telemedicine virtual doctor

Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation.

Executive summary: Healthcare is becoming decentralised, enabled by broadband and smartphones. The current pandemic has helped accelerate the inevitable. Telemedicine (or telehealth) represents an efficient solution to matching customer demand with physician supply, reducing the burden of inefficiency and cost inherent in legacy healthcare systems. Both patient and doctor feedback has been extremely positive, even if more still needs to be done. The growth opportunity ahead is significant, with some studies suggesting that not even 1% telehealth adoption has been reached yet across developed markets. Expect market growth rates in the mid-teens for the coming years. Against this background, start-up funding has accelerated (and may have topped $10bn in the US in 2020) although there are few listed ways of playing the theme currently. Teladoc appears to have an early lead.

When was the last time you went to see a doctor? Think about what a strange process it is. Typically, a patient develops symptoms, next visits a surgery, potentially infecting others while waiting for their appointment. The doctor then diagnoses the problems, usually from outwards symptoms and subsequently sends the patient home, perhaps with a prescription but often with the recommendation of watch and wait. In most cases the patient recovers, although sometimes a trip to hospital becomes necessary. This model is evidently ripe for disruption with virtual healthcare, or telehealth/medicine, providing the solution. The COVID-19 pandemic has elevated a rethinking of healthcare from being not just about choice and convenience, to one of necessity to protect both doctors and patients.

Healthcare provision needs rethinking. How money is spent currently is highly inefficient, while populations are ageing, in the developed world particularly. Some studies suggest that more than $1 in every $5 spent on US healthcare is either wasted or misallocated (per the Journal of the American Medical Association). This matters when 28% of the US federal budget (or 17% of the country’s GDP) is spent on healthcare annually. Consider that, even at a basic level, the average patient has to wait 24 days to schedule a doctor’s appointment in the country’s 15 biggest cities (per Doctors on Demand, a healthcare provider). The problems don’t end there: if you do need treatment, medical error constitutes the third biggest killer in the US (data from the OCED). Perhaps this shouldn’t be too surprising given that the World Health Organisation estimates that globally there will be a shortage of more than 7m healthcare workers; a figure that will rise to 13m by 2025. Overworked and under-resourced medical professionals are having to deal with increasingly elderly and more fragile populations too. Some 80% of people over the age of 65 have at least one chronic condition (per the New England Journal of Medicine), while 50% suffer from at least two.

Medical equipment on the desk

Healthcare provision needs rethinking: more than $1 in every $5 spent on US healthcare is either wasted or misallocated

The good news is that there are solutions at hand. New technologies will create better outcomes and free up resources to help manage demographic pressures. Consider it the decentralisation of healthcare, enabled by broadband and smartphones. Under this world view, patients become more empowered as consumers and (some) care is shifted from the surgery/hospital to the home. The recent pandemic has served to accelerate this trend. A McKinsey survey of May 2020 showed that 76% of consumers said they were interested in virtual care, a massive jump compared to the 11% in favour a year prior. In a separate study (by Teladoc, a leading provider), 67% of patients said they want a virtual care doctor to partner with their existing services. Additionally, 80% of large companies in the US state that implanting virtual healthcare solutions is their number-one healthcare priority (per a survey conducted by the Business Group on Health). Viewed from the other perspective, 64% of healthcare providers now say that they are comfortable using telehealth services (again per McKinsey).

So what is telehealth? Put simply, it’s a portmanteau combining telecoms/technology and healthcare. The term is used interchangeably with telemedicine too. Perhaps the best formal definition comes from the US Department of Health, which defines it as the use of electronic information technologies to promote clinical healthcare and patient and professional health-related education. Such services are typically provided using video communication technology but may also be provided using alternative audio and text-based media.

~$500 per patient is saved for every virtual healthcare visit relative to real world encounter

Teleconsultation via computer communicator

The main benefit of adopting telehealth services is that everyone wins: customer demand is matched with physician supply. Consumers typically lack access to high-quality, cost-effective healthcare at appropriate sites of care. Telemedicine effectively brings healthcare services direct to consumers, extending the geographic reach and expertise of both physicians and healthcare facilities. This results in major cost efficiencies: better staffing, reduced travel times (on both sides) and fewer or shorter hospital stays. The largest study to-date on the topic (conducted by Veracity Analytics in 2019 and covering 2m people) highlights that an average of $472 per patient was saved under a virtual health scenario relative to a real world visit. The American Medical Association states that “studies have consistently shown that the quality of healthcare services delivered via telehealth is as good as those that are given  in traditional in-person consultations.” No wonder then that 84% of people who had a virtual medical consultation said they were able to completely resolve their concerns during the visit (per a JD Power 2019 consumer survey).

Against this background, “telehealth is now being accepted as an essential service”, per Amit Phadnis, the Chief Digital Officer at GE Healthcare. Global virtual healthcare interactions probably exceeded 1bn in 2020 (per Forrester Research). The pandemic has had an inevitable effect in accelerating demand. McKinsey estimates that ~11% of US consumers used some form of telehealth service in 2019, a figure which had jumped to 46% during the peak of the pandemic (May 2020). Teladoc disclosed that on its busiest days during the past year, it was handling 15,000 video requests for telehealth services a day. Interestingly, demand cut across all age groups, cohorts and regions as well as medical reason. While some demand has inevitably dropped off as lockdowns started easing, Teladoc’s best estimate is that its virtual visit trend could stabilise at a level some 40%+ higher than pre-pandemic. 

“Telehealth is now being accepted as an essential service”

(Amit Phadnis, Chief Digital Officer At GE Healthcare)

It is not only in America that demand for such services has accelerated. Consider that in Japan – where the average age of both a doctor and a patient is higher than anywhere else in the developed world – telehealth adoption has jumped from 1% in 2018 to ~15% in 2020, despite generational resistance to technology (per the Japanese Medical Association). Although no publicly disclosed figures are available for the Chinese market, anecdotally, the country has spent large sums to drive the digital adoption of healthcare. Meanwhile, several smaller countries such as Estonia and Israel have embraced fully digital healthcare systems for some time.

Even if there is no consensus from analysts and consultants on exactly what falls under the broad umbrella of telehealth, the market has significant growth potential ahead. Most forecast a 15%+ CAGR for the global market through to the middle of this decade (based on studies from the likes of Grand View Research, Markets and Markets and Polaris). Thought of another way, Teladoc says that it has ~70m patient relationships today in the US, which compares to the country’s population of 320m. If you were to add in the international population of other highly developed countries, this results in an addressable market of ~1.1bn people, of which less than 1% are covered currently. McKinsey’s study suggests that in the US alone, 20% of all Medicare, Medicaid and commercial outpatient, office and home health spend could be virtualised, equivalent to a $250bn opportunity.

Colored pills

Less than 1% of the addressable market for telehealth is covered today

It’s important to remember, however, that there is a limit to what telemedicine can do. It will never fully substitute for an in-person visit, lacking the ability to conduct a physical examination and a deeper inter-human connection based around non-verbal cues and the greater transmission of trust and empathy. Though telehealth is often pitched as a solution to improve access to healthcare for everyone, more than half (52%) of users say they encountered at least one barrier that made usage more difficult than anticipated. The most common hurdles were limited service, confusing technology requirements and lack of awareness about cost (per the JD Power consumer survey cited earlier). It is therefore crucial not only for regulators and insurers to create the appropriate framework for market development, but also better broadband access to be rolled out. Some 20m Americans – and often those most in need of healthcare – lack broadband access currently (per the FCC). Furthermore, in order to ensure greater adoption, matters such as the security and privacy of confidential data need to be considered as well as its sharing and the interoperability across different competing virtual solutions.

Despite these considerations, increasing sums of venture capital are being allocated to healthcare technology start-ups. Investors put a record $5.4bn into early-stage US healthcare technology businesses in the first six months of 2020, more than in any other six-month period dating back to 2010 (per Rock Health, a seed fund). Europe has also jumped on board, with an estimated 300+ deals occurring over the same period in 2020, equivalent to $2.6bn of funding (per Research Briefs). However, there are currently few listed pure plays within the telehealth arena. The industry remains highly fragmented, characterised not only by start-ups, but also by subsidiaries of larger players operating across the healthcare value chain. Businesses as diverse as Cerner, Cisco, GE Healthcare, IBM, IQVIA, Medtronic, Philips and Siemens Healthineers all claim to lay a stake in virtual healthcare provision. One study (by Becker’s Hospital Review) lists over 260 telehealth businesses active in the US as of September 2020.

Increasing sums of venture capital are being allocated to healthcare technology start-ups.

Multimedia doctor

Teladoc is the largest player within the telehealth space. Listed in 2015 and capitalised at ~$41bn, it has an estimated global market share that is 4-5 times higher than its next closest rival. Services are delivered in more than 175 countries in over 40 different languages. Teladoc works with over 50,000 clinicians covering more than 450 sub-specialities. Over 14m virtual visits occurred across all Teladoc facilities in 2020, more than double the previous year’s level. Also active within the US market is Amwell, which was founded in 2006 and listed in September 2020 (capitalised at ~$8bn). The business says that 150m potential patients currently have access to its telehealth plans. Further afield, investors can also gain access to two large listed plays in China. Ping-An Good Doctor claims to be the country’s largest online health platform, while Ali Health is expanding into virtual care given its current position as China’s largest e-pharmacy business. Ping-An Insurance and Alibaba respectively hold majority stakes in these businesses. Watch this space for more listings globally…

Alex Gunz, Fund Manager, Heptagon Capital

Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.


The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital LLP believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital LLP, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital LLP is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital LLP disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

The document is protected by copyright. The use of any trademarks and logos displayed in the document without Heptagon Capital LLP’s prior written consent is strictly prohibited. Information in the document must not be published or redistributed without Heptagon Capital LLP’s prior written consent. 

Heptagon Capital LLP, 63 Brook Street, Mayfair, London W1K 4HS
tel +44 20 7070 1800
email [email protected] 

Partnership No: OC307355 Registered in England and Wales Authorised & Regulated by the Financial Conduct Authority 

Heptagon Capital Limited is licenced to conduct investment services by the Malta Financial Services Authority.

Related Insights

Alzheimer’s: The final healthcare frontier
  • Featured Insights

Alzheimer’s: The final healthcare frontier

Season 6, Post 16: From golf course to warehouse
  • Featured Insights

Season 6, Post 16: From golf course to warehouse

Season 6, Post 14: My type of fish
  • Featured Insights

Season 6, Post 14: My type of fish


Sign up to our monthly email newsletter for the latest fund updates, webcasts and insights.