COVID-19: Telehealth Provides 'Stop Gap' for Providers

The big question, however, is what will happen to telehealth when the coronavirus subsides.

The coronavirus pandemic has accelerated the use of telehealth and provided a stop gap for in-person physician visits, and large healthcare providers and distributors are positioned to benefit from this transition, Fitch Ratings said.

"For now, telehealth usage is partially offsetting service revenue that would have otherwise been lost during the pandemic," Fitch said. "Virtual care provides revenue continuity, with positive knock-on effects through the healthcare supply chain as doctors continue to prescribe medications."

The big question, however, is what will happen to telehealth when the coronavirus subsides.

"Post-pandemic demand will depend on whether payers, including Medicare and private insurers, continue to cover telehealth visits and patients continue to see value in virtual care," Fitch said.

In-office visits will remain "the primary delivery channel" for healthcare in the United States after the pandemic, but telehealth services will continue to grow as it matures and becomes more nuanced, and as providers figure out how to bill for telehealth services.

The federal government provides funding for telehealth during the pandemic under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Coronavirus Preparedness and Response Supplemental Appropriations Act.

Earlier this month, President Donald Trump signed an executive order proposing the Centers for Medicare and Medicaid Services make some telehealth provisions permanent.

Fitch notes that money is flowing into telehealth through M&A, venture capital and other investors who see the need for infrastructure to support virtual services.

"However, penetration post-pandemic could be limited by reimbursement uncertainty," Fitch said, "particularly as CMS seeks public input on which telehealth services to make permanent; access to high-speed internet services among seniors; and questions about the effectiveness of video versus in-person visits."

Teladoc Health, the largest telemedicine software provider in the US, reported 2.8 million virtual visits in the second quarter, more than triple the same period last year. The company said it expects gains to spill into 2021, Fitch said.

Increased demand for remote services during the quarter was confirmed by HCA Healthcare, Universal Health Services, Tenet Healthcare, and Community Health.

HCA recorded more than 500,000 virtual visits, Tenet had more than 190,000 virtual visits within its physician business and tens of thousands of hospital-to-hospital telehealth visits, and Community Health had more than 230,000 virtual visits, Fitch said.

"Healthcare providers are particularly challenged by depressed volumes of elective patient procedures during the health crisis," Fitch said. "HCA, Universal and Tenet have sufficient rating headroom to absorb the effects on volumes, assuming the sector experiences a strong recovery in elective patient volumes beginning in the second half of 2020 and into 2021."

"Volume declines are more detrimental to Community Health, however, due to its already stressed credit profile," Fitch said.

Telemedicine could also partially offset pandemic-related volume declines for pharmaceutical and medical distributers.

McKesson said telemedicine accounted for up to 15% of its oncology practice in the second quarter, and AmerisourceBergen said its community-based practices adapted to telehealth visits, Fitch said.

"Longer term, healthcare providers may be able to attract, service and retain more patients with virtual care, due to the convenience provided, and, depending on coverage levels, bill for calls that were previously uncompensated," Fitch said.

"Increased patient flow and greater operating efficiency could improve profitability and cash flow, as information collected during visits along with data from other technologies could help control healthcare costs."