The Blockbuster Merger
The August 5, 2020, announcement of the US$18.5 billion mega-acquisition of Livongo – a chronic disease management company – by Teladoc – a multinational telemedicine and virtual healthcare company – rocked the virtual healthcare industry with seismic shockwaves.
Both companies had posted strong revenue growth before the acquisition. Teladoc’s revenue grew by 85% (or US$241 million) in Q2 2020. In the same quarter, its visits rose by more than 200% YoY to 2.8 million. Livongo’s revenue for the quarter grew by 125% YoY, bringing it to $91.9 million, with enrollments increasing 113% YoY to reach 410,000 members. The merger results in one of the world’s largest virtual health entities, with a combined valuation eclipsing US$37 billion.
The Mutual Strengthening
The importance of telehealth in a pandemic-stricken world became evident as the crisis overwhelmed providers (as it did other businesses), forcing many to close and postpone nearly all elective, low priority, and non-emergency appointments. To address ongoing health challenges, a significant portion of care provision shifted to virtual models, bringing companies like Teladoc to center stage. Digital healthcare and virtual health have since had an unprecedented surge in interest, investment, and adoption around the world.
The Teladoc-Livongo merger strengthens many facets of virtual healthcare delivery, which could benefit healthcare providers/facilities and patients. It is also evidence of the ever-growing complexity of engagements and constructs shaping virtual care. The resulting organization will be able to realize multiple benefits given synergies between the two companies:
- Teladoc will benefit from Livingo’s analytics prowess, which is delivered through its Applied Health Signals offering. The strong fundamentals of the data-driven approach underlying Livongo’s behavioral change and chronic management offerings can enable Teladoc to add significant value by layering its existing products with the acclaimed technology to provide its patients with tailored, efficient, and effective programs.
- Livongo’s patient base will have access to a larger pool of healthcare professionals, who can provide more in-depth care and help diagnose and care for other ailments beyond the current set of offerings. The additional medical practitioners from multiple clinical specialty areas will enhance care delivery, improve options available to patients, enable access to a wider set of services, and eventually improve healthcare outcomes.
- Patients will have access to a more integrated and comprehensive care experience given the expanse of virtual care segments the combined entity will offer.
- Beyond the expanded pool of care professionals, both companies bring their own partnerships with health plans, employers, and other care-specific partners to the relationship, providing significant cost and coverage benefits to existing and future enrollees.
- The combined entity will be able to increase its global footprint and benefit from cross selling services to an expanded client base, especially at a time when the adoption curve for virtual care is at the precipice of significant growth.
The Road Ahead
The era of digital health has been long coming, and the COVID-19 pandemic has only exacerbated the need for virtual care. This merger sets the stage for future growth, particularly in areas such as remote patient care, remote monitoring, remote diagnostics, digital-led triaging, digital therapeutics, self-care, and others that will revolutionize the care experience.
The industry has crossed an inflection point beyond which lies an extremely dynamic and unpredictable path, which requires healthcare entities to stay nimble, rethinking care models and care delivery through remote technologies. Healthcare payers and providers must quickly adapt to the shifting landscape and adopt the necessary digital means to stay competitive and become competent.