Credit Suisse https://www.credit-suisse.com conducted a conference call with Teladoc Health (TDOC)https://www.teladoc.com management to review 2Q19 results, question Teladoc on the rise of telemedicine in the large employer market, behavioral health trends, CVS rollout, United Health Group https://www.unitedhealthgroup.com (UNH)/Teladoc contract, plus Teladoc’s relationship with Health Insurance Innovations (HIIQ https://www.hiiq.com.
Management replied that most large employers do offer telemedicine in their suite of benefits, or offer telemedicine simply because it is provided with their health insurance plan. Teladoc has recently seen these employers start to actively engage in a real telemedicine strategy by rolling out a full suite of telemedicine services.
The discussion continued concerning behavioral health trends as related to Teladoc. The company responded by highlighting strong growth drivers such as Business to Business (B2B) and BetterHelp’s e-counseling platform in 2Q19.
Is this the result of seeing more visits because you have more employers enrolled into behavioral offerings this year versus last year, or is the increase in visits due to increased utilization from your existing customers? Teladoc reports seeing both a bigger population as well as greater utilization of the service.
Details on the CVS partnership with Teladoc raised the question on the number of states and where the company has installed their technology at CVS MinuteClinics. Finally, what does the timeline look like for the rollout to be complete across the states?
Management cleared up the issue by explaining that as of today, it is not Teladoc Technology in MinuteClinics. The company has rolled out their technology powering virtual visits through the CVS app and through the CVS web. Currently the partnership is across 27 states and is expected to expand into more states during the year. As of now, there is not specific timeline for Teladoc’s rollout as CVS controls the timing of the rollout.
Also, Medicare Advantage plans either by themselves or via partnerships are showing interest in CMS’s decision to expand telemedicine rollout for seniors. The company sees the telemedicine roll out for seniors as a three year ramp versus full adoption to be effective January 1, 2020.
In July 2019, Credit Suisse presented their expectations on the Teladoc/UnitedHealth Group (UNH) contract based on conversations with industry contacts although neither party had publicly disclosed contract details. It has been reported that Teladoc’s contract is an extension of UNH’s telemedicine partnerships with two to three vendors.
In September, UNH issued a press release on their telemedicine offerings which included some preliminary details around their partnership with Teladoc. Teladoc notes that this contract spans across 15 min of UNH’s commercial lives. Roughly one third are under the Subscription-based Per Member per Month model, while the remaining two thirds of lives will be covered under the Visit-Fee only model.
However, Teladoc sees the opportunity to move the Visit Fee only model to its Subscription Fee-based model with plans to expand the scope of services covered over time. Under the contract Teladoc’s physicians will be delivering the visits at $49 per visit.
In other news related to Teladoc, Credit Suisse management has done some fact checking and has weighed in on the Teladoc and Health Insurance Innovations (HIIQ) relationship. On August 15, 2019, it was reported in a “Seeking Alpha” article that Teladoc shares had traded down 7.4% The article focused on Teladoc’s relationship with HIIQ and concluded that Teladoc’s revenues via their relationship with HIIQ represents roughly $21 min in revenue & EBITDA.
HIIQ offers TDOC’s telemedicine offering as one of their supplemental benefits alongside the insurance plans HIIQ sells on the website. The customers enrolling for Teladoc’s offering pay certain fees, of which HIIQ keeps a certain portion with the rest passed on to Teladoc. While neither company directly commented on the pricing arrangements discussed in the article, both stated that the analysis and assumptions included in the Seeking Alpha article are incorrect
For more information or to provide feedback contact Research Analyst Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.
USDA Invests $52 M in Community Facilities
USDA https://www.usda.gov is investing $52 million in 45 projects through the “Community Facilities Direct Loan Program”. This will benefit nearly 200,000 rural residents in 16 states, but the projects must be in rural areas with a population of 20,000 or less.
More than 100 types of projects are eligible for funding under USDA’s Community Facilities program. The types of projects eligible for funding under the program include municipalities, public bodies, nonprofit organizations, and federally recognized Native American tribes.
The projects selected are in Alabama, Arizona, Colorado, Georgia, Illinois, Missouri, Nebraska, New York, North Carolina, Ohio, Pennsylvania, South Carolina, South Dakota, Tennessee, Virginia, and Wisconsin.