Teladoc Health: A Clear Winner During (and After) COVID-19

It is clear that Teladoc and other telemedicine providers are clear winners during today’s global pandemic. The question is: Will they continue to be winners when COVID-19 is over and societies go back to normal?

There is no doubt that consumer preferences are today placing evermore importance on convenience. Even during COVID-19, consumers have been prioritizing convenience and ease by buying meals through delivery apps and ordering same-day-delivery Amazon goods. The comfort that telemedicine provides makes medical visits and diagnosis no exception to this trend.

Besides its convenience, as society continues to try to stay socially distant and avoids visiting hospitals and other crowded medical centres during COVID-19, telemedicine has become top-of-mind when one starts feeling sick. As a result, Teladoc Health, Inc. (“Teladoc”), a telemedicine and virtual healthcare company based in the US, has been thrown under the spotlight in the last months.

Teladoc’s mission is to transform the way people access and experience healthcare. With over 2,400 employees, the Company delivers health in more than 175 countries.[1] Since March, Teladoc has experienced unprecedented daily volumes in the US as COVID-19 continues to spread. This spike in demand has partly been driven by several health plans waiving consumer cost sharing. Public health officials across the US have also been encouraging the use of telemedicine to reduce community exposure. [2] This surge in demand has left Teladoc providing in excess of 20,000 visits per day.[3] These virtual medical patient visits have helped ease pressure in the wider healthcare system, as patients are visited by physicians virtually (by phone, web or through Company’s app) and receive their diagnosis through Teladoc’s platform, all from the comfort of their own home.

“A community’s healthcare system can become overwhelmed and virtual care can help provide needed relief,” said Lew Levy, MD, Chief Medical Officer at Teladoc Health. “We have the unique ability to immediately connect with the CDC and other government agencies, to add the right screening tools and clinical quality protocols, and most importantly, to keep patients – particularly those most at risk with underlying health conditions – out of care settings where they can face exposure.”[2]

In order to be able to cope with this unprecedented surge in demand, Teladoc has put in place significant initiatives to adapt its business model. These initiatives include simplifying the onboarding process to expand doctor capacity, improving the Company’s algorithms to manage patient visit queues, and temporarily increasing doctor compensation to ensure high-quality and timely care.[3] 

Exhibit 1: How Does Teladoc Help You Feel Better? (Source: Teladoc Health Company Website)

Teladoc’s business model was also relevant before COVID-19, as its digital platform is beneficial for all participants in its system:

  • Insurance Providers: Telemedicine patient visits are beneficial for payer economics as the cost of virtual visits is lower. It can also help avoid unnecessary emergency department visits.
  • Patients: Telemedicine patients benefit from the platform’s convenience and time-savings. Through Teladoc, patients can book appointments with the next available physician and receive diagnosis from the comfort of their own home.
  • Family Caregivers: Caregivers also benefit directly from Teladoc’s convenience and ease. Telemedicine lets them avoid the time, travel costs, and hospital admissions process associated with accompanying patients to their visits.
  • Physicians: Although physicians are generally paid less per telemedicine visit than they would be in a traditional in-person visit, telemedicine allows them to increase their income by visiting patients during times that they would have otherwise been idle.

As a result of the COVID-19 outbreak and Teladoc’s ability to offer low-cost high-quality virtual care, the Company has been able to capture a significant number of new patients, the majority of which had never used telemedicine before. In particular, more than 60% of Teladoc’s current visit are with members that are new to the platform.[3]

Although the ultimate impact of COVID-19 in the Company’s volumes and growth in unclear, given the uncertainty around the long-term effects and duration of the pandemic, demand could remain long after COVID-19. In fact, several Harvard disease experts predict that some sort of social distancing might continue until 2022.[4] Although telemedicine has historically struggled to win widespread acceptance before the pandemic[5], patients who were previously skeptical might recognize its benefits after experiencing this digital platform during the COVID-19 period. Also, insurance companies who previously didn’t cover telemedicine have amended their policies to include its services. Experts agree that it is unlikely that they will change it back.

Apart from being convenient and reducing the pressure on the US healthcare system during COVID-19, telemedicine presents many other advantages over traditional medical visits. One clear advantage is its low-cost services. For instance, while Teladoc’s cost per visit depends on the patient’s insurance plan, their Everyday Care visits never exceed $49 (according to the Company’s website). Not only does this provide high-quality low-cost care, but it also helps solve many of the hassles of traditional in-person visits. For example, it helps reduce the time that patients have to take off their schedule to travel and attend a medical visit[6]. Patients also avoid having to spend time in a waiting room and experiencing delays before seeing their doctor. Other benefits include the comfort of using telemedicine from home (which is particularly relevant for people who suffer iatrophobia, or fear of doctors and hospitals) and having 24/7 year-round access to US certified doctors by web, phone or the Company’s mobile app. Teladoc’s account can be set up in just a couple of minutes, making the overall process extremely smooth and convenient.

These clear advantages and the expectation that telemedicine will continue to be relevant going forward have made Teladoc’s and other telemedicine stocks experience a significant jump in prices. The chart below shows how Teladoc’ share price has evolved in the last year: doubling in the last month and rising from $60 to almost $200 in the last twelve months.

Exhibit 2: Teladoc LTM Share Price Performance (Source: Google Finance as of April 27,2020)

It is clear that Teladoc and other telemedicine providers are clear winners during today’s global pandemic. The question is: Will they continue to be winners when COVID-19 is over and societies go back to normal? Probably. It wouldn’t be a surprise that after what we’re currently experiencing, people continue to prefer staying away from crowded centres, especially those with sick people in them. This “new normal,” coupled with society’s evermore pursuit of convenience and ease, will change the way patients think about their medical visits.

Sources:

[1] Teladoc Health Fourth Quarter and Full Year 2019 Results.

[2] “Teladoc Health Sees Daily Virtual Medical Visits Up 50% in Past Week,” Teladoc Health March 13, 2020 Press Release.

[3] Teladoc Health First Quarter 2020 Results Preview.

[4] https://www.weforum.org/agenda/2020/04/coronavirus-social-distancing-how-long/

[5] https://www.cnbc.com/2020/03/03/coronavirus-could-be-boon-for-telemedicine-to-stop-hospital-crowding.html

[6] https://investorplace.com/2020/04/teladoc-is-much-more-than-a-coronavirus-stock/

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Student comments on Teladoc Health: A Clear Winner During (and After) COVID-19

  1. Great post, Loti!

    I also wrote about a telemedicine company for my blog post, as I imagine so will several others since it’s a hot space these days. I agree with your general conclusion that the shift towards telemedicine that was accelerated by COVID-19 will likely persist to a large extent even after the current situation is behind us. I think it’ll be really interesting to see which companies end up winning out in the fight for market share when things calm down. Teledoc seems to be positioned quite well from a communications infrastructure perspective, but my hypothesis is that companies will start needing to do more do stand-out. Potential areas for differentiation could include, for example, partnerships with existing local health systems, diagnostic or therapeutic tools that can be ordered/delivered/executed digitally, etc. Will definitely be interesting to see it all unfold!

  2. I think the main reason telemedicine didn’t go mainstream before COVID were bureaucratic obstacles (e.g. insurance, liability etc). Across the world, governments have now fast-tracked progress in these areas. That will to the most part not be reverted after COVID is less of a problem, so I do think the rise of telemedicine is here to stay.
    https://www.hhs.gov/about/news/2020/03/17/secretary-azar-announces-historic-expansion-of-telehealth-access-to-combat-covid-19.html
    https://medicalfuturist.com/covid-19-was-needed-for-telemedicine-to-finally-go-mainstream/

  3. Thanks for sharing these insights. The need to maintain quality and doctor-patient relationships is top of mind in terms of whether Teladoc can continue to be a key player post-pandemic. I worry also about health inequity. Will we see a segmenting of healthcare provision by socioeconomic status — the lowest cost providers will stay on virtual platforms and serve the most vulnerable populations who can’t afford in-person medical care?

  4. Hi Loti,

    Thanks for this brilliant post. Teledoc’s offerings really are filling a void that COVID-19 has created and as you pointed out, telemedicine had major benefits for all stakeholders even before the pandemic. I agree with you that the current situation has put a spotlight on telehealth and while its usage will be greater than it was pre-pandemic, I am not sure that it will continue to be quite as high as during the pandemic, currently.

    So many patients are only using telemedicine during the pandemic because they are unable to visit their PCP, making it the only option, and Medicare is giving practices the option to waive cost-sharing. In addition to this, more doctors are providing consultations via telemedicine because the number of physical consultations may have reduced, plus we cannot ignore the fact that during this time, some payers are reimbursing telehealth at the same rates as in-person visits. Plus, the pandemic has led to more geographical flexibility and rural and site limitations have been removed. I do not anticipate all of this being the case in a post-pandemic era, which will consequently affect the usage of telemedicine.

    Thanks again for a great post!

  5. Thanks for the great post Esteban!
    Is interesting to see how Teladoc used COVID-19 lockdown to expand its business model and reach a broader customer base. I personally believe that telemedicine will be a key driver to reduce health cost in the future. Beyond the concerns and desire to avoid crowded places, I think the service will show some value for customers that just don’t like or don’t have time to visit a doctor. The success will depend, however, on how the company can leverage other solutions like devices that can do more sophisticated diagnostics remotely, I am optimistic though as we think of smart devices and internet of things, the future seems promising. I would definitely be a patient!

  6. Great post, Loti. I agree with you that the telemedicine industry will continue to expand not just because of coronavirus, but also because of less restrictive regulation around e-visits and better reimbursement schemes. However, I am not so sure that Teladoc will be the one to capture most of this increased value. Telemedicine seems to be pretty commoditized — many hospitals and even smaller clinics now have their own platforms for seeing patients virtually. I wonder what Teladoc can do to stand out. Right now, price seems to be one competitive advantage, but it also might not make sense long term to get into a price war with other platforms. One option is to focus on high-end concierge service, which is something that Summus Global is doing. It will be interesting to see how this landscape plays out in the next few years!

  7. Thank you for this blog post. I also wrote about a telemedicine company in India named Practo. One of the ways in which they are ensuring that this pandemic has a long-lasting positive effect on their business is my monitoring demographics of new patients. For example, they are seeing a 200% surge in the gynecologist consultations from rural areas of India and now they are training their doctors to handle those consultations well. I believe this pandemic will help telemedicine companies come across new opportunities that they might not have even thought about. Overall, I feel this pandemic is a boon for the telemedicine sector.

  8. Thanks for a great post Loti! I also wrote about Teladoc and am on the same page with you. I believe telemedicina is here to stay now that it has be “forced” to be mainstream by coronavirus given the removal of bureaucratic hurdles that were holding it back before. Moreover, the mass market has now experienced telemedicine and is aware of the clear benefits it brings to the table over regular doctor visits. The one thing I would add is that Teladoc should exploit the SaaS vertical now that hospitals all over the US and the world are fast tracking telemedicine projects. This would diversify their revenue streams and provide a sticky, predictable source of income for the future.

  9. Super interesting post, Loti!

    It is very interesting that Covid-19, with all its obvious downsides, helped telemedicine to gain traction by eliminating many bureaucracies along the way.

    I definitely think that telemedicine will have its space in the future, but I wonder if Teladoc should not use the opportunity to push stronger towards creating a larger health ecosystem (with more services and offerings), such as MyDoctor and Ping An Good Doctor (both from China). I believe that the company is in a very good spot to do so!

  10. Thank you for the post, Loti!
    I do have a positive view towards the future of TDOC. The original problem of tele-health solutions was the difficulty to penetrate the complicated health care system and acquire enough customer. The health solution itself has no doubt to generate a lot of value. Therefore, after this pandemic, these customers are likely to stay.

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