The answer to volatile revenue? Digital.

By Brian B. Sanderson and Alexander P. Garrison
| 12/15/2020
The answer to volatile revenue? Digital.

The impact of the COVID-19 pandemic on the business of healthcare has been striking: Patient volumes, and therefore revenue, have been significantly down across the industry. And, while the second surge of the pandemic has created some uptick in COVID-19-specific volumes and revenue, traditional medical and surgical volumes do not appear to be returning to early 2020 levels.1

These changes to healthcare utilization are the result of a few different factors. Primarily, many patients have been putting off care during the pandemic due to virus fears and hesitancy to interact with the healthcare environment. Because of these changes in utilization, provider organizations will be left with a sicker, more acute patient population.

As healthcare leaders grapple with these changes while making short- and long-term financial plans, several market indicators offer insight into future opportunities. The common thread among these indicators? Digital. Many signs indicate healthcare is on the precipice of a true digital health environment.

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A digital health surge

A few markers in the industry help tell the story of how healthcare is evolving into a more digital environment. Two of the most significant markers are:

The telehealth increase. The rapid expansion of telehealth services across the healthcare industry has been a hallmark of the pandemic. In late April 2020, weekly telehealth encounters at U.S. providers were nearly 1 million per week, compared to baseline levels of fewer than 20,000 per week.2

While telehealth use has decreased since the initial expansion, use of telehealth isn’t expected to go away. A May 2020 consumer survey by McKinsey & Company found that while only 11% of consumers reported using telehealth in 2019, more than 75% of survey respondents reported being interested in using telehealth going forward.3

Private equity’s investment in digital. Throughout 2020, investment in healthcare with a focus on technology and innovation has increased. During the first half of 2020, total health innovation funding reached $9.1 billion, a nearly 19% increase over the same period in 2019.4

One highlight of this activity was in September 2020, when long-standing telehealth provider Amwell raised $742 million in its initial public offering.5 This followed the more than $100 million it raised from additional funding by Google Cloud a month earlier.6

Following significant stock value increases, two other major telehealth companies, Teladoc and Livongo, in August 2020 announced plans to merge, with the final $18.5 billion deal closing in October.7

What does this digital health surge mean for today’s healthcare provider organizations? It creates opportunities for healthcare leaders in three key areas:

1. It reframes market share. When healthcare is delivered digitally, patients can access care anywhere. And, in the absence of a “primary service area,” healthcare leaders can approach service area with a different mindset. Provider organizations can look to attract patients who otherwise might not have sought care at their brick-and-mortar facilities due to distance or other factors. This might become especially important as employers shift increasingly to virtual, “work from home” models. With larger numbers of the workforce no longer tied by geography to their workplaces, having a strong digital presence becomes even more important for healthcare providers as they look to reach a wider array of consumers.

2. It can be a valuable retention tool. When patients can access digital tools such as wearable devices that connect the monitoring of their care to one provider, it can be a powerful incentive to stay with that one provider. The desire to avoid having to start all over again with a new set of wearables or other digital monitoring devices at a new healthcare provider is compelling.

3. It can open the door to value-based contracts. Value-based care contracts or risk-based contracts (for example, capitation) tie a healthcare organization’s reimbursement to the overall quality and utilization of care it provides to its patient population. Digital health tools such as wearable devices provide health systems with invaluable data about the real-time health of the populations for which they are responsible. This data helps organizations monitor patient trends and guide expansion of healthcare services designed to increase preventive care and overall wellness.

Finding opportunities with digital

How can healthcare provider organizations make moves into the digital arena?

First, rank the specialties for which the organization wants to invest in digital technologies. This ranking will be different for each organization. Some organizations might choose to start with primary care, for example, while others might choose to incorporate digital health tools into cardiology. Each department will require different digital health modalities, and the specialties where it makes the most business sense to pursue digital options will differ from organization to organization. Organizations could consider picking two or three specialties with similar clinical protocols to begin incorporating digital tools, and, once they are operating successfully, move on to other departments.

Second, engage providers. The clinical staff on the front lines of care can offer valuable insights into how digital tools can enhance their clinical protocols. In addition, engaging with clinicians transparently and collaboratively can help healthcare leaders overcome barriers such as clinician resistance to change.

Third, rethink ambulatory strategy. Traditional ambulatory market strategy was principally geographic. It was setting up complementary specialty care in proximity to a main, physical care hub. With telehealth, geography is less of a consideration. Healthcare leaders in a digital environment need to consider new ways, apart from real estate, to use their core competencies and offerings to attract and retain patients and provide the best care. Healthcare leaders need to ask what they can do to increase loyalty and offer an exceptional digital experience.

The COVID-19 pandemic has brought financial challenges not previously seen in the industry and, along with that, a shifting healthcare landscape. As CFOs make plans for the future and budget for new realities, they also can begin to plan for a new, more digital healthcare environment. By focusing on digital technologies, organizations can seek out opportunities and set themselves up for success moving forward.

1 “Crowe RCA Benchmarking Analysis: Volumes and Net Revenue Return Nationally, but Not to Previous Levels,” Crowe, August 2020,
2 Larry Van Horn, “COVID-19 Real-Time Impact on Healthcare Delivery,” Preverity, streamed June 9, 2020,
3 Oleg Bestsennyy, Greg Gilbert, Alex Harris, and Jennifer Rost, “Telehealth: A Quarter-Trillion-Dollar Post-COVID-19 Reality?” McKinsey & Company, May 29, 2020,
4 “StartUp Health’s 2020 Midyear Funding Report Shows a Robust, Diversified Health Innovation Market,” StartUp Health, June 30, 2020,
5 “Telehealth Platform Amwell Shares Surge 42% in NYSE Debut,” Reuters, Sept. 17, 2020,
6 Christina Farr, “Google Is Investing $100 Million in Telehealth Provider Amwell, Which Will Use Google Cloud,” CNBC, Aug. 24, 2020,
7 Jackie Drees, “Teladoc, Livongo Finalize $18.5B Merger: 4 Details,” Becker’s Hospital Review, Oct. 30, 2020,


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Mindy R. Herman
Mindy R. Herman
Managing Principal, Health and Sciences