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Signify Premium Insight: SOC Telemed Joins Telehealth Top Table

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.

Last month, US telehealth vendor SOC Telemed acquired virtual behavioural health firm Forefront Telecare. The deal, which sees SOC Telemed rebranded as Access TeleCare, establishes the firm as a leading high-acuity hospital telehealth vendor in the US, and significantly deepens its presence in the country’s fast-growing behavioural health market. Access TeleCare is now well-positioned to build scale in its newly-acquired and existing businesses to bring synergies and deliver cost efficiencies.

The Signify View

The Forefront Telecare acquisition is an important milestone for Access TeleCare, which has historically benchmarked itself against its much larger peers Amwell and Teladoc. As a leading hospital telehealth vendor in the US, with a deepening footprint in behavioural health and a well-rounded high-acuity clinical service lines portfolio, Access TeleCare would be well advised to leverage its recent acquisitions, better integrate the products and services in its strategic portfolio, build scale through its acquired and existing businesses and deliver greater cost efficiencies. Achieving the above would not only solidify its leadership position in hospital telehealth, but also make it a potentially attractive acquisition target in the medium-term.

Journey To The Top: Services to Products 

Access TeleCare’s route to US hospital telehealth leadership status began, under the Specialists on Call brand name, with the provision of physician support telehealth services (primarily neurological) to acute care hospital providers. It made its first foray (as SOC Telemed) into IT/platform development in March 2018 with Telemed IQ, a platform initially developed to support SOC Telemed’s neurology, critical care and behavioural health telehealth services. Telemed IQ was subsequently extended to SOC Telemed’s customers, part of a broader trend of physician support service providers moving into the acute virtual care platform market. This move brought SOC Telemed into direct competition with established platform vendors such as Amwell, InTouch Health (now owned by Teladoc) and Philips.

M&A Growth  

In addition to the shift from services to IT/platforms, mergers and acquisitions have also accelerated SOC Telemed’s growth over the last four years. In August 2018, it acquired behavioural telehealth service provider JSA Health, providing a launchpad into the-then nascent US virtual behavioural health market. In October 2020 SOC Telemed merged with Healthcare Merger Corp, allowing it to trade publicly via SPAC listing. Then in March 2021, SOC Telemed bought Access Physicians. This $194m acquisition added cardiology, infectious disease, maternal-foetal medicine, nephrology, endocrinology and other clinical service lines to its portfolio, and trebled its workforce to 750.

New Revenue Streams 

The acquisition of Access Physicians opened up new opportunities for Access TeleCare to cross-sell services and generate new revenue streams. Of SOC Telemed’s $94m total revenues in 2021 ($58m in 2020), Access Physicians contributed $29.3m.

The Forefront deal similarly boosts Access TeleCare’s revenue potential. Notwithstanding any challenges with integrating Forefront’s platform with Telemed IQ, it is a low-risk deal for Access TeleCare, with high upside potential. There is unprecedented demand for virtual behavioural health support services in the US, so any deepening of its footprint in this area makes strategic sense for Access TeleCare. Forefront triples the size of Access TeleCare’s behavioural care network, adding 400-plus psychiatrists, psychiatric nurses, psychologists and licensed clinical social workers. It also extends Access TeleCare’s clinical capabilities.

Being one of the biggest hospital telehealth vendors also affords Access TeleCare new economies of scale and resulting cost efficiencies in behavioural health (via the Forefront deal in particular) and IT. This could play well in any future sale of the business.

Groomed For Sale? 

In early 2022, SOC Telemed was acquired by private venture capitalist Patient Square Capital, and delisted from the stock exchange.

If Patient Square Capital’s end game is to sell Access TeleCare, it might presently find a few suitors. Aside from the strength of its acquisitions in recent years, the company’s balance sheet is also positive: revenues almost doubling from 2020 to 2021, and a $30.4m gross profit in 2021 ($19.5m in 2020). The company has bounced back well from a challenging 2020, when its overall revenues fell 12% to $58m as consultation numbers dropped sharply as a result of Covid restrictions. Its high-acuity clinical examinations/medical support business is now bigger than Amwell, and on par with Teladoc, even if the latter are much bigger companies overall (Teladoc revenues were $2bn in 2021, Amwell $250m).

It may therefore appeal to the much larger Teladoc or Amwell should they seek to solidify their hospital telehealth positions. But after a buoyant Covid era when demand for virtual consultations spiked, both have found the going tougher on the balance sheet in the last 12 months, which could dampen their enthusiasm for acquisitions and risk. Amwell has been acquiring in 2022, but posted a $177m net loss in 2021, following a $228m loss in 2020. Meanwhile Teladoc, whose traditional business is still growing relatively well, is still smarting from having to write off $5bn in debts following its 2020 merger with Livongo, the consumer digital health company.

A big EHR vendor might see Access TeleCare as a viable route into hospital telehealth. Amazon and Google both have a taste for acquisitions in 2022 as they seek to surf the US value-based care (VBC) wave, and Access TeleCare might provide the right break.

Next Steps 

Whatever Patient Square Capital’s ultimate goal for the business, Access TeleCare will for now build scale in its existing and acquired businesses, as well as address any gaps in its portfolio.

One obvious gap is around low-acuity virtual care. But where Amwell and Teladoc have both enthusiastically transitioned from local point-solution providers to international enterprise-scale vendors via acquisitions, product developments and partnerships, the highly commoditised, ultra-competitive, low-margin low- acuity environment will never be Access TeleCare’s sweet spot. This is despite the transformation that enterprise-scale telehealth will have on the telehealth IT supplier base.

Access TeleCare will instead continue to focus on, and see success in, high-acuity consultations and platforms, and strengthen its grip in the highly consolidated hospital telehealth market, where just six vendors (Philips, Teladoc, Access TeleCare, Hicuity Health, Amwell and Global Med) account for about two-thirds of the market.

As such, Access TeleCare should double down on integrating its products and services and scaling up its acquired and existing businesses, to capitalise on the strength of its portfolio.

The Gold Standard In High Acuity  

Access TeleCare sees itself as setting the gold standard in high acuity in hospital telehealth, but it has work to do if it is to maintain a market leadership position. It might boast a well-rounded portfolio and reflect on successful recent acquisitions, but it cannot rest on its laurels. Achieving economies of scale and integrating products and services through the business will be crucial next steps. The Forefront acquisition aligns with this strategy and offers new revenue opportunities in the fast-growing behavioural health space.