Director of research at Feedback Research Services, Fran Fields, answers the tough questions about the elusive pursuit of a market analysis for telemedicine. In this interview with TRC senior research associate, Bill Grigsby, Ph.D., Fields provides insight into the challenges and offers appropriate methods of assessing the size of the telemedicine. Fields offers some perspective on the repercussions faced by market reports seen as conservative and unfavorable. Fields also offers her outlook on the e-health craze and its future.
Feedback Research Services is a leader in the production of timely market analysis reports for telemedicine and health care.
TIE: How did you go about assessing the size of the telemedicine market?
FF: In the world of 'medical market research reports,' the first goal is to identify individual product categories and the total number of competitors. The most reliable approach involves a 'bottom-up analysis' in which individual segments are defined and characterized to build a total market estimate.
Unfortunately, in telemedicine, there are a limited number of segments for which sales data can be obtained. This is partly due to the fact that many of the larger competitors (such as Kodak in radiology and VTEL in videoconferencing) generate a relatively small portion of total corporate revenues from telemedicine-based activities. Another problem is the number of privately held competitors involved in this market (some of which can be significant players, such as Welch Allyn in the medical peripherals segment).
Our telemedicine reports have therefore exclusively concentrated on 'telemedicine videoconferencing' and 'teleradiology' system sales, which make up the higher-end equipment purchases in most programs. These two segments, however, represent a fraction of total telemedicine expenditures, since infrastructure and telecommunications development usually involves a huge initial investment. Also, market research reports generally tend to focus on revenues generated by product sales rather than services (such as system integration) because the latter are very difficult to quantify (i.e., amounts spent vary with each customer and the information is usually proprietary).
TIE: Have you been able to observe any trends in federal or state funding of telemedicine/telehealth (in terms either of funding amounts, or funding priorities-e.g., research, clinical care provision, subsidized care (versus short-term grant funding), etc.)?
FF: Because we track market trends and product sales, our information often comes from industry rather than government sources. In fact, one of the reasons that the telemedicine 'market' seems so robust is the huge amount of funding that has been allocated by federal and state sources. Military expenditures have historically been among the largest, and many grants have been issued to telemedicine programs by agencies as varied as the Department of Agriculture, the Department of Commerce, the Department of Health & Human Services, and even the Federal Communications Commission (Universal Services). These efforts represent hundreds of millions of dollars, but only a relatively small portion involves equipment purchases. Therefore, from our perspective, an analysis of funding sources doesn't provide us with useful information.
That said, within the telemedicine industry, the general consensus is that federal and state funding peaked in the mid-1990s. Additionally, lower equipment costs and increased competition within the health care field has contributed to self-funding of telemedicine programs, a trend that has been substantiated by survey data included in the 1999 ATSP Report on U.S. Telemedicine Activity.
TIE: Why do you think there so many disagreements over market size (e.g., Frost and Sullivan's, Waterford's, etc.,)?
FF: The key to any market analysis is to carefully define the methodology being used -- otherwise, the numbers being discussed are essentially meaningless to the reader. It's also important to remember that when you see a market number, it often comes from a 200+ page report! Obviously, one of the major problems facing all analysts is that the numbers are what people find interesting, so market estimates are often cited completely out of context.
It's not so much a matter of 'disagreement' as it is use of differing analytical criteria. One way to resolve this would be to provide at least a paragraph description of the basis for each published telemedicine market estimate included in the 'official ' press releases that are issued when a report is first published. Of course, there is no control over how the number will be used subsequently, but at least there would be one reference that could be tracked by diligent researchers to put the number into some kind of perspective.
TIE: Why do you think differences of opinion over this are so contentious? Would you care to talk about the reaction to your press release issued in response to an article published in the Florida Journal edition of The Wall Street Journal?
FF: Many people probably think that the results of market research are 'neutral', but in reality, every market analysis is quite subjective -- even from the first step of the process in which the methodology and segmentation is established. Despite this, the target audience (company representatives) buys market research reports to hopefully gain a somewhat independent perspective. To meet this need, there has been an increase in the numbers and types of market analysis being provided. Leading medical market research publishers such as Frost & Sullivan have faced more competition in non-traditional health care topics such as telemedicine from specialty publishing companies and other sources.
For decades, there have also been investment analyst reports that focus on various segments of the health care market, and these are often very favorable to the leading competitors whose stock is being promoted. Because the relationship between the company producing the report and the contents is disclosed, there is no conflict of interest. With the increasing popularity of the Internet, however, excerpts from these and other non-referenced sources are being more widely distributed than ever before, and yet these are never subjected to the kind of industry scrutiny that faces a commercial market research report (during preparation and after publication). The end result appears to be a proliferation of unsubstantiated market estimates for which there is not even a basic definition of what the 'market' includes. Unfortunately, using a market number without a reference has become commonplace, with few people ever questioning the source. In a booming economy in which Wall Street activities (and dot.com IPOs) have become so important, efforts to challenge the validity of a favorable market number can be met with hostility.
In the incident you refer to in your second question, a very conservative total 'home care telemedicine market' number was provided by Feedback Research Services to a reporter with the Florida Journal edition of The Wall Street Journal. This number was used in an article for comparison with a very aggressive year 2000 forecast for CYBeR-CARE sales of the Electronic HouseCall device (generated by an investment analyst). In response, Feedback Research Services issued a press release suggesting that various e-health and telemedicine market numbers might not reflect actual product sales. Only time will tell what Electronic HouseCall device sales volumes will be (FDA approval is still pending), but the investment analyst's forecasts cited in the original article appeared to be wildly optimistic by telemedicine industry standards.
So, an alternative (more conservative) estimate was presented in the Feedback Research Services press release. Not unexpectedly, individuals from several investment companies who were promoting CYBeR-CARE stock contacted us with responses ranging from polite to hostile. The reason for the contentiousness of the investment people, in this particular situation, was probably greed. After the Florida Journal article appears, CYBeR-CARE stock rose spectacularly, and many people made a lot of money in a short period of time. There is nothing illegal about this, but it was still disturbing to us that some investors might have held the stock based on an inflated expectation of year-2000 Electronic HouseCall device sales. This concern prompted our press release response.
TIE: From your viewpoint, what effect will e-health and the growth of the Internet have on conventional telemedicine? In what time frame?
FF: In recent months, it's become clear that the advertising/sponsorship business model for health information portals such as drkoop.com won't be sufficient. Other revenue sources will need to be developed, and e-commerce seems like a reasonable route to take. Despite ongoing issues with confidentiality, consent, privacy, and regulation, there are examples of successful transition of traditional medical services to the Internet, such as online pharmacies. As doctors become more comfortable with new ways of delivering health care, the Internet also offers novel marketing and patient-physician relationship opportunities.
Until broadband access becomes widespread within U.S. households, however, the Internet is likely to only support e-mail and informational activities, rather than videoconferencing-based interactions such as telemedicine. This may be the case for another two or three years. In the meantime, there is increased interest from consumers to obtain free, reliable health care information. This creates a potentially huge new audience for provider organizations (such as the Mayo Clinic) that can extend an existing reputation for high-quality medical services. When a person's physical location becomes less of an issue, new delivery systems such as telemedicine could allow these Web site visitors to become patients.
In another scenario that is already happening to a certain extent, health care providers are able to use the Internet to monitor chronically ill patients to identify and alleviate problems before a more serious situation occurs. Ultimately, information access (appointment scheduling, ask-the-doctor forums, medical research, nurse advice, etc.) will be combined with medical services in a unique way, perhaps within the next five years. The Application Service Provider (ASP) model is likely to be especially important for this to happen quickly.
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