3 Stocks Poised to Profit from This New Medicare Rule

A new Medicare rule could change the future of telehealth. How can private insurers, Verizon, and Google benefit?

Jul 12, 2014 at 1:45PM

The Centers for Medicare & Medicaid Services recently issued a proposed update to the Medicare Physician Fee Schedule for 2015 that could have game-changing implications for the fledgling telehealth industry.

The proposed rule would add wellness visits, psychotherapy, psychoanalysis, and prolonged evaluation and management services over telehealth platforms to the services covered by Medicare. If the new rule is approved, research firm IHS' bullish forecast for telehealth -- which expects the U.S. market to grow from $240 million today to $1.9 billion in 2018 -- could actually prove conservative. Therefore, let's look at the companies that could benefit from this new rule.

Virtual clinics in retail pharmacies
According to a study published in the journal Health Affairs last month, the expansion of health insurance under the Affordable Care Act could cause 7 million Americans to face a primary care physician shortage after 2014.

This means that "virtual clinics" -- kiosks set up with telepresence devices which can connect remotely to doctors -- could become a viable alternative to a doctor's visit. Rite Aid (NYSE:RAD), the third largest retail pharmacy in America, signed a deal in 2011 with UnitedHealth Group's subsidiary OptumHealth to bring its telehealth platform, NowClinic, into its brick-and-mortar pharmacies.


NowClinic for Android. Source: Google Play.

The kiosk, which functions as a "virtual clinic" in Rite Aid's pharmacies, allows patients to visit a doctor remotely through a video conferencing platform and receive prescriptions to be filled at the pharmacy. The service is generally faster than scheduling a doctor's visit -- patients will generally see a provider within 30 minutes, and the majority of all visits are completed within 10 minutes. The service is available to treat patients in 44 states and Washington, D.C., and drugs can be legally prescribed through the telehealth platform in 36 states and D.C..

Following Rite Aid's lead, CVS Caremark is now piloting telehealth for its MinuteClinic locations earlier this year. The benefit to these pharmacies is clear -- the more medical conditions that Medicare covers for telehealth visits, the more prescriptions they can immediately fill.

Verizon's biometric network
Over the past two years, Verizon (NYSE:VZ) has expanded its telehealth offerings. The idea is simple -- connecting patients to the Internet could complement its core business of connecting phone lines, the Internet, and broadband TV.  

The centerpiece of Verizon's telehealth strategy is Converged Health Management, a software platform that enables doctors to remotely monitor patients. Medical devices installed with this software can transmit biometric data across Verizon's wireless network to its HIPAA-compliant cloud server. Doctors and patients can then access these records through the platform's mobile app or Web portal. This portal consists of an internal social network where patients can also provide support to one another.

Verizon also recently released Virtual Visits, a video conferencing platform similar to LiveHealth Online and NowClinic. But Verizon's platform is much more ambitious. If Verizon collects enough biometric data via Converged Health Management, it could offer a much more complete snapshot of the patient's health than other telehealth platforms.

Since Verizon's Web portal keeps patients connected to other patients and health-care professionals, and its devices can constantly monitor patients at home, its strategy is perfectly complemented by the proposed Medicare coverage of prolonged evaluation over telehealth platforms.

Google's opportunity in mental health
Last but not least, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Helpouts, its marketplace for consultations from certified experts, has shown promise as a telehealth platform.  


Google Helpouts. Source: Google.

Experts charge clients per session, per minute, or both, and are paid through Google Wallet. A client can contact an expert through a Google+ account. To encourage the use of Helpouts as a telehealth platform, Google waives its 20% cut of the expert's fee for health-related questions and promotes the site as a HIPAA-compliant platform.

Online therapy has existed for several years, but it has not taken off due to the lack of Medicare coverage and uneven support from private insurers. But if the proposed rule regarding psychotherapy passes, Google has a chance to leverage its massive ecosystem to make online therapy a mainstream reality.

The Foolish takeaway
Only a handful of companies could today benefit from the expanded Medicare coverage of telehealth. There are, though, plenty of other telehealth start-ups that could also be lifted up with the rising tide.

Looking ahead, there are still many obstacles that could throttle the growth of the telehealth market. Given that state support for telehealth is currently spotty, a federal law standardizing telehealth regulations across the country could make a big difference. Only then will the futuristic market of virtual doctors' visits start soaring toward IHS' lofty estimates.

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Leo Sun owns shares of Google (C shares). The Motley Fool recommends Google (A shares), Google (C shares), UnitedHealth Group, and WellPoint. The Motley Fool owns shares of Google (A shares), Google (C shares), and WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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