Teladoc shelled out the large sum of cash to acquire a fellow leader in the virtual care space, California-based InTouch Health, in a deal that’ll tie off by mid-2020, according to MedCity News. While InTouch is smaller in terms of bandwidth and revenue, the buy is slated to provide Teladoc with a revenue bump: It could tack on an extra $80 million to the $550 million Teladoc expects to rope in for full-year 2019.
The InTouch Health purchase will greatly expand Teladoc’s roster of partners and aligns with the acquisition-heavy strategy it’s used to dominate the telehealth market.
The tie-up could more than double the number of hospitals Teladoc works with. Teladoc currently works with upward of 300 hospitals, per its website — and InTouch boasts deals with more than 450 hospitals and health systems, per MedCity News.
Further, Teladoc is gaining access to Solo, InTouch Health’s enterprise-facing, multiuse platform. Unveiled in April 2019, the Solo platform can apply to a range of use cases, including direct-to-consumer and provider-to-provider telehealth initiatives. Teladoc will also become affiliated with Rite Aid via the tie up: The pharmacy titan announced that a handful of its locations would be rolling out telehealth kiosks in alliance with InTouch Health in July 2019, which we expect it will build out further in the coming year. This will help Teladoc boost its presence in the retail pharmacy space: Teladoc already provides the platform for CVS’ smartphone-enabled telehealth service.
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And this deal builds on Teladoc’s strategy of using mergers and acquisitions (M&A) to grow rapidly. Teladoc has bought nearly a dozen companies since its 2002 launch, far exceeding some of its rivals’ M&A activity: Fellow virtual care provider American Well has snapped up just two firms since it got off the ground in 2006, for context.
The purchases are affording Teladoc opportunities to wade into new markets and new treatment areas: For instance, two of its recent purchases — MédecinDirect and Teladietician — allowed it to extend its international footprint into France and gave it access to the resources needed to provide virtual nutrition services, respectively.
Despite considerable consumer interest in telehealth — and the swath of companies occupying the market — adoption still hangs low, which could bring on mass consolidation in the space:
- Because consumers aren’t converting interest in telehealth into high utilization, providers may be reluctant to invest in virtual care. While 66% of US adults report willingness to use telehealth, only a mere 8% have tried it, according to a 2019 American Well survey. Low consumer use could leave provider organizations questioning whether any investments in virtual care platforms and services would pay off if their patients don’t act on their alleged interest. Further, about one-third of providers say that they wouldn’t use telehealth because they fear it could give rise to medical errors and could open them up to privacy violations, according to Deloitte.
- So, smaller companies with provider-facing offerings could have trouble landing deals as big fish like Teladoc cement their lead in the market — making consolidation a strong bet for survival. As such, we think we’ll see smaller telehealth providers combining forces — like we saw with San Antonio-based Carenet Health and North Carolina-based Citra Health Solutions in July 2019. But beyond mergers, we think we’ll see tinier telehealth companies shuttering operations this year as bellwethers like Teladoc and American Well roar ahead with acquisition efforts.
Source: Business Insider