I’m super long TDOC/LVGO and one of the most common bear theses that I’ve read ask why can’t a managed care organization like UNH or an EHR company like Epic bolt on their own offering to sell into their networks? Both as a point of competitive differentiation, to lower premiums paid out to TDOC for insurers, and because it’s a very lucrative, fast-growing space. They are so entrenched in health systems across the country. And in fact, they already are: https://www.beckershospitalreview.com/ehrs/epic-launches-new… and UNH also acquired a number of telehealth and remote-monitoring startups. “Twilio’s cloud-based platform allows Epic clients to perform video visits, access patient history and update clinical documentation within the EHR during a visit.” And they can also acquire a remote monitoring competitor like Omada and have an end-to-end platform, right? People would want to stick with their existing providers.
My answer: Basically, TDOC is like Amazon and Epic is like Shopify. The key difference with healthcare is that the latter can’t share supply and demand between networks. Each hospital system has their own EHR system. TDOC+LVGO covers more conditions than they would, so it’s better for smaller health systems to partner and gets referrals for in-person visits from TDOC’s national network. I think that over time, you’ll be seeing a lot more patients who do most of their visits online, just like online shoppers who buy most of their stuff on Amazon, hence the value of accessing Teladoc’s patient pool keeps increasing. Imagine you’re a small hospital system and you get a surge in telehealth visits. You don’t have the staff to perform on-demand consultations while TDOC can leverage a physician halfway across the country who is online. Also, not all hospitals use Epic and not everyone is covered under Epic so their patient and provider pool are inherently limited. This is especially true for multinational organizations who want to buy one digital health service across their global operations, TDOC already is in 175 countries.
Smaller EHR companies probably don’t have the resources to build the same end-to-end platform and would be better off partnering with TDOC just like smaller businesses that don’t have a very recognizable brand would be better off selling on Amazon. EHR systems are notoriously hard to work with and they were not designed to enable real-time, point-of-care clinical decision support and analysis from a range of sources; to do so, health systems must integrate the EHR with many other digital resources which is challenging. https://www.healthcatalyst.com/insights/EHR-integration-digi….
Hospitals also won’t be so keen to change because by shifting to a paradigm that focuses on preventative care (via remote monitoring), they will lose revenue. A hospital can make ten or twenty times more if a patient comes into the emergency room for a minor problem instead of going online and talking to a telehealth doctor, even though most consumers would be better off starting with an online visit. So it’s safe to say that they won’t be the harbingers of change. As more health systems shift to this new model because they lose patients to Teladoc, they will be forced to change though but for many, that means partnering with Teladoc to get referred patients for in-person care. Meanwhile, individual providers who are on Teladoc get to make extra money on the side so it’s a model that circumvents the bureaucratic health system.
As for companies like UNH, they don’t benefit from improving patient outcomes. They benefit from having a reason to charge policyholders a ton of money and paying out as least as possible. So providers are trying to charge insurers as much as possible by adding on follow-up visits, extra tests, etc. The underlying problem is that who decides what to buy, the person who pays for it, and the person who benefits from it are all different. So no one has the patient’s best interests at heart. This is creating opportunities to circumvent traditional health insurance by cutting them out of the equation entirely. Rather than opaque cost structure, consumers and employers get to know exactly what they are paying for and exactly what they’re getting in return. Like basically any other industry. Look at Livongo, consumers are choosing them even if they have insurance because it makes them healthier, so their care costs less. With the cost of care rising so much in the US, health plans are becoming unaffordable so the consumer has increasing financial responsibility. So basically, health insurers’ entire business model is getting disrupted and they’re going to lose a ton of revenue to disruptors like TDOC/LVGO either way. Trying to embed their own service in their plans isn’t going to work when consumers don’t even need their plans! Hemant Taneja, a managing director at the VC firm General Catalyst who helped ideate and build Livongo and oversaw the merger talks about all of this in his new book UnHealthcare, highly recommend reading it.
Saying that TDOC or LVGO will be commoditized is like saying that Uber will be commoditized. Anyone can get you from point A to point B but the value in Uber is that because it has the largest scale and the most popular brand, you can find a ride anywhere, at any time from a trusted driver. Now, this is especially true in healthcare which is infinitely more complex than driving a car, meaning that upstarts will have no chance of breaking in. What gives TDOC even more differentiation besides its provider network is its range of services, it will take a lot of investment, admin approvals, and technical skill to replicate the same end-to-end platform and while hospitals can replicate remote monitoring, I think it’ll be a stretch to say that they’ll do it at a speed that matches TDOC so their first-mover advantage will continue to widen. There is also more than enough room for multiple players. This is a space that will create multiple 100B+ companies over the next decade.
Anyone else have any thoughts on this?
Richard