You are on page 1of 34

Telehealth Services in the USMarch 2014 1

WWW.IBISWORLD.COM

On call: A shortage of physicians and the aging


population will rapidly boost industry revenue

IBISWorld Industry Report OD5775

Telehealth Services in the US


March 2014

Stephen Morea

2 About this Industry

18 International Trade

Industry Definition

19 Business Locations

Main Activities

Similar Industries

21 Competitive Landscape

31 Industry Data

Additional Resources

21 Market Share Concentration

31 Annual Change

21 Key Success Factors

31 Key Ratios

4 Industry at a Glance

30 Industry Assistance

31 Key Statistics

21 Cost Structure Benchmarks


23 Basis of Competition

5 Industry Performance

23 Barriers to Entry

Executive Summary

24 Industry Globalization

Key External Drivers

Current Performance

25 Major Companies

Industry Outlook

25 GlobalMed

12 Industry Life Cycle

26 InTouch Technologies Inc.

14 Products & Markets

28 Operating Conditions

14 Supply Chain

28 Capital Intensity

14 Products & Services

29 Technology & Systems

16 Demand Determinants

29 Revenue Volatility

16 Major Markets

30 Regulation & Policy

32 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

Telehealth Services in the USMarch 2014 2

WWW.IBISWORLD.COM

About this Industry


Industry Definition

This industry delivers health-related


services and information via
telecommunications technologies. Services
include transmission of diagnoses,
exchanging health services or education,

Main Activities

The primary activities of this industry are

monitoring patients and providing health


advice. Telecommunication methods
include the use of electrical devices, such as
telephones, web cameras, videoconference
systems and the internet.

Providing communication between patients and health care providers


Providing provider-to-provider communications
Providing videoconferencing services
Providing remote patient monitoring
Transmitting digital medical imaging information
Transmitting digital medical data
Providing healthcare education communications

The major products and services in this industry are


Exchange of medical and health information
Medical education
Remote patient monitoring and follow-up
Transmission of medical data and images for diagnosis

Similar Industries

33451b Medical Device Manufacturing in the US


This industry includes manufacturers of electromedical and electrotherapeutic apparatus, such as magnetic
resonance imaging equipment, pacemakers and electrocardiographs.
33911a Medical Instrument & Supply Manufacturing in the US
This industry researches, develops and produces nonelectronic medical, surgical and opthalmic instruments,
such as syringes, blood transfusion equipment, catheters and medical thermometers.
62111a Primary Care Doctors in the US
This industry comprises practitioners that have a Doctor of Medicine (MD) or Doctor of Osteopathy (DO)
degree. These doctors primarily work using a broad understanding of illnesses.
62111b Specialist Doctors in the US
This industry includes MDs and DOs that practice specialized medicine, such as anesthesiology, oncology
and ophthalmology or surgery. This industry does not include primary care physicians.

Telehealth Services in the USMarch 2014 3

WWW.IBISWORLD.COM

About this Industry

Additional Resources

For additional information on this industry


www.americantelemed.org
American Telemedicine Association
www.cms.gov
Centers for Medicare & Medicaid Services
www.telehealth.va.gov
Veteran Affairs telehealth services

IBISWorld

writes over 700 US


industry reports, which are updated
up to four times a year. To see all
reports, go towww.ibisworld.com

WWW.IBISWORLD.COM

Telehealth Services in the US March 2014

Industry at a Glance
Telehealth Services in 2014

Key Statistics
Snapshot

Revenue

Annual Growth 09-14

Annual Growth 14-19

Profit

Wages

Businesses

$320.2m 30.7%

49.7%
$136.3m 417

$52.8m

Private investment in computers and software

Revenue vs. employment growth

GlobalMed 
12.0%
% change

InTouch
Technologies Inc.
10.0%

80

12

60

40

% change

Market Share

20
0

6
3
0
3

20

Year 06

08

10

Revenue

12

14

16

18

Year

20

07

09

11

13

15

17

19

Employment
SOURCE: WWW.IBISWORLD.COM

p. 25

Products and services segmentation (2014)

12%

Key External Drivers

Private investment in
computers and software

13%

Medical education

Exchange of medical
and health information

Number of adults
aged 65 and older
Federal funding for
Medicare and Medicaid

40%

Transmission of medical
data and images for diagnosis

Demand from medical


device manufacturing
Number of people with
private health insurance

35%

Remote patient
monitoring and follow-up

Prime rate
p. 5

SOURCE:
WWW.IBISWORLD.COM
SOURCE:
WWW.IBISWORLD.COM

Industry Structure

Life Cycle Stage


Revenue Volatility

Growth
Very High

Regulation Level
Technology Change

Capital Intensity

Low

Barriers to Entry

Industry Assistance

Low

Industry Globalization

Concentration Level

Low

Competition Level

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31

Medium
High
Medium
Low
Medium

Telehealth Services in the USMarch 2014 5

WWW.IBISWORLD.COM

Industry Performance

Executive Summary | Key External Drivers | Current Performance


Industry Outlook | Life Cycle Stage
Executive
Summary

The Telehealth Services industry uses digital


technology to deliver medical services and
health education by connecting multiple
users in different locations. Telehealth
services include diagnosis, treatment,
assessment, monitoring, communication
and education. The industry includes a wide
range of information, networking and digital
imaging technologies, delivered primarily in
three ways: videoconferencing, which
provides real-time patient-provider
consultations and provider-to-provider
discussions; remote patient monitoring, in

A dvances

in communication technology
and medical technology have driven
industry revenue
which electronic devices transmit patient
health information to healthcare providers;
and store-and-forward technologies, which
transmit digital images, such as X rays,
computerized tomography (CT) scans and
video clips between primary care providers
and medical specialists. Technology serves
as the backbone of this industry, and
therefore, advancements in medical
technology and telecommunications will
drive industry performance.
The Telehealth Services industry is
rapidly expanding. Advances in

Key External Drivers

Private investment in
computers and software
The level of private investment in
computers and software reflects the
general implementation of information
technology within the private sector.
Growth in the Telehealth Services industry
is largely determined by technological
expansion. For example, advancements in
communications, such as mobile devices
and high-speed networks, have improved
audio and video transmission between
patients and healthcare providers.

communication technology and medical


technology, such as wearable selfmonitoring devices and digitized medical
scans, have propelled the industry forward.
Furthermore, industry growth has been
supported by a healthcare system suffering
from skyrocketing costs, a looming doctor
shortage and an aging population
susceptible to chronic disease. As a result,
industry revenue is expected to increase by
an annualized 30.7% to $320.2 million in
the five years to 2014, including revenue
growth of 23.1% in 2014. These revenue
estimates are based on Medicare
reimbursements for Telehealth Services
and a 2014 IHS report on the world market
for Telehalth.
From 2014 through 2019, the industry
will continue to benefit from the
demographic and structural factors affecting
the healthcare industry as telehealth will
emerge as a cost-effective solution to
meeting the medical needs of an expanding
and aging population. Existing legislation,
such as the Affordable Care Act, and
pending legislation will raise federal support
for telehealth services, benefiting patients,
healthcare providers and industry operators.
Last, future innovations will likely increase
the scope and availability of telehealth
services. As a result, industry revenue is
expected to increase at an annualized 49.7%
to $2.4 billion in the five years to 2019.

Therefore, an increase in private


investment in computers and software
corresponds with a rise in industry
revenue. Private investment in computers
and software is expected to increase
during 2014.
Number of adults aged 65 and older
As baby boomers age and the average life
expectancy in the United States increases,
the number of people aged 65 and older
will rise. Individuals in this group are more
likely to require medical assistance, which

Telehealth Services in the USMarch 2014 6

WWW.IBISWORLD.COM

Industry Performance

will promote demand for telehealth


services. The number of adults 65 and older
is expected to increase during 2014.
Federal funding for Medicare
and Medicaid
An aging population will likely lead to an
increase in the number of individuals with
chronic diseases, such as congestive heart
failure (CHF), chronic obstructive
pulmonary disease (COPD), diabetes,
hypertension and end-stage renal dialysis.
For individuals 65 and older, Medicare
commonly reimburses a high percentage of
the costs associated with treating these
conditions. As federal funding for Medicare
and Medicaid increases and doctors
increasingly use telehealth services for
patients with these diseases, industry
revenue and profitability will rise. Federal
funding for Medicare and Medicaid is
expected to increase during 2014,
representing a potential opportunity for
this industry.
Demand from medical
device manufacturing
Advancements in medical technology, such
as wearable monitoring devices and
digitized medical scans, have created new
opportunities for telemedicine, supporting
industry revenue growth. As a result, when
new devices are brought to the market and

revenue in this industry expands, demand


for the Telehealth Services industry also
increases. Revenue for the Medical Device
Manufacturing industry (IBISWorld report
33451b) is expected to increase in 2014.
Number of people with
private health insurance
As studies continue to validate the efficacy
of telehealth and telemedicine services,
private health insurers are more likely to
cover industry-related services. Therefore,
increased insurance acceptance of
telehealth services and a rise in the number
of privately insured individuals will lead to
an increase in industry revenue. The
number of people with private health
insurance is expected to increase in 2014.
Prime rate
The level and movement of interest rates
have a formidable influence on spending
and investment decisions. When interest
rates are high, it is more expensive for
not-for-profit and for-profit health care
providers to raise capital and invest in
technological upgrades, including
investments in telehealth and
telemedicine equipment. While the prime
rate is expected to remain flat during
2014, expected increases in the next five
years will represent a potential threat to
the industry.
Number of adults aged 65 and older

Private investment in computers and software


12

3.5

3.0

% change

% change

Key External Drivers


continued

3
0

2.0
1.5

Year

2.5

07

09

11

13

15

17

19

1.0

Year

07

09

11

13

15

17

19

SOURCE: WWW.IBISWORLD.COM

Telehealth Services in the USMarch 2014 7

WWW.IBISWORLD.COM

Industry Performance

Current
Performance

Fueled by a surge in technological


advances in the field of communications
and a torrent of new wireless selfmonitoring healthcare devices, operators
in the Teleheath Services industry are
currently enjoying a period of rapid
expansion. From 2009 through 2014,
industry revenue is expected to expand
at an average annual rate of 30.7% to
$320.2 million, including a 23.1% jump
in 2014 alone, based on information
regarding Medicare reimbursements for

Technology advances
industry

Technology has strongly driven growth for


the Telehealth Services industry and is
crucial to the industrys success.
Technological innovations have been
implemented in a vast array of areas
including patient records, disease
diagnoses, consultation, treatment
delivery and self-care. Technological
advances have taken services from the
confines of hospitals and into homes.
Mobile health is freeing healthcare devices
of cords and wires and allowing remote
access for both patients and physicians.
There has been a proliferation of
self-monitoring tools that allow patients to
monitor conditions like pacemaker
activity, blood sugar level, blood pressure,
blood oxygen level, respiration and heart
rate. With these tools, patients can also
remotely transmit their results to
healthcare providers. There has also been
a dramatic rise in wearable devices, which
were first created for consumers and
sports enthusiasts, but later developed for
medically-oriented purposes. These
instruments, referred to as Medical Body
Area Network (MBAN) devices can
measure electrocardiogram (EKG)
readings, respiratory rate and insulin
levels; detect breast cancer by reading
changes in cellular structure; transmit an
alert if a person falls down; and detect,
through a bandage, skin pH levels to
determine if a cut has become infected.

telehealth services and a 2014 IHS


report on the world market for
telehealth. Industry operators have
demonstrated that they can provide
sound healthcare to a greater number of
patients at lesser cost. As a result, the
Telehealth Services industry is
maximally positioned to help provide
solutions for a healthcare system
suffering from skyrocketing costs, an
aging population susceptible to chronic
diseases and a looming doctor shortage.

Self-monitoring

tools
allow patients to
transmit their results to
healthcare providers
Smartphones and tablets are
increasingly replacing conventional
record-keeping systems, offering
healthcare providers greater ease in
accessing, storing and sending
information. Advancements in store-andforward technology has allowed X rays,
MRIs, CT scans, CAT scans and audio
and visual observations to be digitally
stored and instantaneously shared.
Advancements in telecommunications
and videoconferencing equipment have
also enhanced real-time communication,
allowing physicians and specialists to
confer across great distances, promoting
proper patient diagnosis and treatment.
Additionally, peripheral devices can be
attached to computers, mobile robotics
and other equipment to aid in diagnoses.
Direct two-way audio and video
streaming between health centers has led
to lower costs in these critical areas of
health treatment.
Self-service kiosks have also been
implemented in some hospitals. These
kiosks can expedite processes like hospital

Telehealth Services in the USMarch 2014 8

WWW.IBISWORLD.COM

Industry Performance

Technology advances
industry
continued

registration without having to involve


hospital personnel. Automated kiosks can
assist patients with copays, checking
identification and other registration
requirements. Such services have helped
healthcare providers save on staffing costs.
However, these industry services designed

Research validates
efficacy of telehealth

Growth in the Telehealth Services industry


has been augmented by numerous clinical
research studies, validating the efficacy of
telehealth treatment. A 2013 analysis by
the Commonwealth Fund examined
findings from three early telehealth
adopters: the Veterans Health
Administration, Partners HealthCare and
Centura Health at Home. The study
concluded that telemedicine and
telemonitoring reduced hospitalizations,
readmissions and healthcare costs, while
improving patient satisfaction and
engaging patients in their own healthcare.
In 2011, a United Kingdom, Whole System
Demonstrator (WSD) program revealed
similar results. The program evaluated
6,191 telehealth patients, focusing on three
conditions: diabetes, chronic obstructive
pulmonary disease (COPD) and coronary
heart disease and concluded that, if
delivered properly, telehealth could
substantially reduce mortality, reduce the
need for hospital admissions and lower
the number of patient overnight stays.

A 2010 study of tele-intensive care units


(ICU) at the Massachusetts Memorial
Medical Center found that 50.0% more
patients could be treated at facilities with
tele-ICU capabilities; these patients would
otherwise require a transfer to another
hospital, saving an average of $10,000 per
patient. Similar positive outcomes were
found in other studies involving
congestive heart disease, diabetes,
dermatology and psychiatric treatment.
Taken as a whole, these studies confirm
that telehealth improves access to
healthcare, boosts quality of care and
increases cost efficiency, factors which
have been instrumental in driving
industry sales.

Advancements in technology and the


medical communitys acceptance of
telehealth services has driven robust
industry growth during the past five
years. Like industry revenue,
employment has also expanded at a
rampant pace; the number of workers is
expected to increase an annualized
20.1% to 3,739 in the five years to 2014,
as greater demand for telehealth services
facilitates the need for skilled workers.

However, due to the wide-array of


product and service offerings in the
Telehealth Services industry, companies
that specialize in telecommunications,
health information technology, software
and analytics, digital imaging, as well as
medical diagnostics and device
manufacturing, all contribute to this
industry. Variety in these companies
cost structures makes it hard to assess
average industry profit margins.

Industry structure

to cut administrative costs represent only


a small portion of the telehealth market.
Advancements in healthcare technology
and the use of this digital technologies to
deliver medical care, health education and
aid have been and will continue to be the
primary driver for this industry.

Studies

have validated
the cost-effectiveness
and overall success of
telehealth services

Telehealth Services in the USMarch 2014 9

WWW.IBISWORLD.COM

Industry Performance

Industry structure
continued

Nevertheless, IBISWorld estimates that


average profit for a company in the
Telehealth Services industry is 16.5% in
2014. In addition, from 2009 to 2014,

Industry
Outlook

From 2014 to 2019, the Telehealth


Services industry will continue to benefit
from shifting demographics and
structural factors affecting the healthcare
system, namely, an aging population that
will increasingly demand medical care, a
shortage of doctors and rapidly rising
healthcare costs. Various studies have
supported the idea that the industry can
provide quality care to a large number of
patients with greater cost-efficiency. In
addition, existing legislation and pending
legislation will increase federal support
and aid for telehealth services, benefiting
patients, healthcare providers and
participants in this industry. As a result,
industry revenue is expected to continue
its skyward trajectory, expanding at an

average annual rate of 49.7% to $2.4


billion in the five years to 2019.

The passing of the Affordable Care Act


(ACA) in March 2010 and its
implementation in October 2013 will likely
be a boon for the Telehealth Services
industry. The Congressional Budget Office
has estimated that by 2023, 25.0 million
otherwise uninsured people will gain
healthcare coverage. As a result, the ACA
will substantially enlarge the telehealth
consumer base. In addition, the ACA
incorporates several incentives for the
Telehealth Services industry: it directs the
Center for Medicare and Medicaid
Innovation (CMI) to explore the facilitating
of local hospital inpatient care by the use of
electronic monitoring by outside
specialists; it allows the CMI to develop
patient-care models using remote-based
monitoring systems to coordinate care over
time and across settings; it permits
physicians to use telehealth to determine

the need for home healthcare and in-home


medical equipment; and it directs the CMI
to provide medically underserved areas
with telehealth services in order to
treat behavioral health problems and
stroke patients.
The ACA also makes doctors and
hospitals more accountable by moving
medical care providers away from fee-forservice medicine, shifting reimbursement
structures toward the value of care rather
than the volume of services. This provision
will pressure doctors and health
professionals to keep patients out of
hospitals, where care is more expensive.
Therefore, the use of telehealth services
should strongly increase, as research has
demonstrated that, in many cases,
telehealth services are more cost-efficient,
result in less hospital visits and are as
effective as hospital treatment.

Affordable Care Act


helps industry

the number of companies that specialize


in telehealth services is expected to
increase at an average annual rate of
15.1% to 417 enterprises.

Industry revenue
80

% change

60
40
20
0
20

Year 06

08

10

12

14

16

18

20

SOURCE: WWW.IBISWORLD.COM

Telehealth Services in the USMarch 2014 10

WWW.IBISWORLD.COM

Industry Performance

An aging population
boosts revenue

Pending legislation to
benefit industry

The number of adults 65 and older is


expected to grow at an average annual rate
of 3.2% from 2014 to 2019, and according
to Nippon Telegraph and Telephone
(NTT), people in this age bracket are
expected to comprise 19.0% of the US
population by 2030. An aging population
will likely encounter increased incidences
of chronic diseases including congestive
heart failure (CHF), chronic obstructive
pulmonary disease (COPD), diabetes,
hypertension and end-stage renal dialysis.
Accordingly, treatment of these chronic
diseases will sharply accelerate the overall
cost of US healthcare.
Greater demand for medical services,
combined with an expected shortage of
doctors, will drive demand for telehealth
services. The Association of American
Medical Colleges (AAMC) has long
predicted a physician shortage in the
United States. Most recently, in February

2014, the AAMC predicted the situation


could worsen; there will be a shortage of
about 63,000 doctors by 2015 and a
shortage of 130,600 doctors by 2025. The
Telehealth Services industry is wellpositioned to help alleviate this lapse in
care. By incorporating telehealth services,
fewer physicians can treat more patients.
Remote wearable monitoring devices, the
use of smartphones and tablets to
transmit self-monitored patient data and
the ability of local physicians to confer
with specialists remotely via
videoconferencing will assist the delivery
of adequate care and compensate for a
physician shortage.

Three pending federal bills will create


added opportunity and revenue for the
Telehealth Services industry. The
Telehealth Modernization Act
introduced in December 2013 would
create a federal definition for telehealth
and provide principles that states could
use for guidance when developing new
telehealth policies. The proposed bill
would provide clarity regarding the
scope of healthcare services that can be
safely delivered via telehealth services
and would spur innovation and research
in the delivery of healthcare.
The Telehealth Promotion Act of 2012
would increase federal support and
payments for telehealth services
nationwide. This bill would establish a
federal reimbursement policy, making it
impossible to exclude health coverage
solely because it is furnished via a
telecommunications system. If passed, the
bill would increase access to telemedicine
within Medicare, Medicaid, the Childrens

Health Insurance Program and the


Department of Veterans Affairs. It would
be a major step forward in Congressional
support for telemedicine and would
extend telehealth benefits to nearly 75.0
million Americans.
Finally, the Telemedicine for Medicare
Act of 2013 or TELE-MED Act was
introduced in September 2013. If passed,
it would amend Title XVIII (Medicare) of
the Social Security Act and permit certain
Medicare providers licensed in a state to
provide telemedicine services to Medicare
beneficiaries in a different state.
This groundswell of Congressional
support in telehealth and its potential to
meet pressing US health issues bodes
well for the future of the industry. With
an increase in anticipated demand for
industry services, employment in the
Telehealth Services industry is expected
to expand by an annualized 41.2% to
20,969. Industry profit margins will
remain high, however, profit expansion

Industry

services will
offset the projected
shortage of physicians

Telehealth Services in the USMarch 2014 11

WWW.IBISWORLD.COM

Industry Performance

Pending legislation to
benefit industry
continued

will occur at a more tepid pace because


competitive pressures will increase as
more companies enter the industry. In
the five years to 2019, the number of

companies specializing in telehealth


and telemedicine is expected to rise
at an average annual rate of 30.2% to
1,558 enterprises.

Telehealth Services in the USMarch 2014 12

WWW.IBISWORLD.COM

Industry Performance
Industry value added is expected to grow at a
much higher rate than the overall economy

Life Cycle Stage

Technological innovation is underpinning


growth in the Telehalth Services industry
Industry employment and establishment
growth is occurring at a rapid pace

% Growth in share of economy

Telehealth Services
20

Maturity

Quality Growth

Company
consolidation;
level of economic
importance stable

High growth in economic


importance; weaker companies
close down; developed
technology and markets

15

Key Features of a Growth Industry


Revenue grows faster than the economy
Many new companies enter the market
Rapid technology & process change
Growing customer acceptance of product
Rapid introduction of products & brands

10

Quantity Growth

Many new companies;


minor growth in economic
importance; substantial
technology change

Health & Welfare Funds


Physical Therapists
Medical Device Manufacturing
0

Medical Instrument & Supply Manufacturing


Telecommunication Networking Equipment Manufacturing

Decline

-5

Shrinking economic
importance

-10
-10

-5

10

15

20

% Growth in number of establishments


SOURCE: WWW.IBISWORLD.COM

Telehealth Services in the USMarch 2014 13

WWW.IBISWORLD.COM

Industry Performance

Industry Life Cycle


This

industry
is G
 rowing

The Telehealth Services industry is in the


growth stage of its life cycle. The
industrys revenue and mix of services
are constantly augmented by
advancements in medical technology and
telecommunications. In addition, the
industry is poised to benefit from its
inherent cost-efficiencies, which make it
a viable alternative to traditional inpatient care and from the growing
number of individuals 65 and older,
whose increasing need for medical
attention will drive industry demand. As
a result, industry revenue has been
expanding rapidly.
Industry value added (IVA), a measure
of the industrys contribution to the
overall economy, is expected to grow at a
staggering average annual rate of 34.3% in
the 10 years to 2019. This growth rate is
over 10 times the growth rate of US GDP
over the same 10-year period, estimated at
an annualized 2.7%. This disparity is one

indication that the industry is in the


growth phase of its life cycle.
Industry products and services are far
from established. Technological
innovation has been crucial to the
industrys success; new products and
services, such as self-monitoring devices
and Medical Body Area Network devices,
have enabled patients to measure heart
and respiratory rates, measure insulin
levels, detect skin PH levels and transmit
data to a medical professional or
healthcare provider.
Furthermore, the number of
companies in the industry is growing,
indicating there is an increasing market
for telehealth services. The number of
enterprises has grown an annualized
22.4% in the 10 years to 2019.
Employment is also expected to spike
over this period as more businesses and
greater demand for industry services will
necessitate more workers.

Telehealth Services in the USMarch 2014 14

WWW.IBISWORLD.COM

Products & Markets

Supply Chain | Products & Services | Demand Determinants


Major Markets | International Trade | Business Locations

Supply Chain

KEY BUYING INDUSTRIES


52512

Health & Welfare Funds in the US


Establishments in this industry provide medical, surgical, hospital, vacation, training and other
health- and welfare-related employee benefits for telehealth services.

62111a

Primary Care Doctors in the US


Primary care doctors accept patient referrals from telehealth services.

62111b

Specialist Doctors in the US


Doctors that specialize in a particular branch of medicine accept patient referrals from
telehealth services.

62134

Physical Therapists in the US


Physical therapists accept patient referrals from telehealth services.

62161

Home Care Providers in the US


Companies that provide skilled nursing services in the home accept patient referrals from, and
contract with, telehealth services.

62211

Hospitals in the US
General medicine and surgical hospitals accept patient referrals from, and contract with,
telehealth services.

62221

Psychiatric Hospitals in the US


Psychiatric and substance abuse hospitals accept patient referrals from, and contract with,
telehealth services.

62311

Nursing Care Facilities in the US


Facilities that provide inpatient nursing and rehabilitative services accept patient referrals from
telehealth services.

KEY SELLING INDUSTRIES

Products & Services

33421

Telecommunication Networking Equipment Manufacturing in the US


Larger telehealth services firms build their own data centers with equipment purchased from
this industry.

51121

Software Publishing in the US


Operators in this industry provides software used by telehealth services to create and publish
their content.

51711c

Wired Telecommunications Carriers in the US


Telehealth services firms pay operators in this industry for telephone access.

51711d

Internet Service Providers in the US


Telehealth services firms pay operators in this industry for internet access.

51821

Data Processing & Hosting Services in the US


Operators in this industry provide website hosting services for telehealth services.

Transmission of medical data


and images for diagnosis
Transmission of medical data and images
for diagnosis or disease management
accounts for the majority of industry
revenue. Primary care physicians and
specialist doctors providing patient
consultation or diagnosis account for
about 40.0% of industry revenue. This is

typically done with the use of


videoconferencing, streaming media,
wireless communications and
transmitted diagnostic data and images.
Telehealth services software requires the
capability to connect patients and their
medical records, including images, to
providers. Over the past five years, this
segment has declined slightly, as there is

Telehealth Services in the USMarch 2014 15

WWW.IBISWORLD.COM

Products & Markets

Products & Services


continued

Products and services segmentation (2014)

12%

13%

Medical education

Exchange of medical
and health information

40%

Transmission of medical data


and images for diagnosis

35%

Remote patient
monitoring and follow-up

Total $320.2m
a lag in outfitting consumers with the
technology on their end to accommodate
such treatment.
Remote patient monitoring
and follow-up
Remote patient monitoring and followup is expected to account for 35.0% of
industry revenue. Services in this
segment include the remote collection
and sending of data to a remote
diagnostic testing facility for analysis.
These services can be used as a substitute
or to supplement visiting nurses for data
such as blood pressure, blood glucose or
heart ECG. This segment is expected to
increase over the current period, with
hospital beds consistently being at or
near capacity for patients requiring more
intensive care.
Exchange of medical and
health information
The exchange of medical and health
information is estimated to account for
13.0% of industry revenue in 2014. Such

SOURCE: WWW.IBISWORLD.COM

information includes patients receiving


online medical and health data from
doctors and online discussion groups
facilitated by a medical professional.
Physicians also provide support to
patients. Over the past five years, this
segment has remained rather steady, as
many support groups are face-to-face or
peer-to-peer. However, this segment is
expected to increase over the next five
years with changes in technology
becoming available to more consumers.
Medical education
Medical education accounts for an
expected 12.0% of industry revenue. This
segment is composed of continuing
medical education credits for physicians
and others working in healthcare and
seminars for special medical education in
rural areas. Continuing medical
education credits are mandatory for
those in the medical profession;
therefore, over the past five years,
this segment has also remained
relatively constant.

Telehealth Services in the USMarch 2014 16

WWW.IBISWORLD.COM

Products & Markets

Demand
Determinants

Major Markets

Research and development spending


Revenue for the Telehealth Services
industry primarily depends on demand
from medical establishments (e.g.
hospitals, clinics and doctors offices) that
provide remote care for patients. As a
result, any economic downturn that
adversely affects these markets would
also have a negative effect on industry
revenue. For example, a decrease in the
number of consumers with health
insurance could potentially result in a
decline in profit, as consumers find
themselves foregoing expensive medical
treatment and opting for less expensive
alternatives. This, in turn, would lead to a
cutback in research and development
spending, causing cash-strapped
telehealth services companies to focus on
existing product lines.
Increased consolidation in
biotechnology and medical device
manufacturing could also negatively
affect revenue for the Telehealth Services
industry. In periods of consolidation and
low competition, these companies could
spend more on marketing and
maintaining existing treatments. Fewer
new treatments would result in a lower
instance of technological change,
ultimately hurting revenue for telehealth
services system providers.

socioeconomic factors, such as patient


accessibility to healthcare, increased life
expectancy rates and the aging of the
overall population. A majority of
healthcare expenses come toward the end
of a persons lifespan and the United
States is experiencing an aging
population. From 2009 to 2014, the
number of adults aged 65 and older is
expected to increase at an annualized
2.8%. As a result, the incidence of
age-related illnesses such as mental
health, heart disease and diabetes are
rising. Fortunately, elderly Americans
have more disposable income when
compared with the previous decade,
and these factors have increased the
demand for medical services that
provide remote treatment for common
medical conditions.

Demographics
Industry revenue is also driven by a
variety of demographic and

Government regulations
The Patient Protection and Affordable
Care Act is bolstering health insurance
coverage for Americans and, therefore,
demand for industry services. As more
Americans are being covered by health
insurance, there will be a greater number
of patients demanding medical attention.
Telehealth services enable physicians to
care for more patients through remote
visits during daily rounds. Additionally,
Medicare and Medicaid cover many
mental health services, increasing
demand for covered Americans for
such treatment.

Congestive heart failure


Congestive heart failure (CHF) is a condition
in which the heart is unable to pump a
sufficient flow of blood to the rest of the
body. Symptoms of CHF include shortness
of breath, swollen legs and the inability to
exercise. The condition, caused by various
forms of heart disease, is typically diagnosed
by a physician using blood tests and an
echocardiography. Industry operators are

able to remotely monitor CHF patients from


their home, thereby eliminating unnecessary
visits to doctors offices and hospitals. CHF
accounts for an estimated 43.7% of industry
revenue in 2014. Over the past five years,
this segment has remained relatively
constant as more Americans are better at
treating their diabetes, high blood pressure,
high levels of stress and obesity, all of which
can lead to CHF.

Telehealth Services in the USMarch 2014 17

WWW.IBISWORLD.COM

Products & Markets

Major Markets
continued

Major market segmentation (2014)

7.4%

4.1%

Mental health
Hypertension

1.8%
Other

43.7%

15.9%

Chronic obstructive
pulmonary disease

Congestive heart failure

27.1%

Total $320.2m

Diabetes

Diabetes
Diabetes is a chronic disease in which a
person has a high amount of glucose in
their blood. There are three primary types
of diabetes: Type 1 or insulin-dependent
diabetes is a result of the body not
producing insulin and is treated with
insulin injections; Type 2 diabetes is a
result of the body being resistant to the
insulin that the body produces; and
gestational diabetes can occur in pregnant
women who develop a high level of sugar
in their blood. These women have had no
prior diagnosis of diabetes; however,
gestational diabetes can be a precursor of
Type 2 diabetes. Telehealth services allow
diabetes patients to have insulin levels
monitored by their doctor from a remote
location. Diabetes is expected to account
for 27.1% of industry revenue. Over the
past five years, this segment has increased
as Americans have been eating diets high
in sugar.
Chronic obstructive pulmonary disease
Chronic obstructive pulmonary disease
(COPD) is common lung disease in which
breathing becomes difficult. The two main
forms of COPD are chronic bronchitis and
emphysema. While smoking is the main
cause, heavy exposure to secondhand
smoke, pollution and gases or fumes also

SOURCE: WWW.IBISWORLD.COM

place nonsmokers at risk. Symptoms of


COPD include coughing, fatigue,
respiratory infection and wheezing. The
chronic illness is best diagnosed using a
spirogram to test lung function. COPD
patients employ industry services to be
monitored remotely by their physician.
COPD accounts for an expected 15.9% of
industry revenue and has been steady over
the past five years due to antismoking
campaigns directed toward teenagers.
Hypertension
Hypertension or high blood pressure is a
chronic condition that occurs when there
is elevated blood pressure in the arteries,
typically at or above 140/90. In the
majority of hypertension cases, there is
no underlying medical cause; however, a
small percentage of cases are caused by
other conditions affecting arteries, the
endocrine system, the heart or kidneys.
Those with hypertension are at a greater
risk for stroke and aneurysms. Industry
companies are able to easily monitor
hypertension patients remotely,
decreasing the need for on-site visits.
In 2014, hypertension accounts for an
estimated 7.4% of industry revenue.
This segment has increased over the
period as Americans are eating foods
high in sodium.

Telehealth Services in the USMarch 2014 18

WWW.IBISWORLD.COM

Products & Markets

Major Markets
continued

Mental health
Mental health problems include anxiety
and depression. With telehealth, patients
are able to meet with their doctors via video
conferencing, in lieu of an office visit. This
segment accounts for 4.1% of industry
revenue in 2014. Mental health cases have
increased over the past five years as many
mental health treatment costs are now
covered by Medicare and Medicaid.

Other
Other telehealth services account for
1.8% of industry revenue. This segment
includes skin diseases, nutrition, oral
health and reproductive health. Remote
monitoring and conferencing with
providers allows patients and doctors
greater flexibility. Over the past five
years, this segments share of revenue
has declined.

International Trade

Industry operators primarily provide


services to the domestic market due to
the service-based nature of the Telehealth

Services industry. As a result, imports


and exports are not applicable to
this industry.

Telehealth Services in the USMarch 2014 19

WWW.IBISWORLD.COM

Products & Markets


Business Locations 2014

West
New
England

AK
0.2

Great
Lakes
WA

ND

MT

1.5

Rocky
Mountains
ID

OR
1.1

West NV
1.0

0.7

SD
0.1

WY

0.5

MN

0.1

0.2

Plains

CO

0.8

KY

0.7

OK
1.3

NC
2.3

TN

AZ

NM

2.3

0.5

Southwest
TX
8.9

HI
0.5

Additional States (as marked on map)


1 VT

2 NH

3 MA

4 RI

5 CT

6 NJ

7 DE

8 MD

0.2
1.2

0.3

4.0

1.7

0.3

SC

Southeast

0.9

MS

AL
1.4

1.2

GA
3.1

0.8

LA
1.6

FL
8.5

Establishments (%)

0.4

2.1

AR

0.6

2.1

13.9

WV VA
2.2

1.4

1.5

CA

West

3.4

MO

KS

1.5

OH

1.6

3.7

4.0

IN

IL

0.5

UT

PA

3.1

0.6

0.3

1 2
3
NY
7.8
5 4

MI

1.1

IA

NE

0.2

WI

ME

MidAtlantic

9 DC
0.2

Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
SOURCE: WWW.IBISWORLD.COM

Telehealth Services in the USMarch 2014 20

WWW.IBISWORLD.COM

Products & Markets

Distribution of establishments vs. population


30

20

10

Southwest

Southeast

Rocky Mountains

Plains

New England

Mid-Atlantic

Great Lakes

0
West

The distribution of industry


establishments closely follows the US
population. Most industry players are
located in urban areas, often near
hospitals and doctors offices. According
to the American Medical Association
(AMA), 75.0% of physicians are located
in metropolitan areas, while the
remaining 25.0% are located in rural
areas. Although, patients in rural
communities greatly benefit from
telehealth services, they are able to have
many health conditions monitored from
afar without having to commute to see
their physician.
The Southeast region holds the largest
concentration of telehealth services firms
with an estimated 26.1% of industry
establishments and 25.4% of the
population. The demographics and
specific needs of communities dictate the
need for industry services. The elderly,
the immobile and those living in rural
areas, all prevalent in this region,
typically require frequent medical
attention. Telehealth services allows
them to receive such assistance from the
comfort of their own home. Florida
accounts for the most significant share of
both population and industry presence;
the state has several large cities, which
are hubs for many medical professionals.
The Mid-Atlantic also holds a large
share of the nations population and of
the industrys establishments at 15.5%
and 18.4%, respectively. The regions
higher share of establishments signifies
that the Mid-Atlantic has the highest
physician-to-population ratio, according
to the AMA. Furthermore, US News and
World Report ranks five of the top 10
medical schools in the nation in this
region and the nearby New England
region: Harvard University, Johns
Hopkins University, University of

Percentage

Business Locations

Establishments
Population
SOURCE: WWW.IBISWORLD.COM

Pennsylvania, Yale University and


Columbia University. While Columbia
University, Johns Hopkins University
and the University of Pennsylvania are
located in this region, students from
Harvard and Yale are likely to migrate to
the Mid-Atlantic for opportunities in New
York (7.8% of total establishments) and
New Jersey (4.0% of establishments).
Other regions with a significant share
of industry establishments are the West
(18.2%), Southwest (13.0%) and Great
Lakes (12.8%). In the West, California
holds the largest share of industry
establishments at 13.9%. There are many
major medical facilities and teaching
hospitals in the state which necessitate
the need for industry services. Texas,
located in the Southwest, also accounts
for a large portion of industry
establishments. Despite being home to
several large teaching hospitals, the Great
Lakes region has one of the lowest
physician-to-population ratios.

WWW.IBISWORLD.COM

Telehealth Services in the US March 2014

21

Competitive Landscape

Market Share Concentration | Key Success Factors | Cost Structure Benchmarks


Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration

in
this industry is L ow

Key Success Factors


IBISWorld

identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:

Cost Structure
Benchmarks

The Telehealth Services industry has a low


level of market share concentration. The top
four companies are estimated to account for
27.3% of industry revenue in 2014. Barriers
to entry in this industry are moderate and
potential entrants may have difficulty
sourcing talent for product and software
development. Additionally, this industry has
a moderate degree of patent protection and
new companies must develop telehealth

services systems that are not in violation of


existing patents. Nevertheless, this
developing industry is rapidly expanding,
with the number of industry enterprises
expected to increase at an annualized 15.1%
over the five years to 2014 and 30.2% in the
five years to 2019. For example, InTouch
Health now serves more than 1,000
hospitals and claims to introduce one new
telehealth services device per day.

Access to highly skilled workforce


Employees in this industry are highly
knowledgeable with expertise in software.
Attracting and keeping highly skilled
software developers is a key to continued
success in this industry.

faster than competitors offers


companies a competitive advantage,
and a failure to change may result in
a loss of business and market share.

Must comply with


government regulations
Industry operators must comply with
significant legislation on federal and state
levels regarding patient data security,
accuracy and traceability.

Ability to vary services to


suit different needs
Telehealth software can be used as a
productivity-enhancing tool in a variety of
applications. Tailoring an industry
product to a specific customers need can
lead to new clients and increased revenue.

Ability to quickly adopt new technology


This industry is subject to fast changes in
technology. Adopting new technologies

Proximity to key markets


Industry operators must be located near
hospitals and doctors who aid in the care
of patients.

Due to this industrys wide-range of


products and services, companies involved
in telecommunications, health information
technology, software and analytics, digital
imaging and medical diagnostics and device
manufacturing all contribute to this
industry. As a result, industry cost structure
varies depending upon the service offerings
of each individual company. There are,
however, many industry operators that
provide broad-based telehealth solutions.
These companies serve as a good barometer
for industry costs.

Profit
Industry profit, calculated as earnings
before interest and taxes, is expected to
account for 16.5% of revenue in 2014.
Profit margins tend to be relatively high
because companies offer a unique service
and have little competition. In the past
five years, profit margins have increased
from an estimated 13.5% in 2009, as
telehealth services have gained increasing
acceptance in the medical community. As
the US population ages and the incidence
of complicated medical conditions

WWW.IBISWORLD.COM

Telehealth Services in the US March 2014

22

Competitive Landscape

increases, industry revenue and profit


will rise. In addition, existing legislation,
such as the Affordable Care Act and
pending legislation, will increase federal
support and aid for telehealth services,
boosting industry sales and sustaining
profit growth.
Wages
Wages constitute the greatest share of
industry revenue, accounting for an
expected 42.6% in 2014. Industry
operators need skilled workers from a
variety of fields, including medical
software, systems management and
information and imaging technology. In
addition, employees in this industry must
possess knowledge of pathology and
medical terminology. Wage costs are also
connected to sales commissions, and the
industry is in a high-growth phase, with
companies pushing sales and trying to
increase market share.

Purchases
Purchase costs in the industry are also
high, accounting for an estimated 25.9%
of industry revenue in 2014. Purchase
costs include the costs related to
procuring software, video,
communications and medical equipment.
These purchases tend to remain constant
as a share of revenue because they factor
into regular industry operations.
Other costs
Marketing costs are minimal and expected
to comprise only 1.5% of total industry
revenue in 2014. Depreciation for the
industry is low, estimated at 2.2% of
industry revenue in 2014, and aside from
computer systems, there is little equipment
to maintain and replace. Other costs include
rent, utilities, administrative costs, business
and legal expenses as well as amortization,
which is the depleting value of nontangible
assets like copyrights and patents.

Sector vs. Industry Costs


Average Costs of
all Industries in
sector (2014)
100

Industry Costs
(2014)

8.6

Profit
Wages
Purchases
Depreciation
Marketing
Rent & Utilities
Other

16.5

80

Percentage of revenue

Cost Structure
Benchmarks
continued

43.4

42.6

60

18.1

40

2.8
20

6.2
18.5

25.9

2.3
2.2

2.9
8.4

1.5
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM

Telehealth Services in the US March 2014

23

Competitive Landscape

Basis of Competition
Level & Trend
 ompetition
C

in
this industry is
Mediumand the
trend is S
 teady

Barriers to Entry
Level & Trend
 arriers to Entry
B

in this industry
are M
 ediumand
Increasing

The Telehealth Services industry is


moderately competitive. Providers
compete on the basis of product quality,
which is often determined by factors like
product functionality and the speed,
performance and ease of product use. This
industry is especially subject to changes in
technology, and the ability to develop
innovative products that enhance usability
and interoperability can assist operators
in gaining market share against
competitors. Therefore, industry operators
dedicate a substantial segment of revenue
toward research and development.
Additionally, industry operators
compete on the value of the service
offered. Marketing and customer services
is of key importance in this industry, as
knowledgeable sales personnel with
expertise in software are necessary.
Training is typically offered to clients, as

There are moderate barriers to entry for


the Telehealth Services industry. On a
technical basis, there are few barriers to
entry for software publishing start-ups.
Typically, most software companies begin
with a little more than a handful of
programmers and computers. However,
patents of intellectual property can limit
competition while the industrys largest
companies are able to rely on brand
recognition, strong networks and
connections to downstream health
industries. Companies in the Telehealth
Services industry also receive recurring
revenue from contracts with existing
clients, which increases the barriers
to entry to this industry. Although,
these contracts are often in shorter
duration, offering opportunity for
potential entrants.
The market for skilled employees creates
an additional barrier to entry to the

applications can require customer


support, especially in the early stages of
product use.
Industry operators also compete on
the breadth of product offerings, and
providers often tailor data management
solutions to the specific needs of their
clients. Industry operators can
customize a data management system
for a specific field of medicine, delivery
option or transmittal.
Other factors, such as data security,
are important to the industry and serve
as benchmarks for product
differentiation. Operators gather, store
and analyze sensitive information. Thus,
securing data is essential. Any breach in
confidential medical data or patient
information can result in lost revenue for
industry operators or potentially subject
operators to litigation.

Barriers to Entry checklist


Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance

Level
Medium
Low
Growth
Low
High
Medium
Low
SOURCE: WWW.IBISWORLD.COM

industry. Telehealth service providers


compete with all other software companies
for the same pool of software engineering
talent. A broad skill set is also necessary for
industry employees. Client-facing positions
must be versed in understanding the
softwares abilities, as well as in medical
knowledge. Therefore, potential entrants
may find it difficult or costly to attract a
skilled and talented workforce.

WWW.IBISWORLD.COM

Telehealth Services in the US March 2014

Competitive Landscape

Industry
Globalization
Level & Trend
 lobalization
G

in
this industry is
Lowand the trend
is I ncreasing

The Telehealth Services industry has a


low level of globalization. The vast
majority of industry operators are
US-owned and earn revenue
domestically. Significant globalization is
prevented by a number of factors: the
personal nature of services (i.e. between

the physician and patient); the


prevalence of doctor-owned practices;
the tendency for doctors offices to be
small, with limited benefits to achieving
large size; and the ability of local
operators to access government and
private third-party payment systems.

24

Telehealth Services in the USMarch 2014 25

WWW.IBISWORLD.COM

Major Companies

GlobalMedia Group LLC | InTouch Technologies Inc. | Other Companies

Major players
(Market share)

InTouch Technologies Inc. 10.0%

78.0%
Other

GlobalMed 12.0%

Player Performance
GlobalMed
Market share: 12.0%
Industry Brand Names
GlobalMed

SOURCE: WWW.IBISWORLD.COM

GlobalMed is a telehealth software


company located in Scottsdale, AZ that
focuses extensively on improving
healthcare technology systems. The
company manufactures mobile
telemedicine stations used for
videoconferencing and sells
telecommunications software to
healthcare professionals through its
trademarked CapSure, CapSure Cloud
and EasyShare systems. GlobalMeds
video conferencing systems are used by
hospitals throughout remote areas in
which in-person hospital visits are
especially difficult. In 2013, GlobalMed
was ranked third on Modern
Healthcare magazines Healthcares
Hottest Companies List, which
recognizes the healthcare industrys
fastest-growing US companies that

generate $20.0 million or more in


annual revenue.
Financial performance
GlobalMed is a privately owned and
operated company and therefore does
not release its financial information to
the public. However, based on the
companys press releases, IBISWorld
anticipates continued growth over the
next five years. Currently, the company
employs an estimated 114 workers. The
increasing popularity of video
conferencing among medical
professionals and their patients will lead
to continued growth for the company;
IBISWorld anticipates GlobalMed has
grown at an average rate of 16.5% per
year since 2009, generating an estimated
$40.7 million in total revenue in 2014.

GlobalMed financial performance*


Year

Revenue
($ million)

(% change)

Operating Income
($ million)

(% change)

2009

19.0

N/C

2.8

N/C

2010

22.4

17.9

3.3

17.9

2011

26.3

17.4

4.0

21.2

2012

32.2

22.4

5.1

27.5

2013

36.5

13.4

5.9

15.7

2014

40.7

11.5

6.7

13.6

*Estimates

SOURCE: IBISWORLD

Telehealth Services in the USMarch 2014 26

WWW.IBISWORLD.COM

Major Companies

Player Performance
InTouch
Technologies Inc.
Market share: 10.0%

Founded in 2002, InTouch Health is a


telehealth service provider and medical
systems manufacturer that serves more
than 1,000 hospital locations across 20
countries. Located in Santa Barbara, CA,
the company develops, manufacturers
and markets various remote conferencing
systems and wireless systems that enable
practitioners to remotely communicate
with patients. Through its cloud-based
infrastructure and trademarked
SureConnect patient care, the company
allows doctors to perform consultations
with patients in real-time, and the
company estimates over 6,500
consultations are performed per month
using its technology. InTouch CEO Yulun
Wang recently expressed concern over
the long-term growth prospects of the
company in the United States due to

increasing regulatory barriers that the


company must continually overcome.
Physician licensing and credentials have
slowed the companys adaptation across
additional hospital locations, and the
company must continually engage
prospective users in understanding
the time-saving advantages of
telehealth capabilities.
Financial performance
InTouch Health is a private company and
does not disclose financial information to
the public. However, IBISWorld
anticipates the company will generate
$32.1 million in total revenue over 2014.
This increase represents substantial
annualized growth of 33.7% since 2009,
when company revenue was an estimated
$7.5 million.

InTouch Health financial performance*


Year

Revenue
($ million)

(% change)

Operating Income
($ million)

(% change)

2009

7.5

N/C

1.1

N/C

2010

15.8

110.7

2.4

118.2

2011

26.5

67.7

4.1

70.8

2012

28.5

7.5

4.8

17.1

2013

29.1

2.1

4.7

-2.1

2014

32.1

10.3

5.3

12.8

*Estimates

Other Companies

Teledoc Inc.

Estimated market share: 1.8%


Founded in 2002, Teladoc Inc. is a
Dallas-based telehealth provider that
offers health services to its members
through online video consultations.
Teledoc provides services through
contracts with professional associations
and licensed physicians. Teladoc
Physicians, PA, the companys in-house
association of practitioners, provides

SOURCE: IBISWORLD

additional operational and administrative


support with telephone and video
consultations. The company earns
revenue through one-time consultation
fees and monthly network plans.
Customers are expected to provide
medical forms prior to joining but are
entitled to around-the-clock consultation
access via telephone or video conference.
Practitioners cannot prescribe certain
drugs, and consultations are typically

Telehealth Services in the USMarch 2014 27

WWW.IBISWORLD.COM

Major Companies

Other Companies
continued

limited to minor diagnoses such as sinus


infections, bronchitis, respiratory
infections, flus, allergies and other
common ailments. Teledoc has grown
steadily over the past five years, and
IBISWorld estimates the company will
generate $5.8 million in revenue over
2014, representing 1.8% of total
industry revenue.

Carenet Healthcare Services

Estimated market share: 2.8%


Carenet Healthcare Services is a San
Antonio company that specializes in
medical process outsourcing, healthcare
support services, call center resources
and telehealth services for healthcare
companies, hospitals and government
agencies. The company was formed in
1988 and initially provided advice to

patients and nurses. Over the past five


years, the company has rapidly expanded
alongside other telecommunicationsbased healthcare service providers to
include professional medical telephone
service through health plans, employer
groups and pharmacies. The company
operates a team of registered nurses and
health professionals to provide additional
services not included within the
telehealth industry, such as hospital
administrative outsourcing, patient
advocacy programs and hospital postdischarge assistance. Carenet has been
consistently ranked as one of Americas
fasted growing companies according to
Inc. magazine over the past five years,
and IBISWorld estimates Carenets
industry-relevant revenue will reach $8.9
million in 2014.

Telehealth Services in the USMarch 2014 28

WWW.IBISWORLD.COM

Operating Conditions

Capital Intensity | Technology & Systems | Revenue Volatility


Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level

of capital
intensity is L ow

The Telehealth Services industry has a low


level of capital intensity. IBISWorld
estimates that for every dollar spent on
wages, industry operators will spend $0.05
in capital investment. Capital investment is
mainly in equipment, such as computers
and software and hardware components.
Over the past five years, capital intensity
increased slightly; in 2009, for every dollar
spent on wages, industry operators spent
about $0.04 in capital investment. Capital
expenditure is mostly incurred at the start
of the business and as assets are replaced.
The rise in capital expenditure was partly
due to innovating upgrades as a result of
the implementation of the Patient
Protection and Affordable Care Act, which
provide additional resources to cover
telehealth treatments.

Capital intensity

Capital units per labor unit


0.5
0.4
0.3
0.2
0.1
0.0

Economy

Healthcare and
Social
Assistance

Telehealth
Services

Dotted line shows a high level of capital intensity


SOURCE: WWW.IBISWORLD.COM

Furthermore, this industry is labor


intensive. Duties undertaken by
employees include product generation,

Tools of the Trade: Growth Strategies for Success


Investment Economy

Recreation, Personal Services,


Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.

Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.

Telehealth
Services
Physical Therapists

Traditional Service Economy


Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.

Medical Device
Manufacturing

Health & Welfare Funds


Medical Instrument &
Old Economy
Supply Manufacturing

Capital Intensive

Labor Intensive

New Age Economy

Agriculture and Manufacturing.


Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.

Change in Share of the Economy

SOURCE: WWW.IBISWORLD.COM

Telehealth Services in the USMarch 2014 29

WWW.IBISWORLD.COM

Operating Conditions

Capital Intensity
continued

processing purchases, sales and customer


service. Unlike capital costs which vary
between operators, labor costs are an
integral part of operating expenditure
and are an annual expense which cannot

be depreciated and spread over time.


Therefore, labor costs for this
industry and other service industries
are substantially larger than
capital expenditure.

Technology
& Systems

Telehealth software is developed from a


fusion of audio, high-definition video,
third-party medical programs and
collaboration tools. The time and costs
associated with this data integration
process varies on the amount and
complexity of data. The latest systems offer
web delivery, such as Ciscos
HealthPresence, which allows clients to
more easily control remote patient
management, collaboration and demand
for services. Increased flexibility and
interoperability enhance telehealth
systems. Furthermore, high data

encryption is necessary to ensure data


security. Despite the many recent strides in
industry technology, telehealth services are
still not to be used in emergency situations.
Additionally, this industry is subject to
frequent changes in technology. Adopting
new technologies faster than competitors
provides a competitive advantage to
companies. Industry operators are
vigilant in updating their products in an
effort to increase interoperability and
enhance data security. Failure to provide
clients with improvements such as these
features may result in a loss of business.

Revenue volatility in the Telehealth


Services industry is very high. Industry
revenue has increased in each of the past
five years, ranging from a 10.4% increase

in 2012 to a rise of 63.5% in 2010.


Revenue growth has slowed but remains
strong, with expected growth of 23.1% in
2014. This is a result of increased health

of
Technology
Change is H
 igh

Revenue Volatility
Level
The level

of
Volatility is
Very High

A higher level of revenue


volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.

Volatility vs Growth
1000

Revenue volatility* (%)

Level
The level

Hazardous

Rollercoaster

Telehealth
Services

100
10
1
0.1

Stagnant
30

10

Blue Chip
10

30

50

70

Five year annualized revenue growth (%)


* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM

Telehealth Services in the USMarch 2014 30

WWW.IBISWORLD.COM

Operating Conditions

Revenue Volatility
continued

insurance coverage for Americans with


the implementation of the Patient
Protection and Affordable Care Act,

which allows more Americans to receive


necessary medical treatment, driving up
industry demand.

Regulation & Policy

Software used in industry systems is


subject to the Federal Health
Administrations (FHA) standards. The
industrys computerized systems must
meet broad guidelines with regards to
accuracy and traceability. These systems
must also meet regulations concerning
data security. Standards issued by the

Health Insurance Portability and


Accountability Act (HIPAA) are also
relevant to industry operators. As a
result, firms undertaking trial processes
must comply with federally mandated
standards on issues such as privacy and
security with regard to a subjects
health information.

The Telehealth Services industry does


not receive assistance in the form of
tariffs; industry services are provided
domestically to Americans. The
industry does, however, receive indirect
funding from Medicare and Medicaid.
Medicare and Medicaid cover some
treatments for telehealth patients,
predominantly for mental health
services. Demand for industry services
is thereby boosted when insurance, and

not patients, is responsible for


treatment fees.
The industry also receives indirect
assistance from industry associations,
such as the American Telemedicine
Association and the International
Society for Telemedicine and Health.
These organizations promote industry
business by providing resources and
advocating for and supporting the use
of remote medical technologies.

Level & Trend


 he level of
T

Regulation is
Mediumand the
trend is I ncreasing

Industry Assistance
Level & Trend
 he level of Industry
T

Assistance is L ow
and the trend
is I ncreasing

Telehealth Services in the USMarch 2014 31

WWW.IBISWORLD.COM

Key Statistics
Industry Data
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Revenue
($m)
37.0
64.6
67.0
63.5
84.0
112.6
184.2
203.4
260.2
320.2
478.5
723.8
1,153.3
1,703.0
2,405.5

Annual Change
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Revenue
(%)
74.6
3.7
-5.2
32.3
34.0
63.6
10.4
27.9
23.1
49.4
51.3
59.3
47.7
41.3

Industry
Value Added
($m)
24.9
38.9
47.0
50.4
62.4
80.8
112.2
127.9
154.6
196.2
278.5
399.1
603.1
861.1
1,190.8

Establishments
89
129
173
177
214
266
312
336
355
430
558
726
983
1,297
1,686

Enterprises Employment
87
603
126
868
170
1,180
170
1,228
206
1,498
258
1,867
300
2,438
326
2,807
345
3,048
417
3,739
535
5,223
689
7,364
922
10,884
1,207
15,318
1,558
20,969

Exports
----------------

Industry
Value Added
(%)
56.2
20.8
7.2
23.8
29.5
38.9
14.0
20.9
26.9
41.9
43.3
51.1
42.8
38.3

Establishments
(%)
44.9
34.1
2.3
20.9
24.3
17.3
7.7
5.7
21.1
29.8
30.1
35.4
31.9
30.0

Enterprises Employment
(%)
(%)
44.8
43.9
34.9
35.9
0.0
4.1
21.2
22.0
25.2
24.6
16.3
30.6
8.7
15.1
5.8
8.6
20.9
22.7
28.3
39.7
28.8
41.0
33.8
47.8
30.9
40.7
29.1
36.9

Exports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Key Ratios
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

IVA/Revenue
(%)
67.30
60.22
70.15
79.37
74.29
71.76
60.91
62.88
59.42
61.27
58.20
55.14
52.29
50.56
49.50

Figures are inflation-adjusted 2014 dollars.

Imports/
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Exports/
Revenue
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Revenue per
Employee
($000)
61.36
74.42
56.78
51.71
56.07
60.31
75.55
72.46
85.37
85.64
91.61
98.29
105.96
111.18
114.72

Imports
----------------

Wages
($m)
18.9
28.5
36.4
40.8
49.0
62.1
81.0
93.0
109.0
136.3
188.1
261.5
380.3
530.4
723.4

Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Number of adults
aged 65 & older
(%)
36.8
37.3
37.9
38.9
39.6
40.4
41.5
42.7
44.0
45.3
46.7
48.2
49.7
51.3
52.9

Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Wages
(%)
50.8
27.7
12.1
20.1
26.7
30.4
14.8
17.2
25.0
38.0
39.0
45.4
39.5
36.4

Domestic
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Number of adults
aged 65 & older
(%)
1.4
1.6
2.6
1.8
2.0
2.7
2.9
3.0
3.0
3.1
3.2
3.1
3.2
3.1

Wages/Revenue
(%)
51.08
44.12
54.33
64.25
58.33
55.15
43.97
45.72
41.89
42.57
39.31
36.13
32.97
31.15
30.07

Employees
per Est.
6.78
6.73
6.82
6.94
7.00
7.02
7.81
8.35
8.59
8.70
9.36
10.14
11.07
11.81
12.44

Average Wage
($)
31,343.28
32,834.10
30,847.46
33,224.76
32,710.28
33,261.92
33,223.95
33,131.46
35,761.15
36,453.60
36,013.79
35,510.59
34,941.20
34,625.93
34,498.55

Share of the
Economy
(%)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.01

SOURCE: WWW.IBISWORLD.COM

Telehealth Services in the USMarch 2014 32

WWW.IBISWORLD.COM

Jargon & Glossary

Industry Jargon

DIAGNOSTIC EQUIPMENTPeripheral hardware or


equipment, such as scopes and cameras that can
gather medical data.
MEDICAL BODY AREA NETWORK (MBAN)
Technology that provides a platform for the wireless
networking of body transmitters used for measuring
and monitoring patient health information.

IBISWorld Glossary

BARRIERS TO ENTRYHigh barriers to entry mean that


new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
US Bureau of Economic Analysis implicit GDP price
deflator.
DOMESTIC DEMANDSpending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISEA division that is separately managed and
keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in the
United States.

REMOTE MONITORINGA healthcare service which


uses mobile or peripheral devices, such as a glucose
meter to perform routine health test and transmit the
data to a healthcare professional in real-time.
TELE-ICUThe use of telehealth technology and
services to provide care for critically ill patients.

INDUSTRY CONCENTRATIONAn indicator of the


dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is
less than 40%.
INDUSTRY REVENUEThe total sales of industry
goods and services (exclusive of excise and sales tax);
subsidies on production; all other operating income
from outside the firm (such as commission income,
repair and service income, and rent, leasing and
hiring income); and capital work done by rental or
lease. Receipts from interest royalties, dividends and
the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value
of goods and services produced by the industry minus
the cost of goods and services used in production. IVA
is also described as the industrys contribution to
GDP, or profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue
and imports to domestic demand. For exports/
revenue: low is less than 5%, medium is 5% to 20%,
and high is more than 20%. Imports/domestic
demand: low is less than 5%, medium is 5% to 35%,
and high is more than 35%.
LIFE CYCLEAll industries go through periods of
growth, maturity and decline. IBISWorld determines
an industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth
rate of the number of establishments; the amount of
change the industrys products are undergoing; the
rate of technological change; and the level of
customer acceptance of industry products and
services.
NONEMPLOYING ESTABLISHMENTBusinesses with
no paid employment or payroll, also known as
nonemployers. These are mostly set up by selfemployed individuals.
PROFITIBISWorld uses earnings before interest and
tax (EBIT) as an indicator of a companys
profitability. It is calculated as revenue minus
expenses, excluding interest and tax.

Telehealth Services in the USMarch 2014 33

WWW.IBISWORLD.COM

Jargon & Glossary

IBISWorld Glossary
continued

VOLATILITYThe level of volatility is determined by


averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate volatility
is 3% to 10%; and low volatility is less than 3%.

WAGESThe gross total wages and salaries of all


employees in the industry. The cost of benefits is
also included in this figure.

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

At IBISWorld we know that industry intelligence


is more than assembling facts
It is combining data with analysis to answer the
questions that successful businesses ask
Identify high growth, emerging & shrinking markets
Arm yourself with the latest industry intelligence
Assess competitive threats from existing & new entrants
Benchmark your performance against the competition
Make speedy market-ready, profit-maximizing decisions

Who is IBISWorld?
We are strategists, analysts, researchers, and marketers. We provide
answers to information-hungry, time-poor businesses. Our goal is to
provide real world answers that matter to your business in our 700 US
industry reports. When tough strategic, budget, sales and marketing
decisions need to be made, our suite of Industry and Risk intelligence
products give you deeply-researched answers quickly.
IBISWorld Membership
IBISWorld offers tailored membership packages to meet your needs.

Disclaimer
This product has been supplied by IBISWorld Inc. (IBISWorld) solely for use
by its authorized licensees strictly in accordance with their license
agreements with IBISWorld. IBISWorld makes no representation to any
other person with regard to the completeness or accuracy of the data or
information contained herein, and it accepts no responsibility and disclaims
all liability (save for liability which cannot be lawfully disclaimed) for loss or
damage whatsoever suffered or incurred by any other person resulting from

the use of, or reliance upon, the data or information contained herein.
Copyright in this publication is owned by IBISWorld Inc. The publication is
sold on the basis that the purchaser agrees not to copy the material
contained within it for other than the purchasers own purposes. In the event
that the purchaser uses or quotes from the material in this publication in
papers, reports, or opinions prepared for any other person it is agreed that
it will be sourced to: IBISWorld Inc.

Copyright 2014 IBISWorld Inc