The doctor will see you now. But it won’t be face-to-face as telemedicine becomes the new normal

Telemedicine is no longer just for millennials.

The coronavirus pandemic is driving a surge in companies offering online medical consultations as patients and health care workers are forced to seek new ways of interacting.

And the big winners will be private equity and venture capital firms that have already identified the subsector as a lucrative target to juice their returns for investors.

In recent weeks, dozens of companies across Europe which provide patients with a range of services from virtual checkups, to making payments, receiving prescriptions and giving doctors easy access to medical records have recorded a spike in registration numbers and revenues.

These include General Atlantic-backed Doctolib, Sweden’s Kry International, which recently raised money from the Ontario Teachers’ Pension Plan, and UK’s PushDoctor, which counts Celeres Capital and Oxford Capital among its investors.

For some investors, the concern will be whether these businesses can sustain the uptick in revenues once lockdowns are lifted and patients choose to return to seeing their doctors in person.

But for now, the numbers look encouraging. In just four weeks, France-based Doctolib, which started out as a scheduling platform before offering online consultation services, has seen the number of video consultations spike from 1,000 to 100,000 a day. As of 22 April, patients had booked 2.5 million consultations on Doctolib.

In Sweden, Kry has seen the total number of consultations surge by a massive 163% from 1 February to 27 April across all its markets. The company has also recently expanded into the U.S.

In Britain, PushDoctor has increased the number of partnerships it launched with NHS providers by 62% — a record—in April.

“The European health care market is at a digital inflection point,” Chris Caulkin, managing director and head of technology for EMEA at General Atlantic, said. “We believe technology is in the early innings of transforming how patients and doctors engage with health care, and that there is significant potential to improve the service delivery model and overall access to health care,” he added.

General Atlantic invested in Doctolib in March 2019. The company offers its technology and services to every doctor and other health care practitioners allowed to practice medicine by the French and German medical chambers.

The doctors pay a monthly fee of €79 — but the service is free during the crisis. All health care professionals, from midwives to pediatricians can offer video consultations.

Caulkin said that since offering its telehealth platform for free during the crisis in early March, the team has brought on over 30,000 doctors.

“Before our partnership, we were very impressed by Doctolib’s progress in only five years. Their approach to health care digitization has delivered concrete results.”

Stanislas Niox-Chateau, co-founder and president of Doctolib said video consultations had been widely adopted and is now becoming “essential.”

“It will never replace physical consultation—it will probably represent between 15% and 20% of the activity of user physicians, as it is already the case in Scandinavian and some Asian countries, where the practice is more common. It must be a tool available to physicians enabling them to monitor their patients as part of the traditional health care pathway.”

Doctolib has made several add-on acquisitions, including the takeover in 2018 of its main competitor Mon Docteur, to grow its business. It will explore similar deals that help expand its geographical reach and services. An internal survey by Doctolib found that 80% of patients and 74% of GPs would like to continue using the online consultation service after the pandemic ends.

Even before the crisis, telemedicine was growing in popularity. The companies say they can help reduce wait times, provide access to specialists when travel is expensive or inconvenient and reduce health care costs. While more startups are launching such services, the ones that have received the most investment include Doctolib, Kry International and Babylon Health in the U.K., which last year raised $500m in a round led by Saudi Arabian sovereign wealth fund PIF.

“Early indications have shown that demand for digital doctor services have surged in the past few weeks in Europe due to the highly infectious nature of Covid-19 in medical institutions,” noted data provider PitchBook in an analyst note.

“If demand continues to rise, with hospitals and general practitioner surgeries remaining off-limits to other patients, these digital health care startups could demonstrate significant revenue growth quickly.”

Venture capital firms have poured more than £1bn since 2014 in telemedicine startups in Europe, according to PitchBook. Healthcare private equity buyouts surged to the highest ever disclosed deal value in 2019—313 deals worth $78.3bn compared with 316 deals worth $63.6bn in 2018, according to Bain & Co.

Those numbers could quickly be surpassed.

“More PE firms will go into this area,” said Franz-Robert Klingan from Bain & Co. “You can see by the multiples and how well some of those assets have held up more recently, that the durability is very good, there is lots of resilience.”

As appetite for deals in the sector increases, some startups and investors could fast-track bidding rounds to quickly grab assets ahead of competitors, analysts at PitchBook said.

“Lengths of lockdowns are currently unknown, and once lifted, the public may demonstrate stickiness with virtual services as major benefits include ease of use, time saved traveling and ultimately no risk of spreading or catching diseases. We believe rounds could be focused around telemedicine as a subsector over the next year,” the analysts said.

One hurdle is a myriad of regulatory obstacles stand in the way of buyout funds trying to scale these businesses and harvest high returns.

The General Data Protection Regulation introduced in 2018 across the EU carries a significant penalty if breached. That means online health care businesses that are just starting up have to be extremely careful not to fall foul of the rules that protect patients’ privacy, and need to ensure they have robust systems that will prevent any data breaches.

In addition, not all countries around the EU have the same reimbursement rules when it comes to telemedicine. If the services aren’t 100% covered by the state, the prospect of paying for such a service can easily keep patients at bay.

Telemedicine businesses can experience problems expanding into different countries when they need to change language and reimbursement systems, according to Bain’s Klingan.

“In Europe they have suffered from the scaling question. The regulation is different in every country, and they have been quite protective,” Klingan said. “What the crisis tells us and sets precedent for, is many of those services can be delivered in a safe and compliant way even though certain elements of historic regulation had to be dropped in view of the crisis.”

These restrictions may be eased as the pandemic prompts some governments to loosen existing regulations, giving the sector a major boost.

The French government relaxed the reimbursement rules for patients using telemedicine to facilitate the use of online consultations during the pandemic. During this period, the consultation will be reimbursed entirely by the National Health Insurance, as opposed to the usual 70%, and patients will no longer need to see a doctor at least once in the year preceding the teleconsultation to demand the reimbursement.

In Germany, new legislation that came into effect at the start of the year has allowed reimbursement for online consultations. In addition, health care providers are now allowed to actively promote their digital services to patients on their website.

In the U.S. policy makers and insurers across the country are eliminating co-payments, deductibles and other barriers to telemedicine for patients stuck at home and who need to see a doctor.

Buyout groups are hoping that, even if some telemedicine companies see a drop off in demand from older patients who prefer in-house visits once countries start to ease lockdown restrictions, they will be able to depend on a wider generational shift for future revenues.

The majority of millennials—typically defined as those born between 1982 and 1996—expect convenience, speed, and transparency from services they purchase and health care is proving to be no exception. That should stand buyout groups’ investments in good health for the foreseeable future.

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