By Bret Swanson
Necessity is in fact often the mother of invention. A year ago, the arrival of COVID-19 forced a stubborn health care industry to finally begin widespread adoption of internet-based technologies that should aggressively have been deployed over the past few decades.
With billions of people locked in their homes, doctor visits finally went virtual. And most everyone — patients and doctors, especially — found that in many circumstances, virtual visits are in fact a superior solution. Older patients don’t have to contend with icy roads and sidewalks. Doctors can see far more patients, with greater flexibility. The examples of convenience and cost savings are endless, but doctor visits are just the tip of the digital health iceberg. In the near future, telehealth might not only save everyone billions of hours of time each year, but also transform health care into an information industry.
The chief obstacle to telehealth has been our insanely complicated web of health financing mechanisms, which often disincentivize or even block convenience, efficiency, and innovation. It had been obvious for many years that in many cases it was easier for doctors to video chat or email their patients. But how would they get paid? When the pandemic hit, we threw many of those payment policies out the window, and the US broadband internet was more than capable of delivering technologically. COVID-19 finally picked the lock and opened the door to an explosion of telehealth innovation.
CB Insights reports that in 2020, telehealth startups raised nearly $10.5 billion spanning 600 deals. That was a 66 percent increase over 2019. So far in 2021, telehealth investments are only accelerating, with 130 deals totaling $4.2 billion in equity funding in the first quarter alone.
This wave comes not a moment too soon for an industry that exerts a growing and potentially devastating drag on the economy and our governmental budgets.
We have insisted for many years that one of the greatest obstacles to faster economic growth is the lack of productivity in the gigantic health sector, which is approaching 20 percent of the US economy. As the chart above shows, firms and sectors that more aggressively and creatively leverage digital technologies vastly outperform those that do not. The size of this challenge, however, corresponds to an equally large opportunity to turn an economic anchor into an accelerant.
It is also worth noting that telemedicine was not nearly a perfect replacement for in-person care during the pandemic. There’s lots of evidence lockdowns harmfully reduced cancer screenings, surgeries, and other crucial diagnoses and treatments. We will be tallying the true costs of overly broad quarantines for years.
And yet a silver lining remains. The long overdue use of the internet to boost efficiency in patient care is just one facet among several that will soon remake health care and medicine into information industries.