Will more services under one roof boost telehealth utilization?

Consolidation is sweeping through the telehealth marketplace. Providers of a wide range of virtual services are either acquiring or are being acquired. What's unclear is whether this is a sign of improving health for the industry, or of its historic inability to measure up to expectations that leaves startups vulnerable.

Perhaps it's a bit of both. As major players like Teladoc Health continue to scoop up smaller telehealth fish, the ultimate beneficiaries may be employer-sponsored health plan members. Integrated telehealth platforms will, in theory, provide easier access to a wider range of telehealth services and, as a result, lead to increased usage of such benefits.

Now, emerging telehealth solutions crowd the landscape. Sorting out which ones will deliver the promised results, and which ones plan members will use, can be so difficult that brokers and plan sponsors tend to pick a cheap solution and move on.

Result: Low telehealth usage by plan members. Given the hype that telehealth has received almost from its inception, utilization rates of less than 5% for most telehealth solutions have undermined the entire sector.

But with consolidation and improved consumer education, some believe telehealth is about to come into its own.

More freedom to experiment

Consolidation alone will not move the engagement dial for telehealth services, says Mike Ehrle, head of strategic partnerships for benefit management software and services provider Hodges-Mace. Acquisitions need to be strategic and must be accompanied by a strong component of education, so brokers and their clients can quickly see how a telehealth solution contributes to better employee health and lower overall plan utilization.

“The more a big company acquires smaller ones, the more it becomes a greater provider of technology and services. Then it can really drive costs down,” he says.

The key is understanding how a telehealth service, such as one that offers a virtual physician consultation, can replace a clinic or urgent care visit by a plan member. If plan sponsors can move the highest benefits users to a telehealth service, costs will drop.

“The larger players can buy incubators and see which ones work,” he says.

His favorite example is Teladoc's 2018 purchase of HealthiestYou, a physician phone service that not only connects plan members with board certified physicians on a 24/7 basis, but will even prompt them to make the call.

“Healthiest has almost 10 times the engagement of other services,” he says. By adding HealthiestYou to its suite of services, Teladoc sought out a provider that already had high utilization. Teladoc now has an internal business unit to serve as a model for future growth.

Longer term, Ehrle sees major insurers as owners of telehealth platforms. “The carrriers need to bring it in house and use it. They will own the Teladocs of tomorrow because cost per claim goes way down.”

A standalone benefit

Reid Rasmussen launched a telehealth business in 2009. Over time, he became frustrated with the lack of understanding of telehealth's benefits on the part of brokers and plan members.

“I got tired of attending the enrollment meeting and hearing people say they didn't know our service was part of their benefits,” he says. “I realized you can have the best service, but if people don't know about it or are afraid to use it, you'll get nowhere.”

So, in 2012, he rebranded his company, freshbenies, focusing on communications and plan member education rather than a specific telehealth solution.

Today, freshbenies serves as a consolidator of as many as 16 different virtual services, from physicians on call to advocacy services and, says Rasmussen, utilization rates are well above industry averages.

Rasmussen believes the future of telehealth lies in standalone telehealth services (the platform model) that are separate from the standard employer health plan. If the array of services is paid for by the employer or at least affordable (freshbenies charges a single monthly fee for its suite) and well-communicated to the plan member, utilization jumps.

“Today, what you see is the cheap [telehealth] version is in the medical plan, but no one uses it. Ours costs something but people use it. It is taking the market a bit to understand that all telehealth services are not the same. But there is no question we will head this way. The real question is: Will there even be the poorly rolled out version, or will they all be one that includes member education and engagement goals attached? I tend to believe it will be the latter.”

An ongoing obstacle

That may be telehealth's future. But right now, Health Rosetta's Dave Chase believes telehealth is suffering from a basic flaw: a lack of connection with its potential users. Chase distinguishes between telehealth–generally short virtual engagements with an unfamiliar practitioner–and virtual primary care (VPC) services. He thinks the former are doomed to low utilization, while VPC has considerable upside.

He reasons that the highest users of health plan services are always the primary target of these services. And high users won't be comfortable with a 10-minute consult with a doctor they are meeting for the first time.

“For that limited number of employees who are responsible for most of health care spending (typically 5-8 percent of employees consume 50-80 percent of spending), having a trusted and unconflicted primary care physician is imperative to help patient navigate to the highest quality healthcare organizations,” Chase says. “Telehealth doesn't address that need. By comparison, VPC and direct primary care models do that well as that's a core part of their value proposition.”

He estimates a good VPC service can accomplish “95 percent of what a traditional office-based PCP can do.”

Chase says that while plan sponsors and brokers may not understand this basic telehealth obstacle, “Investors and management have greater visibility into this than the people selling their service so they see the handwriting on the wall.”

This “visibility,” he says, explains in large measure why consolidation is occurring–founders are selling out. “Put simply, telehealth hasn't worked for anything that is a meaningful part of where health care dollars are spent… Recent M&A activity is more based on the model not working.”

Teladoc's wild ride

Teladoc's twisted journey offers insight into the industry's evolution. Launched nationally with much ballyhoo in 2005, Teladoc has established itself as telehealth's leader. Its asset base has grown nearly tenfold since 2014, fueled largely by acquisitions of such telehealth hopefuls as Advance Medical, Best Doctors, and, this year, HealthiestYou. With its array of services under one umbrella, brokers can turn to Teladoc to offer employers a standalone telehealth service for plan members.

But there's another side to the Teladoc story. Asset growth has been equaled by rising debt, and total liabilities have outpaced asset growth. It continues to lose money, in part due to its ongoing acquisitions strategy, although losses have narrowed considerably over the past five years.

Meantime, shareholders have had a wild ride. This year alone, shares hit a high of $89–and a low of $30. It's currently in the $40s. Worse, shareholders had to deal with the resignation of Teladoc's CFO, accused of insider trading. In addition, of its acquisitions, BetterHelp, provider of mental health services, reported problems that also undercut the stock.

In a Dec. 26 article on Teladoc's volatile stock movement, Fox Business noted: “The main thing for investors to watch with Teladoc Health now is how well the company executes on its strategic plan. Teladoc has made key acquisitions to establish a global presence. It's also hoping to benefit from a shift in the U.S. from fee-based reimbursement to value-based care.

Teladoc Health will probably continue to be relatively volatile compared to many stocks. But the company's long-term prospects appear to be as solid as ever.”

Or as risky as ever. If the premier consolidator of telehealth services cannot turn a profit after 13 years, perhaps all aspects of the industry–vendors, brokers, plan sponsors, and plan members–are in for yet more education on the benefits of telehealth products and services.

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Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.