Healthcare


Healthspot: What Went Wrong?

by Victor Camlek 08 Jan 2016
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In a way, the events surrounding Healthspot are very similar to when Robert Bosch Health Systems Inc., exited the U.S. telehealth and remote patient monitoring (RPM) markets last year. In both cases, the move was very sudden despite notable contracts; Bosch with Veterans Affairs and Healthspot with Rite Aid, the Cleveland Clinic and others.

 

So far the demise of Healthspot has everyone scratching their heads. One of the better first assessments is on MedCity News by Neil Versel. In this piece, the head of American Well was contacted and CEO Dr. Roy Schoenberg was clear in stating this was not a happy occasion because a competitor failed. In fact, this development represents a rather visible blow to the momentum for virtual telemedicine, but more realistically another blatant example of the risks associated with telemedicine as a business. Although Healthspot was entirely focused on kiosks and this differs from virtual telemedicine services to the home that American Well provides the two markets are closely related. In fact, American Well has added kiosks to its repertoire.

 

My first thought was perhaps the patent dispute with CSI was the culprit, but the indications are that the legal actions were going nowhere. There were two initial cases with Healthspot attempting a pre-emptive strike in the U.S. District court of Ohio before CSI could file its infringement motion in Nevada. However, Ohio’s case was tossed out, the judge ruled that the case needed to be waged at the Federal Appellate level and there are no indications that the action ever really moved forward.

 

In addition, the Nevada case was paused following a motion by both parties to await the Federal Appellate decision. Based on some fast research it appears that the legal actions were not pursued and the only pending case I can find is one whereby Healthspot was attempting to recoup $830K in legal fees from CSI. Meanwhile media reports indicate Healthspot claimed CSI had admitted that it did not have solid patent infringement grounds. Therefore, the patent litigation was probably not the issue.

 

The next issue could be Healthspot's financial condition. However, from an economic perspective Healthspot was very well funded with over $43 million in recent private investment and had very promising active contracts and implementations.

 

That takes us to the next potential challenge, which could involve the cost of service. It is clear that there is no one economic model consistent across all segments of the virtual Telemedicine service providers. The prevailing perception is the cost of service is somewhere around $39 to $49 for about 10 minutes, however this varies across providers. Meanwhile, there are other reports that indicate the doctors garner about $30 of these basic fee dollars. In some cases there are subscription fees, in other cases institutional customers (employers) pay on a per-member-per-month bases; yet in some cases it's simply usage based. There are some reimbursable coverage options based on the state involved but it's very complicated and many consumers opt to pay out of pocket. The lack of a standard business model could be a challenge.

 

Additionally, the challenges in facing the adjacent virtual home services become more visible when a major player goes public, such as the situation for market leader Teladoc, a public company required to issue financial reports. This visible data reveals the stock has been on a roller coaster ride and there are public documents revealing the company is not profitable. In fact, media reports have indicated that the investment community has challenged the rate structure claiming the $49 price point (for around 10 to 15 minutes) is too low. However, when you do the math based on the time factor, this service is not cheap and raising the price could really decrease the demand.

 

A significant advantage Healthspot appeared to have over the virtual telemedicine services like Teladoc. MDLive, etc., was that the kiosks were true diagnostic centers rather than enhanced async communications or videos minus diagnostic tools. I've seen the Healthspot kiosk and it was impressive. American Well has introduced kiosks, but most of the other players are seeking partners who offer diagnostic apps to measure vital signs. This means that unless American Well ramps up its kiosks or CSI takes off, the future of the Kiosk is not promising at this point.

 

So, what else went wrong? The theories are beginning to range around the fact the management team was not experienced in healthcare, despite a very media comfortable and charismatic CEO; the systems needed for scheduling, billing and revenue cycle management are difficult and costly to implement or that this market is at this nascent stage more hype-based than fact based.

 

In addition, another challenge all virtual telemedicine vendors need to accept is that there is, as of this point, no clearly defined case law devoted to virtual telemedicine malpractice. There have not been any notable malpractice cases and most of the leading competitors brag about the positive reactions among consumers based on customer satisfaction surveys. However, as with any medical practice, there will be many lawsuits. It is unclear what the true legal risk will be.

 

Also notable, despite the technology interface we need a warm blooded human doctor at the other end of the communications link. There is ample evidence that the doctors remain unsure whether this model is competitive with their normal business, an adjunct opportunity or worthwhile. It appears to be most enticing to younger doctors, retired physicians or those close to retirement. Small practices see value but lack the scale to implement the added support systems needed to support the workflow. Some larger healthcare systems have jumped in but may have to work with doctors from the service provider networks.

 

Additionally, there is no commonly used standard agreement across the board pertaining to exclusivity of doctor provided service. Some telemedicine services have exclusive agreements, at least for full-timers while others do not.

 

The reality of starting a virtual telemedicine business that becomes visible when a participant fails is that the risks are high on all fronts: costs, pricing, legal issues, medical practice issues, workflow, marketing, revenue recognition and customer relationship management are all challenges that need strategic planning and back office systems. Also, let's not forget the various state medical boards as a factor in either positive or challenging ways as we have seen in Texas, Colorado and Mississippi (for example).

 

Healthspot appeared to have a unique product which looked much more high-tech than its prime competitor and legal opponent CSI. Actually, the pending patent issue was not about the design or features of the Kiosk, but had to do with data transmission.

 

One question remains; what went wrong?

View Victor Camlek's blog

Comments (1)

By  klara andrian
klara, klara

15 Jun 2017 06:08
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