With the acquisition of Best Doctors, Teladoc wants to create a global market for a “virtual medicine dashboard” that gives patients a single source for finding a doctor, exploring treatment options for a range of about 450 acute and chronic care conditions, and then seeing the doctor online.

It’s been two months since telehealth services provider Teladoc Inc. announced its $440 million acquisition of  Best Doctors Inc.,  a digital healthcare company that provides patients and doctors seeking diagnostic and treatment advice access to medical experts in the U.S. and it’s been just over a month since the acquisition was complete.

With the deal making done, Teladoc is beginning to build a combined operation that will take Teladoc beyond the U.S. telehealth market, Teladoc senior vice president of product and corporate strategy Dan Trencher tells Internet Health Management.

With the acquisition of Best Doctors, Teladoc wants to create a global market for a “virtual medicine dashboard” that gives patients a single source for finding a doctor, exploring treatment options for a range of about 450 acute and chronic care conditions, and then seeing the doctor online. “We did the deal because we are looking to break some new ground,” Trencher says.

Before the acquisition Teladoc was focused primarily on telehealth. For the first quarter ended March 31, Teladoc had 7,500 clients, including health plans, health systems, employers and other organizations, more than 20 million users  the company calls members and a network of more than 3,100 board-certified, state-licensed physicians and behavioral health specialists.

Patient visits increased 60% year over year to 384,839 visits in the first quarter of 2017, while revenue was $42.9 million, up 7.4% from $26.9 million in the first quarter of 2016. Net loss for the first quarter was $15.5 million compared with $15.1 million in the previous year.

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For the second quarter ended June 30, revenue grew year over year 67.7% to $44.6 million from $26.6 million. Net loss for the quarter was $15.4 million compared with $14.9 million in the second quarter of 2016. The number of users totaled 20.5 million while patient visits increased year over 33% to 309,000.

Before the Best Doctors acquisition, Teladoc, based in Purchase, New York, had been forecasting a relatively strong year. The company had projected 2017 revenue of $185 million, which would be a 50% increase from $123 million in 2016, 31% year-over-year growth in memberships from 17.5 million to 23 million, and that total visits would increase about 63% to 1.5 million from 920,000.

With the acquisition of Best Doctors, Teladoc wants to create a global market for a 'virtual medicine dashboard' that gives patients a single source for finding a doctor, exploring treatment options for a range of about 450 acute and chronic care conditions, and then seeing the doctor online

But the acquisition of Best Doctors now gives Teladoc a new range of services to offer and the opportunity to move beyond the U.S. into international markets. The Best Doctors global network consists of more than 50,000 medical experts in more than 450 medical specialties. Best Doctors’ services range from having a doctor review a patient’s diagnosis and treatment plan in detail and provide expert answers and advisory services to answering basic questions about a medical condition or treatment plan.

The company also provides a critical care program that provides support for patients experiencing multi-trauma, spinal cord injuries, traumatic brain injuries, severe burns and sepsis, and for patients with increasing ventilator requirements, such as acute respiratory distress syndrome and acute lung injury.

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Best Doctors, based in Quincy, Mass., provides physician search assistance and treatment decision support services. With the acquisition of Best Doctors, the deal added about $92 million in annual revenue to Teladoc’s revenue base and added more than 800 clients in about 100 countries. “The acquisition literally opened up a whole new world for us,” Trencher says. “It allows to expand in a lot of new directions.”

The consumer telehealth market is growing. In 2015, U.S. consumers spent an estimated $639 million on digital doctor visits, says consulting and research firm Accenture. This year spending on digital provider, or telehealth sessions that take place on a mobile device could exceed $1 billion, Accenture says.

As a cheaper and more flexible alternative to patients than the emergency room, the doctor’s office or walk-in clinics or the doctor’s office, more big employers are giving employees access to telehealth services. Virtually all employers (96%) will make telehealth services available in states where it is allowed next year, says a new study from the National Business Group on Health. More than half (56%) of employers surveyed plan to offer telehealth for behavioral health services, such as counseling, more than double the percentage in 2017, according to the survey.

Today there are multiple vendors including the publicly traded Teladoc, competing for business in the consumer telehealth market. Key competitors to Teladoc include American Well, Avizia Inc., Carena Inc., Doctor On Demand, MDLIVE Inc., Philips Healthcare, Polycom Inc., Sherpaa Healthcare, SnapMD Inc., and Zipnosis.

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But Teladoc is telling Wall Street analysts and the broader healthcare market the company is using the Best Doctor acquisition to transform Teladoc into a global virtual care delivery platform, with telehealth as one core offering. “Teladoc will soon represent the first stop for many consumers around the world looking to resolve their healthcare issues in the most efficient, high-quality and cost-effective manner,” says CEO Jason Gorevic. “Regardless of their need, ranging from cost to cardiac conditions, Teladoc will have the ability to help solve their concerns.”

Best Doctors, which Teladoc says generates about 40% of its business internationally, brings a diverse mix of services that will help Teladoc build its virtual medicine dashboard, Trencher says. These services include oncology insights by specialists that can provide evidence-based treatment recommendations, concierge case management for behavioral health, a web, phone and database service that links patients with medical specialists worldwide for diagnosis and treatment plan, and an online service for catastrophic events such as spinal injuries and brain injuries. “It’s a full spectrum of services for acute and chronic care,” Trencher says.

The $440 million deal to acquire Best Doctors included Teladoc paying $375 million in cash and issuing $65 million worth of common stock to Best Doctors shareholders.

Teladoc says it has secured financing from Jefferies Finance LLC and Jefferies Group LLC for $360 million, which combined with the company’s cash on hand, will fund the cash portion of the transaction.

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Now that the deal is complete, Teladoc is offering a revised forecast for the third quarter and the full year. Revenue for the third quarter 2017 is expected to be in the range of $67 million to $68 million while membership is expected to total approximately 22 million users to 22.5 million users, Teladoc says.

Revenue for the full year is expected to be in the range of $230 million to $235 million and membership is expected to total approximately 22.5 million users to 23 million users. The company did not release guidance on net income or loss.

“By providing a single interface and intelligent guidance due to full spectrum of clinical capabilities, tools information and guidance in the Teladoc portfolio, we will transform how the consumer accesses the healthcare system, providing greater convenience, better outcomes and unmatched value, Gorevic told analysts on Teladoc’s recent second quarter earnings call based on a transcript from SeekingAlpha.com.

Full details are still forthcoming on when Teladoc will roll out new virtual care services. But the company is telling Wall Street research firms that Teladoc in January is planning the release of a single web interface and app with a more robust version coming by the middle of 2018.

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At least one Wall Street analysts also sees the acquisition of Best Doctors as good evolutionary move for Teladoc, whose stock market symbol is TDOC.

“Teladoc continues to expand the breadth of its virtual health offerings, and adding expert opinion capabilities has been a priority,” says Baird Institutional Equities and Research vice president and senior research analyst Matthew Gillmor. “Strategically, Best Doctors further expands TDOC’s position in the virtual health market, provides a significant cross-sell opportunity, and appears highly complementary from an operations/sales perspective.”

 

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