Teladoc Health, Inc. (TDOC) Earnings Call Transcript & Summary

Okay. Wow, we're both hip and really into health care. So have you enjoyed the music? It got me moving on this bleary Friday morning. All right. So next up is our final -- oh, here's the poll results. So interesting. We asked people when they got their last visit, telehealth visit, or they or their child. And a lot of people got it within the last month or 6 months. This is good, but there are some numbers. And then we have the vaccine, when they'll get it towards the middle of 2021. All right. Cool. All right. Well, thank you all for participating. We are back for our final panel in health care delivery in a virtual world. I always say that telehealth was a breakout star of 2020 and virtual care generally has been. Last year, we talked a lot about it, and this year, we've actually seen it in practice. So I'm very excited for today's panel. On today's panel, we've got Dr. Amy Fahrenkopf, who's the President of HSS, Hospital for Special Surgery Healthcare, and also a Senior VP at the hospital. We've got Jason Gorevic, who's had a big year, who's CEO of Teladoc Health. Thank you for making time. And Dr. Julie Silverstein, who's Divisional President of Oak Street Health, also have had a very big year. So thank you. And our moderator, Kevin Kendra, who is research analyst at G.research. So as before, please put your questions in the Q&A box. If you have comments or chat, chat them, but put your Q&A in the question box, I know that Kevin is moderating it. So thank you. Take it away.

Great. Thank you, Bunny, for that introduction, and thank you to everyone, especially our panelists, for joining us today. As we all know, COVID-19 has changed our lives in so many ways, one of which has been the adoption of technology and the shift to a virtual world.

So I'd like to start the conversation there, maybe hear from each of you about your place in the health care universe and how have you been adjusting to this rapid virtual transition that's been prompted by the pandemic. Perhaps we'll start with you, Dr. Fahrenkopf.

Sure. Thank you, and good morning, everybody. So as many people might know, really, telehealth was not something that was really big in the musculoskeletal orthopedic world before COVID. A lot of telehealth was around urgent care, primary care, some mental health. We in -- at HSS, in 2019, did a total of 1,000 telehealth visits, and most of those were physical therapy. So we really had to gear up quickly, especially in New York. When the shutdown happened, that shut down elective surgeries, which was about 90% of our volume, overnight. And we had a lot of patients we needed to connect to. And we went -- so we went roughly over a 3-week period of time from something like 20 visits a week at most to about 5,000 visits a week. And we actually -- as opposed to the 1,000 visits we did in 2019, we just hit 100,000 visits about 2 weeks ago, and we haven't even finished the year. So it really changed HSS in that it showed a lot of the physicians and a lot of patients that even for specialty care this could work. I think, for us, it was a life saver during the shutdown to be able to keep that connection. And now we're really entering into an interesting phase. Because what a lot of -- what we've really got to realize is that telehealth is really just once we get back to normal, whenever that is going to be, it's a tool in your toolbox. It's one way of being able to interact with your patients the same way that seeing them in person and having surgery is one way of doing it, and that there's another set of virtual tool. So our focus right now and our real goal for 2021 is, as a specialty hospital focused on musculoskeletal care, is defining the omnichannel care model around orthopedics, rheumatology. And it's a new care model that will by service line or maybe even by procedure is identifying that right combination of when someone needs to be seen in person, when it's fine for it to be telehealth and when really it's about digital tools and capabilities. So we're all very excited about that. And this really got us -- they are a lot quicker than we would have otherwise.

Great. Jason, I see you smiling and well deserved given everything that we've been hearing about telemedicine. Perhaps you could tell us about how Teladoc's been able to ramp up for this huge surge of demand that's been coming since COVID.

Yes. So first, thanks for having me, and I'm honored to be on the panel with 2 amazing physicians, leaders and talk a little bit about something I've dedicated the last 11 years of my life to. And I don't -- I think I'm maybe the only one who wasn't surprised that virtual care was able to play the role that it has over the course of the last 7 or 8 months. I knew it would happen eventually. I didn't think it would take a pandemic to make it happen and make people wake up to the power of connecting with people remotely and delivering care on their terms where they are and being able to bring the health care system to the consumer as opposed to the other way around. And I think it's been an amazing transition. I say, at this point, we're probably -- we've accelerated the role of virtual care by probably 4, 5 years over the course of about 7 months. And that's true among consumer adoption, awareness, adoption, willingness to engage and actually the satisfaction scores that go along with it. Provider adoption, where we heard a lot of reluctance prior to March. And now I hear from people like Amy all the time this is great and the doctors actually really like it. It's a way to connect differently with consumers and be able to deliver a different kind of care and in many ways a more personalized individual one-on-one interaction, which the health care system has struggled with at times. For us, it was just an amazing overnight like overwhelming increase in volume. Our volume literally doubled overnight. And the good thing for us is the technology platform was built to handle it. We had to onboard a lot of additional physicians, though. It took us a couple of weeks, probably 10 days to really catch up with the volume, and we were onboarding thousands of physicians a day, literally, in order to be able to handle the volumes. And now what we're seeing is this massive expansion of the clinical use cases and the reason that people are coming to us. Infectious disease is down substantially because masks and social distancing don't just prevent the spread of COVID, they prevent the spread of colds and flus and strep throat and things like that, that we would normally be dealing with a lot more at this time in the year. But our volumes stay up because we're seeing so many more people with noninfectious diseases, people with -- coming to us for hypertension, for lower back pain, for anxiety and depression. And it's exciting for me to see people, just the average everyday consumer, embrace virtual care for this broad array of clinical services and for their needs because it has the power to really impact people's lives regardless of where they are on sort of the health care spectrum.

Great. And Dr. Silverstein. Can you tell us a bit about kind of what's been happening at Oak Street Health as you guys have been navigating this pandemic?

Certainly. And thanks for having me as well. It's great and fun to think about this and reflect on it. For those who don't know, at Oak Street, we provide primary care for the Medicare population. And our model is a high-touch, very in-person, see people very frequently, anticipate exacerbation of illness, to try to keep people as well as possible, recognizing that in the older population there are many chronic diseases and many things that can go wrong. We also pivoted on the dime. I was very proud of how flexible we were, but we're probably additionally challenged by the population we serve. In general, the older population has the challenge of utilization of tools that they may not be familiar with or comfortable with, may not actually even have a device that could operate telemedicine. And in addition, we are generally in lower socioeconomic communities. And therefore, there are problems with the technology in terms of even getting a good signal or people having plans that can support the data transmission that's necessary. So even given all of that, we very quickly went from doing 100% inpatient -- in-person care to about 90% virtual care. A good portion of that was telephonic and not video for the reasons I just mentioned. We saw a lot of what's already been described. So much gratitude from our patients in being able to connect. And it's very intense when you just look at somebody on the screen one to one. With that said, they generally are people who really enjoy the social nature of a visit to the office. And our model is also built on that. So COVID threw us a one-two in that we stopped being able to do the community gatherings that are one of the strengths of our program, for obvious reasons. So I'd say we were highly successful, but we're also rapidly pivoting back as much as possible, the last week or 2 excluded, when we're facing the challenges perhaps in a renewed way. But we do know that telehealth, whether it's by phone or by video, plays an important role in being able to keep very close tabs on our patients and help them, particularly with their chronic illnesses, Jason, that you were mentioning, which is not the usual way we think about the telemedicine platform.

Yes. So it sounds like in your practice at Oak Street health it makes sense that at some point it's going to roll back and won't be as certainly as virtual as it's been. But what sort of place, going forward, how much of a role do you see telemedicine playing among that Medicare population, given some of the challenges you noted?

Yes. Good question. So we pivoted back as quickly as possible. I mean part of what allowed us to do more in-person care was the rapid knowledge that we're gaining over COVID and understanding how to protect ourselves, our patients and our colleagues and our staff. So we've done a good job of protecting ourselves and each other so that we can do a lot of in-person care. With that said, we continue to do 10% to 20% of our work virtually depending on the part of the country that we're talking about. We are also in the process of -- trying to answer that question, Kevin, more completely, what exactly should be the role. I believe that it's in that -- I think we've learned that we can see some of our visits virtually and make things more convenient for our patients and maybe give them even more intense attention by using virtual tools. On the other hand, we saw mortality go up significantly during this period. It's no secret that people were not getting the preventive care they need, the disease management care that they deserve. And overall in the Medicare population, not just Oak Street, mortality went up in 2020, COVID aside, compared to 2019, even if we exclude those deaths. So we are strong believers in our care model, and we know the power of the visit. And so I think we'll come up with a blend that's a little bit more like an 80-20 favoring in-person. But we have a lot to learn still. And certainly, this next surge is another platform to learn more.

Great. And you mentioned patients are dealing with other chronic conditions alongside COVID. That brings me to a question I specifically want to ask to you, Jason, about Teladoc's recently completed merger with Livongo. It's one of the biggest health care deals in 2020. So what are the trends and opportunities that you see with this combined company now that convinced you to go out and spend roughly $19 billion in cash and stock to do this sizable deal? What really has you excited about the Livongo-Teladoc opportunity?

Yes. So thanks for pointing out that price tag. So as you heard me say, I think the role of virtual care has accelerated dramatically 4, 5 years. And we saw a number of trends. One, consumers looking for whole person care, right? To be able to go to a destination, to a provider, to a resource to take care of their entire person, not just their diabetes or not just for urgent care, not just for mental health care, but for their health care. And so bringing together the leader in chronic care management with the leader in sort of what's -- on both ends of that spectrum, acute care with our general medicine services, with our pediatric services, things like that, but also our more complex conditions with our expert second opinion services and things like that. So we really now have the full scope ranging from episodic acute all the way to complex. Now there are plenty of things we can't do virtually, right? We're not operating on someone's knee virtually. And therefore, it's really important that we integrate with the overall health care system seamlessly so that we can get people the right care that they need. But there is no question, demand -- I'll give you an example. We just did a pilot for virtual primary care. And it was amazing, the breadth of diagnoses that we saw, over 70 different diagnoses. And top diagnoses included diabetes, prediabetes, hypertension, pre-hypertension, anxiety, depression, obesity. Now these are all things that are longitudinal in nature. And the Livongo capabilities, combined with the rest of our clinical and technology assets, really round out that delivery model. So it's a category-defining combination. And I think it was an inevitable combination. The pandemic just accelerated it because it increased the market readiness, and it was clear that the time was now to do it. It was hard to get done during a pandemic when we were all socially distanced and had to negotiate over Zoom. But it's been really great. And the common mission of the 2 companies has made that integration a lot more successful.

You mentioned you can't exactly repair an ACL or replace a hip over an iPad, at least not yet. I want to ask Dr. Fahrenkopf, how do you see the opportunity with things like Livongo, Teladoc with the different technologies that are out there, to be in front of your patients at Hospital For Special Surgery and help them with either aftercare or, perhaps more ideally, with care that may potentially keep them off the operating table?

Yes. This is -- we're really excited about the potential. So just to be clear, so I run all of our digital strategy at HSS, but I also -- and President of HSS Health, which is our commercialization arm. You might think of it as sort of the Optum of HSS. And I'm excited on both sides of that because I think, as I said, I think musculoskeletal care, it's definitely one of those areas where there hasn't been as much of a care model approach. It's -- there hasn't necessarily been as much of a prevention approach. And so when you think really more broadly beyond telehealth being an important tool, but more broadly, around digital tools, capabilities, very similar to what Jason just mentioned what like Livongo can do with chronic care and -- but with us think about -- well, we do have chronic conditions we take care, we have a big rheumatology department, and that's obviously a chronic care area as is chronic [indiscernible] But what I get excited about is not just what we could do with them, but thinking about episodes of care, which is what a lot of surgical episodes are and being the trends that are or really setting the standard of what are the right tools and capabilities you need for that. Because it's very different than what some of the great work Livongo's done with diabetics, for instance. But this is a chronic disease, there's a behavior management piece that goes long term. For this, you're talking sometimes about 6-, 8-week period of time, very intense. This is not behavior change that has to last forever [indiscernible] it's very important that you engage patients and engage them in the recovery as well as maybe bring in new data that you haven't had traditionally. So when we look around this care model, we're looking at maybe we know you have to do -- for hip replacement, the first visit in-person, obviously, the surgery has to be in-person, but had -- we're building a platform that, in between, it gets triggered by your surgery being scheduled. And as soon as that happens, you get digital education through the platform. You get introduced to your -- who your physical therapist is going to be. We don't have this yet, but we're envisioning the ability to do some basic range of motion capture with your phone, where you set a standard instead and ask some simple questions about baseline pain and activity. That then as you go forward, you can imagine, right now, our surgeons don't really get very much information between the surgery and the postop visit 6 weeks later. They might have a patient who calls, but things could go off track during that time that they may not know about, especially physical therapy is happening somewhere else. So thinking through what are the pieces of information that if they knew at the 1-week or 2-week point might have them come back into the hospital or place a phone call to check on them. So simple things around pain, are you able to go to the bathroom on your own? And those pieces of information, but also bringing in how many steps are they having. Are they actually completing physical -- between physical therapy sessions, and you assign them digital instead of that PDF. I've had, unfortunately, many orthopedic procedures and you get handed a PDF with like some of the exercises crossed up and some circled, and we'll only do this on this leg. But instead, if you have a digital exercise in between, it's assigned by your physical therapist, and you actually can see if they completed it or not and how many times they completed it. And that data coming in and then being able to flag to the doctor at the 2-week time, look, the steps are going down actually. Pain, we're monitoring pain as pain seems to be going up. Maybe the -- you need to schedule a telehealth visit then instead of waiting to the 6-week part. So we're -- and we're also looking at some of the advances with telehealth itself. Most of it's very simple platform. And it's really more about the juice of the docs and what -- that interaction. But in musculoskeletal health, you can have really interesting -- this doesn't work for every specialty, but we're looking at asynchronous exams, which can be almost a digital record of what someone's baseline is. And that movement, that's going to be different. You're not -- an asynchronous exam won't work necessarily for mental health or work for diabetes. The diabetes, the blood sugar is the asynchronous exam. But thinking about sort of new technology and how that can be used with telehealth as one of these tools. So we're really excited about this. HSS is a worldwide leader in quality and outcomes for musculoskeletal health, and so we believe we should be at the forefront of helping define what this new care model would be.

Great. I actually had ACL surgery at HSS, and a lot of the stuff would have been really cool to have back then.

I had it there, too, just so you know. I had ACL surgery there, too.

Well, I hope you had it there. We'll pivot -- I want to pivot to something that came up in the last panel, and that was about social determinants of health care. And we know that different things like socioeconomic status, race and even geography can impact the outcomes that you see in health care. Maybe I'll start with you, Dr. Silverstein. How can we use these tools, telemedicine, AI, machine learning, all these things that are now coming to the forefront, in order to make sure that we can improve on these challenges that we see with social determinants and I think, more importantly, make sure that we don't make them worse?

I think the second half of that question's really important, Kevin. So there are a number of very small things that we've tried to do at Oak Street to pivot to address some of that, even as simple as bring a device to somebody's home, turn it on for them, set them up and let them have the visit. And actually, that works quite well. So we bring it with the WiFi, and we can get over some of those barriers. It's an intense service to offer. And -- but for those who can't get out, I think it can be very helpful. You mentioned in the beginning of your question about AI. I think that's really important. It's another very appropriate thing to think about right now. So we've worked really hard on our population health platform and population health analytics. And one of the things that's been one of the strongest opportunities is actually to build in those social determinants of health, if you will, those potentially negative predictors, into our algorithms that help us identify which patients we really need to pay attention to. So we actually do a clinical exercise where we estimate how "sick" we think someone is, and we intensify our services if we think that the -- if we perceive the patient at greater risk. We've been able to use some of the newer technologies to employ not just retrospective data into our quantification of that risk, but also some other things that have to do with the outcomes of research on predictors and social determinants. So our -- we've recently redone our predictive modeling, and we are much better actually at capturing or identifying who is going to have a higher mortality. And we can intervene with our model in a more specific way when we do that. I think that those things will help us potentially close the gap. And that's a very different place to be than on the utilization of technology as a platform for health care delivery because this is in the predictive part of our model and kind of where to institute that very intensive hands-on intervention.

Great. Jason, I'm sure this is something that you guys have been looking to tackle for years now. What are your thoughts on this?

Yes. I appreciate the question. This is something that we're very passionate about. I really see virtual care as the great equalizer, democratizing health care. When you think about the Livongo devices, you have a connected blood glucose meter, you have a connected blood pressure cuff, you have a connected scale. All of them work off of cellular using 3G, right? So you don't need -- this isn't something where you have to do a Bluetooth connection to some device and be connected to a WiFi in your home. And we've purposefully gone to that lowest common denominator such that we can engage the full population regardless of where they are. Our InTouch business is in hospitals and health systems all around the world, enabling them to bring specialists remotely into their facilities so that even in a rural or intercity hospital you can bring in a neonatologist or a vascular neurologist, such that they can see the consumer without actually having to be there in that location. And then mental health care for me is like probably the pinnacle of this. Most of the communities we're talking about are underserved overall by the health care system and especially when it comes to mental health care. But the ability to connect with a therapist, a psychologist, a psychiatrist remotely without having to move into some other part of town or figure out how to navigate your way through the system and ask somebody who they'd recommend who probably has never even thought about the mental health care system is really, really powerful. And to Julie's point, a lot of that can be done over the phone, right? I mean, certainly, we do lots of video visits. And our incidence of video visits is up significantly since the beginning of the pandemic, for reasons just like we have conferences like this now. Like -- but we've always supported a multimodal model where it's really up to the consumer how they want to connect with us, unless it's clinically necessary, right? So if a consumer wants to have a phone call, that's great. I had -- early in the pandemic, I had a stye. And so I uploaded 2 pictures and then had a video visit, and the doctor sort of knew what was going on already and then looked at my eye through the video visit and was able to take care of me. That's something that really needed to be visualized. But a mental health care visit can be very well done telephonically. And to the point that you all have made earlier, you can apply really good science against that. So we're starting to apply AI and natural language processing against some of those phone interactions to even better inform the therapist of nuances in the voice, inflection, changes in the words that are being used in order to really measure sentiment and mental health. And I think there's almost unlimited opportunity there.

Yes. I just -- before you -- we move on, I want to tag on to that, Jason, because I'm really glad you brought up mental health, extremely important. We actually have an unusual model with that. We employ some mental health providers to do telehealth with their patients, but we bring them to our centers to have the visit. So it's the -- since providers are limited, we have the provider stay put, and we have -- we bring the patients as if they're coming to see the patient live, but they see them on a screen. And that has worked for several years at Oak Street to help us with distribution of resources and really kind of get our services to where they need to be and, again, allows the patient to still be in a community environment, but they're actually having a virtual visit on site. The other thing that came to mind that I didn't mention is that we also have a pretty sophisticated system for e-consults. And so another way to provide virtual care to patients might not even require their participation when the primary care person consults the specialist with the information they need in a virtual world excluding the patient until they communicate back with primary care. So there are a few different ways to flip the switch to use the technology that don't depend as much on user skill. And that, I think, is part of that equalizer piece, when we use those other nontraditional ways and help the patient get access.

Yes. I might add here, too. We don't -- I agree with everything that Julie and Jason have said. We don't think a lot about the -- some of the unseen barriers to care and the -- just the amount of time and sometimes money for parking or tools it takes to actually go to the doctor. And then if you think about that, again, within a surgical episode, you not only have the initial visit, the needs for labs, radiology, the actual surgery and then all of the PT that happens within a 6- to 8-week period of time and how much that can -- that this is absolutely preventative if someone has to go somewhere, depending on your job. You could lose hours in the day trying to do that. So the ability to do tele-PT, we have seen unbelievable results from going to almost entirely tele-PT post surgically. We were already doing some of that with our Medicare population as part of our bundles, but we've really seen great outcomes and great satisfaction, but that can be used in other -- for other populations where it's just that barrier to physically getting somewhere and the time it takes. I would also say, post surgically, you can have somebody who is -- who has social challenges but is relatively stable until there's an event. So -- especially if you're talking about loneliness and that aspects of social determinants, which a lot of elderly have, others have, where you might be on the brink economically, and you live by yourself and you can manage, but the minute you have surgery, you can have an issue where you're not getting any food. You're not getting -- you don't have access to that. So the ability to have these additional tools post surgically where that event -- an event could be something like a stroke or something else, obviously as well. But at least for us, how does a surgical event change someone's ability to cope with their social determinant? So I think it's -- it has great potential as an equalizer as long as we -- we're -- just the way that we're -- we've been concerned about this with kids with the remote learning, as long as the -- some of the wireless access issues are fixed because that's probably the biggest challenge. Almost everybody now has a phone at least, but the variability in access to good Internet is probably the biggest challenge.

Great. Then I wanted to ask about health care costs. It's obviously a big part of health care is the cost of health care. And technology, virtual medicine often promise to help reduce those costs. So can you talk about what you've seen in the time -- in the last 9 months since you've seen increased utilization? What has it done for the opportunity to take costs down for carriers to take costs down for patients? Maybe...