1/ My 2021 Top Pick: Teladoc

The US healthcare system is broken.

We spend more on healthcare than any other country but aren’t seeing comparable outcomes. 25% of healthcare spending is considered waste.

Fixing it is one of the greatest opportunities that exist.

Enter $TDOC.

2/ A significant contributor to this waste comes from traditional fee-for-service payment models, creating all the wrong incentives for providers

Increasingly, the cost burden is being passed down to consumers and employers which is leading them to search for better alternatives

3/ The path to a better healthcare system starts with value-based reimbursement which aligns incentives by making health systems accountable for the quality of outcomes and forces effective cost management.

TDOC is well-positioned to be the infrastructure enabling these models.

4/ Teladoc is the leading telemedicine platform, with 51.5M paid members and a network of over 55,000 physicians.

It has relationships with 40% of the F500 and has cornered the employer market. This is important because employers have the most long-term incentive to reduce costs

5/ TDOC is also making increasing in-roads w/health systems.

With TDOC's white-label solution, health systems can take advantage of TDOC’s additional provider supply while retaining their brand.

The InTouch acquisition allows providers to deliver care at any of >2000 locations.

6/ However, the telemedicine industry is becoming very competitive with low pricing power and switching costs.

TDOC understands this and has made 12 acquisitions to become the one-stop-shop for virtual care. Why so many? The real value was not the tech, but their relationships.

7/ It's only with its Livongo merger though, that its greater vision is becoming clear and was accelerated by COVID

LVGO is the leading remote monitoring company, it helps patients manage chronic conditions with the use of connected devices, health coaches, and AI-enabled nudges

8/ The future of virtual care is going to be about providing the right care, when and where patients need it.

Zoom is doctor-led, pre-merger TDOC and the other telemedicine providers are patient-led, and post-merger TDOC is now moving towards the most impactful people-led model:

9/ Remote monitoring enables providers to dedicate their limited resources to deliver personalized care to the patients that need it the most.

This will all come to play in their Virtual Primary Care (VPC) offering, targeting the 25% of Americans w/o a primary care doctor.

10/ When it launches early next year, patients will be introduced to the TDOC ecosystem via their annual exam, then spend their entire journey with Teladoc’s multidisciplinary care teams informed by Livongo’s continuous data, ultimately delivering better outcomes for a lower cost

11/ It will start with higher PMPM + visit fees, then morph into a shared savings model. TDOC will directly benefit from the savings they are already creating for their clients

Since 25% of the $4T in healthcare spend is considered waste, there's room to build a future mega-cap.

12/ TDOC currently trades at 17x 2021 sales which is almost a 40% discount to its closest peer $AMWL despite significantly better revenue growth and margins, and a superior moat and TAM.

Mgmt projects a 30-40% pre-synergy sales CAGR through 2023 and a 15-18% Adj EBITDA margin.

13/ Sales grew at a 74% CAGR between 2013 and 2019. With LVGO, they are projected to grow 2020 revenues 87.5% YoY at a $1.36B run rate and 67% GM.

I believe synergy estimates are greatly understated as LVGO gets introduced to health systems/international https://twitter.com/richard_chu97/status/1310639155127480321?s=20

14/ The primary risk lies in management not effectively integrating acquisitions and focusing on empire building, leaving the door open for smaller competitors to better serve verticals better. LVGO mgmt leaving compounds this.

However, the VPC pilot boasted an amazing +95 NPS.

15/ This isn’t a COVID story, Teladoc is reshaping healthcare from the bottom up

Data network effects, switching costs, and its vast set of relationships ensure TDOC stands alone in its capability to create a more sustainable healthcare system

For more: https://richardchu97.substack.com/p/teladoc-health-reshaping-healthcare