B2B Telehealth — Thoughts on the European telehealth market
COVID-19 has certainly changed our lives in several aspects, especially as many of us spend a lot more time at home. One area that has been particularly affected is healthcare, with physical visits to our doctors becoming much less attractive. And that’s when telehealth comes into play, the option to get medical services remotely.
Since I first tried Kry last year and fell in love with the product, I’ve been watching the market. And COVID-19 surely acts as a catalyst, speeding up legislation and consumer & user behaviour by several years. Since the outbreak, telehealth evolved from a nice-to-have to a must-have service at breakneck speed.
But while most news are centered around D2C services like Kry or Babylon, what is about all the healthcare providers like doctor practices and clinics that own their customer relationships?
To shed some light in this, I researched the B2B telehealth infrastructure market — startups that provide their services to practices, clinics and other businesses, but not directly to consumers. Most likely, I will soon also publish another article solely on D2C startups.
In the next minutes, I’ll share my insights on:
1) The current state of regulations in Europe
2) A market overview and trends
3) The startup landscape — Mapping, trends and funding activity
4) Some final thoughts
What is telehealth?
Before we dive into all, let’s spend a moment on what telehealth actually is and why B2B services are so important. Broadly said, telehealth describes the use of technology to supply health care and related services over a distance, such as consultation and monitoring, but also communication between professionals.
In fact this area is not new. Portugal for example is engaged in telehealth since 1990, and since 2006 reimburses telehealth services, for example by phone. But since the pandemic, development in this space is faster than ever.
And why the B2B space? Healthcare is a core pillar of our society, and suddenly this service can not be provided in the same form anymore. And while Kry and other D2C startups are skyrocketing, they still only capture a tiny share of the market. That leaves the main suppliers of medical services, practices and clinics, with the challenge to find new ways to treat and communicate with their patients. And this is where B2B startups come into play, and provide healthcare companies with the tools they need to operate remotely. While D2C might be more flashy, B2B is the much larger market. But as said, I’ll cover D2C in another article.
1) Current state of regulations in Europe
In recent years the EU is paying increased attention to telehealth, with an extensive market study in 2018, as well as Ursula von der Leyen stating eHealth as one of her key priorities. But as of now, there is no unified legal framework for telehealth in the EU and the topic is driven by national regulations. This regulatory maze is quite complex, with a variety of legal aspects such as GDPR, reimbursement rules and medical guidelines.
Looking at the largest European economies, we can see a trend for telehealth-friendly regulations.
a) France, which already deployed telemedicine regulations since 2009, now decided that teleconsultations will be entirely covered by national health insurance, at least temporarily.
b) Germany now also enables doctors to utilize telehealth consultations. Since 2019, national health insurances cover teleconsultations and a law has been passed that prescriptions can be mailed digitally. Also, digital apps can be prescribed as medical products. Once an app passed certain criteria, it is reimbursed by national health insurances for at least a year.
c) The UK too, under pressure of the severe outbreak, issued significant policy changes and now urges doctors to switch to teleconsultations.
“We’re basically witnessing 10 years of change in one week”, Sam Wessely, a London-based GP, tells the Guardian.
Other countries such as Switzerland, The Netherlands, Sweden, Estonia and Portugal are also increasingly opening up to telehealth services. And looking over to the US, in March the Trump administration announced to expand reimbursement for clinicians who provide telehealth services for Medicare beneficiaries during the pandemic.
Overall, reimbursement is a major topic for the penetration of telehealth services. In comparison to the US, in Europe this is much more dependent on state regulations, as national health services play a more important role.
It is also important to consider that these regulations can change, which can be illustrated by one of the early adopters of telehealth, Sweden. While Sweden was among the first to reimburse digital services, reimbursement rates were cut last year. In the case of a doctor consultation, the rate was lowered to 500SEK, 23% less than before.
“There is also a high risk that any flexibility in regulation may be reversed after this, so it is imperative for companies capitalising on this window to make sure the ROI they can offer is in the long term,” Will Gibbs of Octopus Ventures tells sifted.
In the end, we can for sure see that regulations are changing at an unprecedented speed and this trend is likely to continue, but there are uncertainties. It will also be interesting to see if EU wide regulations will be issued this year. This being said, I believe that to succeed, startups need to have a clear roadmap of the regulatory landscape and navigate the chances and risks as well as upcoming changes.
2) A market overview
Now that we know the rough state of legalization, let’s have a look at 4 trends in the market.
1) The number of medical practitioners and psychologists in the EU is growing, with large geographical differences in doctors by population
As we’re looking at the B2B market, it makes the most sense to look at the numbers of actively practicing medical doctors within Europe. Looking at the 5 most populated countries, we can see that Germany leads with 425 practitioners per 100,000 population and the UK lacks behind with only 281. Overall growth is modest, with a 2011–2017 CAGR between 0.2% (Spain) and 1.5% (Germany). Among the countries with the fastest growth are Slovenia (3.7%), Romania (2.9%), Croatia (2.4%), and Ireland (2.3%).
A market segment that is strangely often overlooked, but highly relevant are psychotherapists and psychiatrists. Sadly, data in this space is quite scarce and I didn’t find any European statistics. In the UK though, the number of overall psychologists rose from 29k in 2012 to 38k in 2019 (CAGR: 3.9%). And in France, that number rose from 41k in 2012 to 66k in 2018 (CAGR: 8.3%). So from the data available, growth here appears to be much higher than for medical practitioners.
2) Far behind countries are catching up in eHealth services
In a HIMSS study back in October 2018 among eHealth professionals, none of the largest EU countries was mentioned among the top 5 innovative countries within eHealth. The UK, on sixth place, was far behind Estonia, Denmark, Finland, Sweden and the Netherlands. Looking at the events of the past months, this underlines how fast change is happening now across Europe’s major economies, with countries such as the UK urging doctors to switch to teleconsultations. In France for example, the percentage of all medical consultations conducted remote via telehealth rose from 0.1% in the first week of March to over 28% in the first week of April.
3) Consumers show a high acceptance for telehealth services
In one of the most recent consumer surveys since the outbreak among over 2,000 UK citizens aged 16–64, 63% said they would consider using a telehealth service or already do so, and only 17% said they would not. Unsurprisingly though, the willingness to use telehealth services is the highest among Generation Y and Z. And while the overall high willingness is in parts likely due to the ongoing isolation, I believe that telehealth will stay on the consumers’ radar.
4) Practitioners see telehealth services among the biggest trends in eHealth
Lastly, when looking at the B2B market, the practitioner’s view is crucial, as they will provide the telehealth services and have to react to the changed landscape and consumer behaviour. In another 2018 survey by HIMSS among over 500 European health professionals, the 4 biggest eHealth trends according to the practitioners were a) digital health records, b) telemedicine services by providers, c) health information exchange and d) patient self-monitoring. This means that telehealth, including information sharing and remote monitoring, was on practitioners’ radars long before COVID-19. And while the switch to new tools and ways of working generally takes time, the outbreak now works as an accelerator.
In this analysis, I refrained from using market sizing reports, as the ones I found were either from lesser reputable sources or outdated. And I don’t think it makes much sense to look at a 2016 report, given what has been happening this year. Also, there is no real breakdown that would allow to get to the B2B market. But with the numbers of practitioners above, you could get a proxy by estimating how many practices and clinics there are (i.e. practitioners per practice). Still, if you want to have a look, here and here are some reports.
3) The startup landscape
Segmentation of the startups
As a start of my analysis, I looked at about 400 companies in the broad space to get a feeling of what is out there. Next, I singled them down to 70+ startups and found that the market can best be segmented along:
a) Communication (both the communication between practitioner and patient as well as between practitioners)
b) Monitoring
c) Telehealth solutions for one specific disease
d) Backend/Data services
In the following, I’ll share my 10 main insights and trends, as well as how I think that startups can win the market.
10 Trends and Insights
1) Communication (especially Video) is the most common area and startups adapt quickly
Unsurprisingly, the need to consult your doctor from home makes teleconsultations (mostly via video) one of the hottest services. In the field of doctor-to-patient communication, we can see startups that focus solely on video consultations (e.g. Confrere) and those that include some kind of practice management services (e.g. Healee, RED Medical). Almost all startups in this space offer video consultation as a service, and while some already offered it before, many introduced this feature within weeks. For example London-based accuRx, which got famous for its Chain SMS, developed a video chat tool over a weekend.
In order for seamless telehealth services to work, there also need to be solutions for practitioners to communicate and share patient information. Services here range from secure messaging apps (siilo) to cloud-based sharing platforms (InsightMedi). Other related services in the communication space include medical translator Care to translate.
2) Teleconsultation startups grow like crazy
This is probably an obvious one, especially as we’ve seen the increase of teleconsultations in France above, but it’s still interesting to look at the numbers of some startups. In the first week after accuRx introduced their video service, 12,000 video consultations were facilitated, in the second week 63,000 and just on Monday of the third week 20,000. Similarly, Doctolib saw teleconsultations rise from 1,000/day end of March to 100,000/day by end of April. Even by VC terms, this is an outstanding growth.
3) While D2C is dominant in remote monitoring, B2B solutions emerge
While the majority of monitoring solutions can be found in the D2C space, with major players like fitbit (Google) and Apple entering the space or Finnish rising star Oura, more and more startups target healthcare providers as their main customers. We can see mainly three kinds of solutions:
a) Self-assessment services (e.g. Monsenso) in which consumers log data or fill in questionnaires
b) services that track biomarkers via smartphones (e.g. Neurocast, Happitech)
c) wearable-based solutions (e.g. Nightwatch).
4) Specific disease solutions and monitoring often overlap
Another interesting segment are solutions that are specific to only one disease or use case. Examples for this are ScarletRed, a service for remote dermatology assessments or WoundDesk, a remote assessment and documentation tool for wounds. Many of the solutions in this spcae overlap with monitoring, and also often involve hardware products.
5) Most startups operate only in one country
Except for a few startups like Doctolib, Docplanner or Viveo Health, most companies operate only in their home country. So far, an internationalization seems only likely, if the home market alone is not large enough (e.g. Nordics, Eastern Europe) or the company reached a certain size. I guess this is mostly due to the regulatory maze as well as the sales-effort needed to reach out to practices — which is easier done region-by-region.
6) SaaS monthly plans are the predominant business model and during the outbreak video communication is often offered for free
Most startups operate as B2B SaaS companies, and either offer individual solutions or monthly plans, often in a tiered plan (e.g. Silver, Gold, Platinum). Many startups that offer video consultations acted fast and offer these services for free during times of the outbreak, to gain traction and expand their user base. Doctolib for example offers the service for free until September 30th, after which it will cost €69/month in Germany.
7) UI/UX design is less important than simple onboarding and utility
Interestingly, after looking at all these companies and especially the most successful ones, it seems like UI/UX design is not that important. A good example for this is accuRx, which, according to a NY Times article is used by 90% of all UK primary care clinics, which is an astonishing figure. While the onboarding process is easy and the service has a high utility, neither the website nor the tool look very appealing (at least not to me). My guess is that the core customer group (practices and clinics) is used to working with software without a sexy design and that they pay more attention to the ease of use and system integration. If you’re interested in more about accuRx, I can recommend this episode of Dr. Hogg’s podcast.
8) Several companies are both active in B2B and D2C
A quarter of all companies I’ve looked at in this space target both direct consumers and businesses. Examples for this are Doctolib, Qare and ViviDoctor. In the case of consultations, this almost always means that patients can book direct appointments via the startup and practices are offered the software for video consultations. In my opinion this is an interesting mix, as I expect some tension coming up in this field. While D2C providers enable doctors to make a side income, they also draw away customers form the practices.
9) Mental health is an underserved space
I mentioned it earlier, but I strongly feel that mental health and psychologists are underserved in the B2B market. While people stay at home, many can’t visit their psychotherapists or psychiatrists anymore, and would be equally dependent on digital solutions. And while the space may appear less urgent right now, I feel it is more important than ever. Especially as the isolation has serious effects on our mental wellbeing.
While many video consultation tools now only offer a small range of features (payments, messaging, note taking, …), new services around practice management are being added, and they are almost always tailored to medical practitioners. As the needs for both customers groups differ to some extent, I expect some more tailored solutions. Of course the D2C space has been booming in the past years, and if you’re interested, I can recommend this piece by a VC turned founder.
10) Not only young patients are using teleconsultations
In an episode of one my favorite podcasts “Invest like the Best”, guest D.A. Wallach shared a thought that I found particularly intersting. He said that too many healthcare startups focus on healthcare for healthy, not for the sick. Looking at Doctolib’s latest figures, 15% of patients using teleconsultation are between 55–64 years and 11% are over 65 years old. Similarly, Teleclinic CEO Katharina Jünger shared that their 2 most prominent customer groups are young parents between 30–40 years and men around 45. The usual group of early adopters (20–30 years old) are less relevant, as they don’t often visit a doctor. This means that while the most affected group (older people) already use the services to some extent, there is still a lot of potential left.
How to win the market
This is of course very subjective, but I feel there are few ways how startups can position themselves to win the market and want to share 2 of them.
1) “Low-bottom-high-ceiling” solutions
I heard this expression in a podcast recently and loved it. An example for such a solution is excel — which is easy to get into for beginners but provides superusers with almost endless possibilities. Similarly, I believe it is important to have a simple and catchy entry for customers (e.g. video consultations or text messaging as with accuRx). And then once you have the users on your platform, step-by-step offer them more solutions such as practice management or the ability to communicate with other practitioners. Most important is that the solutions stay as lean as possible and that the focus lies on usability and system integration to easily onboard customers to new features. There are already some solutions out there that cover many different use cases, but to me they mostly felt overly complicated or too diversified (e.g. services for 20 different kind of practitioners).
Among the most important functionalities that I saw when looking at the different startups are: Communication (Video, text, automatic messaging), scheduling, integrated payment, remote issuing of prescriptions, EHR documentation, information sharing with other practitioners and general practice management functions.
2) Ability to navigate the regulatory maze and have a clear path for expansion
As of now, most startups are focused on their home country, and most likely it requires more on-the-ground sales staff to sell services to practitioners, unlike for D2C services like Kry which already operates in several countries. But also in the B2B space we can see players like Doctolib expanding geographically. And while it may seem beneficial to start in a large market, Nordic successes show that this is no requirement. To succeed with an expansion, I believe a clear path as well as a very good understanding of the regulatory landscape are crucial. As the market is booming right now, and we can see that accuRx already has a monopole-like market share in the UK, I think it’s important to act fast.
VC activity in the space
As we can see in the cart below, 2019 has been a crazy year for telehealth funding with a 5x increase of total funding since 2018, while the number of funding rounds declined. Clearly, this was driven by mega rounds such as Babylon’s €495m Series C, Doctolib’s €150m round, and Docplanner’s €80m Series E. 2020 started strongly with Kry’s €140m Seriec C, but since then there has been little funding activity. As the topic is hot and on the radar of many VCs, I expect funding to go up once the dust of the outbreak settles a bit.
5) Final thoughts
So far 2020 has been a hell of a year for telehealth. Adoption in this space does not only rely on technology, but regulation, reimbursements, medical standards, data privacy and social acceptance. While it is a quite complex market, I feel the box of Pandora has been opened, and though some things may revert back, most of it is here to stay.
Still, this will not come without challenges, as there are big risks involved in healthcare, mainly data privacy and care quality. And while telehealth enables better access to healthacare at lower costs, it also has its pitfalls. A Swedish doctor who used Kry told me that a problem him and his colleagues see is that the barrier to consultations has been significantly lowered, which also leads to many people consulting doctors with minor problems, who would have otherwise just waited a few days and the problem would have solved itself. Also the question remains how to make sure that this service is made available to the older and less tech-savvy population, which is most in need of healthcare.
But overall and despite all the buzz, we have to remind ourselves that telehealth is still in its very early stages and inevitably will have its ups and downs. I myself as a consumer am more than happy about these new services as they provide me with an incredible level of convenience and I’m very excited to see what’s gonna happen in the next years.
Thank you for reading and every feedback is highly appreciated! 🙌 🙂
If you’re interested in other markets, check out my articles on Pet Tech and Cannabis Tech!
Cheers
Dominik
