Telemedicine Comes to the Forefront | Barita Insights | March 8, 2021

An Accelerated Shift

While many industries have faced unprecedented disruptions from the COVID-19 pandemic, healthcare has been uniquely affected given the nature of the crisis. The importance of health care and by extension, health care innovation, was made painfully clear as hospitals became flooded with more patients than beds throughout many nations. Given the constraints stemming from these overcrowded hospitals, telemedicine, which is described as the remote diagnosis and treatment of patients by employing telecommunication technology has been on the rise. Like many shifts we’ve seen become mainstream, telemedicine is being fuelled by the convenience it provides, a key driver in several secular shifts driving industries, economies and capital markets. More importantly, the pandemic has highlighted the benefit of healthcare outside the walls of hospitals. Specifically, in many regards, doctors have somewhat refocused towards preventing patients from needing to visit hospitals in the first place. With that said, we view telemedicine as a key market within healthcare that has become more prominent since COVID-19 and is expected to remain after the pandemic. In this article, we discuss the intricacies of this important and growing sub-industry.

Benefits of this New Market

Over the last several decades, chronic illnesses have become increasingly prevalent, driven by several global factors that increasingly result in the occurrence of these diseases. Over time, the costs associated with treating these illnesses have grown significantly. In the US for example, health care costs represent 17.7% of GDP and on a per capita basis, amounting to U10,966 based on data from The Peterson-KFF Health System Tracker. For further context, the per capita GDP of the US is approximately $65,297.52 which implies healthcare costs account for 16.8% of per capita GDP. Telemedicine essentially reduces costs for everyone involved, across the medical spectrum, including patients, hospitals and governments. Simultaneously, the adoption of telemedicine has shown improvements in efficiency through reduced travel times, and hospital-stay reductions as persons are advised faster than if they were to venture to the hospital. In our view, these benefits are substantial and will continue to be a tailwind for this industry.

Phenomenal Growth Underway

Now, the COVID-19 pandemic has truly been a catalyst for the telemedicine industry. In 2019, prior to the pandemic, the global market size as reported by Fortune Business Insights totalled US$41.63 billion and with the onset of the pandemic, the market growth catapulted significantly by 91.7% in 2020. On the heels of this initial burst of growth, the telemedicine market is expected to grow by a Compounded Annual Growth Rate (CAGR) of 25.8% between 2020 and 2027. This growth is being fuelled by the rapid evolution of modern technology, which is increasingly making telemedicine and by extension, telehealth, progressively plausible. Across the globe, the US stands as the main adopter of this fast-growing market, owing to the growing burden of chronic diseases and the high adoption of advanced healthcare technologies in the country. Amidst this growth and the benefits from this market coupled with the pandemic, government support for Telemedicine has increased. Specifically, the US has broadened access to Medicare telehealth services so that beneficiaries can receive a wider range of services from their doctors without having to travel to a healthcare facility.

Telemedicine in Jamaica

While research in Jamaica about this market is less than ideal and the shift has been less pronounced given the technological constraints, we’ve witnessed increased usage of telemedicine even here. MD Link, for instance, is an app where you can set an appointment, choose a physician, the appointment you want (phone call, video call, text message) and after the appointment, a prescription is sent to a pharmacy of your choice. While the worst of the pandemic has passed, we believe the benefits of telemedicine remain intact and like many other shifts spurred by the pandemic, should see continued momentum as individuals favor convenience which telemedicine provides as it relates to health care.

Capital Markets Positioning

During the heights of the pandemic, telemedicine ETFs and individual stocks in telemedicine saw significant investor confidence given the importance of these companies paving the way through the worst of the pandemic. Since February, amidst rising long-end treasury yields, we’ve seen a decline in the broad market and even more so in COVID-19 beneficiaries, including telemedicine companies. As indicated prior, the growth of the industry is expected to be significant at just under 26% up to 2027. With that said, we see this as a shift that will continue in developed markets and even here in Jamaica and believe investors should consider the long-term growth of this segment of the health care sector.