The telehealth market, long identified as a significant opportunity for communications service providers (CSPs), has been slow to gain traction. The technical capabilities to support the telehealth market have long been in place, but regulatory concerns, coupled with supply-side issues such as business models, have restricted market growth. Most early movers have struggled to build and scale their telehealth offerings beyond the pilot phase. We estimate that there were only around 0.7 million remote patient monitoring connections globally in 2013, a small fraction of the total 500 million machine-to-machine (M2M) connections. To stimulate market growth, CSPs will need to invest in platforms to support telehealth services, make long-term commitments and prepare for long-term returns. The rest of this article examines the persistent barriers to CSPs entering the market, and the opportunity that telehealth may present for CSPs in the long term.
Near-term barriers to telehealth adoption remain
The traditional healthcare market has provided significant communications and IT services opportunities for CSPs. Some CSPs, such as Orange and Deutsche Telekom, have been very successful in targeting this vertical. However, telehealth applications face new challenges, few of which are technical. CSPs face a fragmented demand-side healthcare market, and the key challenges impacting telehealth adoption are:
- Funding and reimbursement: healthcare systems tend to be decentralised and fragmented, often making it difficult to source funding for telehealth delivery models. In addition, healthcare providers may not be reimbursed by insurers or payers for telehealth services because medical procedures outside of healthcare facilities are not always formally recognised.
- Scale: it has been difficult to scale products and solutions for a number of reasons. For example, each healthcare authority has different requirements with regard to medical devices, most of which operate proprietary interfaces and can be costly to integrate. There are few proof points of large-scale deployments of remote patient monitoring, making it difficult to prove the business case.
- Regulation: there is stringent, well-established regulation around medical devices in most markets, but new delivery mechanisms require new regulation. The regulation governing patient data is also a major concern, specifically how to protect it in a more open market where data is shared with application providers.
All of these factors have served to create market uncertainty, making it difficult for providers to formulate a telehealth strategy.
CSPs entering the telehealth market will need to formulate a long-term strategy
Governments and healthcare stakeholders are seeking to transform the healthcare sector in many developed markets to curb the spiralling costs of provision. The sector recognises that telehealth applications have the potential to address some of the weaknesses in the current approach to delivering healthcare services and introduce more sustainable delivery models, but these changes will take many years to happen. CSPs entering the healthcare sector will therefore need to plan for the long term.
CSPs may adopt different strategies for different applications or customer groups. Telehealth is a highly complex market and to move up the value chain requires significant long-term investment. Forging relationships in the complex and fragmented ecosystem is not easy and CSPs will need to develop strategic partnerships for capabilities such as devices, systems integration and medical expertise. There are three main routes to market which are illustrated in Figure 1, and which are discussed in more detail below:
Figure 1: CSP roles in the telehealth value chain [Source: Analysys Mason, 2015]
- Connectivity provider: this is a low-risk, but low-visibility (and lower-value) role in the value chain, and is subject to fierce competition and low returns. Connection volumes are not sufficient to generate large revenues, hence connectivity is a low-value opportunity in healthcare. However, it also requires low investment and may scale for certain target customer groups such as the pharmaceutical market.
- Enabler platform provider: this is a low-to-medium risk role and requires more investment with regard to leveraging platform capabilities such as data storage and business support systems (BSS) as well as partnership building. It is an attractive role for CSPs as it generates higher value, but will also be subject to intense competition. Maxis Malaysia has adopted this strategy for its remote patient monitoring service.
- Platform service provider: this role involves significant long-term investment and will most likely require senior-level backing. CSPs will need to consider partnerships and acquisitions to bring services to market. They will adopt a more holistic approach to providing a platform of technical and commercial capabilities to support the healthcare ecosystem. Operators including Deutsche Telekom, Telefónica and Telstra are moving towards a platform service model.
The telehealth market is complex and adoption is slow, and will likely remain a niche M2M sector for the foreseeable future. Any CSP entering the sector should take a long-term view on strategy and be prepared for some failures along the way. Connectivity alone is not much of an opportunity and success will require investment and long-term horizons.
CSPs that intend to play higher up the telehealth value chain will need to commit long term, invest significant technological and commercial assets and look for synergies across the different application groups that they provide. They should also consider partnerships and acquisitions to bring end-to-end services to market.
Analysys Mason has extensive experience of digital service strategies – including overall portfolio management, organisation design, and specific initiatives such as IoT, mobile financial services, digital advertising and ecommerce.