It’s not quite “Game of Thrones” but the biggest telemedicine companies are buying companies or raising capital to get a bigger share of what is shaping up to be a multibillion-dollar digital healthcare market.
Earlier this week, American Well announced it was acquiring rival telemedicine company Avizia Inc. for an undisclosed sum. Boston-based American Well claims to have a growing business base that the company says includes 55 healthcare plans and insurers and 70 health systems. American Well also churns out lots of frequent marketing updates announcing new services, such as a May 1 update for a new telehealth service that can be used throughout a hospital setting and directly from an emergency room.
But American Well’s deal to acquire Avizia is a move to diversify American Well beyond its initial niche for acute care, or urgent care, and digital doctor visits and into more enterprise healthcare telemedicine applications in the U.S. and overseas. Avizia claims to have more than 1,300 hospitals and 70 health systems using its telemedicine platform for behavioral health, chronic care and care for strokes, pediatrics and urgent care. “Our merger will allow us to create an end-to-end offering,” says American Well CEO Ido Schoenberg.
The move by American Well comes 10 months after 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 Best Doctors, 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.
Deal making is happening at several levels in the telehealth services market as vendors scramble to build a base to capture more transactions and sales in what some analysts call the about-to-“boom” market for telehealth.
The U.S. telehealth market is expected to generate about $2.8 billion in total revenue, compared with about $500 million in 2014, says Grandview Research. As healthcare organizations look for new ways to cut costs and give consumers more convenient ways to see a doctor or seek treatment, as much as 80% of all healthcare visits—more than 800 million—have the potential to be delivered online vs. in the doctor office or the emergency room, says Aetna Inc.
“With big growth ahead, more telehealth services providers are making deals and raising cash to acquire more customers, offer more services and give employers, insurers and health systems access to one turnkey telehealth program that covers patient care from the moment they seek treatment, in the hospital while getting treatment and during recovery,” says KPMG director Neha Sachdeva, who covers digital healthcare.
“The race is on to connect the dots all across patient care,” Sachdeva says. “The vendors are scaling to make what they have work across an entire enterprise.”
For some telehealth companies, the emphasis is on making deals or raising money to build out and potentially dominate a particular niche. For example, San Francisco-based Doctor on Demand recently raised $75 million in new funding from Goldman Sachs and Princeville Capital. Doctor on Demand will use the funds to offer and expand new services such as laboratory tests to employers looking for a telehealth services provider. “We are building a new way of accessing care,” says CEO Hill Ferguson.
Another telemedicine company out to grow its hospital and health system base is InTouch Health, which earlier this week acquired rival Reach Health for an undisclosed sum. The acquisition now gives InTouch Health a base of 200 health systems as customers, says CEO Joseph DeVivo. “The telehealth industry is fragmented and health systems demand a single telehealth platform that can overcome interoperability challenges, ensure data management continuity and scale from a single physician office to a multi-hospital enterprise,” DeVivo says.
What’s happening with the sudden round of deal making in telehealth is not unlike the vendor consolidation that took place in electronic health records. Eventually, the biggest companies, Cerner Corp. and Epic Systems Corp., came to dominate the market because each company was able to scale quicker and sign up the most—and biggest—hospitals and health systems.
“What’s happening in telehealth is a coming round of consolidation,” Sachdeva says. “It’s a natural evolution.”
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