Tag Archives: Amwell

SPI Digital Health: Telehealth Vendor Financials Q1 2023

Three months ago, Signify Research described the Q4 2022 and FY2022 financial results of Amwell and Teladoc as offering ‘grounds for guarded optimism in 2023 and beyond’. 

The macroeconomic picture has, if anything, become bleaker since then, and the two telehealth vendors’ Q1 2023 year-on-year (y-o-y) results are underwhelming at best. Both remain in a revenue rut, pummelled by soaring inflation, manpower shortages and the last vestiges of a COVID hangover. Amwell reported yet another quarter of near zero y-o-y growth, while Teledoc’s y-o-y revenue growth is modest. 

Despite this, the grounds for optimism referred to in early March remain, with a little more clarity on how Amwell and Teladoc might boost their revenues now emerging.  

The Signify View  

The latest quarterly results have a familiar ring. Amwell’s struggles continue, its Q1 2023 revenues 0.4% down on Q1 2022 at $64M. Net losses plunged, increasing 623% q-o-q to $398.50M, reflecting mainly a $330.3M one-off impairment charge. Discounted, the loss was $68.2M against revenues of $64M.

Teladoc’s revenues, while hardly cause for mass celebration, fared far better, up 11% on Q1 2022 at $629M. This was its lowest y-o-y quarterly growth rate since it went public in 2015 and the first quarter it has reported a q-o-q decline in revenues.  

Total visits for Amwell numbered 1.71M in Q1 2023 (1.775M in Q1 2022), although the number of ‘in-house visits’ (i e those Amwell provides with its own doctors rather than third-party health system doctors) rose. Teledoc’s visit numbers increased 4.9% in the quarter. However, again this was the lowest y-o-y quarterly growth rate for visits since it went public.  

Amwell Revenues

 Source: Amwell

Teladoc Revenues

Source: Teladoc

Flat Lining 

Amwell’s almost non-existent revenue growth is nothing new, of course. More noteworthy is how the company can reignite growth within its health system and health plan businesses, where it has consistently struggled to win new customers. Trying to sell more solutions to its existing customers is therefore the logical next step. 

It can do this by offering a selection of additional modules to health system customers, what it refers to as its ‘land and expand – from telehealth to ‘digital first’ strategy. These modules encompass virtual care tools across the entire patient journey. Amwell is one of just a handful of vendors offering enterprise-scale telehealth solutions across diverse care settings, from primary care to pre-admission and hospital and post-acute care, so it well positioned to execute on this strategy.  

This strategy also plays into the fact that health systems increasingly look for a ‘catch-all’ solution from one vendor to service all their needs, rather than buying point telehealth solutions across different care settings. It promises to deliver incremental success over time and start to increase revenue per customer. 

Aligning with VBC  

Amwell is also betting big on automated care programmes. These are workflow tools that can help guide providers’ longer-term care management strategies for patients that have, for example, been discharged from hospital or who suffer from chronic conditions. 

This is a ripe opportunity, and aligns closely with the value-based care (VBC) movement in the US. But it also comes with risk for Amwell. This is unfamiliar, and highly competitive, territory for the vendor. Babylon Health, Signify Health, VillageMD, some retail players and primary care management organisations like Aledade all specialise in structured care management programmes, and are also developing their own virtual care services and platforms for health providers, which is Amwell’s traditional stronghold. Amwell will need to dislodge, and there is no guarantee that it will be successful. 

Positive Behaviour 

As with its health systems business, Amwell has also had problems growing its health plan customer base, and so here as well it can now intensify its focus on boosting revenue per existing customer, something it has already had success in doing (see figure below). It can do this by moving away from its legacy business and into new markets like behavioural health. 

Amwell acquired UK mental health platform developer SilverCloud Health in 2021, and focusing on behavioural health makes sense given the strong momentum in this market in the US in particular. This is also a competitive arena, however, in which Amwell has a relatively small footprint. Further acquisitions will be necessary if it wants to make meaningful inroads in the US and internationally (a route it has yet to fully exploit).   

The company is acquisitive by nature. In 2021 it spent $320M on SilverCloud as well as Conversa Health, for example, but this was at the giddy heights of the COVID boom. In 2023, against a more sombre backdrop of losses and shrinking funds, acquisition will be less palatable.  

Amwell Revenues Per Customer by Customer Type

Source: Amwell

Brighter Picture 

As in previous quarters, the Teladoc story also improved little in Q1 2023 q-o-q, although overall the picture is brighter than its rival. Revenues were up 11% y-o-y at $629M and, unlike Amwell (which effectively loses $2 for every $1 it makes), Teladoc reported just a narrow negative EBITDA of –$7.3M in Q1 2023. It is tantalisingly close to profitability. 

And, while its US revenues fell, its international business (which accounts for a smaller chunk of the business overall) experienced rapid q-o-q growth, highlighting the benefits of Tedaloc’s geographical diversity (which Amwell lacks). 

However, if anything highlights the visionary gulf that exists between Teladoc and Amwell, it is in mental and behavioural health. While Amwell is only now making moves into this buoyant market, Teladoc was acquiring BetterHelp, the digital mental health platform, back in 2015. BetterHelp now has 460,000 members, a far smaller number than Teladoc’s traditional integrated care and video consultation business, but, tellingly, it makes a lot more money from each BetterHelp member.  

Beyond behavioural health, Teladoc has a solid, well established customer base, and the experience with success and mistakes along the way. Where Amwell has been more conservative and circumspect, Teladoc deftly diversified into areas like behavioural health and chronic care management long before its rival. 

Grasping the Moment 

Amwell has, in a way, done the easy part by deciding its strategy on increasing revenue per customer rather than chasing new customers. The hard part will be executing this in highly competitive areas, amid very challenging macroeconomic times and with its hands tied to an extent by its own financial circumstances. It has also shed hundreds of jobs in the past year. 

The fact it is unable to grow its customer base leaves it vulnerable to churn. As nearly all health systems and health plans now have relationships with telehealth platform or service providers, this is not the greenfield opportunity it was three years ago. Back then, there were many potential customers who had no solution in place.   

Unfounded Optimism? 

Curiously, Amwell has also recently indicated that it needs to generate $500M in revenues just to break even. Given its performance over the last four years (when annual revenues inched from $245M to $280M), with a zero-growth forecast for 2023 and with limited cash to fund its strategy, $500M seems far off. It will need to hit the metaphorical jackpot with its growth strategy, which is unlikely. 

And so, while Teladoc has been slowly slotting the various parts of its jigsaw into place, the pieces of Amwell’s jigsaw remain scattered across the drawing board. Both vendors are navigating incredibly challenging operating conditions, and both must find ways to cut costs substantially in the current environment. But with solid foundations and foresight, Teladoc says it can achieve 11% revenue growth this financial year, where its rival predicts none. It will be many more quarters of disappointing revenues before Amwell turns the corner. 

Signify Premium Insight: Riding out the Storm: Amwell and Teladoc Financials Q4/FY2022

In the face of sustained macro-economic challenges, Amwell and Teladoc continue to wage battle on several fronts. As in previous quarters, Teladoc is riding out the post-Covid storm better than its rival on several counts. But, amid the pervading global gloom, the telehealth industry is in decent overall shape; and there are some genuine bright spots in both companies’ Q4 and full-year (FY) 2022 financial results. This offers grounds for guarded optimism in 2023 and beyond. 

Amwell at a Loss  

By far Amwell’s most pressing challenge is how to stem losses which have been a black mark on the company’s bottom line since the end of the Covid telehealth boom. In 2022, soaring inflation intensified the problem, pushing operating expenses ever higher.  

Losses aside, there are several positives to glean from the results. Revenues continue their upward trajectory (see chart below): total Q4 2022 revenue rose 9% from Q4 2021 to $79.2M, and total FY revenue grew 9.7% year-on-year to $277.2M. This is up significantly on the 3.1% growth between FY 2021 and 2020. Amwell’s results are notoriously seasonal and in the below chart we also show the four-quarter rolling revenue average. After two quarters of QoQ decline in the middle of 2021, the last four quarters’ results have all provided positive growth.  

Subscription revenue grew 12% to $120.9M in 2022. The company says this was positively impacted by including a full year of revenue from its 2021 acquisitions of behavioural health firm SilverCloud and automated virtual care firm Conversa. 

Amwell’s new Converge integrated platform is scaling well, accounting for 28% of total visits as of Q4 2022 (16% in Q3 2022). The company says it expects the number of active providers to expand further as more customers migrate to Converge. Amwell ended the year with 107,000 active providers, up 11% on 2021. 

Overall, there were 1.7M visits to Amwell’s platform in Q4 2022, 12% more than Q4 2021. Q4 2022 AMG visit revenue (revenue from Amwell’s own affiliated providers) was 12% higher than Q4 2021 at $35.1M, although still short of AMG’s all-time high of $36M (Q2 2020). For the year, AMG visit revenue grew 7% year on year to $124.3M. AMG visit numbers grew 23% for the quarter, and 11% for the year.  

Amwell Revenues

Source: Amwell

Scaling Success  

Another positive trend for Amwell is increasing revenue per customer in both health systems and insurance plans (see chart below). Health plan revenue per customer jumped 19% in 2022 versus 2021, and 13% for health systems. Revenues from ad hoc visits also rose 7%. 

Amwell is selling more (and a greater range of) products (for example chronic and speciality care, where the company has made some acquisitions) to each customer, and is providing more consultation services to each customer. 

Amwell Revenues Per Customer

 

Source: Amwell

Elephant in the Room 

Despite the positives, Amwell’s big problem remains high net losses, which in FY2022 represented 98% of overall revenues. Inflation is one factor behind skyrocketing operating expenses, of which doctors’ salaries are a major component. In FY2022 Amwell also had to absorb the costs of migrating customers to Converge, along with costs relating to the integration of its acquisitions. 

We discussed previously in this Insight ways in which Amwell might mitigate high costs, but there are few short-term fixes. AI will eventually cut payroll costs as more services are automated. There is already (admittedly limited) evidence that Amwell’s consultation efficiencies are improving: whilst reducing the number of AMG providers servicing customers by roughly 15% in 2022, it managed to increase AMG revenues and AMG consultation volumes (up 16%).  

Another obvious lever that Amwell could pull is to charge more per contract or visit, but it would be a brave step in a highly competitive telehealth market. 

Slow Burner 

Given the scale of losses confronting Amwell, profits look a distant dream. While the global economic environment will improve and inflation ease, it could take years for big impacts like AI to really kick in. 

Amwell is setting expectations accordingly. The company’s 2023 revenue guidance of $275M to $285M mirrors 2022’s $277.2M, although it says it expects revenues to grow again in 2024. 

A best case scenario for Amwell in 2023 will be to further increase revenue per customer and achieve full migration to Converge (one of Amwell’s stated priorities for the year). The company might consider shedding some underperforming parts of the business, though suitors might be in short supply. A left-field option might even be to go private again. Could Amwell’s original owners, flush from the lucrative flotation two and a half years ago, be tempted to take the company back at a serious discount? 

Realistically, only a sustained period of substantial revenue growth and belt tightening will arrest a malaise which has seen investors abandon ship in their droves. Nearly 88% has been wiped off Amwell’s value in the last five years, and shareholders will remain jittery for the foreseeable future. 

Thumbs Down for Teladoc 

Teladoc Health reported its Q4 2022 and FY2022 results on 22 February. Highlights included 15% Q4 2022 revenue growth year-on-year to $637.7M, and FY revenue growth of 18% to $2.406B. Q4 EBITDA totalled $32.97M and FY EBITDA was $5.6M. In its 2023 guidance notes, Teladoc revealed it expects annual revenues in the range of $2.55B to $2.68B, and FY losses of $1.75 to $1.25 per share. However, the FY2023 revenue growth outlook of 6% to 11% is well short of 2022 levels. 

The company’s share price took a hit as the results were announced, before recovering slightly. The share value has fallen 3.85% in the last week, continuing a trend which has seen the stock plunge 65% over the last year. The scars of the billions of dollars of write-offs from the Livongo acquisition have yet to heal properly. Taking into account the write-off hit, the company’s net loss for the year amounted to $13.7 billion.  

Teladoc Revenues

Source: Teladoc

Arguably the most notable aspect of the latest results is the introduction of two new reporting lines: Integrated Care Segment and BetterHelp.  

Integrated Care accounts for the bulk of the Teladoc business – health plan customers, providers, and the Livongo and InTouch Health businesses. BetterHelp, meanwhile, accounts for the international direct-to-consumer business, where profits jumped strongly in Q4 2022 compared with the more measured growth of Integrated Care. In last month’s earnings call, Teladoc’s chief financial officer said that BetterHelp should see margins ‘bottom out’ in Q1 2023, and then progress consistently during the year. 

While Teladoc faces the same challenging operating environment as Amwell, it continues to manage costs better, and (the Livongo hangover notwithstanding) it at least has a clear path to profitability. We have written previously about how its international business is a possible trump card for diversifying revenues, and international visits already make up a sizeable chunk of business (see chart below). After its Livongo experience, Teladoc is learning to be more disciplined with acquisitions, and this will stand it in good stead in 2023 and beyond.  

Teladoc Customer Visits

Source: Teladoc (note split between US and international visits is an estimate for Q422, total is reported by Teladoc)

Reality Check 

While revenue growth in a highly competitive market is to be applauded, both companies need to do more to rein in escalating costs. While there is only so much they can do to fend off wider forces affecting the global economy, they will need to smartly execute long-term strategies to drive expenses south. Technology is central to this, but it is a long play. Expect several more quarters of losses, and more shareholders voting with their feet, before better times arrive.  

Signify Premium Insight: MDLive Plays Chronic Care Catch Up

Two months ago, US telehealth services company MDLive announced it would be expanding its virtual primary care platform. For the first time, it will offer support tools to manage patients with chronic conditions. This will start with hypertension support tools, before expanding through 2023 to include other chronic conditions.  

MDLive says the new chronic care management tools will support millions of patients who currently subscribe to its services via employer health benefits schemes in the US. It also claims that it is the first virtual primary care programme to offer a consistent stream of insights between the primary care physician, health provider and patient. This, it claims, will result in better care co-ordination. 

Although it is a leading US telehealth vendor with a track record in low acuity services, MDLive is a latecomer to chronic care management. Teladoc, which is heavily invested in chronic care management (not least through its multi-billion dollar Livongo acquisition in 2020), is the market leader. MDLive will need to play catch up, although it is well placed to grow its revenues per chronic life managed. This is where its focus will now be trained. 

The Signify View 

MDLive’s move into chronic care management is a logical next step for a company which has played in low acuity services for much of its existence. Last November, the company claimed that its virtual primary care platform registered a 300% year-on-year surge in consultation numbers. While this was impressive, even more significantly MDLive says 68% of the patients who used its platforms for a wellness visit over this period identified with at least one chronic condition. This results in a massive potential captive market for MDLive, which it can now start to serve with its new suite of chronic care management tools. 

MDLive’s relatively recent corporate history also informs its current approach to portfolio and services. It was acquired by Evernorth, the healthcare services subsidiary of insurance firm Cigna, in February 2021. Evernorth essentially co-ordinates healthcare services for employers and government workers, managing patients’ conditions cost-effectively and proactively. Acquiring MDLive gave Evernorth an integrated in-house virtual care service covering urgent care, dermatology, therapy and psychiatry via a network of certified clinicians that it could offer to its payer customers covered by Cigna policies. While relatively modest cash-wise, the deal was a milestone for MDLive. For the first time, leveraging its parent company’s model, it was able to offer services more cost-effectively and proactively. This was a significant departure from its traditional approach of simply reacting to care needs, and the first real sign that it was aligning itself with the tenets of value-based care (VBC).  

Barren Landscape 

As we have stated, MDLive’s decision to expand into chronic care management is sound, given that around two-thirds of the patients using its wellness platform identify with at least one chronic condition. 

Virtual care in the US is, however, almost saturated (this is a problem for MDLive, which only operates in the US). Nearly all payers and employers in the country offer some kind of virtual care service in 2023. Indeed, most companies take a more proactive approach to managing people, patients and chronic conditions than ever, broadly in keeping with VBC. 

Because of the above, opportunities to prise customers from their existing virtual care provider contracts are limited, and there are very few new customers in the market. As such, it is verging on the impossible for MDLive to win meaningful share from the likes of Teladoc or AmWell in the current environment.  

The question for MDLive therefore becomes how to maximise the revenue potential of each patient interaction. Every one of the 68% of patients on MDLive’s platforms with a chronic condition represents a new revenue opportunity. 

VBC reimbursement models, where payers are incentivised to better manage their services, are integral to capturing this opportunity. Medicare Advantage contracts, where providers offer everyone on Medicare Advantage an Annual Wellness Visit (AWV) screening service, are promising for MDLive, and reimbursement structures are already in place to support this. 

RPM and the Reimbursement Opportunity 

Remote patient monitoring (RPM) reimbursement models are another route to fresh revenue streams for MDLive. As the company’s chronic care management tools are rolled out this year, physicians will track personalised care and condition management plans through connected devices (for example blood pressure cuffs and blood glucose monitors). Similar to the VBC reimbursement models referred to above, RPM also has reimbursement codes in place (see graph below), and many RPM vendors are already geared up to support them. This is a straightforward way for MDLive to generate new revenue streams. 

Another RPM trend could also play into MDLive’s hands. Pharmaceutical companies are moving into the tracking of medication use, adherence and efficacy. The combination of medication and monitoring devices and patient-reported outcomes offers synergies, not just in the virtual care offering but also in the development of the pharmaceutical/medication elements of RPM.  

Late to the Party 

Although it is an established US telehealth vendor, MDLive has long followed in the slipstreams of Teladoc and AmWell. The origins of all three companies, however, are very similar, initially selling only low acuity services, mainly to insurance companies or employers.  

Teladoc and AmWell then accelerated swiftly from that point, decoupling their platform from their service and selling it independently, and scaling the acuity ladder. Teladoc bought virtual care firm InTouch Health in 2020, while AmWell bought Avizia, the acute care telehealth specialist in 2018.  

MDLive, by contrast, has been much more circumspect. It has spent most of its existence in low acuity care, focused on payer and employer markets. It did eventually follow its rivals’ leads by selling its platform, but the company has not scaled anywhere near as largely as Teladoc and AmWell. Even the Evernorth acquisition has had limited impact on scale. 

Teladoc was one of the first telehealth vendors to recognise the potential of virtual chronic care management. It bet big on the opportunity, paying a multi-billion dollar Covid premium for Livongo, a leader in platforms and services for managing patients with chronic conditions. Positively, Teladoc gained an impressive 600,000 chronic lives managed from the deal. Less positively, it also inherited a mountain of debt. AmWell has also started to make noises in the chronic care management direction, although to a lesser extent than Teladoc. All three companies (plus other telehealth players) rode the Covid telehealth boom, when revenues soared. Teladoc and AmWell have seen revenue growth decelerate since (which we describe in detail in this Insight), while MDLive’s 300% claimed increase in consultations suggest its fared slightly better post-Covid. 

MDLive may be latecomer to chronic care management. But what it lacks in scale compared to its rivals is compensated by a more conservative and measured approach to growth, which serves it well in the post-Covid era. 

End-to-End Ambitions 

MDLive’s decision to expand its telehealth portfolio into chronic care management is part of its ambition to offer end-to-end virtual care for its customers. By integrating MDLive’s virtual care platform, Evernorth believes it can build a connected care delivery model that can more quickly identify patients’ needs, more easily facilitate specialist or behavioural health referrals, and broadly reduce costs.  

Seen in this light, another interesting parallel that can be drawn is with UnitedHealth Group subsidiary Optum, which offers healthcare provision (including RPM via Vivify), pharmacy benefit management and data analytics services. In both instances, the use of new technologies to manage chronic conditions should lead to better patient outcomes and lower insurance pay-out costs for the parent company.  

If MDLive is to really capitalise on chronic care management, it will need to find ways to extract more revenue from each life managed. Leveraging reimbursement models and supporting VBC will be key to achieving this. 

Signify Premium Insight: A Tale of Two Telehealth Vendors: AmWell and Teladoc Financials Q3 2022

This Insight is part of the Signify Premium Insights (SPI)-Digital Health service, which will launch on 9 January 2023. From that date, this and all SPI-Digital Health Insights will be available only by paid subscription. Click here for a free one month trial of this service. 

AmWell and Teladoc have been on quite the rollercoaster ride over the last three years, with a Covid-fuelled boom then leaving a trail of mundane financial results and strategic puzzles in its wake. Telehealth’s golden pair must now address these issues to pick themselves up from the post-pandemic blues.

The Signify View

After the Covid ‘party’ came the post-Covid hangover. Having both enjoyed the adrenalin rush of double- and even triple-digit year-on-year (y-o-y) revenue growth in 2020 and 2021, AmWell and Teladoc are back to earth with a bump in 2022. 

All told, Teladoc’s landing has been slightly softer than AmWell’s. It is at least turning a positive adjusted EBITDA, revenues are growing steadily quarter-on-quarter (q-o-q) (see chart), albeit at nothing like the growth rates during Covid, and its strategic growth plans are advancing.  

AmWell’s position is a little more precarious. Its core health plan subscription business (in terms of health plan customer numbers) is stagnant, its revenues are lumpy, losses are mounting, its share price is in the doldrums (although Teladoc has the same problem), and it is overly reliant on the US market.  

However, both companies need to act fast, and decisively, to prevent any long-term malaise.

Teladoc revenues ($M)

AmWell revenues ($M)

Milestones and Millstones

Overall, Teladoc’s revenues have fared well since 1Q 2019, rising sharply (108% y-o-y in 2021) with the onset of US Covid social restrictions from 2Q 2020 as demand for telehealth services exploded almost overnight. Revenue growth has since settled to a more sober (but still respectable) 20% in the first three quarters of 2022 (compared to 10% for AmWell). 

The company has also achieved acquisitive revenue growth with its takeovers of Livongo and InTouch Health.  

Teladoc has also seen a strong surge in virtual visits in both US and international markets from 1Q 2020 to 4Q 2021 (see chart below), although numbers have since flattened and stand at roughly 4.5 million in 3Q 2022. 

Teladoc customer visits (thousands)

There are several areas of concern for Teladoc, however. One is Livongo’s performance, which continues to disappoint since Teladoc acquired it in August 2020 on the back of 120% y-o-y growth in numbers from 4Q 2019 to 4Q 2020. Since 4Q 2020, growth has been just 33%. This was the main reason for the $9.6B debt write-down earlier this year. 

The company is also running a net loss and, in all but two quarters since it went public, it has been running a negative EBITDA. However, it does report a positive adjusted EBITDA. 

Teladoc’s share price has also fallen off a cliff.  

This period of relative calm in the market will be an opportunity to address issues and restore investor confidence. 

Stuck in a Rut

AmWell is in a different, and slightly more difficult space than Teladoc right now. Like its rival, it reaped the rewards of the Covid boom – quarterly visits peaked at 2.2M in Q2 2020 before falling back to 1.45M in 3Q 2022, a 5% quarter-on-quarter fall from 2Q 2022. 

The company has found the post-Covid environment comparatively hard going. Its loss-to-revenue ratio is stubbornly high and widening, and it is bleeding cash. The fact that it reported its highest ever quarterly revenue in Q3 2022 is some comfort. but the company’s share price has also taken a battering in 2022 (though Teladoc has also suffered in this). 

There is some interesting context behind AmWell’s story over the last three years. The number of active internal providers (AMG) utilising its platform has not changed dramatically since Covid. This has been roughly flat since 2Q 2020 at approximately 4,000. However, the number of external active providers using its platform has increased massively from less than 10,000 pre-Covid to just under 100,000 in 3Q22.  

Trends in visits supported by these providers mirror this trend. Quarterly visits supported by its internal providers (AMG) have remained at the 300,000-400,000 level since the onset of the pandemic, similar to the pre-pandemic level.  

However, quarterly visits supported by external providers have averaged at 1.2M per quarter since the pandemic started, up significantly on pre-pandemic levels (e.g. 360,000 visits in 1Q20).  

Both trends emphasise the shift in business model since COVID towards platform only customers, and away from the combined platform and physician services models. A ratification of its strategy to expand its health system clients which have jumped >60% over the last four years to approximately 150.  

Number of Providers Licensed to Use AmWell Platform Per Quarter (AMG is AmWell’s “internal” providers, customer providers refers to third party providers licensed to use AmWell’s platform)

Number of Consultations Provided Via AmWell per Quarter (AMG is consolutations provided by AMG, AmWell’s “internal” providers and Customer Providers refers to consultations provided by non-AmWell providers)

Silver Linings 

Although Teladoc paid the price – literally and figuratively – from the Livongo acquisition, the deal at least stands Teladoc in good stead going forward. The number of lives Livongo manages is rising (albeit at single digit growth at present), but, importantly, it also offers exactly the kind of focus on chronic care management which will drive new revenue. 

The same can be said for its InTouch acquisition. Like AmWell, Teladoc started life providing on-demand, low-acuity physician support services to employers and private health insurance companies in the US. Teladoc bought InTouch, the leading US acute care telehealth company, in 2020. This acquisition gave Teladoc a foothold in high-acuity platforms for the first time, and a launchpad to becoming a true – indeed the first – enterprise-scale telehealth vendor. 

Teladoc will also take heart from its access fee revenue mix. These subscription plan revenues, more predictable in nature, are solid in their US core market and have remained stable, even during Covid. On the other hand, adhoc ‘pay as you go’ physician consultation revenue in the US spiked sharply during Covid, soaring 163% year-on-year in 2020, and 13% year-on-year in 2021. 2022 growth has levelled out, but subscription plan revenues remain the bigger revenue driver for Teladoc.  

Uncertain Path Forward 

AmWell’s path forward is more complicated and unclear. Similar to Teladoc, it has moved into the high-acuity care platform space (in fact before Teladoc), buying number two player Avizia in 2018, so it is also positioned well to address the hospital telehealth market and offer an enterprise scale offering. However, it lags in a couple of key areas.  

To stem its losses and expand its customer base, it must look further beyond its core sectors, and also beyond its home US market. AmWell would be well served to accelerate its expansion into international markets (a strategy its already following via acquisitions such as SilverCloud), increasing its offerings in disease-specific domains (again the SilverCloud acquisition ticks the box here) and attempting further inroads into RPM and chronic disease management.  

Building greater efficiencies into its current telehealth processes would also help reduce costs. Artificial Intelligence will be key here to support its virtual care offerings, for example symptom checkers. Its Conversa acquisition in 2021 also supports this strategy.  

In 2020, Google announced that it would be investing $100M in AmWell. We wrote then (see Insight here) that this would allow AmWell to leverage Google’s AI and machine learning experience to support platform development and patient triage. This will be no overnight revenue fix, with any material impact on margins several years off. But it at least gives AmWell a long-term plan to increase automation and drive down costs.  

The New Normal 

After a whirlwind 2020 and 2021 for telehealth, a new, far calmer normal now prevails for AmWell and Teladoc. With the dust having settled on a breakneck 2020 and 2021, both companies are now in reflection mode on where, and how, to move forward. 

A key opportunity for both lies in value-based care. As health systems and payers adapt to quality-based payment structures, telehealth and virtual care is increasingly being viewed as a key tool in managing populations’ health, particularly for high-cost patients. Either via partnerships, acquisitions, or product development both companies are well-positioned to take advantage of this by moving up the value chain and enabling telehealth and virtual care to become an indispensable element of a health system’s or care management team’s value-based care toolset. The good times that COVID brought for these two companies may never return to the same extent, but value-based care at least offers a route for both to inject new life into their longer-term growth strategy.  

Hospital Telehealth Vendor Financials Round Up – Teladoc Health, Amwell & SOC Telemed

Signify Research’s Hospital Telehealth definition includes the following components:

Tele-ICU/Clinical Surveillance – IT solutions and associated hardware that support remote monitoring of critical patients in acute settings, such as, but not limited to, the ICU.

Clinical Examinations/Medical Support – IT solutions and associated hardware (point of care devices – carts, peripherals, etc.) that support provider-to-provider AV consultations, along with real-time patient data, in relation to clinical examinations or medical advice/support.

Written by Arun Gill, Cranfield, UK, 13th May 2022 – Several hospital telehealth vendors enjoyed great success in 2020 as they benefitted from unprecedented demand for their IT and services during the pandemic. But as lockdown restrictions were lifted and the strain on hospitals’ in-house capacity across the ICU and other acute care wards eased into the second half of 2021, were the vendors able to maintain their growth? With full-year results from several of the leading hospital telehealth vendors now published, here’s our take on the recently announced financials and business developments for these vendors.

Amwell
Amwell has established itself as one of the leading telehealth providers globally. As the telehealth market matures towards enterprise-scale demand, it is essential that suppliers to the market evolve their offerings to address this, and Amwell has done this well via product development and acquisition. Since its strategic acquisition of Avizia in 2018, Amwell’s rapidly expanded its customer base to providers using telehealth for inpatient and virtual clinic applications. Amwell’s most recent acquisitions (July 2021) include SilverCloud Health, a digital mental health platform provider, and Conversa Health, a provider of automated virtual healthcare. By integrating these recent additions onto Amwell’s platform, the vendor will be better placed to enhance its own behavioural health offering and scale its services across different settings.

Amwell’s platform supports both telehealth consultations provided by its own physicians and those provided by its provider customers directly. The Avizia acquisition brought with it the Avizia One platform, targeted more at provider-to-provider telehealth, into its portfolio alongside customer endpoints such as its “Carepoint” carts and peripherals. The above platforms were superseded in April 2021 with the launch of Amwell’s Converge platform, ensuring a single interface and extensive third-party vendor integration. Further, the Amwell Exchange allows its partners and customers to connect in order to provide additional support services. The integration of Avizia into its legacy platform means that its able to offer providers a complete enterprise-scale platform that can be used to address nearly all the potential telehealth needs of a provider. As of December 2021, 53 of its clients had deployed Converge, and the intention is to ramp up adoption in Q3 2022 to transition all existing clients by the first half of 2023.

Diving into Amwell’s financials, the vendor reported growth in its overall telehealth business revenue of 65% in 2020 to USD $245m, although its 2021 revenues had largely flattened (+3%, USD $253m). To some extent, the lack of growth in its hospital telehealth business in 2021 reflects the performance by the overall business. Its Carepoint business, which includes revenues for its hardware and services to support provider-to-provider hospital telehealth consultations, rose by 21% to $USD 29.7m in 2020, driven by the increased sales volume of its hardware and consultations to support providers during the pandemic. However, it was unable to maintain growth during 2021 as revenues fell by 6% and consultations dropped to an estimated 1.1m volumes. Whilst a return to the annual growth rate achieved during 2020 is unlikely, it is anticipated that the Carepoint and services business, which represents approximately 10% of its overall company revenues, will continue to witness growth and represent a relatively stable proportion of Amwell’s business.

Teladoc Health
US-based Teladoc Health is a leading enterprise-scale provider of solutions across all telehealth settings. Via several acquisitions, it has expanded in terms of products offered and vertical markets targeted. The USD $600m InTouch Health deal in July 2020 created a market leading company with an offering that spanned most areas of telehealth, and also expanded Teladoc’s international footprint significantly. The missing piece in Teladoc’s portfolio was Remote Patient Monitoring (RPM), something it addressed with arguably its most significant deal to date, the USD $13.9bn acquisition of Livongo Health in October 2020. It is one of c. 50 vendors profiled in Signify Research’s new dedicated report on the RPM – World – 2022 market publishing this month.

In relation to hospital telehealth specifically, the InTouch acquisition has enabled Teladoc to build on the success the former achieved serving US health systems in inpatient applications, particularly in the areas of emergent consultations (Clinical Examinations/Medical Support) and ongoing patient management (Tele-ICU/Clinical Surveillance). Despite the InTouch acquisition only taking place in July 2020, Teladoc Health’s 2020 revenue and consultations in Signify Research’s analysis below includes InTouch’s hospital telehealth revenue for the full year.

Within the hospital telehealth setting, Teladoc was the world’s leading provider of Clinical Examinations and Medical Support IT (hardware, platform, IT services) in 2021 with an estimated revenue of c. USD $100m, up by around 10% versus 2020. It was also the largest provider of consultations, with 4.1m volumes reported in 2021, up by 4.2%. The slowdown in growth, illustrated in its quarterly platform enabled sessions (consultations) during 2021 was expected and proved hard to match, due to the tough comparable quarters in the previous year. However, as highlighted in the first graphic earlier in this insight, Teladoc was the only vendor to achieve revenue growth in consecutive years. As the effect of the pandemic fades further into 2022, Teladoc is well placed to build on its leading market position and will feel confident of sustainable growth.

SOC Telemed
The Physician Support Services segment of Signify Research’s Hospital Telehealth analysis is led by SOC Telemed. The vendor had its origins in providing services addressing telehealth requirements in neurology. However, growth in recent years has accelerated via M&A activity, starting in August 2018 with the acquisition of JSA Health, a provider of behavioural health telehealth services. SOC’s M&A strategy picked up pace during the pandemic, initially in October 2020 with the completion of its merger with Healthcare Merger Corp, allowing SOC to begin trading as a public company.

SOC enhanced its position as a leading provider of hospital telehealth with the acquisition of Access Physicians in March 2021, diversifying its service line offering from emergency to inpatient with the addition of seven service lines including cardiology, infectious disease, maternal-fetal medicine, nephrology, and endocrinology, and trebling the size of its employee network to 750+. The acquisition solidifies SOC’s standing as the largest dedicated acute telehealth physician support service provider in the US.

Many leading hospital telehealth vendors reported positive financials in relation to their hospital telehealth business in 2020, however, SOC Telemed was one of the major anomalies due to its heavy reliance on generating revenues from its core business of physician support services (surgical/medical consultations represented 98% of SOC’s overall revenue in 2019 – USD $66m). This suffered reduced utilisation during 2020; consultation volumes fell by 21% and SOC’s overall revenues dropped by 12% to USD $58m. However, it did experience rising demand for its Telemed IQ platform-only business during the pandemic, which doubled in absolute revenues to USD $2m in 2020, albeit from a small base.

Acquisition fuels the rebound
Whilst 2021 saw a return to growth in SOC’s legacy consults (145,000, up by 12% Y-o-Y), this was still shy of pre-pandemic volumes (163,000 in 2019). However, factoring in consults contributed by Access Physicians, it generated an additional 110,000 volumes in 2021 (26th March -31st December), bringing the total figure to 255,000 since the acquisition. SOC’s legacy annual 2021 revenue (USD $65m) was also just short of its pre-pandemic level, although once more the Access Physicians contribution (almost one-third of additional revenue) propelled the total figure to $94m (+63% Y-o-Y, although +12% adjusted to include like-for-like comparison).

Diving deeper into the financials, almost $100 was trimmed off the overall business’ 2021 revenue per consult ($333) compared to SOC’s legacy 2020 figure ($430). Access Physicians historically generated a much lower figure due to its wide service line mix and huge variation between the duration of each consult, so it’s no huge surprise that SOC’s new, broader portfolio and strategy pursuing cross-selling of services and new revenue streams resulted in a trade-off with its 2021 revenue per consult.

Valuation Reset
It’s worth noting that SOC’s market valuation has suffered significant turbulence since its October 2020 IPO (valuing the vendor at USD $720m); in early February 2022, its value had plummeted by 90%. Further, the public listing lasted just 18 months as SOC was acquired by Patient Square Capital in an all-cash transaction last month (April 2022), valuing the business at USD $304m. However, SOC’s not alone in experiencing a plunge since its initial IPO valuation; Teladoc and Amwell are just some other high-profile examples of digital health vendors experiencing a striking contrast in fortunes between the beginning of 2021 and 2022. High values driven by strong revenues during the height of the pandemic have been offset by factors such as constant losses and missed targets. Further, outside of the vendors’ control are huge global economic uncertainties caused by interest rate hikes – particularly problematic for Teladoc and Amwell as they remain unprofitable and will likely face increased borrowing costs – and Russia’s assault on Ukraine, badly damaging investor sentiment and contributing towards a mass-market sell-off in recent months.

Market Optimism Remains
Nevertheless, with a 2020-2025 CAGR of 14% and 16% respectively projected across the Tele-ICU/Clinical Surveillance and Clinical Examinations/Medical Support market revenues, the outlook looks promising. There are many reasons for vendors to remain optimistic in relation to the hospital telehealth market development, as previously highlighted in a complimentary sample of the Hospital Telehealth – World – 2022 report, and summarised below.

About Signify Research’s Hospital Telehealth Report

The above analysis is a snapshot from our Hospital Telehealth – World – 2022 market report. This is Signify Research’s first stand-alone report on the Hospital Telehealth market and is one of three major components falling within our broader Telehealth Market Intelligence Service. The service also includes detailed standalone markets reports covering Primary Care/Non-Hospital Telehealth and Remote Patient Monitoring.

About Signify Research

Signify Research is an independent supplier of market intelligence and consultancy to the global healthcare technology industry. Our major coverage areas are Healthcare IT, Medical Imaging and Digital Health. Our clients include technology vendors, healthcare providers and payers, management consultants and investors. Signify Research is headquartered in Cranfield, UK.

For further information please contact Arun Gill.

Arun.Gill@signifyresearch.net

+44 1234 1234 986107