If you’ve attended any healthcare deal-making conference in the last few years, you’ve heard that telehealth is one of the hottest target sectors going, right up there with autism services and physician practices (dermatologists, ophthalmologists, dentists, you name it).
It’s caught in something of a perfect storm at the moment, as more states and regions implement laws to facilitate telehealth services. On the federal level, the Centers for Medicare and Medicaid Services on April 5, 2019 finalized policies that increase plan choices and benefits, including allowing Medicare Advantage plans to include additional telehealth benefits.
Private health insurers have been offering telehealth services to their members for some time but continue to up their offerings. Humana (NYSE: HUM) just announced a partnership with Doctor on Demand to launch a new virtual primary care model called On Hand, beginning in June 2019. Teladoc Health (NYSE: TDOC) in March launched a new service in Canada, called Teladoc Telemedicine Services.
For the record, telehealth is different from telemedicine because it refers to a broader scope of remote healthcare services than telemedicine, as defined by the Health Resources Services Administration. While telemedicine refers specifically to remote clinical services, telehealth includes remote non-clinical services, such as provider training, administrative meetings and continuing medical education, in addition to clinical services. We do not include remote patient monitoring as part of the telehealth subsector, due to its more passive, data-collection aspect that does not require a physician’s exclusive attention.
Consumers are getting more comfortable with the telehealth concept, too. From 2016 to 2017, private insurance claims for services rendered via telehealth (as a percentage of all medical claim lines) grew 53% nationally, more than any other venue of care studied by FAIR Health, which published its findings on April 1. Compared with telehealth’s 53% growth, national usage of urgent care centers increased 14%, of retail clinics, 7%, and of ambulatory surgery centers, 6%. Claims for emergency room visits decreased by 2% in that same period.
Adoption by physician practices is still low, however. A 2018 survey by the American Medical Association found just 15% of physicians worked in practices that offer telehealth services. Spending on telehealth services is pretty healthy, however. IBISWorld, an industry research firm, pegged the total market revenue at $2 billion in 2018.
Spending on telehealth deals can’t be measured in the same way, primarily because the targets in this fragmented market are generally small and terms of the deals are kept private.
In the first four months of 2019, five acquisitions of telehealth targets have been announced, compared with 10 each in 2018 and 2017. The five deals we’ve seen in 2019 demonstrate telehealth’s appeal across sectors, as the acquirers include companies outside the digital health sector.
One example is AMN Healthcare Services (NYSE: AHS), which provides healthcare workforce solutions and staffing services to healthcare facilities. On April 30, the company agreed to pay $200 million to acquire Advanced Medical Personnel, a portfolio of Clearwater Capital, which specializes in placing therapists and nurses in contract positions across multiple settings such as hospitals, schools, clinics, skilled nursing facilities and home health. The attraction for AMN was Advanced Medical’s recently launched telehealth platform to serve the needs of children within large school districts with telehealth therapist consultations, in addition to on-site visits.
Also in April, Advantia Health paid an undisclosed price for Pacify. Advantia focuses on women’s health via its Woman’s Health Hub model, which physically and clinically integrates primary care, behavioral health and other common services into its OB-GYN practices to provide coordinated services to meet women’s needs.
Pacify developed a telehealth app that focuses on virtual perinatal care for new and expectant mothers. It connects them with consultants and registered nurses to complement in-person visits with OB-GYNs, pediatricians and other physicians.
Pacify works with more than 30 health plans, employers and public health agencies, including Medicaid managed care organizations and Women, Infants and Children (WIC) programs. This deal combines Advantia’s physical physician practices with Pacify’s virtual capabilities to provide on-demand, 24/7 virtual care for new mothers through the Pacify platform.
On April 1, California-based rehabilitation company Paradigm acquired Restore Rehabilitation, based in Owings Mills, Maryland.
Paradigm treats injured workers through three divisions: catastrophic care management, complex care solutions, and specialty networks. Its specialties include nurse triage, transitional return to work, physician advisory services and complex pain management.
Restore Rehabilitation is a case management company that provides field coverage in 27 states and nationwide telehealth coverage. It will be integrated into Paradigm’s Complex Care Solutions division and will operate under the Paradigm name.
Teladoc is the publicly traded pure-play in the telehealth space, with a market cap of $4.4 billion. It went public in July 2015 with a share price of $19 and is currently trading around $61 per share.
Even before its IPO, the company was actively acquiring. In September 2013, Teladoc took over Consult A Doctor, a Miami, Florida-based telemedicine service and technology platform with a network of board-certified physicians in all 50 states. In May 2014, it acquired Dallas, Texas-based AmeriDoc, a telehealth platform.
In 2016, it paid approximately $153 million for HealthiestYou, a telehealth consumer engagement platform for the small- to mid-sized employer market. A year later, it acquired Best Doctors from Brown Brothers Harriman for $440 million and gained global reach through the target’s network of more than 50,000 medical experts worldwide. All are peer-rated in a Gallup-certifed poll as being in the top 5% of physicians in more than 450 medical specialties.
In March 2019, the company boosted its global presence with the acquisition of the French telehealth provider MedecinDirect, for an undisclosed sum. The deal combines Teladoc’s virtual care services with MedecinDirect’s consultation and prescription digital health solutions. The organization will become the French country unit of Teladoc Health.
Other U.S. players include privately held InTouch Health, an enterprise telehealth platform that supports over 130 healthcare systems, 7,700 registered network users, and 1,780 care locations worldwide. In 2018, it surpassed 1,680,000 network sessions and is expected to manage more than 300,000 clinical sessions in 2019.
Last year InTouch made two deals. In January, it acquired TruClinic, which offers a secure, high definition video communication system and a suite of practice management products. In April it acquired Alpharetta, Georgia-based REACH Health, which provides enterprise telemedicine systems for multiple specialties and settings of care. The REACH 5.0 platform allows bedside clinicians to consult and collaborate with remote specialists. No financial terms were disclosed.
Private equity firms, which are storming many healthcare services sectors at the moment, have not piled into the telehealth sub-sector as heartily as they have other areas of digital health. Rest assured, interest is growing. Harbour Point Capital acquired InSight Telepyschiatry in November 2018, following Pharos Capital Group’s 2016 deal for FasPsych LLC. Other specialties like teleradiology are attracting medical device makers such as Royal Philips (NYSE: PHG). The company acquired Direct Radiology in March. You’ll be hearing a lot more about these services in the years to come.