Providers Need Investor Funds To Expand Services And Customer Support
By Yiqin Shen, Claire Rychlewski, Troy Hooper and Kyle LaHucik
Telehealth, once a slow but steady growth industry, is booming as the coronavirus pandemic has increased patient demand and regulatory support — and many providers will require funding to sustain momentum, industry experts said.
Young Male Doctor Video Chatting On Laptop In Clinic
Mergermarket has reported on a number of telehealth providers eyeing capital raises in recent weeks, with Mediconecta, SteadyMD, MeMD and MDBox all looking for outside funding to help finance their growth.
In March, telehealth visits surged 50%, according to Frost and Sullivan, up significantly from the 10% of U.S. residents having used telemedicine per an October 2019 J.D. Power survey.
One reason for the surge is the lifting of regulatory barriers. The Center for Medicaid and Medicare Services (CMS) has expanded telehealth benefits for Medicare beneficiaries. The U.S. Drug Enforcement Agency also temporarily lifted a provision in the Ryan Haight Act that required an in-person exam before providers could electronically prescribe controlled substances, said Kristy Kimball, a partner at the Utah law firm Holland & Hart. She also said the Department of Health and Human Services is allowing the use of non-HIPAA-compliant communication tools in telehealth, such as FaceTime and Skype.
The Federation of State Medical Boards also reported, as of April 15, that 44 states had waived in-state licensure requirements for telehealth.
Healthcare payors are now seeing more value in telehealth, said Shawn Morris, CEO of physician management business Privia Health.
“[Payors] are reaching out to us saying, ‘Hey, can you handle excess capacity? Because we’re having issues with the current telehealth volume we can handle,’” Morris said.
Privia Health added about 500 doctors to its virtual visit platform and is providing north of 3,000 virtual visits a day, according to Morris. Amwell, a Boston-based telemedicine provider formerly known as American Well, saw patient volume rise 257% nationally in March versus what is typical this time of year, a spokeswoman said.
Telehealth providers are also scrambling to expand their services and customer support — initiatives that all require significant capital in a short period of time, said Henrik Molin, CEO of physical therapy telehealth provider Physitrack.
Capital needs are also driven by the length of payment cycles: Molin noted that hospital and healthcare providers reimburse for services on a longer payment schedule, making cash flow management essential.
“The only way to get over this issue is for the government to start a digital health initiative where they advance payments to these startups, so that they can innovate and then the health systems pay the government back,” said Sherman Williams, a managing partner at Academy Investor Network. This kind of scheme could rapidly increase innovation, he added.
It’s important for telehealth companies to figure out how to monetize at this critical time, Molin said.
Some investments have already materialized: Last week TPG Capital acquired behavioral provider LifeStance Health, a provider of telehealth services, for what is believed to be $1.2 billion.
According to Mergermarket data, this year has already seen the sector’s largest acquisition, with Teladoc Health announcing an agreement in January to purchase InTouch Health in a $600 million transaction. Teladoc, which has a market cap of nearly $13 billion, has been actively consolidating the space, making 10 acquisitions worth $2.2 billion since 2012.
Industry experts are optimistic that interest in telemedicine from both users and investors will remain post-pandemic.
“COVID-19 is accelerating several trends in digital health that were already occurring,” Williams said. The quality of results provided by telehealth services will be a critical area of assessment, he noted. How telehealth providers cope with the COVID-19 crisis will offer helpful data points to convince further investors to allocate resources to the space, he said.
A wider range of investment firms and large technology and pharmaceutical companies are expected to show more interest in telehealth after the crisis, some experts said.
“Big tech companies like Google are already gathering data and they could make telehealth acquisitions,” Kimball said. Her clients that provide technology to key healthcare providers are now being asked to convert their platforms for telehealth.
Philip Segal provided analytics for this story.
Yiqin Shen is a New York-based senior reporter with Mergermarket and Dealreporter, covering healthcare. She can be reached at firstname.lastname@example.org.
Claire Rychlewski is a Chicago-based senior reporter with Mergermarket reporting on healthcare services and biopharma. She can be reached at email@example.com.
Troy Hooper is a Los Angeles-based editor with Mergermarket and can be reached at firstname.lastname@example.org.
Kyle LaHucik, email@example.com, is a reporter Chicago-based reporter with Mergermarket covering software and tech-related companies.
Philip Segal is the New York-based head analyst for Mergermarket-Americas and can be reached at firstname.lastname@example.org.