Teladoc spent $7 million on legal fees last quarter, talks future plans

By Jonah Comstock
10:36 am

TeladocVideoVisitIn Teladoc's first earnings call as a publicly traded company, CEO Jason Gorevic and CFO Mark Hirschhorn reported positive earnings figures, were upfront about the costs of ongoing lawsuits, and even talked a little about future plans.

The telemedicine company made $18.3 million in the second quarter, an increase of 78 percent from Q2 2014. Subscription fees, paid to Teladoc by employee and health plan customers, made up about $15 million, while visit fees, paid by patients, made up just $3 million. Interestingly, while subscription fee revenue increased by 70 percent over last year, visit fee revenue jumped 127 percent -- suggesting that not only the number of covered lives increased, but the number of visits per covered individual rose as well.

Total membership rose to 11.5 million in the quarter (up from 7.8 million in Q2 2014) and 125,322 visits were conducted in the quarter, up from 61,379 in Q2 2014. Notable new customers in the quarter included Health New England, Prudential, ALCOA, Marsh McClennan, and PNC Bank.

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However, despite growth in revenue, Teladoc's earnings actually decreased, thanks to much higher operating expenses than in previous quarters -- $16.3 million vs $2.9 million in Q2 2014. Some of that difference -- about $3.5 million -- was accounted for by costs related to hiring a number of new employees during the quarter, Hirschhorn said on the call. But most of it -- $7 million -- was professional fees, mostly legal fees related to Teladoc's ongoing legal spat with the Texas State Medical Board.

Gorevic talked about Teladoc's ongoing plans to add more specialties to its telemedicine offerings. An upcoming dermatology specialty will grow partly out of the acquisition of Stat Doctors, and the company's behavioral health offering will be led by Julian Cohen, a new Teladoc hire who recently served as the cofounder, CEO and President of Breakthrough Behavioral -- which, interestingly, was acquired in November by Teladoc competitor MDLive.

"We’re really excited about the behavioral market," Gorevic said. "When we roll out a new clinical service we do so in a very robust, clinically rigorus manner. ... We’re then very focused on delivering a differentiated product to market. We’re already seeing very strong results in our D2C behavioral buseinss and we’re actively selling our B2B behavioral product. ... We see it both as an add-on for existing  clients as well as new clients who want to buy a bundle of services all at once."

The dermatology specialty will be in the market by January 1st, Gorevic said, and Teladoc is also working on rolling out a smoking cessation program. Additional specialties are in the works for the future, developed either in house or in partnership with healthcare providers.

"We see potential to grow by expanding into other areas that lend themselves to a remote encounter, such as behavioral health, dermatology, and second opinions, adding features to our platform like mobile apps, biometric devices, and at-home testing, and venturing beyond acute care visits to assist health systems and health care providers with lower cost home care, post-discharge monitoring, and patient screening," Gorevic said.

In response to a question, Gorevic also said he believes that slowly, but surely, the regulatory environment and reimbursement situation for telemedicine is getting better.

"There’s no question that the regulatory landscape is improving across the board, including even in Washington where things don’t generally move as fast, and I’m optimistic that we will see movement over the not too distant future in CMS’s willingness to pay for a broader array of telehealth services," he said. "They have already opened up and expanded relative to where they used to pay. So they’re showing positive movement, though I would say they haven’t gone far enough. We’re pretty optimistic and as the market moves more and more to managed Medicare instead of Medicare fee for service, we think we’ll be a beneficiary of those changes."