Teladoc: Company of the Year

When Teladoc was launched in 2002, the business model allowed patients to remotely consult with state-approved doctors using a new delivery method: video. The idea has been very well received by taxpayers and employers. In 2005, Teladoc expanded nationwide and grew steadily before going public a decade later.

However, the company faced challenges as it continued to expand, including increased competition, skepticism from consumers and doctors, and a host of regulatory and reimbursement hurdles.

Then, earlier this year, the novel coronavirus hit and wiped out what was largely a fringe phenomenon in the mainstream.

No telemedicine provider has taken advantage of the favorable COVID-19 winds as much as Teladoc, experts say. In addition to the advantage of the New York-based provider and internal investment, Teladoc continued its consistent M&A campaign through 2020, further strengthening the healthcare technology space to remain the market leader.

Teladoc bought Livongo, a chronic care management manager, for $ 18.5 billion as part of the largest virtual care contract in the United States. The contract was signed in late October, just three months away, following the announcement of the merger.

“Many companies did well during the pandemic, but none proved their point quite like Teladoc,” said Stephanie Davis, senior IT Health analyst at SVB Leerink.

Despite historical volatility, Teladoc’s market capitalization was around $ 28.5 billion at the end of November, despite sales of $ 533 million last year. At its August high, the stock has risen more than 200% since the start of the year, although it has weakened slightly since then.

“We were designed for this type of situation and our testing really demonstrated the scalability of our platform and operations,” said Jason Gorevic, CEO of Teladoc since 2009, at Healthcare Dive. “And this year they tested us in ways that no one could have imagined.”

According to analysts, the massive purchase of Livongo is perhaps the most telling example of how Teladoc is navigating an evolving industry as the company positions itself as a single point of entry to a wide variety of virtual care products.

However, some investors were initially concerned about the acquisition of Livongo. Digital health stocks tend to take advantage of long-term opportunities. Marrying two of the biggest players in their respective markets increases the potential, but also increases the risk if something goes wrong.

While many assume virtual assistance will remain in place after COVID-19, many benefits could be withdrawn if Washington allows temporary regulatory flexibility to expire. It also raises the question of how much Medicare and other payers will reimburse for virtual assistance, how much usage will change as COVID-19 cases decline, and there is concern that telemedicine could worsen the quality of care around the world. An area that sometimes requires physical contact.

Some experts criticize the so-called “treadmill” approach to certain Teladoc activities and refer patients to the nearest available doctor. This is “contrary to how healthcare works,” said Oliver Kharraz, CEO of Zocdoc’s healthcare market, saying some services shouldn’t be digitized.

There is a danger here that everything looks like a nail with a hammer. A lot of these telemedicine companies are in big trouble because of the pandemic, ”Kharraz said.

Another threat is competition in the virtual care space, as competitors such as Amwell, Doctor on Demand, and MDLive expand to meet consumer demand in 2020.

However, Teladoc’s customer list, which includes major payers, employers, and healthcare systems, is not easy to compare. Customers include over 40% of Fortune 500 employers, 50 top payers, and over 450 hospitals and healthcare systems, including giants like UnitedHealth, CVS, and the Johns Hopkins Academic Medical Center.

Given fears that the use of telemedicine may decline as in cases of COVID-19, Teladoc management is targeting the third quarter. The expected shutdown effect did not occur: in fact, the volume tripled in the third quarter compared to the same period of the previous year and increased slightly sequentially, although states relaxed the lockdowns and fewer new cases of COVID -19 occurred during the reporting period.

The supplier is increasingly focusing on expanding its service lines and experiencing strong growth in specialist areas. Behavioral health and dermatology were the fastest-growing segments in the third trimester, and more than half of the visits were for non-infectious diseases.

Analysts say mental health is an area where Teladoc and Livongo will be particularly strong, and they expect further acquisitions of small to medium-sized telehealth or other digital health-focused companies in the coming years.

And the potential demand for digital health products is staggering. Up to $ 250 billion could potentially be digitized, according to McKinsey, which is roughly a fifth of all healthcare spending. Teladoc, which operates in 175 countries, sees a benchmark market of around $ 121 billion.

In the short term, Teladoc plans to close twice as many reserves in the fourth quarter as in the third. About two-thirds of sales are made up of multiple products, indicating an interest in comprehensive virtual care offerings beyond urgent care. This is where the industry and business have always been, and thanks to the novel coronavirus, it was years, if not decades, earlier than expected.

“The vision for the company has always been the same… we just couldn’t say that at first,” said Gorevic. “It has been a busy year for sure.”