Takeaway: We are adding TDOC as an Active Long to the Hedgeye Health Care Position Monitor.

TDOC | Best Idea Long | Virtual Care is Moving Mainstream

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Telemedicine is becoming mainstream

We will be hosting a call to discuss the outlook for Teladoc this Friday at 10am.  Covid-19 has pushed our lives online as we practice social distancing to remain safe and slow the spread of the disease.  TDOC shares are up over 50% since the end of January and the start of the COVID-19 pandemic while many other companies have been cut in half, so this isn’t news.
We believe COVID-19 is making permanent and structural changes to the health care delivery system and changes in behavior and attitudes that will lead to meaningful and durable upside for TDOC, even from here.  For 2020, this means substantial upside to the top end of 2020 revenue guidance of $710M and the consensus estimate of $712M which has yet to reflect the profound and long lasting impacts to telemedicine that COVID-19 is bringing.
CALL NOW | TDOC BEST IDEA LONG | Virtual Care is Moving Mainstream - tdoc survey

TOPICS FOR THE CALL

  • COVID-19 is likely to continue to impact our lives and patient care patterns through the remainder of 2020 and beyond.  We will discuss our estimates of how much care can move into a virtual setting and our review of sources like the National Ambulatory Medical Care Survey.
  • As the the 2020 Recession takes hold, there is risk to demand for health care services, including Telemedicine.  We'll review medical care trends in prior recessions which typically accelerate against backdrops of declining employment and consumer spending. 
  • Consumer attitudes are changing and we'll review our recent consumer survey showing a substantial move to online care in just the last 30 days.  Consumers are being driven online by fear of infection, doctor offices are closing, and fear of losing their health benefits. 
  • There are many competitors in both the virtual and the brick and mortar world. We will look at evidence that TDOC's relationship with CVS, UNH, and payors and providers
  • Telemedicine has emerged as the primary solution to de-risk health care delivery in the time of COVID-19. As the focus turns to executing plans to address the outbreak, providers, health plans and patients are seeking ways to avoid unnecessary physical interactions with clinicians and other sick people and the federal government has been quick to support the effort through regulation and financial support. Although much of this federal support lasts only as long as the COVID-19 crisis exists, we expect that demand is going to make it hard to put the telehealth genie back in the bottle.
  • More Customers | Federal regulation is expanding the telehealth customer base in a number of ways:
    • Traditional Medicare beneficiaries will be able to access telemedicine services regardless of where they live or access the care and without cost-sharing. Currently, there are about 38 million Americans enrolled in traditional Medicare. Given the low penetration of telehealth services, most, excluding dual eligible would likely make use of the benefit.
    • In the COVID stimulus bill includes an increase of 1% for states that offer telehealth services on the same more relaxed terms as Medicare. There are approximately 70 million Medicaid enrollees of which about  6 million are enrolled in CHIP; 15 million enrollees, and likely to rise – constitute the expansion population and are likely candidates for telehealth services.
    • The stimulus legislation includes funding for enhanced broadband services in rural areas, the absence of which will limit telehealth services. While it may take some time to develop, the end result will be greater access to health care in rural communities and more telehealth patients.
  • In connection with expanding the customer base in federal program, the emergency measures include expanded access to providers. State Medicaid programs can enroll out-of-state providers to provide telehealth services. Similarly, Medicare is temporarily waiving state licensure requirements to permit any doctor anywhere to treat a Medicare patient during the COVID-19 outbreak.
  • Although these measures are temporary, they provide an enormous opportunity to overcome institutional resistance by providers and habits of patients. Moreover, the expanded use of telehealth services allows for the collection of data on costs, access and savings that may finally assuage the CMO and pave the way for permanent legislative change.

Thomas Tobin
Managing Director


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Emily Evans
Managing Director – Health Policy



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