Teladoc will raise its visit fees for the first time in three years

By Jonah Comstock
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TeladocVideoVisitOn it's third quarter earnings call, Teladoc announced continued growth and a number of new customers, but also stopped to address what appears to be growing investor unrest about the per member per month (PMPM) payment model, likely inspired by competitor Doctor on Demand. They also reminded investors of a previously announced increase to visit fees, the first in three years. The increasing will take effect in January.

"Over the last couple of months there has been a lot of noise about the PMPM model and its sustainability," Teladoc CEO Jason Gorevic said early in the call. "In fact, most of our meetings with investors start with this very issue. While we understand the interest in this topic, as our industry is still young and models are being proven out, our 13 years of operating experience demonstrate that our PMPM model produces outstanding ROIs and tangible results for our clients."

Teladoc received a lot of press attention when it lost the fully-insured business of Highmark, a major client, to American Well and Doctor on Demand. Speaking to MobiHealthNews about the news, Doctor on Demand CEO Adam Jackson took shots at Teladoc's PMPM model in a bold way.

"One thing will certainly be true in the telemedicine market in the next 12 to 18 months,” he said at the time. “No one will be charging a per-market per-month [PMPM] fee. We’re basically forcing it out of the market.”

On the earnings call, Gorevic reiterated his dissent. He said that per member per month subscription revenue is growing, something that wouldn't be the case if the business model were flawed, and that many of their major new customers chose Teladoc over competitors that did not charge a PMPM fee. And employer clients who pay the highest PMPM fees also have the highest utilization rates.

"At $0.45 per month, the Teladoc PMPM fee represents an infinitesimal expense," Gorevic said. "With the prospect of saving millions of dollars in unnecessary medical costs, our clients understand the wisdom of making a small investment to drive a large return. As a result, we remain confident in the sustainability of our model."

In the quarter, Teladoc grew revenue 83 percent year-over-year, to $20 million, up from $10.9 million in the third quarter of 2014. Subscription fees accounted for 85 percent of that revenue, while visit fees accounted for the remaining 15 percent. Teladoc intends to move that ratio to 80-20 in the short-term and 60-40 in the longterm.

Part of that shift will come from increased utilization, the company hopes, but Teladoc is also raising its visit fees for the first time in three years. Effective January 1st, visit fees will increase from $40 to $45.

Teladoc grew to 12.6 million members, up from 8.1 million members a year ago -- an increase of 56 percent. Ninety percent of that growth was organic and 10 percent came from the acquisition of Stat Health. They also increased their staff of doctors to 950 physicians and 1,700 behavioral health specialists, up from 800 physicians and 750 behavioral health specialists at the end of Q2.

On the call, Gorevic listed an impressive roster of new customers including Starbucks, Dell, BP, TD Bank, Merck, DuPont, American Honda, Marriot, Sprint, Panasonic, Mercedes-Benz, Sherman Williams and the State of Alabama. They also launched with several hospital systems including Meridian Health in New Jersey, North Shore LIJ in New York, and a Medicare Advantage population in Nevada.

One more category of customers Teladoc hopes to add in the future is Medicare and Medicaid patients, but Gorevic isn't holding his breath for CMS to make those decisions.

"I feel good about the prospect of CMS making decisions to cover telehealth for Medicaid and Medicare on a fee for service basis," he said. "I know better than to ever predict the timing of the federal government, so I wouldn’t prognosticate about when they’re going to happen, but I do feel good about the conversations that are going on and the likelihood of that happening in the future."

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