TELADOC – Has telemedicine finally gone mainstream?
Before COVID-19 struck, the once-niche telemedicine industry struggled to gain traction and mainstream acceptance. Now it has gone mainstream. Will this hold post COVID-19?
Before COVID-19 struck, the once-niche telemedicine industry struggled to gain traction and mainstream acceptance. The reasons were numerous, including government regulations, lack of interest from big companies, and tech-averse doctors and patients. However, the current situation is prompting even the largest skeptics about this technology to give it a try (given the lack of options) and health centers across the globe are fast-tracking telemedicine projects. It is still early to tell whether this situation represents a lasting shift in healthcare or just a short-term response, but the reality is that telemedicine companies are rushing to add doctors and bandwidth to their platforms.
One company reaping the benefits of this unprecedented surge in demand is publicly traded Teladoc, the largest standalone telemedicine service in the U.S. While most stock prices are in red for the year across all industries, Teladoc’s is among the fortunate few in green. Year to date, Teladoc’s stock has risen 110%, a spectacular growth number amid the current macroeconomic situation. This should not come as surprise – for perspective, the company saw a 50% increase in usage during the week of March 20 versus the previous week.
Teladoc’s business model relies on using telephone and videoconferencing software to provide on-demand remote medical care. Patients log on to the service through a mobile app at any time and connect with board-certified, state-licensed physicians within minutes. The company provides access to an expert network of over 55,000 physicians in all 50 states, including 450 medical subspecialties. These experts treat non-emergencies in 5 different categories of care:
- Everyday care (i.e. flu, sinus infections, stomachaches, dermatological conditions, etc.)
- Children & family
- Mental health
- Medical experts (i.e. opinions about a diagnostic or the need for surgery)
- Wellness & prevention (i.e. Nutrition, sexual health, STD testing)
Value Creation & Capture
Teladoc’s value creation formula is clear – they provide instant and affordable access to board-certified doctors remotely via phone, video, or app 24 hours a day, 7 days a week. Connecting to doctors through Teladoc is a simple, convenient, and effective way to access care and saves patients a trip to their health center for minor health concerns. In addition, their expert network is very effective at what they do – In 2019, the company claimed that 92% of medical issues were resolved after the first visit.
In terms of value capture, the cost of a Teladoc visit depends on the patient’s health plan. They charge subscription fees to insurers and large employers. This said, copay amounts are decided upon by the employer, health plan, or insurer contracting with Teladoc:
- Everyday Care: $49 or less
- Dermatology: $75 or less
- Mental Health:
- Licensed therapist: $90 or less
- Psychiatrist: $229 or less/first visit and $99 or less/ongoing visits
- Medical Experts: No cost
In addition, Teladoc is available for patients without insurance starting at $75 for everyday care, $99 for mental health and $95 for dermatology.
With greater demand comes greater complexity
Even though the unprecedented volume of patients trying to use these services is a plus for broad telemedicine adoption as a great alternative to legacy healthcare, companies are struggling to keep up. Teladoc is not experiencing IT issues, but the disproportionate increase in demand is putting a lot of stress in the system, leading to increases in response times. Teladoc is adding doctors by the thousands and paying more to attract doctors, but so far this is not enough. Moreover, given the hiring spree and associated marketing costs, Teladoc recently struggled to pay a small percentage of its doctors.
The main selling point for telemedicine is convenience, but this quickly goes away when patients face the same (or even longer) wait times than they would in the traditional system. Recently, patients have reported wait times of up to 22 hours to find a specialist.
Looking forward – Is telemedicine here to stay? How can Teladoc sustain growth?
Personally, I am not too worried about the problems and complexities mentioned above. Under the current COVID-19 situation, these are expected troubles for an overwhelmed healthcare system on all fronts (in-person or virtual). As the pandemic fades away, telemedicine supply and demand will balance out again and these pains will disappear, thus leaving a very robust system capable of withstanding the worst public health scenarios.
Moreover, the somewhat “forced mainstream adoption” that telemedicine has experienced will set the ground for sustainable future growth. Patients, doctors, hospitals, and regulators have all been forced into accepting telemedicine as an alternative, and I’m of the opinion that this demand is here to stay given the clear benefits that telemedicine brings for all actors in the system. As everyone becomes more comfortable with doctor appointments via video from the comfort of their home or office, more and more people will switch to telemedicine as their main option.
With this said, I recommend one main action that Teladoc should take in order to sustain the future growth to come. Even though the company provides its own telehealth service directly to patients (their main source of revenue), they also provide their platform to hospitals and health systems under a SaaS business model. This enables providers to extend virtual care services to their patients but using their own doctors. With hospitals around the world fast-tracking telemedicine projects, Teladoc should double down on their SaaS business unit and sign as many hospitals as possible. This would allow them to diversify their main revenue source and make the company more robust, given the security of SaaS revenue streams. The opportunity is huge – Teladoc currently serves 300 hospitals though their SaaS platform but there are over 5,000 in the U.S. and over 165,000 in the world. Lastly, by signing more hospitals under their SaaS model, Teladoc could generate value for all actors involved in the platform. For example, they could help hospitals create synergies with regards to underutilized resources, and ultimately patients would benefit from access to a global healthcare system through Teladoc.
As Teladoc’s CEO recently stated, “the healthcare system is on the verge of a new era for virtual care”. COVID-19 accelerated mass adoption of telemedicine, and demand is here to stay given the clear benefits it brings for all participants in the healthcare system (patients, doctors, hospitals, governments, etc.). Demand will eventually balance out with supply once the pandemic is over, but Teladoc is uniquely positioned to continue growing sustainable through their telehealth service but, most importantly, through their SaaS platform service for healthcare organizations.
Student comments on TELADOC – Has telemedicine finally gone mainstream?
Thanks for sharing, James! It is nice to see telemedicine catching on since it allows health care systems to keep people who don’t need to visit in person out of the hospital or care provider in order to free up space for those who truly need in person care. Teladoc certainly fills a need in the health care system and it is interesting to see that relaxed regulations have enabled it to thrive. I like your idea of expanding their SaaS platform and I could see it being valuable for employers, as well. If Teladoc can offer its platform to employers, employees will be able to see doctors virtually from the office for simple concerns that do not require in person care. This would reduce the time that employees spend to visit a doctor in person, which would be valuable for employee productivity. Not only would this be a nice benefit as an employee, it would also benefit the employer immensely.
Thanks a lot for the post! Super insightful. I don’t feel Teledoc was fully ready to capture the value as a result of the pandemic. I have heard anecdotal evidence from several friends that they had to wait for hours and hours to get on a call with a doctor using the Tele-Doc platform, neither have I seen any advertisements of Teledoc to take full advantage of this opportunity. I do agree we are in a new era of virtual care, but the main value proposition should be focusing on creating an extra-ordinary customer experience. The Tele-health player that is able to manage that would be best positioned to take advantage of this shift to virtual care.
Great post! I agree that Teledoc should accelerate its SaaS model and put more capacity on the platform, because as HZ mentioned I believe that customer experience is a key for the business. Many customers would leave Teledoc after the pandemic if their experiences were bad. On the other hand, positive customer experiences would generate strong viral leads and a long-term growth. The pandemic gives the company an opportunity to showcase its services to many people who wouldn’t be reached out easily without the outbreak, so they should all-in and speed up to fix the long waiting time problem and provide better customer experiences.
Great post! I agree with you that Teladoc is here to stay. Digitization has been revolutionizing key sectors, including retail and financial services, and that trend has started in the healthcare sector. As a market leader, Teladoc is strongly positioned, however, the Big Tech are looking closely at this space, suggesting increasing competition