Should Teladoc be worried about Zocdoc’s new telehealth service?
The demand for virtual health services has exploded. According to a study by the American Hospital Association, about 76% of hospitals nationwide use video and other technologies to connect healthcare providers to their patients. Another study published in May reported that between 2017 and 2022, telemedicine is expected to achieve a compound annual growth rate of 19%. In 2017, the telemedicine market was valued at just under $ 30 billion. Since the start of the COVID-19 pandemic, the demand for quality telehealth services has increased significantly. In fact, the telehealth market is expected to experience 80% year-over-year growth due to the surge in demand resulting from the coronavirus crisis.
Founded in 2002, Teladoc (NYSE: TDOC) has grown in importance in recent years as a pioneer in telehealth. The company held its initial public offering (IPO) in 2015. The company already has many competitors in the telehealth field, but a new leader has recently emerged.
In April, Zocdoc, a popular medical appointment booking start-up, added virtual doctor visits to its list of services. In the seven days following the launch of the virtual video tours, the company has booked more than 350,000 appointments in 50 different medical specialties. Zocdoc has since announced the launch of Zocdoc Video Service, a HIPAA compliant telehealth solution available completely free of charge.
Could a relative newbie in the telehealth industry threaten a veteran like Teladoc? Here’s what investors need to know.
Teladoc is one of the leading digital healthcare providers
Teladoc offers a wide range of telehealth services. Through the Teladoc portal, patients can connect with certified physicians 24/7 in a range of medical fields including emergency care, internal medicine, pediatric medicine, mental health and dermatology. While Teladoc is very clear that prescriptions are not guaranteed with a virtual tour, doctors have the discretion to write prescriptions for certain drugs.
Many employer-sponsored health plans and private health insurance companies across the country include Teladoc as part of their covered services. If your health insurance benefits do not include Teladoc services, you can also set up an individual plan and pay a fixed rate for each virtual doctor appointment. The price of an appointment through Teladoc is based on several factors, including the benefits covered by your health plan and the type of service you book.
One of Teladoc’s most popular services is called Everyday Care. Patients with elective illnesses can use Everyday Care to speak to a doctor via video, mobile app, or phone to get a diagnosis and treatment plan. If your insurance plan includes Teladoc services, the cost of each daily care appointment will not exceed $ 59. Otherwise, each daily care appointment costs $ 75. The duration of a Teladoc meeting varies. On average, daily care visits last 15 minutes, while appointments with a mental health professional last 45 minutes. Teladoc currently has over 43 million members on its platform and hosted 4 million telehealth appointments last year.
Zocdoc has just made a gesture of genius
Since its inception in 2007, Zocdoc has made waves in the digital health community as an innovative medical appointment booking service. Millions of patients per month use the Zocdoc platform to locate doctors in their network and book medical visits. Zocdoc makes the process of preparing for a medical appointment quick and easy. Patients can read thousands of reviews from existing patients before choosing their provider. They can also fill out paperwork online to save time during the appointment. While the cost of an appointment scheduled through Zocdoc depends on your specific insurance plan, the platform allows patients to book these visits completely free of charge.
As COVID-19 swept the country in early spring, Zocdoc was quick to respond to growing demand for virtual health services. After only a week of offering its new telehealth service, video tours represented more than 20% of Zocdoc’s overall bookings. About 30% of patients using these services were on the company’s platform for the very first time. Among patients making virtual doctor appointments through Zocdoc, 20% did so citing complaints related to the coronavirus. The remaining 80% of patients booked a video visit to meet primary care needs.
Shortly after the initial launch of its video tours by Zocdoc, the company announced the launch of a brand new telehealth solution called Zocdoc Video Service. The service is HIPAA compliant and completely free for providers and patients. Medical providers who are not currently part of the company’s platform can still register for the Zocdoc video service, and those who are already part of the company’s existing provider network can register for the service free of charge. .
So far, around 8,000 providers have opted for the Zocdoc video service. Zocdoc issued a press release announcing the launch of this service on May 13th. In its press release, Zocdoc referred to a study by Merritt Hawkins, which found that 48% of doctors nationwide now see their patients virtually. Zocdoc also cited another survey from Ipsos, noting that “with virtual care encounters set to exceed one billion by the end of 2020, around three-quarters (76%) of providers surveyed… said that they would offer more telehealth appointments as an option in the future, even after returning from their in-person visits. “
The doctors of all the specialties of the Zocdoc platform have opted for the new service of the company. The medical specialties that have seen the largest increase in video tour bookings are mental health (70%) and neurology (55%). On average, telehealth appointments now represent 30% of reservations for all specialties combined on the Zocdoc platform.
The use of Zocdoc is completely free for patients. Medical providers are billed based on a Zocdoc pricing model for their condition. Last year, Zocdoc changed its pricing model in several states. In New York, for example, Zocdoc lowered the annual fee that providers had to pay from $ 3,000 to $ 299 and began billing providers for each initial patient visit. The exact cost of the first reservation for each patient depends on the specialty area in which the medical provider practices. The move is meant to help the business expand into more rural areas where high upfront fees are prohibitive for practices, although some doctors who have high ZocDoc patient volumes have criticized the change.
Flourishing stock vs eagerly anticipated IPO
Many companies have seen their bottom lines weaken amid the COVID-19 pandemic, but digital health companies like Teladoc have had the opposite experience. Unsurprisingly, as the lion’s share of equities experienced extreme volatility in the coronavirus bear market, Teladoc shares surged. Currently, Teladoc stock is up nearly 103% since the start of the year. In the first quarter, the company reported profits totaling nearly $ 181 million, up more than 40% year-over-year. Teladoc expects second-quarter revenue to be between $ 215 million and $ 225 million, with expected annual profits between $ 800 million and $ 825 million. In May, SunTrust analyst Sandy Draper raised the share price target from $ 144 to $ 200.
Although Zocdoc has yet to go public, there has been talk for a long time about its IPO. A public offer in the next few years seems plausible. The company has late-stage Series D funding, with approximately $ 226 million in venture capital and support from angel investors, and a post-money valuation of between $ 1 billion and $ 10 billion. Zocdoc has notable backers with a lot of experience in IPOs of companies, including Amazon Founder and CEO Jeff Bezos and salesforce.com founder and CEO Marc Benioff.
The bottom line
Teladoc is and has been the leader in telehealth. The COVID-19 pandemic has helped, without harming, its bottom line and bottom line, and the company’s services will no doubt continue to be in high demand once the storm has passed. However, companies like Zocdoc are poised to step up competition in the field of telemedicine.
One thing is certain: if Zocdoc goes public in the next few years, Teladoc could face a serious disruptor in its dominance of the digital health market.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.