. 

Janine: And part of that is that, you know, our diabetes nurses and clinic are amazing. But if they had to learn like different tech and have all these different companies that patients are getting their tech from and have everything be so different, and if they had to be the experts and training patients and how to use everything, that's a lot to ask of them, you know, for expanding beyond just glucometers and blood pressure cuffs, but making things simpler for everyone, I think can really help. 

Lee: Okay, so we've talked through a number of opportunities and challenges currently facing the telehealth industry, but we've yet to get to the real elephant in the room. 

Some of the HIPAA regulations were loosened in this environment. And I guess I do wonder, willing that we, at some point, get past this and we are in a place of more normalcy. Do you anticipate HIPAA regulations being evolved moving forward, you know, to allow more of this patient-provider relationship to be online? 

Janine: I definitely think HIPAA is a big barrier. But I think the payment piece is also so important. Telephone visits did not used to be reimbursed in the way that they became reimbursed during COVID, and right now that's temporary. With HIPAA there's so many issues there, you know, getting BAAs (business associate agreements) signed with vendors and data use agreements, that takes time. Lawyers are, all of our lawyers are like frantically working on so many things right now. You know, with video, specifically, there's so many questions that I don't think the HIPAA law was designed to answer. And, you know, yeah, vendors, I think, are still sort of navigating how to convince people that they're HIPAA compliant and what that looks like. And so there's just still a lot to learn. I do hope that we end up at a place where all these changes become permanent, because if anything, if the payment goes away or if someone cracks down on HIPAA regulation or whatever, like we're going to lose all the progress that we made. 

Kaia: One of the reasons for the rapid growth of the telehealth industry is the recent regulation changes that came about with COVID. And we still don't know where that's going to go. And that's going to be up to probably whoever wins the next election, as we don't foresee COVID going away anytime soon and not knowing what's going to happen there could pose a lot of risk. 

Lee: As of October 2020, telehealth visits have leveled out to just around 6% of all visits in a given week, according to the same Commonwealth Fund report referenced at the top of the episode. While there's still significantly more visits taking place via telehealth than we saw prior to COVID, there is a question as to whether that demand will continue once the pandemic passes. 

Janine: So we're actively trying to answer that question. I think a lot of health systems, not just ours, have seen this sort of boomerang effect that their ratio of in-person to televisits sort of flipped almost completely into televisits at the height of the surge, and now it's flipping back to more in-person visits than televisits. But televisits are definitely not going away or going back to the levels that they were before. Neither are e-consults or store-and-forward, like I'm going to see my dermatologist a picture of my rash. You know, teleconsults, tele-ICU, that's not going away. If anything, I think that that will just continue to grow. And I think some of that has to do with, you know, both clinicians and administrative leadership being empowered that they were able to implement something in just two months or one week or whatever crazy timeline they've never done before. And then some of it has to do with the patient demand being there. I think both insurance companies and value-based systems are just so nervous about patients that are foregoing care and that are just going to show up a year later much sicker because they didn't get the care they needed. So we need to create offerings that patients will be excited about and engaged in. And I think the patient pressure is going to push us to continue offering more and better telehealth just because of that. 

Lee: And Steve's thoughts on how we can move toward more patient-driven solutions. 

Steve: I think we need to figure out as a society, how do we move outside of the insurance networks to a type of consumer-oriented care where NPS score utilization matters. 

Lee: NPS stands for Net Promoter Score, which is basically a percentage rating of how likely customers are to recommend a product or service. 

Steve: Like you have a good experience and you're getting advice from people that are board-certified doctors in the US or in your state that actually can give you really good advice, but very efficiently. And so that's where we're going; the technology is catching up, but the players are so far behind—the hospitals and the insurance companies—and there's a lot of incentives to continue the systems they have. It's going to be a long time before they catch up. So, that's why these vertically integrated telehealth or virtual health businesses that actually have their own doctors, I think, are going to be in a much different position to win and then force change at the hospital level. 

Janine: So I think my takeaway from telehealth is I'm cautiously optimistic, but I also just caution against the people really oversimplifying telehealth, that is just implementing a new software or implementing a new tool. There's really just so much more to it in terms of this implementation. And providers cannot just transfer their clinical skills one to one. It takes new skills on the provider end, new workflows, a new comfort level with a different, totally different type of care. And we haven't caught up to that yet, but hopefully we will. So, you know, no one has to solve all those problems in one fell swoop, but they just have to be aware of them in any telehealth work that they do and just make sure that they're asking the right questions. So I think there always has to be a good blend of telehealth and in-person care. And figuring that piece out is actually really important. Like, there's no great medical literature on how often a person needs to be seen in person versus virtually. That's just a simple example. But I do think we've made a lot of progress in terms of pushing people, especially doctors who are not so comfortable rapidly iterating and changing what they do, we've pushed them to progress really quickly. And I don't want to see that go away. 

Lee: And Kaia is optimistic about continued progress and growth in this space. 

Kaia: I foresee a lot of consumer biometric devices gaining FDA approval to become a remote patient monitoring device, starting to integrate with physician platforms and send data back to the physician. I believe more people are going to be using telehealth not only for illnesses, but also just their weekly therapy appointments. They're not going to see the need to go in. People have adapted to working remotely, to Zoom calls, to speaking to their doctors without seeing them in person. And a lot of people have realized how convenient that is, how easy that is. It's not just to be used to open up hospital beds or to decrease exposure of other illnesses that you're facing when you go to the hospital. It's also just convenient for the consumer. It's convenient for the physician who wants to practice from home and not go to the hospital. And this level of convenience also decreases costs. You know, the hospital doesn't need as many beds. The counselor doesn't need to have an office. They're able to bill the insurance companies or the payer at a lower cost, and the insurance companies are able to save a lot of money, so they're more likely to push that onto the consumers. So we just see large opportunity across the board. 

Janine: There's just such an opportunity for people outside of the health care system to step it up and design things for us to make it better, and we need that. I really am excited for the ideas that will come out of all this telehealth work. 

Lee: The urgency of these pandemic times has made clear some of the problems that can be solved with technology. And patients and providers alike have shown a willingness to gravitate toward those solutions. But only time will tell after COVID-19 subsides, whether they can be fully integrated for the long term. 

While we may not all have needed medical care during the pandemic, there is no doubt that COVID-19 has changed the way we shop. In our next episode, we'll shift our focus to grocery tech and learn about the new technologies and ecommerce models that are being developed to meet a new era of consumer demand.

In this episode

Janine Knudsen, MD
Medical Director of Special Operations in the NYC Department of Health’s Office of the Commissioner

Janine Knudsen, MD, is the Medical Director of Special Operations in the NYC Department of Health's Office of the Commissioner. She is a clinical assistant professor at NYU School of Medicine and primary care physician at Bellevue Hospital Center, where she cares for vulnerable patient populations, including people experiencing homelessness, recent immigrants and essential workers of New York City. She previously served as medical director in the NYC Health + Hospitals Office of Population Health, where she launched community health worker and home-based primary care programs and co-led the development of telehealth initiatives during the COVID surge.

Steve Sarracino
Founder, Activant Capital Group

Steve Sarracino is the founder of Activant Capital Group, a growth equity firm focused on investing in market-leading companies as they hit an inflection point on their way to becoming at scale enterprises. Activant invests globally and focuses on commerce and data-heavy businesses. Previously, Sarracino was a founding member of Serent Capital, and he helped open the technology investing office at American Capital, Ltd., in Palo Alto. Sarracino also worked at McKinsey & Co. in their Hong Kong office. He began his career in mergers and acquisitions at Robertson Stephens in San Francisco.

Sarracino has an MBA from The Wharton School at the University of Pennsylvania. He attended Southern Methodist University for his undergraduate degree, where he received a BBA in finance with a minor in history.

Kaia Colban
Emerging Technology Analyst at PitchBook

Kaia Colban is an emerging technology analyst at PitchBook, where she contributes to the company's emerging technology research covering the digital commerce and wellness tech markets. Prior to joining PitchBook, Colban was an associate at Boston Consulting Group and a financial analyst at Amazon and Citi.

Colban received a bachelor's degree in psychology, applied economics and management from Cornell University. She's based in PitchBook's Seattle office.