Our Take: FEATURE: Tracking Teladoc’s ascent to, and continued presence at, the top of the telehealth industry
Editor’s note: Sometimes in the summer months and around the year-end holidays there simply isn’t a major story worth offering our perspective in Our Take. We’re experimenting with some feature stories and other commentary to provide our readers with some value during those news-barren weeks. I hope you enjoy this brief exploration of Teladoc below. -JM
When Michael Gorton and Dr. Byron Brooks kicked around the idea of starting a company called Cyber Medical Services as they hiked Mount Kilimanjaro, their intent was to bring about changes to address some of the problems patients faced in accessing care, including long wait times to get an appointment followed by long wait times to be seen after arriving at the physician’s office.
It’s unlikely the two men could foresee how much the telehealth company they eventually founded in 2002, which they named Teladoc, would transform the traditional physician-patient visit — or how large Teladoc would become over the next couple of decades.
While much of Teladoc’s growth has occurred through the acquisition of smaller telehealth providers, the company has also expanded the scope of services it offers through other acquisitions and internal development efforts, branching out from its original on-demand virtual primary care visits into mental and behavioral health, pediatrics, dermatology, nutrition, sexual health, back and joint care, chronic care management, expert medical opinions, technological offerings such as advanced analytics systems and software solutions for hospitals and health systems, and telehealth equipment sales and rentals.
Although the founders initially structured Teladoc’s business model around offering the company’s services mostly to large and midsize employers, implementation of the Affordable Care Act brought an influx of insurers on board. Aetna was among the earliest, becoming a Teladoc client in 2011. Initially, the insurer offered Teladoc’s services to members of health plans in Florida and Texas, eventually making them available to certain segments of members nationwide.
Teladoc cemented its position as the country’s largest telehealth provider after acquiring two of its main competitors at the time, Consult a Doctor, in 2013, and AmeriDoc, in 2014.
The year 2015 was a busy one, with Teladoc acquiring Compile, better known as BetterHelp, early in the year, followed by Stat Health Services, a.k.a. StatDoc, in June. Rival American Well filed a patent infringement lawsuit against Teladoc in June, which a federal judge dismissed the following year, stating that American Well’s claims were too broad.
The company went public in July 2015, becoming the first telemedicine company to be listed on the New York Stock Exchange.
A string of acquisitions ensued, including HealthiestYou in 2016, Best Doctors in 2017, Advance Medical in 2018, InTouch Health in 2020, and Livongo Health (for a hefty $18.5 billion), also in 2020.
In 2018, the company changed its name to Teladoc Health. That same year, Teladoc formed a partnership with CVS to offer MinuteClinic video visits via the CVS Pharmacy app.
In 2020, Teladoc filed a patent infringement lawsuit against American Well, which by then had changed its name to Amwell and, with financial backing from Google, had gone public. The two rivals settled that case last year.
With the increased demand for telehealth services during the pandemic, Teladoc’s revenue doubled in 2020, increasing from $553 million in 2019 to $1.1 billion. In 2021, the company’s revenue increased 86% to $2 billion.
In August 2021, Aetna, which by then was part of CVS Health, launched Aetna Virtual Primary Care, a nationwide primary care telehealth service available to self-funded employers. Through this service, “which is powered by Teladoc Health’s longitudinal, physician-led care team model,” eligible plan members can access health services remotely and in person, including at CVS MinuteClinics and HealthHUB locations. Members can form a continuous relationship with a virtual primary care physician and access a team of specialists.
A couple of months later, Teladoc Health introduced a primary care service of its own: Primary360. In November 2021, Teladoc announced that it was partnering with Trustmark Health Benefits on the launch of Trustmark’s inaugural virtual-first health plan design for self-funded employers, featuring Primary360 and complemented by virtual care services such as chronic care management and mental health.
Teladoc Health was part of Telehealth Access for America, a coalition formed in late 2021 to support the extension of policies Congress implemented during the pandemic. Other members of the coalition included the American Medical Association, the American Hospital Association, AARP, Amazon, Walmart, and CVS.
In early 2022, Teladoc Health launched its Chronic Care Complete program. Soon after that, the company announced a partnership with Amazon that allows customers to use Alexa to access Teladoc’s care providers via supported Echo devices. In mid-2022, Teladoc added new services to Primary360, including in-network referrals, care coordination support, free, same-day prescription drug delivery (through a partnership with Capsule), and in-home phlebotomy (through a partnership with Scarlet Health).
Financially, 2022 was a challenging year for Teladoc Health. The company’s stock price had already seen a substantial decrease the year before in tandem with a decline in telehealth visits across the industry. In addition, the Livongo acquisition hadn’t lived up to expectations; as a result, Teladoc recorded a $6.6 billion non-cash goodwill impairment charge in the first quarter of 2022, causing Teladoc stock to tank in after-hours trading.
In June 2022, investors filed a class-action lawsuit against Teladoc Health, alleging the company made “materially false and misleading” public statements about its business, operations, and prospects for the future. Then Teladoc Health recorded another Livongo-related impairment charge in the amount of $3 billion for the second quarter. In all, the company recorded $13.4 billion in write-downs associated with the Livongo deal in 2022.
Today, Teladoc Health is the self-described “world leader in whole-person virtual care,” doing business in 130 countries. The company’s website touts some impressive numbers, including Teladoc’s team of 50,000 specialists in 450 specialties and subspecialties; the company’s 5,000 employees; its 12,000 clients, consisting of health systems and hospitals, health plans, and employers — including “more than half of Fortune 500 companies”; and more than 50 million “all time” visits.
Recently, the company launched provider-based care programs for weight management and prediabetes. While the announcement stated that Teladoc’s aim is to “drive better health outcomes for all members” by “addressing the full range of cardiometabolic health risk factors associated with obesity, prediabetes, diabetes, and hypertension,” part of the push, no doubt, is to capitalize on the surge in popularity of GLP-1 receptor agonists as weight loss drugs. Research by Morgan Stanley indicates that spending on obesity treatments reached $2.4 billion last year and will increase to an estimated $54 billion by 2030, according to The Motley Fool.
And just last week, Teladoc Health expanded the collaboration it began with Microsoft in 2021, when the two companies integrated Teladoc Health’s Solo virtual care platform into Microsoft Teams, which clinicians use to connect with patients via video. Now, the two companies will integrate several artificial intelligence-based solutions — Microsoft Azure OpenAI Service, Azure Cognitive Services, and the Nuance Dragon Ambient eXperience, or DAX — into the Solo platform. Teladoc said the solutions would be used to automatically document patient encounters at the point of care and improve the quality of shared medical information.
Over the years, myriad Teladoc competitors have cropped up, including MDLive, Doctor on Demand, and Doximity. According to IBISWorld, at the start of 2023, there were nearly 1,400 businesses offering telehealth services in the U.S. alone. Some have a narrow focus in terms of the services they provide or the users they serve. Some are owned by health systems or payers. But, arguably, none has achieved the concurrent depth and breadth of success — and the name recognition — that Teladoc has.
Despite a phenomenal increase in demand for its services during the pandemic, and even though it dwarfs its nearest competitors in terms of its revenue ($2.4 billion in 2022, up 18% from the previous year), Teladoc Health has yet to turn a profit. The company reported a loss of $13.7 billion for 2022, most of which was attributed to the Livongo impairment charges.
Nonetheless, with the global telehealth market expected to grow from its current valuation of over $100 billion to somewhere between $225 billion and $867 billion by 2030 (depending on who’s doing the projections), there seem to be infinite opportunities for Teladoc to maintain and reinforce its position as the industry leader.
What else you need to know
Dr. Amar Desai will lead UnitedHealth Group (UHG)’s Optum Health subsidiary, taking over the role of CEO when Dr. Wyatt Decker, who has served as Optum Health’s CEO for nearly five years, assumes a new position at UHG as chief physician of value-based care, according to their LinkedIn posts. Dr. Desai was previously president and CEO of Optum Pacific West before he left in October to lead CVS Health’s new health care delivery division. Six months later, he returned to UHG as senior adviser to CEO Andrew Witty. Dr. Desai will oversee recently acquired LHC Group’s integration into Optum, as well as the integration of Amedisys if that acquisition is completed.
Eli Lilly agreed to spend up to $1.93 billion to acquire Versanis Bio, a privately owned company with a first-in-class drug candidate called bimagrumab that is being developed for weight loss. Unlike GLP-1 receptor agonists such as Novo Nordisk’s Wegovy (semaglutide) and Ozempic (semaglutide) and Lilly’s own Mounjaro (tirzepatide), which mimic incretins to suppress appetite, bimagrumab is an antibody that targets the activin type II receptor to reduce fat mass. (Approved for type 2 diabetes, Ozempic and Mounjaro are commonly used off-label for weight loss.) Details of the agreement were not disclosed, other than Lilly would pay Versanis shareholders an upfront payment in cash and potential milestone payments. The acquisition is subject to customary closing conditions. Versanis was founded in 2021 by Aditum Bio and received funding from Altas Venture and Medicxi; the company licensed bimagrumab from Novartis.
The Federal Trade Commission and the Department of Justice released a draft update of their merger guidelines, along with a fact sheet. Among the 13 guidelines are ones that state mergers should not significantly increase concentration in highly concentrated markets, eliminate substantial competition between companies, entrench or extend a dominant position, further a trend toward concentration, or otherwise substantially lessen competition or tend to create a monopoly. One of the guidelines states that vertical mergers should not create market structures that foreclose competition. Public comments on the proposed changes are being accepted through Sept. 18.
Ochsner Health and Novant Health signed a letter of intent to enter into a partnership designed to expand access to care for older adults. The two health systems, headquartered respectively in New Orleans and Winston-Salem, N.C, plan to open additional 65 Plus clinics across the Southeast. Ochsner Health opened the first 65 Plus clinic in Covington, La., in May of last year. The health system also operates 65 Plus clinics in Baton Rouge, La., and Pensacola, Fla.; the Pensacola clinic will eventually be co-branded to reflect the partnership with Novant. Ochsner will continue to open and own clinics in Louisiana, and the two health systems will collaborate on identifying other locations in the Southeast.
A tornado destroyed a warehouse at Pfizer’s manufacturing site in Rocky Mount, N.C., last Wednesday. Fortunately, there was no apparent structural damage to production facilities at the site, but CEO Albert Bourla said it would take weeks to get the manufacturing plant back up to speed. Although damages to inventory at the warehouse could eventually affect the supply at hospitals, Pfizer and the FDA are taking steps to mitigate the risk of shortages, according to a press release. Reuters noted that the Rocky Mount facility is one of the world’s largest factories for sterile injectable medicines. According to Pfizer, nearly 25% of the company’s sterile injectables, “including anesthesia, analgesia, therapeutics, anti-infectives, and neuromuscular blockers,” are made there.
Monetizing Medicine: Private Equity and Competition in Physician Practice Markets. American Antitrust Institute, 7.10.23