Teladoc Says Overcrowded Telehealth Field Is Slowing Growth for Fittest Players

Rapid expansion of telehealth solutions throughout the pandemic now finds major players battling market and competitive headwinds as the space sorts itself out.

Factors impacting (and impeding) telehealth providers were on display in Teladoc’s first-quarter 2022 results released Wednesday (April 27), showing a fast-growing sector in transition.

From a high view, Teladoc said it provided 4.5 million visits through its network of clinicians, a 35% gain, with in mental health utilization now a driving force for the company.

On a call with analysts, CEO Jason Gorevic said Teladoc’s BetterHelp mental health service saw “lower-than-expected yield on marketing spend” adding, “We believe the biggest driver of this dynamic is smaller private competitors pursuing what we think are low- or no-return customer acquisition strategies in an attempt to establish market share.”

Mental Health Ascends As Competition Grows

“We’re seeing clients inundated with a number of new smaller point solutions, which has created noise in the marketplace,” he said. “In the near term we expect this noise to persist.”

Gorevic wasn’t shy about telehealth competitors exploiting unsavory loopholes in pandemic rules to grab share, saying “prescriptions for Adderall and other controlled substances from some direct-to-consumer telehealth, specifically mental telehealth companies” are siphoning subscribers from services like Teladoc, which does not prescribe these medications.

Saying Teladoc is “less reliant on paid search as a source of new members than in the past,” Gorevic noted customer acquisition cost (CAC) and related strategies figured prominently, and “our push to diversify customer acquisition channels in recent years has left us better positioned to operate within this environment.”

“No single channel accounts for more than 25%” of new BetterHelp members, he said.

Analysts seemed most interested in the BetterHelp outlook, with mental health edging out COVID-19 as the illness that most Americans are more concerned with today.

Gorevic expects BetterHelp to “grow in the upper half of our long-term target range for mental health revenue growth of 30% to 40% per year” while core services are seeing a shift.

Chronic Care Needs Attention

Noting that “our chronic care sales pipeline developed more slowly than anticipated,” he said that on the corporate side, benefits managers are overwhelmed with return-to-work, contributing to “a longer decision-making process,” plus “a large pipeline of health plan deals that were simply harder to predict when it comes to timing given [their] size and complexity.”

“People are waiting and anxious to see what the early adopters are buying, but we haven’t yet hit the bulk of the market in terms of those who are waiting to see the impact that it will have. I’m very confident in that impact,” he said.

For example, “We’re starting to see large health plans buying in order to offer it to their large, self-insured clients.”

Teladoc’s Primary360 model is “a key linchpin of our ability to deliver upon the promise of whole-person virtual care,” and “opens pathways to Teladoc’s own ecosystem of digital and virtual solutions and coordinates care with third-party providers within a health plan or employer’s network when needed.”

He added that “over the past two months, we’ve made important progress moving deals through the pipeline. We’ve seen particularly strong interest from our health plan clients, many of whom are looking to combine Primary360 with our whole-person suite of telehealth, mental health and chronic condition support to create Virtual First care models for their members.”

Chief Financial Officer (CFO) Mala Murthy said Teladoc U.S. paid membership of 54.3 million members is up 680,000 over Q4. Fee only visits were 25.2 million “representing an increase of 950,000 individuals.” Total unique members enrolled in one or more chronic care programs was 731,000 in Q1 — “an increase of 78,000 enrollees over the prior year’s quarter” she said.