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Thematic ideas | The digitisation of healthcare

Investment outlooks / Q4 2020

A large nascent market opportunity?

Covid-19 has caused significant changes and reassessments in many industries and sectors. In healthcare, it has enormously accelerated a long term trend towards digitisation of the sector across the globe.

Consumer adoption of telehealth skyrocketed from 11 per cent of American consumers in 2019 to 46 per cent by May 2020, as healthcare visits are being replaced with video calls during lockdowns. Providers have quickly scaled up capacity and are registering 50-175x increase in the number of telehealth patients. Before the pandemic, the main question was “What cases are appropriate for telehealth?” This year, the question flipped to “What cases are appropriate for a face-to-face visit?”

Click chart to expand. Source: Citi, CMS, CDC, Urgent Care Association, Merritt Hawkins, McKinsey; May-July 2020.

Before the pandemic, the sum of US telehealth companies’ annual revenue was estimated at $3bn, with the largest players focusing on the “virtual urgent care” segment (on-demand instant telehealth visits). Today, there are different estimates for virtual health’s potential market size, with estimates from Citi and McKinsey currently standing at $107bn and $247bn respectively. The virtual urgent care segment alone presents a $35bn opportunity. The transition to widespread adoption of telehealth is not guaranteed and will require new ways of working for a wide range of providers, improvements in information exchange, and broadening access with integration of technology. The main drivers behind the shift toward digital health are rising healthcare consumerism with an emphasis on cost and convenience, redirection of patients to lower-cost modes of medical care, a shortage of primary care physicians (particularly in rural areas), and growing consumer comfort with virtual interactions.

Click chart to expand. Source: Citi, CMS, CDC, HCCI; July 2020.

The acceleration of virtual healthcare

Even before Covid-19 forced patients to try telehealth solutions, virtual care was already rising. Historically reluctant to promote digital offerings due to the fears of increased and unnecessary utilisation offsetting cost savings, payers have started to form alliances with major telehealth vendors such as American Well, MDLive, Teladoc and others, and began steering members to their channels. After the US government substantially liberalised Medicare Advantage reimbursement via the 2018 Bipartisan Budget Act, direct-to-consumer (DTC) channels have emerged through retail stores and digital apps. From 2011 to 2018 telehealth claim volumes ballooned by 785 per cent.

Click chart to expand. Source: Citi, Fair Health; July 2020.

Covid-19 acted as a catalyst for a rapid uptick in telehealth utilisation. Non-essential visits have started to shift to virtual care, while patients were becoming increasingly wary of visiting doctors in person during a pandemic. Large telehealth vendors all registered a significant spike in the number of daily visits across all age groups at the peak of the outbreak. The US government’s loosening of Medicare and Medicaid regulations and favourable reimbursement policies from the major managed care organisations have helped this trend.

Click chart to expand. Source: Citi, Fair Health, MDLIVE, Credit Suisse; June-July 2020.
Click chart to expand. Source: Citi, Fair Health, MDLIVE, Credit Suisse; June-July 2020.

Historically, the main barrier causing underutilisation of telehealth was lack of awareness, according to data by J. D. Power. After Covid-19 brought virtual care to the spotlight, an overwhelming majority of patients (with a skew towards younger population) are willing to use it. However, even the elder patients found telehealth to be a positive experience. A survey by Better Medical Alliance, the leading research and advocacy organisation supporting Medicare Advantage, conducted in May revealed that half of seniors were comfortable to use digital channels to receive health care and a quarter have used these channels already. Among those who tried, 91 per cent had a favourable experience and 78 per cent are likely to go through a medical appointment via telehealth again in the future.

Click chart to expand. Source: Citi, American Well, J.D. Power; July 2020.
Click chart to expand. Source: Citi, American Well, J.D. Power; July 2020.
Click chart to expand. Source: Credit Suisse, Morning Consult, Better Medicare Alliance; June 2020.
Click chart to expand. Source: Credit Suisse, Morning Consult, Better Medicare Alliance; June 2020.

Despite the fact that telehealth utilisation is likely to moderate as Covid-19 risks fade away, the long-term transition to virtual care looks likely to continue. This pandemic has caused a fundamental shift in patient, payer, and provider priorities. Patients are trying out telehealth at record numbers, payers are embracing virtual health care for multiple disease-states, and providers have stepped up investments in digital health technology. Supported by regulatory changes, this can cause an increase in the aggregate consumer consumption of healthcare services. However, considering the different cost structure, more efficient capacity allocation, and other benefits, digital health solutions can also increase the overall efficiency of the healthcare industry.

Healthcare providers are opening up to telehealth

Before the pandemic, providers of healthcare had been somewhat slow in adopting telehealth. The primary barrier had been the reimbursement disparity between an in-person visit and a virtual visit, according to data by the Foley & Lardner law firm. Without a major shift in patient demand, there are few economic incentives for providers to promote telehealth, as in-person visits are reimbursed by 2-3x more than virtual visits.

Covid-19 has demonstrated that telehealth can complement in-person visits, thus freeing up capacity, broadening physician reach, and improving brand recognition.

In the next phase of its development telehealth is likely to advance its integration with health plan benefit design and providers to expand the treatment of a wider range of conditions. For example, one of the opportunities for growth is in the behavioural health condition space, where the physical presence is less important, the financial burden is disproportionately carried by patients, timely interventions are critical, and patients may feel hesitant for in-person visits.

Click chart to expand. Source: Citi, Foley & Lardner, Teladoc Health; July 2020.
Click chart to expand. Source: Citi, Foley & Lardner, Teladoc Health; July 2020.

Primary beneficiaries

Today, the US telehealth industry is dominated by four large vendors: Teladoc Health, American Well, MDLIVE, and Dr. On Demand. Thanks to relatively low barriers to entry, competition is rising from multiple fronts, including large electronic health records vendors, smaller niche telehealth players, payer/provider insourcing and consumer-oriented tech companies. In regard to the latter, there are risks that large tech giants will enter the industry. However, it is likely that these companies will choose to partner with existing telehealth vendors than develop or manage clinical networks themselves, as this is not their core competency. Such partnerships will combine large tech companies’ consumer data aggregation and elegant front-end user interfaces development capabilities with telehealth vendors’ experience in the provision of clinical care.

Click table to expand. Note: Teladoc Health only reports membership for US paying members. Source: Citi, Company sources; July 2020.

Investment ideas

Below is a table with investment ideas that provide exposure to the growing telehealth industry. Teladoc Health and American Well are two of the four largest telehealth vendors in the US, thus both are a direct play on the theme. BioTelemetry, IQVIA Holdings, Cerner, and Premier are healthcare services providers, which are also exposed to telehealth.

Click table to expand. Source: Refinitiv Eikon; September 2020.

Teladoc Health

Teladoc Health, Inc. provides virtual healthcare services. The Company provides virtual access to care with a portfolio of services and solutions, which includes various medical subspecialties from non-urgent, episodic needs, such as flu and upper respiratory infections, to chronic, complicated medical conditions, such as cancer and congestive heart failure. It provides virtual healthcare services on a business-to-business (B2B) basis to its clients and provides services to consumers directly and through channel partners. The Company’s consumer brands, including Teladoc, Advance Medical, Best Doctors, BetterHelp and HealthiestYou, provides access to advice and resolution of a range of healthcare needs. Its technology enables consumers to manage their own electronic medical records. It also provides access to a message center, provider finder, image upload capability and enable real-time sharing capabilities with providers that includes visit scheduling.

American Well

American Well Corporation is a telehealth company enabling digital delivery of care for the healthcare sector. The Amwell Platform is a digital care delivery solution that equips its health system and health plan, including government, clients with the tools to enable new models of care for their patients and members. Its technology embeds with its clients’ existing offerings and clinical workflows, spanning the continuum of care and enabling care delivery across a range of clinical, retail, school and home settings. The Amwell Platform consists of the home line, provider-to-patient telehealth interactions, typically in the home, and the hospital line, supporting provider-to-provider telehealth interactions, or provider-to-patient, typically in an inpatient or ambulatory setting. The Company offers a range of management software, clinical workflows, Carepoint hardware and system integrations to deliver care across various modalities, including video, phone and secure messaging. American Well did its IPO on 17 September 2020.


BioTelemetry, Inc. provides monitoring services and digital population health management in a healthcare setting, medical device manufacturing and centralized laboratory services for clinical research. The Company operates in three segments: Healthcare, Technology and Research. The Healthcare segment, operating as CardioNet, LLC and Heartcare Corporation of America, Inc., is focused on the diagnosis and monitoring of cardiac arrhythmias, or heart rhythm disorders. The Research segment, operating as Cardiocore, LLC and VirtualScopics, Inc., is engaged in laboratory services that provide cardiac monitoring, imaging services, scientific consulting and data management services for drug, medical treatment and device trials. The Technology segment, operating as Braemar Manufacturing, LLC, Universal Medical, Inc. and BioTelemetry Belgium BVBA. and BioTelemetry Technology ApS, focuses on the manufacturing, engineering and development of noninvasive cardiac monitors for healthcare companies.

IQVIA Holdings

IQVIA Holdings Inc., formerly Quintiles IMS Holdings, Inc., provides integrated information and technology-enabled healthcare services. The Company operates through segments, including Commercial Solutions; Research & Development Solutions, and Integrated Engagement Services. The Commercial Solutions segment offerings include national information offerings, sub-national information offerings, technology solutions, and workflow analytics and consulting services. The Research & Development Solutions segment provides biopharmaceutical development services. It offers project management and clinical monitoring, clinical trial support services, Q2 solutions, and strategic planning and design. The Integrated Engagement Services segment offerings include healthcare provider engagement services, patient engagement services, and scientific strategy and medical affairs services. The Company has its operations in the Americas, Europe and Africa, and the Asia-Pacific.


Cerner Corporation is a supplier of healthcare information technology (HCIT). The Company offers a range of intelligent solutions and services that support the clinical, financial and operational needs of organizations of all sizes. The Company’s segments include Domestic and Global. The Domestic segment includes revenue contributions and expenditures associated with business activity in the United States. The Global segment includes revenue contributions and expenditures linked to business activity in Aruba, Australia, Austria, the Bahamas, Belgium, Bermuda, Brazil, Canada, Cayman Islands, Chile, Denmark, Egypt, England, Finland, France, Germany, Guam, India, Ireland, Kuwait, Luxembourg, Malaysia, Mexico, the Netherlands, Norway, Portugal, Qatar, Romania, Saudi Arabia, Singapore, Slovakia, Spain, Sweden, Switzerland and the United Arab Emirates. The Company’s solutions are offered on the unified Cerner Millennium architecture and on the HealtheIntent cloud-based platform.


Premier, Inc. is a healthcare improvement company. The Company is uniting an alliance of approximately 4,000 United States hospitals and health systems and approximately 175,000 other providers and organizations to transform healthcare. The Company operates through two reportable business segments: Supply Chain Services and Performance Services. Its Supply Chain Services segment operates healthcare group purchasing organizations (GPO) and direct sourcing activities. The Company’s performance Service segment provides integrated data and analytics, software as a service (SaaS) informatic products, consulting services, performance improvement collaborative, government services and insurance management services. The Company plays a role in the healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide.

Private equity opportunities

While the largely privatized US health care industry has the richest set of investments, there are opportunities in other markets. As an example, we recently explored a pan-European healthcare centered crowdfunding platform called Aescuvest. This company illustrates one way that digitalization of healthcare is being nurtured outside of the US.

Founded in Frankfurt am Main in 2014, Aescuvest was the first German crowdfunding platform to offer investors the possibility of early-stage financing, specifically for companies in the healthcare market. Aescuvest is a digital marketing and financial services provider supporting the implementation of business ideas in the health care sector in Europe. The company focuses on medical technology, biotechnology, digital health, health care properties and related services sector.

Aescuvest is closely cooperating with the European Institute of Innovation and Technology Health (EITH). EITH combines the power of well-known, multi-national companies with the resources of the European Union. The platform addresses six core markets of the European health care industry: Germany, Belgium, Denmark, Netherlands, Sweden and the UK. Aescuvest’s partner network currently addresses  more than 220k health care experts and companies from the most diverse fields of activity and sectors of the industry.

In addition to its European reach, Aescuvest, together with its network partner Medical Valley, signed a cooperation agreement with Touwho, China’s largest equity crowdfunding platform for medical science and biotechnology. Aescuvest thus is the first European crowdfunding platform that offers parallel placement of campaigns in Europe and China and supports its customers in entering the Chinese market.

Aescuvest represents a crowdfunding portal for smart ideas, ingenious products and digital concepts in the health care market with significant growth potential. Pent-up demand from less developed countries in health also care offers enormous long-term opportunities for European pharmaceutical companies. Investments in medical technology, biotechnology and digital health provide investment opportunities for private and institutional investors.

In terms of business model, Aescuvest receives from its users a set-up fee for every campaign as well as a success fee of eight percent on the amount raised for the project. In the event of an exit, Aescuvest also participates in the company’s sales value.

Past performance is not a reliable indicator of future returns. Forecasts are not a reliable indicator of future returns. If the information is not listed in your base currency, then the result may increase or decrease due to currency fluctuations.

If not otherwise indicated, all graphs are sourced from Dolfin research, October 2020.

For more information please read our disclaimer.

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