The total market size of the telemedicine industry, also referred as telehealth, in the United States was $5.984 billion in 2018, from about $4.982 billion in 2015. Telemedicine is expected to reach $8.634 billion revenue by 2024 at a CAGR of 6.3%. Telemedicine Medicaid and Medicare spending accounts for less than 1% of the total.
Overview of the U.S. Telehealth Market
The total market size of the telemedicine industry in the United States was $5.984 billion in 2018, from about $4.982 billion in 2015. This market is expected to reach $8.634 billion revenue by 2024 at a CAGR of 6.3%. We have estimated that less than 1% (or just about 0.40%) of the total market spend comes from telemedicine patients using Medicaid. The U.S. telemedicine market is fragmented in nature but current trends show evidence that there will be a rapid transition from highly fragmented into an enterprise-like approach market. The nationwide profit margin of this industry was not made available on any of the released government reports, articles, market research, and publications. We’ve presented our detailed findings below.
U.S. TELEMEDICINE MARKET SIZE
According to the article published by Reuters (referenced from Orbis Research) in 2018, the telemedicine market in the United States posted an estimated market size of $4.982 billion back in 2015 and is expected to reach $6.773 billion by 2020 at a CAGR of 6.3%. To obtain the market size for 2017, 2018, and the forecast revenue over the next five years, we’ve calculated the year-by-year revenue using the provided annual growth rate of 6.3%. We’ve also assumed that the growth rate will carry similar trend until 2024.
- 2015 = $4.982 billion
- 2016 = $4.982 billion * 1.063 = $5.296 billion
- 2017 = $5.296 billion * 1.063 = $5.630 billion
- 2018 = $5.296 billion * 1.063 = $5.984 billion
- 2019 = $5.296 billion * 1.063 = $6.361 billion
- 2020 = $5.296 billion * 1.063 = $6.762 billion
- 2021 = $5.296 billion * 1.063 = $7.188 billion
- 2022 = $5.296 billion * 1.063 = $7.641 billion
- 2023 = $5.296 billion * 1.063 = $8.122 billion
- 2024 = $5.296 billion * 1.063 = $8.634 billion
While we were able to locate and calculate the market size (based on revenue) of the telemedicine market in the United States, its profit margin was largely unavailable in the public domain. We’ve also checked and searched through each comprehensive reports and market research released by PRNewswire, Reuters, Transparency Research, MarketsAndMarkets, Business Insider, IBISWorld, Statista, and including government reports from GAO, MEDPAC, MACPAC, and CMS, but the profit margin of the industry was not made available.
PERCENTAGE OF MARKET SPEND FROM MEDICAID
In 2018, through the research initiated by the Medicare Payment Advisory Commission (MedPac) in its mandated report titled “Telehealth services and the Medicare program,” the report revealed that the Centers for Medicare & Medicaid Services (CMS), including state governments, does not limit the use of telehealth in Medicaid. According to the report, “payment for telehealth services provided under Medicaid FFS largely resembles how telehealth services are paid for under Medicare FFS, with physician-based telehealth services paid for on an item-by-item basis and facility-based telehealth services incorporated in the fixed payment for a unit of care.” While Medicare spending on telemedicine was reported to be about $27 million in 2016, Medicaid spending for telehealth was reported to be “unclear” and no direct national figure was available.
We’ve also checked other reports released by the Government Accountability Office (GAO) and the Medicaid and CHIP Payment and Access Commission (MACPAC) reports but the amount spend for telemedicine from medicaid was also unknown. The lack of information on the figures maybe due to reasons that each states have the “option to determine whether to cover telehealth, which types of telehealth services to cover, and which types of providers can receive reimbursement for telehealth services, among other things.” MACPAC reports that, as of 2017, 48 states and including D.C. already established regulations on some coverage for telemedicine in their Medicaid programs, however, each state has different definitions on the services covered including the type of healthcare providers and location of patients.
ESTIMATED PERCENTAGE OF MARKET SPEND FROM MEDICAID
Due to the limited information available in the public domain pertaining to Medicaid’s telemedicine reimbursement or the amount spent by telemedicine patients using Medicaid, we provided a ballpark estimate using the statistics available in the reports. Since these reports agreed that telemedicine payment trends for Medicaid widely resembles how telehealth services are paid for under Medicare, then we used this trend to triangulate the figure. According to the report, in 2016, the total telehealth Medicare spending was totaled $27 million. This figure was about 0.0038% from the total $702 billion Medicare spending in 2017 [$27million/$702 billion]. Assuming that this percentage similarly paralleled the trend in Medicaid services in 2017, then we could roughly assume that about $21.91 million of the total Medicaid spending of $576.64 billion in 2017 comes from telemedicine patients using Medicaid.
$576.64 billion * 0.0038% = $21.91 million
To calculate what % of the telemedicine market spend comes from telemedicine patients using Medicaid, we divide the above result by the total telemedicine market size in 2017. The percentage would be;
($21.91 million/$5.630 billion)*100 = 0.40%, or less than 1%
IS THE MARKET FRAGMENTED OR CONSOLIDATED?
Several reports agreed that, currently, the telemedicine industry in the United States is largely fragmented in nature. According to PRNewswire, “it is highly dynamic and fragmented with the presence of several medical device manufacturers, software or app providers, and healthcare service providers.” InTouch Health CEO also quoted that “the telehealth industry is fragmented and health systems demand a single telehealth platform that can overcome interoperability challenges, ensure data management continuity, and scale from a single physician office to a multi-hospital enterprise.” Accordingly, the fastest means to consolidate the market and provide better health system was through partnerships, mergers, and acquisitions. Recently, there were evidently mergers and acquisitions taking place in this industry. For example, InTouch Health, a telemedicine firm, acquires REACH Health (telemedicine software) in 2018 and at the same year, American Well acquires Avizia.
According to another report, “one of the biggest health system trends is that telemedicine is moving from fragmented, departmental initiatives into an enterprise approach, pulling disparate elements under one single umbrella for the entire system.” Many large organizations are already merging resources under single management. Examples of these companies are UMMC, St. Luke’s Health System, and Mercy Virtual.
KEY PLAYERS OF THE U.S. TELEMEDICINE INDUSTRY
“Though it notes the distinction between the two terms, the World Health Organization (WHO) uses the terms interchangeably.”
“The American Telemedicine Association also considers telehealth and telemedicine to be interchangeable terms, while carefully pointing out the clinical environment where telemedicine is typically performed.”
“The US telehealth market is highly dynamic and fragmented with the presence of several medical device manufacturers, software or app providers, and healthcare service providers. “
“The rapid technological advancement is encouraging vendors to introduce platforms with innovative and advanced features to meet the growing customer demands in the US market. The leading healthcare companies are investing in R&D to integrate hardware and software to improvise remote healthcare services to end-users and gain a larger US market share. “
Telemedicine Industry Advanced Technology Used, Current Opportunities & Investment Opportunities 2021 in Global Market
“As the practice of telemedicine matures, one of the biggest health system trends is that telemedicine is moving from fragmented, departmental initiatives into an enterprise approach, pulling disparate elements under one single umbrella for the entire system.”
“In 2017, nearly all states and the District of Columbia provided some coverage of telehealth in fee-for-service Medicaid.”
“Telemedicine companies are actively looking for ways to open the sector up to broader adoption. Partnerships and acquisitions seem to be the fastest means to that end, as two recent telemedicine deals would suggest.”
“”The telehealth industry is fragmented and health systems demand a single telehealth platform that can overcome interoperability challenges, ensure data management continuity, and scale from a single physician office to a multi-hospital enterprise,” said Joseph DeVivo, CEO of InTouch Health.”