The Busy Signal: Telehealth Deals Surge as Usage Stays High

MHE PublicationMHE July 2021
Volume 31
Issue 7

Insurers make acquisitions as pandemic adoption of virtual care delivery becomes the norm.

As health insurers and retailers focus on meeting patients’ demands to have access to healthcare when they want it, how they want it, telehealth acquisitions and expansions are going strong.

Among the deals announced this spring were Cigna’s acquisition of MDLive, Bright Health’s acquisition of Zipnosis and Walmart’s announcement that it was planning to purchase MeMD. Meanwhile, Amazon, which has been offering telehealth services to some of its own employees, said it would start to offer virtual care nationwide and signed its first deal this spring to provide its Amazon Care telehealth app to another company.

The dealmaking is just one of the business-related symptoms of the surge of telehealth usage that started with the COVID-19 pandemic last year and has continued at a pace not seen in prior years. Telehealth “needed a jolt. The jolt was the pandemic to really get adherence and adoption,” says Nick Donkar, U.S. health services deals sector leader at the consultancy PwC.

COVID-19 “changed the industry. People realize telehealth is a better solution,” adds Pouria Sanae, founder and CEO of ixlayer, a San Francisco-based company that helps providers offer diagnostic testing virtually.

People have grown accustomed to getting online when they have a medical problem, notes Sanae. In the past, if an individual had symptoms of an illness, “their first reaction was to go see a doctor,” he says. Today, “their first reaction is to go to Dr. Google,” and then they may search out an online healthcare provider.

Because of COVID-19, telehealth usage soared by 154% during the last week of March 2020, as the pandemic was just beginning to take hold, compared to the same period in 2019, according to data compiled by the Centers for Disease Control and Prevention.

FAIR Health, a nonprofit healthcare data analytics company, found that telehealth “claims lines” — the individual services or procedures listed on insurance claims — soared throughout 2020 for those covered by private insurance. Comparing December 2019 with December 2020, telehealth claims lines soared more than 2,800%. They represented just 0.22% of all medical claims lines in December 2019 compared with 6.51% in December 2020. Medicare and Medicaid claims are not included in the statistics.

Niche no more

Behavioral healthcare was the top reason for consumers to seek telehealth care, followed by seeking treatment because of possible exposure to “communicable diseases,” which FAIR Health says likely reflects possible exposure to COVID-19.

Telehealth usage has dipped this year, according to FAIR Health’s data. From February to March, the most recent month for which statistics are available, telehealth claim lines dipped 5.1%, but they still represent 5.6% of all claims.

“A lot of people want hybrid care,” with a blend of in-person and virtual healthcare, says Sari Kaganoff, general manager of consulting at Rock Health, a venture fund that focuses on digital health. Telehealth “isn’t a niche anymore. Everyone knows it’s the future,” she adds, which makes it very appealing to investors as well as consumers.

Last year, Cigna created a new brand called Evernorth for its health services portfolio. Before the pandemic, 97% of Cigna’s behavioral healthcare customers had never had a virtual visit with a provider, said Eric Herbek, Evernorth’s vice president of virtual care, via email. He also noted that since the pandemic began, 60% of behavioral health patients say they have continued using virtual care.

Wheeling and telehealth dealing

As the healthcare system adjusted care delivery, there has been “a tremendous amount of deal activity in the health services space,” Donkar says, and much of that activity involves virtual care. The activity has been driven by healthcare companies’ abilities to leverage artificial intelligence, improve care and reduce costs using telehealth, he says.

Among the major deals:

Cigna’s Evernorth brand completed its acquisition of MDLive in April. Cigna had previously been a major investor in the telehealth company, which is based in Miramar, Florida. Terms of the deal were not disclosed.

Bright Health acquired Zipnosis, also in April. Both companies are based in Minneapolis. Zipnosis’ telehealth platform is used to power the virtual visits of almost 60 large health systems across the country. Details of the transaction were not disclosed. In May, Bright Health filed preliminary paperwork for its own initial public offering.

Walmart in May announced it had reached an agreement to acquire MeMD, a telehealth provider based in Phoenix. With the acquisition, Walmart Health will be able to provide primary care, urgent care and behavioral healthcare — with the goal of “complementing our in-person Walmart health centers,” the retailer said in a recent press release.

Investors plowed $21.6 billion into digital health companies last year, according to Mercom Capital Group in Austin, Texas. The money came in as venture capital, debt and public market financing. Along with major companies such as insurers and retailers, “there’s a lot of money flowing into healthcare right now” from sources such as venture capital companies, Kaganoff says. Investment is “on a wave that’s rising,” she says. “It hasn’t crested yet.”

Other companies are taking different approaches to telehealth. Many eyes are on Amazon and its maneuvers. Amazon created Amazon Care in 2019 to provide virtual care to the online retailers’ employees and their families in Washington state and also offered in-person care at their employees’ homes with medical professionals doing such things as drawing blood or listening to a patient’s lungs. This spring, Amazon announced it was planning to expand its virtual care to Amazon employees around the country, as well as to other companies. It also is planning to expand its in-person care to cities such as Washington, D.C., and Baltimore.

According to several media reports, Amazon Care had signed up its first virtual care client, Precor, a fitness equipment company based in suburban Seattle, in May. Precor was acquired by Peloton in the spring.

Meanwhile, Walmart said in a press release that the acquisition of MeMD “reinforces Walmart’s commitment to integrated, omnichannel health delivery that leverages data and technology to improve engagement, health equity and outcomes.”

Kaganoff says the blend of online and in-person care should serve the retailer well. “Walmart has a really nice opportunity because of its physical footprint.”

The future of virtual care

Although telehealth has primarily been associated with urgent care delivery in the past, Cigna is convinced “virtual care can be used effectively to treat much more than strep throat or an ear infection,” Herbek wrote via email. “We see a future where (patients with diabetes) and others with chronic and complex care needs can access comprehensive care online and where their providers are part of a connected network of care.”

Herbek added that care provided through MDLive is intended to complement, rather than replace, consumers’ interactions with their current providers, with the goal of improving access to care and health outcomes.

Cigna plans to achieve that through earlier identification and diagnosis of critical care needs, improved medication management and increased affordability through referrals to high-quality providers, guidance to appropriate and affordable sites of care, and easier connections to affordable prescriptions, Herbek wrote.

Donkar says he expects to see a “continued interest in all things virtual” in the future.

Herbek agrees: “We see virtual care as an area of rapid innovation in the industry, pushing into new aspects of care and becoming a more essential ingredient in health plan benefit design.”

Susan Ladika is an independent journalist in Tampa, Florida, who covers business and healthcare.

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