American Well Corporation (AMWL) Earnings Call Transcript & Summary

With us, we have the Amwell team. We have Dr. Ido Schoenberg, Chairman and Co-CEO; and Bob Shepardson, CFO.

I think some are probably still relatively new to the telehealth story or the virtual care story, and there's a lot of different players out in the space. And so I guess, just to level set, what do you think Amwell's differentiation is? And then we can go from there.

Sure. Allen, and thank you all for of you that came to see us. Such a funny setting. But in any event, you're absolutely right. People are incredibly confused by the term telehealth because it can span anywhere from simple video visits between a doctor and a patient all the way to full-fledged digital care delivery. While we deeply respect the value of overcoming distance with video visits, digital care delivery is so much more than that, and that's where Amwell's story really begins. What we started to build 15 years ago to the tune of over $1 billion in direct investment is an infrastructure that is not designed to sell urgent care doctors over a video visit as a convenient alternative to your current physician, which some of the telehealth story is focused on, but rather the realization that a revolution that started, I would guess, with the EHRs in 2010 is gaining great momentum where technology can really transform the way all of us are experiencing health care. Saying it differently, technology, of course, can allow for all of us to get much better access to much higher quality care in a fraction of the price, delivering really much better financial and clinical outcome. And the way to do that is to not try to replace the different participants in the care ecosystem, but rather to empower them to virtualize their services so they can work together to create a single, coherent, integrated experience. And that's what we are trying to do in Amwell. It's a technology play, not for the faint of heart. It's very, very complicated, but it's also incredibly valuable. So it's anywhere from moving care to the home, collecting a lot of data, analyzing it, rethinking care plans, engaging the right participants and really delivering the most appropriate intervention, whether it's physical, virtual or automated. We are fairly alone with this incredibly complicated task and are often confused with other people in our sector so called that are also performing parts of what we are trying to do but in a really very different way that often overlaps with some of the traditional players, who are our clients for Amwell. We never confuse our role with theirs, and we are here to complement and empower them, never to compete with them.

And you -- so you mentioned EHRs, which I think is an interesting parallel because there's a couple of EHR vendors that have effectively taken all the market share because what they do is very complex. And once they're integrated within those health systems, it becomes very difficult, if not impossible, to extricate themselves or to get displaced. And Ido, on a recent call, you talked about Amwell as a distribution and enablement platform. So I guess using EHRs as a parallel, what are the technologies that you're embedding within these customers that you think can make it very -- you're adding so much value to their process that it can be very difficult to displace over time?

Sure. So the answer doesn't have one headline, but I'll give it a try in any event. I think there is obvious realization by the different sponsors, health plans, hospitals and so on. The digital care delivery is existential to their future. They cannot only do what they did until now. They need to be present in people's lives all the time and really do everything I said earlier. Care is moving home. A lot of care will be delivered at home. That's great news for most of us. And in order to do that, the main task is to understand that the answer is not going to be provided by one company, but rather by integration of a lot of innovators and a lot of participants. Doing this integration is far, far away from trivial. I'll give you just one example. Bringing together the identity of a member and mirror it and connect it to the identity of a patient and connect it to the identity of an employee is something that is extremely complicated to do. I'm not even beginning to talk about payment systems, practicing across state lines, formularies. There is really an incredible complexity in order to allow for not urgent care, but the entire care continuum to really be provided anywhere all the time by the people that we trust. I think that if we used to sell our products to Chief Medical Officers in hospitals and maybe the head of innovation or the head of national accounts in health plans, growingly, we are facing with a very sophisticated interdisciplinary team, headed by the CIO in those organizations, that are realizing they are just overwhelmed by the enormous effort of just doing the plan integration of data and processes that is required in order to provide the modern health care experience. That's our role. That's hard to do. We've been doing it for many, many years. and our work is becoming more relevant than ever.

That's great. And on the call on Monday, Ido, you mentioned that customers want long-term partners and today, hospitals and health systems and health plans have multiple vendors, sometimes for the same product like for an EHR. Can you talk about some of the potential ways that Converge, if used to its full effect, can help reduce the amount of vendors that some of your customers have? And what are the areas where they can benefit?

Sure. Reducing the number of vendors is one part of the task, being able to replace vendors is another. It starts with a provider and patient experience. It's pretty amazing, but today, our sponsor are sending their clients, patients and providers to log in into multiple applications, multiple environments and so on. These are often not connected with enormous amount of error-prone duplication in what you do. It's very tiring for everybody, and it's almost impossible to control. The first thing the Converge does is creates a unified experience. You log in. And you log in, in the simplest possible way by clicking on a link both as a patient, as a provider. As a provider, the entire experience is laid out to you in your native working environment, which is the EHR. As a patient, you use your cellphone, using messages, the simplest possible thing. In most cases, you don't even need to download an app in order to connect to the platform. So we took a great effort, which is far from trivial, to greatly simplify the interaction with those 2 pillars of connectivity. We did that in order to allow for an enormous amount of heavy lifting of doing all the work of connecting to the different vendors. So we use different technology beyond, I think, the level of interest of the crowd in this room right now to really create a library of experiences that allows both the innovators to hook to our platform in the simplest, easiest way. And very important is the result allows the decision maker to say, "I like this MSK program more than this one. My employer is not happy with the level of diabetes services that we provide. We need to do a change next year and do it in a way that is almost completely transparent to all parties concerns." That is translating to a lower customer acquisition cost in the way of the consumer. You teach ones and everything else changes from the same, familiar environment. The same is also true for the provider. You are in your native environment, things are changing for you. But very importantly, it really reduces the barriers for pretty amazing companies that we see that can bring enormous amount of effort that otherwise would have taken much longer to implement. So to give you just one example. I think I talked about it in the earnings call. UCSF had a cohort of patients with lung transplant. These patients cannot get COVID. I mean COVID for them is just a whole different ballgame. And hospitals are a great place to catch COVID. They do need to go to the hospitals in order to just maintain their life. We're able to create, together with the great providers at UCSF program that is based on automation with Conversa, a recently acquired company, that basically kept them at home using spirometers and lots of other details. But the bottom line is they actually had better care according to the Chief Digital Officer of UCSF with a new program that they had without compromising their health by coming to the hospital.

Got it. That's great. I want to think about another potential example, and you tell me where or if this is applicable to Converge. So let's say that I'm in New York City, I need to get surgery of some type. So I have to go into a hospital. Then I have to rehab in some type of outpatient facility. And then maybe I need to have someone come and check up on me in the home. In today's system, I work at Bank of America, I have that benefit. I don't know how much I owe the hospital. I don't know how much I owe the outpatient facility. I don't know how much I'm going to get charged for care in the home. How can Converge help that health system provide that information to the patient? And kind of what would that look like?

Sure. So we almost got accustomed to brick walls in the health care system, right? Nothing works. You fill in the form again and again in a hospital, you don't even complain anymore. It doesn't make any sense, but you still need to do that. You go through different types of events. Our contribution to the story, which is not insignificant, is to figure out the technology to create the pipes that are going to connect those legacy systems. They're not going to change anytime soon, like payment systems, for example. We got used to the fact that we go to the health care system and have no clue how much we're going to pay. That's a problem that can bankrupt the family. The reason is that the clinical systems are usually not connected to the claims systems, or the payer systems are not connected to the provider systems. The role of Converge is to establish that pipe. Unfortunately, that's not enough. In addition to the technology part, there has to be a business arrangement between the different participants to share those transactions and that information. The good news is that everybody recently, maybe it was COVID just allowing people to reflect more about the future and what they can do, but recently, everybody seems to understand that. If you listen to the earnings calls or to the talks of CEOs of health plans and CEOs of delivery networks, they are now saying the same thing in the way that they really see a vision of the future of a totally integrated experience where everybody is able to really share. I'll give you maybe even a more important example. We got used to the fact that a nurse from Blue Cross is calling us to talk about our diabetes, not knowing much about us at all. The whole notion of care management is disconnected from the main pathway of care. We got used to the fact that when we go into our doctor's office, the doctor is not connected to the gaps in care that are very clearly reflected in our claims history. Imagine a future where this is connected. You come in to see your doctor for a certain test and the doctor says, "You know, Allen, I really think you should consider a PSA test. That's really important." And the health plan and is paying the doctor in order to do that. So I'm very optimistic about the future because we really slaved to create an enterprise-grade technology that creates that pipe and the market is now believing that, that's important and a high priority. So that is going to paint a future that is going to be pretty different from the experience that we see today, and I think it's going to realize far faster than we all believe.

So that leads me right into my next question. I guess just thematically, COVID really accelerated a lot of technology in health care, and health care has been one of the slowest to embrace technology for a host of reasons, HIPAA being one, and I guess cost being another one. I guess, as you think about the way that the digital health space looks like in 10 years or 15 years or 5 years or whatever time frame that you want to use, what do you think the normal technology experience for a patient is? Are there going to be -- are wearables going to be ubiquitous? Is data going to be being constantly fed to providers and payers? What are some of the things that you think are going to happen in the future that maybe people don't appreciate right now? Or just sort of what is your vision for the future?

I think it's going to be incredible. I wish we could fast track it and benefit from all the benefits that we are going to see, but health care is complicated for a reason, and every place you touch is hard and complicated. So you talked about COVID earlier and the impact of COVID, it's often underappreciated but also greatly exaggerated. And the truth, like everything else in life, is in the middle. In my opinion, the contribution of COVID was mostly overcoming a very important psychological barrier of patients and, more importantly, providers to basically interact online for the business of care. That didn't happen before. Many people were concerned about it, and that's no longer the case. And in my opinion, that's a huge deal. Of course, it didn't solve many, many other barriers to create the vision that I talked about. The integrated care delivery future, where the role of technology in care will move from 1% or 2% to 70% is, in my opinion, effect. I don't know if it's going to happen faster or slower. Certainly in the vicinity of 10 years, that's a definite reality. Most of the care that we are going to experience is going to be using digital means for many obvious reasons. There's just no way the number of physical providers in the current way that they practice can make a dent in the growing population and the complexity of ailments. It's very clear that we are going to connect -- be connected this individual to the health care systems all the time. It's safe to assume that wearables are not going to be the case because why wear if you can just get it. It's probably cameras or other sensors that are in the environment that make it incredibly automatic for us to interact with the data. And that itself, the number of toys and their efficiencies is less important because this is going to get better and better. Where it gets interesting is when you have all this data about both individuals and populations, you can begin to create algorithms that are very high quality in order to improve outcomes. Imagine a reality where the best doctors in Cleveland Clinic and in Stanford are available to every person on earth. Unthinkable today, but it's going to be possible with technology. So we are going to have health care in well care provision divided by people that will live and work in campuses that might look much more like Apple than hospitals. There are going to be very brilliant people that are going to create the best algorithms for care. And then we're going to have amazingly empathetic and attentive people on the other side because no one wants to hear from a robot they have 3 weeks to live. The human part will never go away in health care, but most of the stuff in the middle will be automated. Of course, health care will be personalized. Of course, it's going to be genomic-driven and sensitive. It's going to be much more affordable, and we are going to live for many, many more years. Most excitingly, health care will become democratic. Today, if I live in Chattanooga, Tennessee, I'm not getting the same level of care that they get in Boston. And that's incredibly irritating and unfair, and technology has the power to fix that.

Let's bring the conversation back to, I guess, the outlook for this year. One of the things that we're seeing a lot more, and you guys talked about it on the call, I guess for you, Bob, health systems are -- it seems like there's a lot of wage pressure for nurses and other things. The cost of supplies are going up. As you think about your health system customers and prospects that are thinking about adding new modules that could ultimately save them money, how do they think about -- what are they thinking about today in terms of that decision process? Is the fact that they could save money by going to Converge something that's accelerating that decision? Or is the fact that they're seeing other pressures reducing their appetite for spending on new technologies?

Do you want to take that?

No. You go on.

That's fine. So I would say that they are moving to digital for a reason, right? And so that digital mandate is partly driven by cost pressures and the need to get to efficiencies. And so what we enable with Converge is just that. So yes, they're absolutely looking for that ROI, but what Converge brings to them in terms of physician satisfaction and substituting manual care with automated care is very much part of that ROI calculation. And so I would say there's no question that those pressures are present. We think what we bring to the table addresses a lot of those issues, but it's not something that I would say has accelerated to -- we haven't seen it accelerate adoption yet, but it's certainly something that we think will accelerate adoption as we go forward from here with Converge coming on.

I mean I would maybe say it in a different way. There are 3 pain points that they keep talking about that we really, really address for them, and that allows them in a world that is very uncertain and not easy today to make a buying decision. Number one is fragmentation. CEOs just can't handle it anymore. This is not only an emotional workload thing, it's also a financial thing. It translates into a lot of training, many errors, a lot of operational challenges with all these digital not being organized. The fact that we can create quite -- we couldn't create a middle tier that combines everything is a big deal. The second thing is what you just mentioned, Allen, which is efficiency, cost savings. That's a big deal. We have ample proof points in so many ways that we can save them money. I'll give you just one example. A client, not too big, that we have called Spectrum Health, they had -- really were -- had issues with their ER utilization. They implemented Amwell technology in order to create a very simple, automated workflow. Anyone that leaves the ER gets a text to their phone that says, "Can we help you? Are you okay?" and so on and so forth. And then they created a very small team of providers called the transition team, where if you had an issue, you could either solve it digitally, and we had highly personalized, automated ways to do that, or talk to the transition team. Or if you need to, still show up again and readmit yourself into the ED. That little intervention alone was able to reduce ED utilization for them by 5% and save them about $1 million. But the funny thing is that the leadership in this organization did not appreciate as much only the cost savings. They say that the biggest impact of this program was employee retention, which is the third thing. So employee burnout in delivery systems is a huge issue. When I'm talking about huge issue, I'm talking about the reality where 20% of the docs would quit in the next 2 years and maybe 40% of the nurses. That's a giant crisis. So the provider experience, making sure that they focus on care and not in clerical work is actually very near and dear to our customers. One thing that we are doing in order to help them out, a legacy platform was a monolith. You either loved Amwell, and then you spend a chunk of money to buy it, or you didn't. Converge is modular. You can start buying Converge and spend $200,000 or $300,000, and it will still do a lot of things. And when you're ready, you can spend another $100,000 or $150,000 and it will do more. And if you made a mistake, you can shut that part down. So the whole idea is that you buy really one product, which is a family of solutions, and you basically pay for the value that is generated for you. And while it's early days, we think that really resonates in the current reality, which is extremely sensitive to ROI and to value.

So I think on the call, one of the KPIs that has really been inflecting nicely is active providers at your customers. I think you mentioned EHR integrations as part of that. I guess how should we think about that number trending from here? Because over 100,000 is a lot of physicians that are using the platform. Are there more EHR integrations that could be possible? And I guess what else -- was there anything other than EHR integrations that was driving really over the past 2 quarters that growth? And just sort of how we should think how that trends over the course of the year?

So the #1 KPI in Amwell is active providers. It's not revenues, it's not millions other things that are super important, active providers. And the reason it's the #1 KPI is really simple. We see ourselves as an enabler. If I have your doctor connected to my platform, I have you. If I have you and your doctor, I have the rest of the system. Really, really simple. And it was very clear to us 15 years ago, and it holds true today. Now the hard part begins. How do you attract and provide? That's very, very difficult. You're absolutely right that if you don't show up inside their EMR, don't show up at all. I mean that's the screen they are working in every day. You need to be inside, very seamlessly inside their workflow inside their practice management system. Unfortunately, that's just one of a very long list of things that can create that magic. You need to create an environment where it's worth their while financially. You need to create a solution that is very easy to use, that is really embedded in what they do, that doesn't require them to learn new tricks because they don't have the patience or the time to do that. And there are many other things beyond the time that we have. So we see ourselves as enabling health care, not enabling telehealth or digital care delivery. And you think about the -- our audience are all the providers in America, maybe the world. That may sound very ambitious right now, but that's what we are aiming for. We're aiming for ubiquitous utilization by all the participants starting with the very important providers, which are really the start of the health care experience. So we definitely expect this number to grow. We are not unrealistic about how hard it's going to be. We don't really know the pace. But there are millions of providers, and we'd like to get the maximum share of those providers connected to our platform. I want to clarify that I'm not necessarily talking about the video visit. You can be connected in so many other ways to the providers. But as long as it's the same care pathway to digitally connect your doctor with your care plan, then we'd like to be part of that interaction.

And I want to take that one step further. So more than 100,000 providers. And then there's the provider patient interaction, which happens on the platform. However, I want to talk about sort of the patients' experience on Amwell and kind of what it is today and then what it could be in the future. We talked about the ability to potentially see what is owed in terms of deductible and what your health plan is going to pay and things like that. I guess what is the experience that a patient has on Amwell's platform today? And then what are your goals for that experience over the next couple of years? Because I think just as a consumer, I've been through a few different doctors over the past 5 years. They each have their own product that's very different. I think that right now, that -- it's rapidly improving in terms of the usability, but I think there's a land grab for getting access to the patient. So I'm curious what your -- what the product looks like today and then what you're trying to build for the future.

I don't have time to answer your fantastic question. I'll just give it a try. But at the end of the day, 2 things are important. One is whatever you see need to be trusted. We're not trying to sell you another provider who is not your doctor. We're not trying to find you a surrogate system. But whatever you're going to see is going to be the main pathway of your care. That's necessary. As far as consumers are concerned, we don't need to go far when we talk about what do we think, what do we expect a consumer experience to be. Think about companies like Apple or Google or Amazon that created the user experience. You go to the Apple TV, you don't need to navigate through different log-ins and things of that nature, it's laid out for you. You open your phone, you have applications. They all behave in a similar fashion. You don't need to learn how a new application will behave because it's going to behave in a way that is very similar to the previous application that you already had. So our role is to dramatically simplify in a consistent way the touch point between the patient and the health care system, starting with the most convenient thing we -- all of us hold in our hand, which is the cellphone. We believe the cellphone is going to be a critical trusted touch point. The home television is another very important device. We would like to use our voice whenever possible. We'd like to key in as little as possible. We would like to log in with our biometrics and not with long passwords or things of that nature. All of those things are things that we are very, very passionate about. Rome was not built in a day. It's going to be an iterative process, and we are going to continue to invest enormously together with some amazing partners like Google that we didn't have time to talk about to take a page from their expertise and areas of excellence and bring it into health care.

That's great. I think we are out of time, so we'll leave it there. Thanks, Ido and Bob, for joining us.

Thank you, Allen.

Thanks, Allen.

Thank you, everyone.