The Telehealth Masquerade: How Corporate 'Geniuses' Sold Us the 1876 Wine in a New Bottle

Let's get real about telehealth: it's a feature, not an innovation. This concept was revolutionary back in 1876, not now.

Let’s get real about telehealth: it’s a feature, not an innovation. This concept was revolutionary back in 1876, not now. Have we really been so naïve to buy into the hype spun by overzealous founders and greedy venture capitalists, convincing us to shell out extra cash for what’s essentially a glorified phone call between a doctor and a patient?

The telehealth industry, in a stroke of opportunistic genius, leveraged COVID-19 fears to conjure up a business out of thin air. They sold us the illusion of the Emperor’s new clothes!

Equating telehealth with innovation is like repackaging sliced bread as a culinary breakthrough. It’s ludicrous. The fact that a company like Teladoc throws up a flashy website and dubs it ‘the best phone in the world to call your doctor’ doesn’t make it groundbreaking. Let’s be clear: virtually any college kid majoring in computer science can whip up a secure call and messaging platform. We see this all the time in competitions like Kaggle.

Remember that scene from “Elf” where Buddy congratulates the coffee shop on their ‘world’s best cup of coffee’? That's the level of absurdity we’re dealing with here.

For those of my readers who don’t have time to go on beyond “Elf”, let me assure you that that I’m all for telehealth, as a feature of a patient experience during the care process, a telehealth that is  integrated, accessible, easy, caring, ethical, a natural feature, not “manna from heaven,” as it has been portrayed and commercialized by Teladoc and Amwell.

But first things first…

Let’s dive into the meat of my analysis, unfiltered and raw:

1. ‘Telehealth Definition’ – Pay attention, it may be on the test. 😉

2. ‘Goodwill Games’ – The art of asset value manipulation by Teladoc and Amwell.

3. ‘Size of the Telehealth Market’ – A wild guess at best.

4. ‘Telehealth Market History, 1876 - 2023’ – Spoiler: Teladoc didn't invent telehealth.

5. ‘Telehealth Market Players’ – And why it's only Teladoc and Amwell generating all the hype.

6. ‘Telehealth Market Financial Performance’ – AKA the telehealth crash.

7. ‘Corrupt Wall Street Analysts’ – The lies about TDOC, AMWL, and the rest of the telehealth market.

8. ‘My Thoughts on the Telehealth Market in 2024 and Beyond’ – Spoiler: Telehealth is dead as we know it.

9. The Pulse of Telehealth: Two Important Discussions Exposed.

Buckle up for this unfiltered journey. It’s going to be a wild ride.

1. Telehealth Definition. (Pay attention, it may be on the test. 😉)

This is one of those articles where the definition is actually super important. Please pay attention. 😉😉😉

Telehealth, sometimes also referred to as telemedicine, is defined by the Health Resources and Services Administration (HRSA) of the U.S. Department of Health and Human Services (HHS) as the use of electronic information and telecommunications technologies to support and promote long-distance clinical health care, patient and professional health-related education, public health, and health administration. (HHS Link, HRSA Link) It allows health care providers to care for patients without an in-person office visit. Telehealth is primarily conducted online with internet access on your computer, tablet, or smartphone. It includes several options for care such as live conversations over the phone or video chat, secure messaging, email, and secure file exchange with your health care provider, and remote monitoring so your health care provider can check on you at home. (Telehealth.HHS.gov)

And, of course, the most important telehealth definition is that of the National Institutes of Health (NIH), because this is the definition used for medical billing purposes:

Telehealth is the use of communications technologies to provide health care from a distance. (NIH Link) These technologies may include computers, cameras, videoconferencing, the Internet, and satellite and wireless communications. Some examples of telehealth include:

☎️ A “virtual visit” with a health care provider, through a phone call or video chat.

☎️ Remote patient monitoring, which lets your provider check on you while you are at home. For example, you might wear a device that measures your heart rate and sends that information to your provider.

☎️ A surgeon using robotic technology to do surgery from a different location.

☎️ Sensors that can alert caregivers if a person with dementia leaves the house.

☎️ Sending your provider a message through your electronic health record (EHR).

☎️ Watching an online video that your provider sent you about how to use an inhaler.

☎️ Getting an email, phone, or text reminder that it’s time for a cancer screening.

And, for completeness, here’s my own definition of telehealth: Any care provided to a patient outside of the physical medical office.

However, a historical, narrow definition of telehealth that has existed since 1876 (well, the “phone call” part, not the “video call” part) is represented by the first bullet point of the NIH definition: A ‘virtual visit’ with a health care provider, through a phone call or video chat. And this is exactly the definition that Teladoc and Amwell have been selling us in a glossy, over-hyped wrapper.

In this piece, I’m laying it out bluntly: Telehealth, as Teladoc and Amwell define it, is obsolete. It’s dead in the water, dragging these companies down with it. What Teladoc and Amwell peddle under the guise of “telehealth” is nothing more than a glorified phone call, a phone call that’s been around for 147 years.

So, what’s the big deal with Teladoc and Amwell’s phone service? The kicker is, they charge for a service using your phone and your doctor’s phone. They’re merely intermediaries, possessing little to no proprietary technology, and the market is punishing them for their deceptive practices.

And the most egregious of their tactics? Let me introduce you to what I dub the “Goodwill Games.”

2. Goodwill Games. The art of asset value manipulation by Teladoc and Amwell.

“Goodwill Games” are this delightful little charade CEOs and management love to play. Remember, the lion’s share of executive pay isn’t the base salary. Oh no, it’s all about the bonuses, stock options, warrants, and whatnot - all magically tied to their “performance,” or let’s be real, the stock price. The slickest way to jack up that stock price, staying just this side of legal, is to slap some fantastical number on Goodwill. That’s the fuzzy value of all the intangibles like software, brand name, patents, AI, and the like. The real kicker? “Valuing” goodwill is like throwing darts blindfolded. No models, no simulations, just whatever figure the execs pull out of thin air, knowing full well the higher they mark this mystical number, the fatter their wallets get. Conflict of interest? Enormous. But hey, that’s the game, and it’s been played for decades.

Now, there are a couple of nuggets to keep in mind about Goodwill. First off, execs can’t just willy-nilly change its value. There’s this thing called the “goodwill impairment test,” supposedly done yearly. In reality, management treats this test like a pesky fly, swatting it away unless two scenarios pop up:

1. A corporate event happens. The CEO and their merry band in the C-Suite salivate over events like acquisitions, restructurings, IPOs, and the like. That’s their time to crank the Goodwill dial to eleven. Then, usually when a new CEO struts in, they gleefully torch the place, writing off Goodwill to zilch and tossing the blame on the previous regime for puffing it up. Remember, by the time the old CEO and their band of merry executives exit stage, they’ve already hit the jackpot. Ka-ching! They’ve cashed out, laughing all the way to the bank, while leaving a trail of creative accounting in their wake. This whole song and dance is known in corporate finance as “taking a bath” or “kitchen-sinking.” It’s all about starting from ground zero - lower asset base, lower stock price, and nowhere to go but up.

2. The company’s management is forced to ‘fair value’ goodwill when regulators, alarmed by the Grand Canyon-sized gap between market and asset values, start sniffing around.

The reason I’m fixating on Goodwill is that it’s been THE headline act for Teladoc and Amwell.

2.1. Teladoc

Teladoc was founded in 2002 on a noble idea that everyone should have access to the best healthcare anywhere in the world on their terms. The company gained momentum, attracting customers and venture capital, but profitability remained elusive. Despite this, Teladoc went public in 2015, continuing its organic growth until plagued by reckless decisions from its management.

The board, enamored by the allure of health tech, pushed for a venture into this domain. They stumbled upon Livongo, a company masquerading as a health tech pioneer but never turning a profit. As one physician bluntly described, Livongo was more a “BS diabetes supply company” than a tech innovator. Teladoc’s management, blinded by arrogance, avoided consultations with the medical community, perhaps to mask their ignorance. Their million-dollar salaries and perceived expertise silenced any need for outside opinions.

The real twist came when Teladoc, charmed by Livongo’s persuasive executives and flashy online presence, agreed to a leveraged merger. Teladoc, lacking sufficient funds, financed this deal mainly through equity financing, significantly diluting its shareholders’ stakes. To illustrate, Teladoc shareholders lost 48% of their value overnight because Livongo was valued at a size nearly identical to Teladoc, and the majority of the deal was financed by issuing new Teladoc stock. The deal, anchored on Livongo’s inflated $18.5 billion market value, or $14.5 billion book value - largely constituted by $14.5 billion in Goodwill - soon proved to be a monumental miscalculation. Teladoc, perhaps knowingly, ignored that Livongo’s actual technological prowess was minimal, to put it mildly, with its website probably being its most notable tech achievement. This acquisition, cynically termed “a vapor buying a vapor,” epitomized two loss-making entities uniting in a value-destructive merger.

Here’s a hard truth: Three years post-merger, and Teladoc is already choking on its own overreach. They’ve written off a staggering $13.5 billion of the goodwill from their Livongo acquisition, basically admitting they overpaid for Livongo by a factor of 14! They essentially threw billions at a company now valued at peanuts. This colossal blunder slashed Teladoc’s asset value by a jaw-dropping 76%. And yet, in a twist of financial irony, it’s still double their current laughable market cap of $2.8 billion. Remember the days when they boasted a $40 billion valuation post-Livongo deal? What a fall from grace! This isn’t just a misstep. It’s a masterclass in value destruction. And brace yourselves, because it looks like Livongo might just be gearing up to write off the remaining $1 billion in intangible assets. ‘Intangible’ is right – because finding any tangible sense in this fiasco is a fool’s errand.

Subsequently, Teladoc’s balance sheet deteriorated, with a debt to asset ratio soaring to around 50%. Despite these financial strains, the company still navigates through partnerships and collaborations, seemingly desperate to stay afloat. Yet, with the COVID-19 impetus waning and no significant strategic shifts apparent under the current CEO, Teladoc’s prospects look grim, possibly veering towards default or bankruptcy. Meanwhile, CEO Jason Gorevic, who earns an annual salary of $8 million, along with bonuses and stock options, continues to lead the company, apparently unscathed by the disastrous outcomes of his decisions.

2.2. Amwell

If you were baffled by Teladoc’s goodwill manipulation, brace yourself for the rollercoaster that is Amwell’s financial acrobatics: