Teladoc To Buy InTouch Health, Expand Reach In Virtual Care

Teladoc Health, Inc. (NYSE:TDOC) has announced that it will acquire InTouch Health, the leading provider of enterprise telehealth solutions for hospitals and health systems.

This deal will make Teladoc a leading provider of virtual care for health systems, given its wide range of healthcare solutions from critical to chronic to everyday care.

The acquisition will further expand Teladoc’s presence in the virtual healthcare industry. Demand for virtual healthcare is rising by the day, owing to favorable reimbursement from the government. Recently, Centers for Medicare & Medicaid Services (CMS) took significant steps toward modernizing Medicare to expand reimbursement for virtual care, telehealth coverage and care coordination. Thus, hospitals and health systems utilizing virtual care will be reimbursed by the government.

According to 2019 JPMorgan (NYSE:JPM) research, 40% of hospitals surveyed reported planning to increase their budgets for telemedicine solutions. By 2021, 61% of hospital revenue is forecasted to come from managed and value-based care models/ (L.E.K. 2018 Hospital Study Survey). This makes virtual care a crucial strategy to improve consumer engagement, ensure consistent quality and manage health care’s rising costs.

Virtual care has been proven efficient to provide healthcare services. Also, Teldoc Health holds a first-mover advantage in the telehealth industry.

The acquisition is expected to complete by the end of second quarter of 2020 with a purchase price of $600 million, consisting of approximately $150 million in cash and $450 million of Teladoc Health common stock.

Behavioral Health market presents a great opportunity for Teladoc given 168 million annual visits for the same, as reported by The Agency for Healthcare Research and Quality. Teladoc estimates approximately 80% or 131 million could be treated via telehealth. This presents a huge revenue growth opportunity for the company.

The company’s strong business pipeline and continuous development of products and services provide it with a long-term growth trajectory.

In a year's time the stock has gained 49% compared with its industry's decline of 8.9%.

Zacks Rank

Teladoc carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are HealthEquity, Inc. (NASDAQ:HQY) , LHC Group, Inc. (NASDAQ:LHCG) and OpGen, Inc. (NASDAQ:OPGN) . While HealthEquity and LHC Group sport a Zacks Rank #1 (Strong Buy), Natera, Inc. (NTRA) carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

HealthEquity surpassed earnings estimates in each of the trailing four quarters, the surprise being 46.38%, on average.

LHC Group outpaced estimates in the preceding four quarters, the surprise being 08.14%, on average.
Natera beat estimates in two of the four reported quarters, the surprise being 5.05%, on average.

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