Telehealth demand has oscillated over the past several years. There was a peak in usage during 2020 and 2021 during the COVID-19 quarantine, driving dozens of deals in the healthcare M&A market. Deals such as Microsoft Corp.’s purchase of Nuance Communications for $19.7 billion in April 2021 and Teladoc Health’s acquisition of Livongo Health, Inc. for $18.5 billion are some notable examples.
Several companies even hit the public market through a special purpose acquisition company (SPAC). Sharecare, Inc. merged with a SPAC in a deal valued at $3.9 billion in November 2021; Him & Hers joined Oaktree Acquisition Corp., sponsored by an affiliate of Oaktree Capital Management, L.P., in a $1.3 billion merger.
In 2022, telehealth transactions declined by 17% year over year, and usage dropped by more than 30% compared with a high in 2020 across various primary care specialties, according to data released by FAIR Health. As lockdown restrictions were lifted, many patients returned to in-office visits, which became more accessible as retail giants like CVS and Walgreens expanded their outpatient care offerings.
However, telehealth utilization has notably increased in the first half of 2023, mainly due to the increased mental health service usage. For instance, one of the country’s largest telehealth providers, Teladoc, saw a 10% jump in second-quarter revenue to $652 million, boosted by strong growth in its BetterHelp direct-to-consumer mental health segment.
The company’s BetterHelp virtual mental health business saw an 18% revenue increase, generating $292 million during the quarter. According to the company’s second-quarter earnings report, Teladoc’s integrated care segment, its virtual care business aimed at health plans and providers, brought in $360 million, up 5% from 2022.
FAIR Health’s data also shows high telehealth utilization for mental health services. According to the company’s monthly health tracker, in May 2023, nearly 70% of all telehealth usage nationwide was for mental health services.
Access to mental health services in rural areas has always been historically low, so with an increase in mental health platforms and offerings, those populations finally have viable options for care.
According to data captured in LevinPro HC, there have been 34 transactions focused on telehealth providers. So far, this year’s largest deal in the vertical was Clearday, Inc.’s merger with Viveon Health Acquisition Corp., valued at $370 million.
Clearday, Inc. is a San Antonio-based technology company using an integrated robotic companion care and AI-driven technology platform serving the senior adult care sector. The company is focused on care for patients dealing with Alzheimer’s Disease and other cognitive issues.
And naturally, private equity is still keen on investing in the telehealth market. TT Capital Partners, a leading healthcare private equity investor, acquired Pyx Health for an undisclosed sum. Pyx Health is a scalable, 24/7 technology platform that aims to reduce loneliness and social isolation by connecting with its 6 million members outside the traditional care setting. The company works with nearly all major payers and government, employer and community health plans across the United States. Rallyday Partners previously acquired Pyx Health in April 2021.
Other firms, such as Concord Health Partners and Grovecourt Capital Partners, have announced transactions in this space in the past six months.
Despite the fluctuations in usage and demand, telehealth seems poised for long-term growth. According to a study by Fortune Business Insights, the global telehealth market was valued at $128 billion in 2022 but is expected to grow to $504 billion by 2030. Although the COVID-19 pandemic accelerated the adoption of telehealth, other factors, such as improved infrastructure and a catch-up on government and reimbursement models, should further cement its place in the healthcare delivery system.
