The rapid evolution of digital health technology coupled with the relaxation of many regulatory barriers relating to virtual care over the last two years has super-charged innovation in healthcare – in health technology, products, services, partnerships, and even in the legal and regulatory strategy digital healthcare innovators leverage. 

As the healthcare industry continues to drive toward improved consumer experience, access, and outcomes, the traditional telehealth model will give way to new and innovative models of virtual care. Digital healthcare is creating many more combinations and hybrids of the models operating in the marketplace.

On a macro scale, the industry is preparing for a world in which healthcare is decentralized, personalized, and delivered wherever a consumer may be, often via some form of  technology. Virtual care models have the potential to improve healthcare access, quality, and affordability. 

From a legal perspective, virtual care business models must be carefully constructed and implemented to maintain compliance with state and federal laws. From a business perspective, the right business model is key to success. 

So, what business models are digital health companies leveraging to bring their solutions to the market? 

I come across a research paper (Business Model Configurations in Digital Health Care) that analyzes 237 digital health ventures in Germany, which could be extended to the global scenario. Presenting below summary of my read from the research paper.

Business Model Configurations in Digital HealthCare – Research Findings

I. Digital Healthcare Areas of activity

1. Administrative automation
Simplifies and improves the workflow in administrative tasks and digitisation

2. Care
Tools that provide elderly care online-offline or facilitate the process for nursing companies and homes

3. Clinical intelligence and enablement
Tools that help providers and payers make clinical decisions to deliver care more effectively and efficiently

4. Clinical trials
Discovery of new health and disease outcomes

5. Consumer health and wellness
Includes rehabilitation, fitness and beauty

6. Drug discovery
Facilitating drug development programs, at any state up to the evaluation of efficacy and safety

7. Health plans and benefits
Insurance relations management

8. Occupational health management
Organisational intervention in order to reduce health risks at work

9. Pharma supply chain
Improvement of effectiveness and digitising at any stage

10. Real-world evidence
Data collection, in general via wearable devices, Patient-generated data

11. Screening and diagnostics
Wide array of solutions from consumer testing to medical imaging to digital pathology, early identification of physiological abnormalities

12. Therapeutics and disease management
Products that help consumers prevent, manage, and/or treat their health conditions

13. Virtual care delivery
Services that emphasis online interactions with healthcare
professionals

II. Digital Healthcare Technology Landscape

1. Supportive technology
* Al-based
* VR-based
* Screening/Sensor-Technology

2. Core bundle of digital artifacts and technologies
* Medical Technology and Devices
* Wearable Devices
* Software
* SaaS
* Big Data

3. Customer interface
* Application
* Platform
* Website

III. Dominant Areas of Activity

1. Therapeutics and disease management
2. Administrative automation and digitization
3. Consumer health and wellness
4. Screening and diagnostics
5. Virtual care delivery

IV. Most Frequent Digital Technologies

1. Software
2. SaaS
3. Medical Technology and Devices

V. Less Popular Business Models

Less popular models lie within the pharmaceutical context, clinical trials, and drug development. These are areas with more complex value chains and regulations

VI. Digital Health Value Creation

This paper depicts new value creation mechanisms in the sector. Due to the exchange of information and data between the service provider and the customer in the digital environment, products and services can be adapted and improved effectively and therapy and care can be delivered in a personalized manner

Digital Health Business Models

The above research leads to many possible business model configurations in digital healthcare. The following prominent business models are imminent in the context of current healthcare marketplace.

I. Platform-Only Telehealth and Virtual Care Management Models

These companies are generally direct-to-consumer (D2C), and serve as marketing companies for products they source for consumers. If their products require a prescription, they will partner with providers, but they do not hold themselves out as healthcare providers. They may indicate that they are a platform through which consumers can interact with or access providers. Companies in the platform-only space sometimes launch with this model as they build out their affiliate clinician network.

Why Companies Build or Buy Affiliate Clinician Networks

Building out an affiliate clinician network is time consuming, and for early-stage digital health companies, it can also be cost prohibitive. Emerging business models enable companies to “rent” an already-existing network of clinicians for a lower price point than building a network from scratch. You can learn more about these Outsourced Virtual Provider Network Models below. The benefit of building an affiliate network is that it gives companies greater assurance that there are enough clinicians to support the level of consumer demand for the company’s products. It also gets these companies closer to the clinicians so that they can monitor for quality of care and customer service provided by an affiliate network. 

(Remember: Platform-Only Models are essentially marketing companies building consumer brands, so any affiliates that impact consumer satisfaction have the ability to impact the brand.)  

Many platform-only companies are currently making “build or buy” decisions as they map out scaling their products and services. Those who build often fall into the “Platform + Provider” model (see below).

II. Platform + Provider Models

This model looks like a single virtual provider company to consumers, but it is actually several companies, organized in an affiliate network made up of several separate virtual clinics managed by a Management Services Organization or “MSO.”  

Almost every telemedicine company you can think of is organized this way. It is often referred to as the “MSO – Friendly PC” model, which I describe in more detail in this article.  

In this model, the outward facing “brand” – e.g. Teladoc – is used by the MSO and may be incorporated into the entity names of individual clinics through which the actual patient care services are delivered. The MSO provides administrative and operational services to support the operations of the clinics. 

Companies operating under this model may provide services on a fee-for-service or subscription basis. They may offer their services and products directly to consumers (DTC) or they may sell directly to other large businesses (e.g., large self-insured employers or payors, or some combination thereof). These companies frequently operate on a cash-pay basis to start, but during the Public Health Emergency (PHE) many more have been experimenting with payor reimbursement. 

III. Pharmacy Services

For Platform + Provider companies, prescription fulfillment is becoming a standard part of the model. Most commonly, these companies outsource this service to virtual pharmacies, often integrating the service seamlessly for the consumer through an API connected to the platform. In limited cases, I’ve seen companies start as virtual pharmacies and evolve into Platform + Provider models.

IV. Outsourced Virtual Provider Network Models

In large part because the time and resources needed to build a clinician network (and related infrastructure) is prohibitive for many companies, especially companies for which provider services are not core to their model, a crop of companies recently emerged to provide an alternative. 

These companies are essentially physician networks for lease, staffed by virtual care doctors (and nurses) who can service the consumers of the lessee company.  More of these companies emerged a few years ago to create the “buy” option in the “build or buy” decision referenced above. 

What kinds of companies are leasing virtual provider networks? Payors, large self-insured employers, and even early stage digital health companies. The cost of leasing a network is steep, but can be less than the cost associated with the “build” option, with faster deployment.

V. Outsourced Virtual Care Management Models

The virtual care management industry exploded in 2019, when CMS (and commercial payors) started to reimburse directly for remote patient monitoring in addition to chronic care management services.  Momentum around the use of virtual care management platforms and management services by outsourced clinical staff has continued to grow as a proven way to improve outcomes and reduce overall costs for patients. 

Telemedicine companies are now looking to integrate remote monitoring and other virtual care management services into their offerings. Virtual care management companies can “add-on” their monitoring or care management services through a combination of software, devices, and even clinical staff. 

It is common for these services to be outsourced, but we are also likely to observe acquisitions of virtual care management companies by telemedicine companies as the latter endeavor to create more comprehensive, preventative, and value-based offerings in the era of value-based medicine. 

VI. Virtual First or “Digital Front Door” Models

I’m seeing the greatest expansion for this kind of hybrid virtual care model this year. In this model, consumers have access to both virtual and brick-and-mortar services, depending on their level of need. Consumers navigate their care options using an online platform that offers access to both virtual care and in-person care.  For instance, a consumer whose first visit for an ailment was via a telemedicine visit may be seen for a follow up or specialist appointment at a brick and mortar clinic. 

A number of payors are moving into this space, given they often have a ready-made and expansive physician network at their disposal. In addition, virtual care companies are creating or acquiring brick and mortar clinics, and in-person clinic network companies are creating or acquiring virtual care companies. 

Ultimately, these companies hope to be able to service a broad spectrum of patient needs, delivering clinical services in the most appropriate setting for the patient’s issue type and acuity.

VII. Mobile Telehealth Models

Companies seeking to build out hybrid virtual care models like those described above know that there are some things you just can’t do via a remote monitoring device or computer screen—things like diagnostic tests, x-rays, lab services, injections, etc. In the last year, companies that provide mobile healthcare services are proliferating. 

Mobile care models enable a virtual-first telemedicine company to offer in-home services. This offers the patient the convenience of a telemedicine visit with the tools available to a traditional clinic. For example, a consumer accesses their physician through a virtual visit, and if the physician prescribes a diagnostic test or x-ray, a mobile phlebotomist or radiologist is dispatched to the home. 

Some models have no or very little virtual component. Mobile urgent care companies, for example, bring the whole visit to the home at the click of a button. Mobile phlebotomy is making a splash, especially with the shift toward decentralized clinical trials. Some companies even provide mobile ER and mobile radiology services. 

These models require more physical assets than their virtual counterparts, but as consumers are beginning to demand on-demand, in-home care, this is fast becoming a more palatable option than the urgent care clinics that have reigned for the last decade.

VIII. Telemedicine Payvider Models

A few virtual care companies have built large and robust provider networks (Platform+ Provider Model), integrated pharmacy and lab services, and are equipped to manage complex patient needs. We’re starting to see these companies transition from telemedicine provider to “Payvider”. 

These companies (and their affiliated providers) contract with payors and large self-insured employers to manage the total care of a population of patients. Instead of earning fees for every service they provide, these companies achieve profitability if they produce quality outcomes and reduce the overall cost of care. 

Payviders take on the care of patients and the financial risk of that care. This, the theory goes, aligns the incentives of payor and provider, which results in better care at a lower cost. 

What’s next? Provider in the Metaverse

As care delivery models across the continuum of care begin to evolve to accommodate consumer demand for on-demand, in-home care, even traditional healthcare institutions have begun to transform from places to platforms. For example, we are seeing glimpses of this in the growing trend toward delivery of acute care in the home (e.g. Medicare’s Hospital at Home program). 

Because of the emergence of mobile, hybrid, and virtual telehealth models, patients will have the choice not to use their local provider – even for acute level care. Already, some large employers will fly their employees to a hospital several states away if it can demonstrate great outcomes for things like joint replacement. 

So, how does a regional hospital system stay competitive? They provide the very best care, AND they reduce friction for patients who want to access their services. We are headed toward a business model in which a traditional hospital system will exist in a virtual world through which patients will access virtual care and only travel to the hospital location when necessary (e.g., procedures, diagnostic testing). Enter the metaverse of healthcare!

Recommended Reading: Healthcare Industry Trends 2021

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