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COVID-19 Pandemic Likely To Cause US Telemedicine Boom

The response to the COVID-19 pandemic will accelerate growth in telemedicine and home internet of things healthcare revenue more broadly, as the U.S. government's response drives a nearly 31% CAGR in Kagan's recently released five-year forecast.

Revenue is expected to grow from $628.3 million in 2019 to $2.40 billion in 2024. Though home IoT healthcare is not exclusively for the elderly, that population will make up a vast majority of IoT revenue over the forecast period, with nearly two-thirds stemming from those ages 65 and over in 2019.

That percentage is expected to increase to nearly 75% of revenue by 2024 due to two factors. First, the COVID-19 pandemic and responses highlight the particular vulnerability of the elderly. As their primary insurer is Medicare, the U.S. government response is key, and the implications on IoT healthcare in the home will be felt by everyone from medical-device makers to communications service providers.

A related second factor driving the forecast consists of two significant government announcements. In March 2020, the U.S. Center for Medicare and Medicaid Services declared that telemedicine visits would be reimbursed at the same rate as in-person visits to all Medicare recipients for the duration of the COVID-19 pandemic. Also in March, the U.S. Food and Drug Administration approved expanded use for remote medical diagnostic devices to reduce the need for office or hospital visits during the pandemic. Both announcements were designed to reduce the burden on the healthcare system, while also increasing patient convenience. These factors should lead to the same outcome: a shift in care from outside to inside the home that primarily affects those over 65.

Kagan assumes that both of these rules will outlast COVID-19 in our forecast, as they serve both the health and convenience of recipients. For this reason, we expect a spike in home IoT healthcare revenues through the end of 2021 before the growth rate then slows slightly for the remainder of the forecast.

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Home IoT healthcare: telemedicine and connected devices

Home IoT healthcare consists of two pieces: telemedicine and cloud-connected or IoT medical devices. Telemedicine refers to home-based, visual, two-way communication with a healthcare provider, and can be via PC, tablet or mobile phone over a wired or wireless connection. IoT medical devices regularly send vital signs to the cloud for access by those healthcare providers. Both are necessary to broadly treat chronic and temporary, acute conditions via IoT.

Chronic conditions refer to long-term health issues and include heart disease, diabetes, chronic obstructive pulmonary disease (COPD), emphysema, severe hypertension and kidney disease. Chronic conditions require medical equipment to properly monitor the patient at home, including vital signs monitors, electrocardiograms (EKG), pulse oximeters, glucose monitors and oxygen equipment. While most of these devices currently are not IoT, there is a trend toward it. An example is OneDrop's $69.95 glucose meter kit for diabetics that includes a meter, a lance for piercing the skin, receptacles and test strips. The meter is Bluetooth-enabled and connects to a mobile phone-based app for transmission of data to the patient's doctor. This form factor of a relatively inexpensive measuring device connected to a phone or tablet is increasingly common for chronic conditions and is helping to drive home IoT healthcare adoption.

In addition to chronic conditions, home IoT healthcare refers to home monitoring of patients of all ages after their release from the hospital. This can be post-surgery or for hospital stays brought on by a variety of medical conditions. As with chronic conditions, the post-hospital patient's vital signs must be monitored, and there must be a visit to the doctor afterward, although the care is temporary. IoT-enabled vital signs monitors and telemedicine appointments should become increasingly popular in this segment as well, especially among older Americans on Medicare due to the new reimbursement rules.

Home health patients: IoT vs. non-IoT

The majority of home healthcare patients do not currently use IoT. They visit their doctor when it is recommended or necessary, and if they have any medical devices in the home, they are not connected to the cloud. And the fact that so many home healthcare patients are over 65, the least technically-savvy portion of the population, makes extending the penetration of IoT a particular challenge.

However, two trends will help to drive IoT going forward. One is the COVID-19-driven move of the U.S. government, both from Medicare and the FDA, toward leveling the field between the home and the doctor's office. Second is the decreasing cost and increasing ease of devices and internet availability in the home environment.

In the past, telemedicine required expensive equipment in the home, including dedicated cameras and networks. That made insurers hesitant to approve the expenditures in all but special circumstances. However, the increasing availability of cheap reliable devices and services in the home, including smartphones with high-resolution cameras and reliable cellular and broadband networks, has made telemedicine increasingly inexpensive to insurers by transferring costs from insurers to patients who already have these devices and services at hand for their own personal use.

The forecast for home IoT healthcare patients as a proportion of total home health patients shows the COVID-19-influenced boom we expect from government regulatory changes. In 2019, only about 20% or 683,000 home health patients used IoT, which we define as having cloud-connected medical devices or contacting healthcare providers via telemedicine. In 2020, that is expected to increase by 228,000 to 25.1% of patients, with most of that increase coming in the second half of the year, when the Medicare and FDA coverage expansions will be fully in effect. By 2024, Kagan expects that 2.3 million or nearly 47% of home health patients will use IoT.

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