Telemedicine Start-Up to Close: Why?

Over the last couple of weeks, several press outlets have reported that the telemedicine startup Call9, using telemedicine technology to help patients in nursing homes avoid going to the hospital was going to shut down operations.

Credit Suisse examined the whole picture as to why the operation was shutting down. Some reports indicated that management attributed the healthcare industry’s slow transition to value-based care from fee-for-services as one of the major challenges for the company. Currently, CMS is focused on using telehealth as chronic disease prevention and management platform to leverage value-based care models.

Credit Suisse has come to the conclusion that telemedicine companies will continue to consolidate. Today, there are more than 250 telemedicine companies in the U.S. Several of these companies primarily small and mid-sized startups are struggling to stay afloat due to inadequate expansion capabilities.

Some of these telemedicine operators are likely to either merge or get acquired by companies with better financial stability and scale. The technology in the telehealth industry is getting commoditized and the companies likely to make it through will be companies with superior consumer engagement and clinical services, and a holistic approach to healthcare.

Several industry experts note that the Call9 business model was based on connecting Skilled Nursing Facility (SNF) staffers to remote physicians via iPads & other technology. The company’s primary goal has been to increase access to care and improve patient outcomes by avoiding unnecessary hospitalizations.

Industry experts believe that the key challenge for Call9 was that the company focused on a specific industry. This industry includes several SNFs across the country that are going through a funding crisis and worker shortage. This has resulted in SNFs not having deep pockets to embrace services such as provided by Call9.

Some experts also note that SNFs are not the leader in the value-based reimbursement concept, which is usually led by Primary Care Physicians or hospitals. In fact, some experts believe the Call9 model might have been seen as unfavorably impacting SNF revenues such as loss of referral fees for physician visits, revenue stream from contacted physicians, etc.

Some industry experts have mixed feedback as to the pace of the U.S healthcare industry’s transition to value based care. While some argue that the pace has been painfully slow, others note that value-based care has gained significant momentum in recent years.

So far, there is no action on the legislation “Reducing Unnecessary Senior Hospitalizations” (RUSH Act) which was introduced in 2018. This bill aims to reduce unnecessary hospitalizations by allowing for the use of technology in SNFs so more patients could be treated in place rather than in hospitals.

Email Jailendra Singh Credit Suisse Research Analyst at or call (212) 325-8121 for more information or to provide feedback and ideas.

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