splash 4 partners tele icu moving beyond the early innings

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tele-ICU: Moving Beyond the Early Innings

What is a tele-ICU?

Drivers of Adoption

Market Evolution

tele-ICU vs. Other Acute Care Telemedicine Services

tele-ICU’s Limiting Growth Factors

Contact Us:

Jacob Grosshandler [email protected] Grosshandler [email protected]



The Emerging tele-ICU Industry

Splash 4 Partners (“S4P”) was recently engaged by a healthcare focused investment fund to help diligence the tele-ICU industry in support of its investment in a company in the space. The following pages include a few high-level highlights from S4P’s analysis of the tele-ICU industry and conversations with industry participants.

Contact S4P to leverage our principals’ years of experience in private equity, lending, and management consulting to enhance your diligence findings and improve your business.


A tele-ICU (sometimes referred to as an “eICU”) provides intensive care units (“ICUs”) with remote access to critical staff—critical care nurses, board certified intensivists, among other specialists—to monitor, consult, and treat patients. An tele-ICU is akin to an air traffic control center where medical staff monitor patient vitals, perform check-ups on the patient via cameras, and quarterback treatment/intervention with the staff physically at the ICU bedside.

The backbone of most tele-ICU systems in use today is Phillips Visicu. Visicu facilitates remote monitoring and data collection while leveraging algorithms that help manage patient volumes, acuity levels, and care delivery. A typical tele-ICU team consists of three critical care nurses and one physician (usually an intensivist) who may oversee 100 or more patients. The tele-ICU is generally used as a supplement to the clinical staff at the bedside and will never fully replace the need for staff on-site, as an ICU patient is on average touched by clinical staff 178 times a day.

What is a tele-ICU?

Source: S4P Interviews and Analysis.


tele-ICU Early Inningstele-ICU is still an emergent service. Intensivist shortages, an aging population, and increased healthcare consumption provide favorable tailwinds for further adoption.

~94k ICU Beds in the U.S.

~10% - 20% of Critical Care Beds

Covered by tele-ICU Services

A Critical Care Bed Turns Over 43x-64x

a Year in the U.S.

54 tele-ICU Command Centers Installed in the U.S.

as of 2012

Over 400+ U.S. Hospitals Currently Leverage tele-ICU

4% of Hospitals Have 24x7

Intensivist Coverage On-Site

Source:. CCM Journal • Volume 41 • Number 12; The Intensivist Company; NIH; Electronic Health Reporter; Society of Critical Care Medicine; Agency for Healthcare Research and Quality; S4P Interviews and Analysis.


1998

Visicu is founded

First Visicu install at Sentra Norfolk General

Visicu installed at 32 tele-ICU

command centers

41 active tele-ICU command

centers covering 249 hospitals

UMASS study of 52 ICUs

quantifies improvements

in ICUs deploying a

tele-ICU Emory

University & Philips launch

eICU to support hospitals in

Australia

2001 2006 2010 2013 20192016

Visicu’s original patent set to

expire

Market Beta

Driving Adoption & Proving Efficacy

Expanding the Market

Philips buys Visicu for $430mm

Visicu finds hospitals willing to run trials and test an eICU solution

Market expanded, but questions remain around clinical efficacy, expense, and ROI

tele-ICU coverage capacity expands as more providers look to sell tele-ICU

services as comfort with telemedicine eases adoption concerns and superior

patient outcomes and ROI is proven out

The Evolution of the tele-ICU Market



“Hospitals were chasing something shiny when they installed EMRs. Since meaningful use, they [hospitals] are poorer and not any better off. Now they are sobering up since there has been little results [pay off]. Since the ICU is such a large percentage of the budget, they are going to look for proven technology and services that will lower and contain costs there.”

– tele-ICU Industry Expert

“Everyone knows what telemedicine is now. We used to have to educate constantly. The market has matured and people know about tele-ICU and the results it can deliver for patient care. The problem now is that telemedicine is what EMR was five years ago…the ‘it’ HCIT buzzword of the moment.”

– tele-ICU Industry Expert

tele-ICU Moving Beyond the Early Innings



Other acute care telemedicine services, such as tele-stroke and tele-psych, differ from tele-ICU continuous monitoring in customer profile and delivery of care.

tele-ICU

ICUs are more likely to be at hubs (i.e., providers of telemedicine services) rather than spoke hospitals (i.e., consumers of telemedicine services)—with exception. As such, the hospital is not looking to “pack and ship” the patient.

Variations in treatment protocols, processes, and available prescription drugs across hospitals increases the complexity of integrating a service.

Specialist shortages driving adoption. Proven to increase quality of care while producing a financial

ROI for hospitals.

Greater use case among smaller, more rural, and suburban hospitals.

Consumers of other acute care telemedicine services more likely to be found in spoke, rather than hub hospitals.

Consumers of acute care telemedicine are more likely to “pack and ship” patients (may adopt telemedicine to try and keep patients local).

Episodic, on-demand coverage is the only model currently available to emergency departments or other non-ICU acute care hospital departments.

Greater variety in hardware & software providers than in the tele-ICU market.

Specialist shortages driving adoption.

Other Acute Care Telemedicine

tele-ICU vs. Other Acute Telemedicine Services



Capital costs to launch a new tele-ICU command center range from $4 million - $8 million.

Lower cost hurdle exists for hospitals that already have the IT backbone to run other telemedicine programs.

Incremental cost to connect an additional hospital to an existing tele-ICU is estimated to be $40,000-$60,000.

Buy vs. Build Costs

Source: NEHI, Critical Care, Critical Choices: The Case for tele-ICUs in Intensive Care. December 2010; S4P Analysis.

While the benefits from implementing a tele-ICU program can be significant, the system cost is substantial. Alternatives to incurring such capital investment from a do-it-yourself (“DIY”) option exists via a limited number of outsourced tele-ICU service providers.

Example tele-ICU Command Center Capital Costs

Command Center Capital Costs $

tele-ICU Support Center Buildout & Servers $1,190,000

tele-ICU Licensing and Implementation Fees 2,400,000

ICU Equipment Costs 1,100,000

Network and Infrastructure Costs 260,000

Software Costs 80,000

ICU Facility Costs (Cabling, Electrical) 470,000

Patient Monitoring System Upgrade Costs 370,000

Project Management and Consultant Costs 1,230,000

Miscellaneous 20,000

Total $7,120,000


Continuous monitoring via a tele-ICU has proven results both in improving patient outcomes and enhanced financial results. ICUs leveraging a tele-ICU solution, on average, experience:

tele-ICU Results

A 23% Decrease in Patient’s Length of Stay (“LOS”) in the

ICU

A Mortality Rate 27% Below the

National ICU Average

Savings Ranging from ~$2,000 to ~$5,000 per ICU

Patient

Source: TelehealthTechnology.org; NIH; S4P Analysis.


Example tele-ICU Industry Participants

Source: S4P Research & Analysis.(1) Includes do-it-yourself (“DIY”) hospitals, hospitals offering tele-ICU services to affiliates and other area hospitals in a hub and spoke model, and hospitals with possible aspirations to further

commercialize their tele-ICU services and offer them on a super regional or national basis.(2) Examples Include service providers offering either continuous monitoring services or episodic / consult driven.(3) To date, only Philips Visicu has a fully dedicated commercial system built around the specific clinical workflows and patient acuity stratification and care algorithms for the ICU. However, some

of the traditional EMR providers and other more general telemedicine hardware and software providers are offering partial solutions.

Outsourced tele-ICU Service Providers(2)Hospitals / Health Systems with tele-ICU Capabilities(1)

Technology Providers(3)


Limiting Factors for Telemedicine Adoption & UseMany of the limiting growth factors are producing far less headwinds when compared to the recent past. Four of the primary growth limiting factors in tele-ICU include:

ReimbursementRates

State Licensing& Hospital

Credentialing(1)

Reimbursement from third party payors for telemedicine services has and continues to lag. With some form of reimbursement parity laws in place ~30 states, many industry participants expect reimbursement for telemedicine services to eventually be covered.

State medical licensing boards limit the geographic reach healthcare providers have to practice. Getting physicians licensed across multiple non-reciprocal states and credentialed and privileged at each individual healthcare facility takes considerable time, expense, and effort.

State RegulationHistoric restrictions protecting the localization of healthcare services has limited the adoption of telemedicine services. However, greater physician shortages coupled with greater financial constraints for smaller healthcare providers has led many states to ease restrictions and accelerate adoption of telemedicine.

Shortage of Skilled Healthcare Labor

A shortage of between 62,000 and 95,000 physicians is expected between now and 2025, including primary care physicians and specialists to say nothing of nurses and other clinical staff. Regulation that localizes the labor of healthcareprofessionals exacerbates the growing shortages by region. Hospitals and other healthcare organizations increasingly compete for skilled labor in order to service greater volumes of patients, often across a number of specialties.

Source: http://www.thune.senate.gov/public/index.cfm/2016/2/bipartisan-team-of-senators-introduces-legislation-to-expand-telehealth-services-improve-health-outcomes-and-reduce-costs; S4P Research and Analysis.(1) The Connect for Health Act, currently in front of Congress, is a bill that would help accelerate licensing across states and facilitate the delivery of services delivered via telemedicine. Additionally, this bill would improve reimbursement coverage from CMS.


Other Questions & Themes Splash 4 Partners Explored

Who are the key providers of tele-ICU services and technology?

What is the market penetration rate for hospitals using a tele-ICU solution?

What are the prominent models hospitals use to deliver / consume tele-ICU services (e.g., DIY, hub & spoke, etc.)?

Considerations among competing tele-ICU business models, including delivery models, pricing, etc.

How are hospitals acquiring / selecting telemedicine providers?

How are telemedicine providers finding success in client acquisition?

Industry perspectives on the future of tele-ICU services.

Reimbursement trends and considerations in telemedicine.

Scale implications and profit sustainability in tele-ICUs.


About Splash 4 PartnersSplash 4 Partners supports middle market businesses and financial sponsors by accelerating growth and increasing profits. We provide actionable insights and data driven solutions to executives and investors in the health, wellness, education, and information technology industries that:

Identify new strategies to capture market share

Expand existing relationships with current customers

Explore evolving competitive dynamics of a market, and

Align the firm’s capital structure with its long term objectives

Contact Us:

Jacob Grosshandler [email protected] Grosshandler [email protected]
