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Should Your PE Firm Consider Telehealth and Telemedicine Investments?

4 Min Read

Today’s consumers are demanding digital solutions more than ever before—and the same is true for their health care experiences. Many consumers have turned to telehealth and telemedicine services to meet their needs. The growing market reached an estimated value of $120.4 billion in 2023. 

That valuation is expected to grow further in the coming years. From 2023 to 2028, experts predict the market will see a compound annual growth rate (CAGR) of 23.2%, eventually reaching $285.7 billion. The increasing reliance on telehealth and telemedicine presents a variety of opportunities for private equity firms to evaluate. 

Some of our private equity clients question whether telehealth and telemedicine investments will pay off with continued market growth. Others wonder whether the novelty of the industry will fade and hurt profitability. In this blog, we’ll explore several angles to inform a potential investment in telemedicine or telehealth services. 

Insurance Carriers Expanding Telehealth and Telemedicine Coverage

Telemedicine and telehealth services often go hand-in-hand. In short, telemedicine is a form of telehealth, referring to a specific service that a patient receives from a provider on a telehealth digital technology platform. During the COVID-19 pandemic, many consumers preferred these low-risk, at-home medical visits to avoid COVID-19 exposure at in-person facilities. 

Our experts found that the pandemic accelerated the need for insurance carriers to adapt to telehealth and telemedicine services. In 2020, the Centers for Medicare and Medicaid Services issued waivers to cover audio and video medical visits for Medicaid beneficiaries. Additionally, some Medicare beneficiaries can receive telemedicine coverage for doctor’s visits, medical supplies and more, depending on specific benefits and charges. Generally, telemedicine is now accepted by most insurance companies, though coverage may vary based on the state or insurance company. 

The Apex Leaders health care desk continues to hear that insurance reimbursement will be key to investment considerations moving forward. One of our advisors who is the Executive Director of Strategy and Business Development from a top 3 healthcare insurer indicated that reimbursement policies continue to change and remain an ongoing conversation in the insurance space. 

Ultimately, telehealth and telemedicine have proven to provide affordable, high-quality care. Consumers now rely on these services for their routine health needs. Given the sector’s popularity, a 2022 study in the National Institute of Health predicts telehealth and telemedicine “will remain an integral part of medical care” since the COVID-19 pandemic.  

Telehealth Platforms Bridge Transportation and Equity Gaps

The adaptability of telehealth platforms and telemedicine services further demonstrate the market’s ability to generate long-term returns for private equity investors. Virtual medical visits can accommodate segments of the population that may otherwise be unable to access medical care, including people who earn low incomes, live in rural areas, who live with disabilities, older patients, people of color and others. Some of these individuals may also lack reliable transportation to travel to and from in-person medical appointments. 

By advancing health equity, telemedicine can improve health outcomes for these individuals, decreasing rates of disease, mortality, medical costs and more. Telemedicine’s ability to fill gaps in the traditional health care system make it an invaluable asset in our society. For private equity firms, the stable demand for virtual health services can offer predictable performance. 

Growing Consumer Preferences for Telemedicine Services

Consumer preferences are not only anecdotal. Recent studies find that consumers prefer telehealth visits to in-person visits for various forms of routine care. Plus, consumers are demanding advanced tech, mental health services and cost-effective medical solutions more than ever before. 

Consumers report preferring telehealth platforms for: 

  • Prescription refills (80%) 
  • Reviewing medication options (72%) 
  • Discussing test results (71%) 
  • Regular mental health visits (57%) 

Of patients who used telehealth platforms, 94% reported that they “definitely will” or “probably will” use the services in the future. Among the reasons consumers choose telehealth platforms? Convenience, ability to get quick care and easier access to health information.  

Innovative Tech is Key to Successful Telehealth Platforms

One of the most critical factors in telehealth’s success is the software that supports its telemedicine services. The market’s most effective software solutions are affordable, easily accessible, enhance patients’ quality of care and offer streamlined workflow management. 

Today’s telehealth technology must meet increasing digital demands, including: 

  • Remote monitoring 
  • Real-time interaction 
  • Information storage 
  • Information forwarding 

In some instances, telehealth providers are leveraging AI chatbots to provide real-time patient assistance. Each software solution offers a specific payment model, such as options for one-time purchases, subscription-based services and pay-per-use platforms. Security features, personalization and self-service resources are other functionalities that consumers desire from telehealth software. The software segment provides a niche opportunity for telemedicine investments. Existing health tech investors may be able to leverage existing expertise. 

Will Telehealth and Telemedicine’s Momentum be Sustainable?

Before the COVID-19 pandemic, telehealth and telemedicine did not demonstrate the same dominance in the health care system. That raises the question about the market’s longevity as a medical solution. Some of our clients are uncertain whether telehealth and telemedicine will become a mainstay in our society. 

However, our experts find that the rapid growth is backed by sustained consumer demand. With awareness of telehealth and telemedicine only growing, it will continue to address increasing chronic conditions and the rising aging population. Plus, government initiatives to promote telehealth and telemedicine are predicted to continue expanding. 

Depending on your firm’s interests, expertise and strategy, there are various market segments that may make investing in telemedicine or telehealth worthwhile for your firm’s future. Some firms may be willing to assume risk by investing in up-and-coming software solutions. Other firms may look for stable opportunities to acquire telehealth platforms with proven success. 

Regardless, making a successful investment in telemedicine or telehealth requires connecting with highly relevant advisors and conducting in-depth research. Proper due diligence will help your firm make smarter investment decisions with confidence. 

Want to Dive Deeper into Telehealth and Telemedicine Investments?

Let the Apex Leaders health care desk assist your firm as you evaluate telehealth and telemedicine investments. Connect with our team to find relevant advisors vetted to your firm’s specific criteria.