M & A in the Telehealth Space- What does it mean for the Industry & Healthcare?

With Jackie Busch at ATA 2018

Last week at the American Telemedicine Association (#ATA) meeting, #Avizia (a company for which I’ve been the Chief Medical Officer since 2014) was acquired by #AmWell. From my perspective, the merger made perfect sense. Avizia has been focused on chronically and acutely ill patients—those more directly attached to a hospital system. AmWell, on the other hand, has been the dominant solution for community-based care; it’s an online consultation service for folks who might otherwise have gone to an urgent care for problems like fever, headache, or a sore throat. Combining these entities provides a solution that spans the spectrum of care, which aligns with the needs of many healthcare systems. Issues related to patient access and satisfaction (think: less acute, community-based care) are top-of-mind for many administrators. However, with 80% of the dollars going to 20 % of the population, managing the continuum for the chronically ill (which is more in line with the mission of Avizia) is imperative to provide better care at a lower cost.

The merger also marks a predictable milestone in the common transition pattern for big ideas (internet, aeronautics, GPS, etc.)—from the military, to academia, to scalable business.

Telemedicine started as a military-run effort. NASA, concerned that astronaut healthcare issues would cause mission failures, was the first organization to devote significant funding to telemedicine research. Early ATA meetings were opened with military-sponsored presentations featuring the Telemedicine & Advanced Technology Research Center, a branch of the Army.

Next came academia. Millions of dollars in grant money were offered, but academics were no longer focused on the health of astronauts. Instead, the goal was providing care at a distance—to the citizens of Rural America. Many early leaders of the ATA came from the universities that built and deployed this technology.

Entrepreneurs are the third wave. Early adopters often experience epic failure and lots of wasted capital. The market isn’t ready. The technology ecosystem isn’t mature, which both limits the user experience and raises costs. The business models don’t align; in the case of telemedicine specifically, reimbursement and monopolist medical licensure limiting the type of care that can be provided across state lines remains stuck in the 1970s. However, things are rapidly changing on both fronts, and innovative care strategies are the result of these changes.

Back to the merger. The combination of Avizia and AmWell signifies that the door has closed (or is closing) on niche technology offerings (a technology or service for a single medical problem) so common 3 to 5 years ago. Hospital systems will now buy from vendors, knowing they’ll be around in the long run with additional support services to help the healthcare system develop a broader strategy for digital care. Yes, there will be room for innovators and entrepreneurs. There is a huge need for provider service organizations (please listen #Envision, #TeamHealth, #Schumacher, #DaVita, etc.), which are groups of doctors and nurses looking to provide care in the cloud for unmet needs; but they are more likely to leverage an existing technology rather than build their own. Entrepreneurs—my advice to you—build enhancements, not isolated technologies.

From my perspective, this is good. I got into telemedicine to transform care. I believe the future should be (at least slightly) less about new drugs and surgeries, and more about reassurance for patients, families, and less-experienced providers. It’s time to stop treating fear and anxiety with expensive (and often ineffective) lab and diagnostic tests and transfers. The only way to get to quality outcomes at a lower cost is by helping people work better together.

Whether Avizia/AmWell will become the GE of telemedicine remains to be seen. But they have a pretty good shot. However, there is room for a Philips and Siemens to enter the space. Competition is good, but so is consolidation.

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