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Celebrating Opportunities in the New Era of Telehealth, a Conversation with Drew Turitz, SVP of Corporate Development at Teladoc
142 Plays1 year ago
Over the last decade, virtual care has witnessed explosive growth. Drew Turitz, SVP of Corporate Development at Teladoc, joins Frederic Laurier at Alantra to discuss the increasing adoption of telehealth, its acceptance by payors and providers, M&A as a strategy to enter new markets, acquisition opportunities in 2023, and the development of value-based care.
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Transcript
Introduction and Evolution of Virtual Care
00:00:06
Speaker
I'm Fred Lawyer with Elantra. I head up the firm's digital health investment banking practice. We have the pleasure of hosting Drew Turret's SVP of Corp Development at Teladoc today. Over the last 10 years, I have witnessed the explosion of virtual care and it is becoming more pervasive by the day.
00:00:23
Speaker
Teladoc is at the center of it all, having pioneered innovation and contributed to mass adoption of telehealth over that time period.
Teladoc's Vision and M&A Strategy
00:00:32
Speaker
On this episode, we will take a deep dive into Teladoc's vision and how MNA has contributed to its transformation. First and foremost, Drew, thank you so much for having accepted the invite. We're very grateful for it. No, thanks so much, Frederick. I'm really happy to be here and looking forward to the discussion.
Drew Turret's Career Journey
00:00:48
Speaker
Before we get going, Drew, maybe a few words on your bio. I see that you've spent over 20 years in healthcare. If I'm not mistaken, you have held various roles in investment banking and also in the VC world. Over the last 10 years or so, I think you have made a transition to corporate world. Is that a fair statement?
00:01:07
Speaker
I've always thought about how I transitioned from a deal-making role into more of an operating role. That was actually the original intent way back when I went to business school. It just so happens that I transitioned into a deal-making role in an operating environment. So for me, it's really been finding the right combination of
00:01:26
Speaker
kind of an entrepreneurial environment and
Teladoc's Growth and COVID Impact
00:01:29
Speaker
culture, really being able to make an impact. And so coming out of my experience in VC, I helped launch the Blue Cross Blue Shield Venture Funds at Sandbox and worked with payers a lot and really saw the power that those platforms have. And that's sort of what led to my taking a role at Aetna, which in itself was a startup. I mean, we were launching Healthagen, which at the time in 2000,
00:01:51
Speaker
12 was kind of their effort to diversify out of insurance and into tech-enabled services. And so that was, to me, a really exciting opportunity. Ultimately, that version didn't work out the way we expected, and that's when I transitioned to Teladoc at the end of 2014. But it's really been about, how do I make an impact with a company and as an individual? And it's certainly been the experience I've had here at Teladoc. What was the biggest difficulty in moving from an investment banking or a VC role to a corporate role?
00:02:21
Speaker
What was the hardest for you? I think each transition that I made has been pretty different from the last. Banking, as you know, is a very intense environment, long hours, some late nights that can be a lot of friction. That's not the norm, and I know that's changed a lot, but great experience. When I was in banking, I learned so much and made such great relationships that are still really of huge value for me today.
00:02:47
Speaker
I hope you get a bit more sleep these days, Drew. Sometimes. I mean, as I said, we're still in the deal making role. And so there's always some periods where you sort of sacrifice that. I mean, every deal is a race to the finish line that no matter how hard you try. So there's always some last minute things to worry about to focus on.
00:03:04
Speaker
Unfortunately, there always is some late detail that needs special care, doesn't it? You did first join Teladoc in 2014, just before their IPO. At that time, the business was doing roughly $80 million or so in revenue. Next year, analysts do forecast for Teladoc to surpass the 2.5 billion mark. It probably makes it one of the fastest growing software companies in the world, full stop over that time span.
COVID-19 and Telehealth Adoption
00:03:30
Speaker
COVID probably did help, so as legislation to some extent,
00:03:34
Speaker
But that said, do you see any clouds on the horizon that would make it difficult for telehealth to reach mass adoption? Maybe you feel it already has as it? There's no question that a lot of the changes we've seen the last few years from COVID, the impact that's had on consumer awareness, on physicians' willingness to adopt telehealth, that was a barrier years ago. And then obviously, a lot of the regulation has been helpful to really enable a lot of that consumption that we've seen.
00:04:03
Speaker
I'd also say there's those things have led to real change kind of payers and employers willingness to really adopt virtual care across a lot of different programs. So just as an example, prior to COVID, health plans didn't want Teladoc and others to interfere in that relationship between the patient and physician.
00:04:24
Speaker
Now that's been turned around entirely right where the pairs are saying we're looking for tell it off to really establish that longitudinal relationship and be that primary care contact and i'd say. A lot of the health systems looking at that way too because primary care is such a challenge and so it's really an example of how the thinking around virtual care has changed so much in the last few years.
00:04:48
Speaker
there's still a long way to go, right? We're still not anywhere near where I think we can be and should be as it relates to utilization across a lot of different programs and clinical conditions. But I think it's mostly about the responsibility is now ours, right, to deliver on a really good consumer experience, to deliver outcomes, because that is ultimately what's going to drive more adoption and more utilization and more embracing of virtual care.
00:05:15
Speaker
across all the different ways that it can make an impact. So moving from urgent care into more longitudinal care, that is a way to really drive better compliance. It's a way to drive more regular prevention and care. And so I see that as really important.
00:05:32
Speaker
To get us towards better outcomes better results and so that that ultimately is the way that we have to be measured along with broader healthcare it's our ability to make it a seamless user experience and to make sure we're getting better engagement and better outcomes for consumers. You feel that now physicians are ready to embrace virtual health. Absolutely i think.
00:05:54
Speaker
We are still in a fee-for-service world, so I think certainly you pay for the behavior that you want. And so physicians are incentivized certain ways, and I think that's the way that they'll continue to practice. But I think they understand increasingly that there is a more efficient way to practice by using
00:06:15
Speaker
virtual, some combinations, you know, by using technology more in their practices. And so I think healthcare does not move quickly. And so the behavior that we've seen through COVID and beyond really moved things forward in a meaningful way.
00:06:31
Speaker
But I think we'll continue to see physicians adapt new technologies, new approaches to providing care. And that's also going to come from reimbursement, right? It's also something that they've got to get paid for. So RPM is a really good example of it's been around for a long time. There's increasingly better technology and how we use the signals that are driven from that technology can lead to kind of what I talked about in terms of better outcomes.
00:06:58
Speaker
and better results. But I think there's still work that has to be done to align payment and incentives so that we're using those technologies for the right reasons and the right use cases. A lot of RPM is still the PERS, I've fallen and I can't get up model. And we've got such better technology, but it's just not being reimbursed in kind of comprehensive ways. And so I think it's just an example of where
00:07:21
Speaker
will continue to see improved behavior, improved reimbursement, and adoption by physicians to ultimately see how it impacts patients.
M&A's Role in Teladoc's Expansion
00:07:30
Speaker
You did touch on it earlier on, you did mention that Teladoc has somewhat transformed itself from a focused virtual urgent care provider to now what we could deem a more holistic care provider. How critical was M&A in that transformation? Do you feel that you could have done it through homegrown initiatives?
00:07:49
Speaker
I think it would have been a much different timeline. So M&A is a way to get scale quickly. And so for Teladoc, that's been how we've been able to launch new programs and into new markets meaningfully. So I wouldn't say that we wouldn't have gotten there. I think the story and the path might have been a little bit different, but certainly M&A has been really essential to our growth strategy and to getting into new markets in a meaningful way quickly.
00:08:16
Speaker
So, just a few examples. In 2016, we acquired a company called Healthiest You that gave us a strong foothold in the broker market, so selling into smaller employers through brokers. Similarly, as we thought about international expansion, the challenge we saw is that every country has different systems for delivery, payment, regulation.
00:08:39
Speaker
thinking about how to create an international presence without having to go country by country, that was a real challenge. But we saw in a company called Advanced Medical, which we acquired in 2018, we saw the opportunity to get a foothold in many countries. So they were already in the UK, Spain, China, Brazil. So they had done a lot of the hard work to kind of establish a presence. So in your opinion, M&A was the best point of entry?
00:09:05
Speaker
Yeah, best point of entry. And so I think just a few examples where we still might be in those markets today had we not done those deals, but by doing acquisitions, we were able to get scale and speed to market in a pretty meaningful way. I think maybe the last point here is just that cost of capital is also pretty important. We were early to go public. We were one of the few public companies in digital health back in 2016, 2017, 2018.
00:09:33
Speaker
And so we had the good fortune of using our stock price and funding that growth off the balance sheet using our stock. That was a purposeful part of our growth strategy. So rather than investing through the P&L and having to drive expenses in R&D and launching programs, we were able to use our balance sheet and our stock price to get at big chunks of opportunity. And so I think just a few reasons why M&A can and has
00:09:58
Speaker
really been an important part of our kind of stepstone into bigger growth and bigger scale.
Public vs. Private Deals in M&A
00:10:04
Speaker
You've done both public and private deals in your career. Livongo being the latest example of a public deal you worked on. Process-wise, what are the biggest differences?
00:10:14
Speaker
We've done over a dozen deals at Teladox, and certainly since I've been here, and I think in general, none is like the other, right? That's what keeps this job interesting. Every deal, big or small, is different and challenging in its own way, and you learn a lot from it. We've only closed one public deal, so I want to try and generalize about, we've looked at other public companies, but Livongo's kind of the only public deal that we've closed, but maybe just generalizing broadly around public deals versus that particular deal.
00:10:42
Speaker
There's obviously with public companies a threshold for material non-public information. And so that has an even bigger impact on the need to be sort of keep things very quiet and to maintain confidentiality. And so when we work through an M&A process, there's kind of a slow, gradual inclusion of more and more teams as you get down the road and start digging into due diligence.
00:11:06
Speaker
With the public deal, I think you have to be even more careful about that. So because obviously the more people know, the more risk there is for a leak. And that's especially challenging and difficult when you're talking about two public companies. Ultimately, sort of who gets involved in being under the tent and how you drive due diligence, that's a big change.
00:11:24
Speaker
I think with public companies, obviously, there's a level of due diligence and disclosure that happens over the course of being a public company as you're filing to go public, interacting with investors and analysts on a regular basis. So that streamlines a lot of the work you have to do with M&A when you think about audit financials, reps and warranties, even financial forecasts. I mean, that's a lot more streamlined when you're working with public companies.
00:11:49
Speaker
We've been in a situation with the private company that not having an audit done by kind of one of the big three or four that can meaningfully extend the timeline. And so I think obviously having the professionalization and the level of due diligence and disclosure for a public company has a big impact. In a public deal, isn't the timetable a little bit more set in stone, especially if both companies are publicly traded?
00:12:14
Speaker
I think it depends. I think there are probably some deals where maybe there's ebb and flow. It just sort of depends on the timing of what we have to announce results or we have some other big inflection point coming. So certainly the Livongo deal for us was a pretty quick timeline, especially relative to other private deals that we worked on. I think just going back to that concern around information getting out in the public sort of forces you to move a little bit faster.
00:12:43
Speaker
and i think because there's already so much information available at pebble company just becomes a little bit easier to do due diligence also from a kind of valuation perspective right it's a little more tangible right you've got a public stock price to anchor for better for worse you know i just think about some of the discussions right now with private companies where.
00:13:03
Speaker
The valuation is tethered to a round that may have happened a year or so ago, and we obviously know that valuations have changed. And so public valuations just can make it a little more specific. You mentioned the danger of leakage, and I'm guessing it's a constant concern when you're working on a transformative deal like Livongo. In the old days, you would hear stories about the extent parties would go to to prevent leakage. Now we have video conference. Does it make it any easier to maintain confidentiality?
00:13:31
Speaker
could be a lot more purposeful of who is or isn't included in the discussion when it's, when it's virtual. There's not that vision of a whole bunch of bankers and lawyers and other people coming in and out of rooms. So it's a lot easier to be discreet and sort of the post COVID.
Challenges of Virtual Due Diligence
00:13:49
Speaker
world. On the other hand, it also makes it maybe too much of a lean away from being in person. My experience is that personal relationship, the cultural interaction, the team interaction is just such an essential part of due diligence. And I think there has been a little less focus on that over the last whatever it is, two or three years.
00:14:09
Speaker
It just makes it more challenging and it means you've got to invest a lot more and be a lot more intentional about creating those interactions to make sure that there's real collaboration and alignment of vision and culture and all those things. Ultimately, that's the most important part and obviously that tends to get overlooked. Trying to achieve the right balance, right? Bun building is much harder virtually than it is in person as well.
00:14:33
Speaker
Were you surprised by the one medical and signify deals? The first one was purchased by Amazon, the second one by CVS. Do you now see them as your biggest competitors?
00:14:42
Speaker
Neither of those companies competes with us directly. And so I don't see anything being different in the short term. But look, we've seen competitors big and small enter the space. I think that really speaks to kind of the big opportunity that everyone recognizes in virtual care. We haven't gone unscathed as the competitive landscape has changed the last two years, I think.
00:15:05
Speaker
We don't take competition lightly, but we've seen both payers and some of the companies that you mentioned introduce products that compete with us in a few categories and they've struggled. In fact, as we've seen, they've kind of been taken out of the market.
00:15:20
Speaker
So I think depending on what path they Amazon and CVS and others take as these deals are completed, there's actually just as strong a case for us to partner with them in different capacity. So I think it's like a lot of things in health there, there's a lot of coopetition, right? CVS is one of our biggest clients in some ways, Amazon is a customer of ours, and so United is in the same boat. So I think a lot of these companies, their businesses are so broad and
00:15:46
Speaker
and diverse and market by market. So we may compete with them in some ways and work with them in others. And that's just sort of the nature of the game. And Bruce Brandes, your senior VP health system innovation recently said in an interview that seamless integration between physical and virtual care is paramount. Now that we are operating in a different market, do you still have the same kind of appetite for M&A? For instance, you mentioned remote patient monitoring.
Hybrid Models and Strategic Partnerships
00:16:13
Speaker
Is that something you feel that if you were to pursue, it would be through organic initiatives? I think Bruce is right. Integrating from virtual to physical, that's table stakes, right? And that's actually a huge focus for my team, whether it's around M&A or whether it's partnerships. The headline for us is, look, we are not going to acquire anything kind of retail or brick and mortar focused. I think Jason Gordovic, our CEO, has said that many times.
00:16:39
Speaker
It doesn't make sense for us from a financial standpoint. There's such a huge amount of fixed assets and capital that's required. We're a national company, right? We're doing tens of thousands of visits every day in every state around the country. And so the idea of trying to put together a patchwork of brick and mortar clinics, it doesn't make sense for us.
00:16:58
Speaker
it's also not consistent with our margin profile but most importantly for us it's that puts us much more directly in line with our competition with our customers right so to the previous discussion we had i think we're trying to partner and we're trying to position ourselves as a partner of choice for
00:17:15
Speaker
as much of the health care ecosystem as we can though hybrid models that's a huge focus for us right we all believe that while there's a ton of opportunity in virtual care to drive better outcomes it only works so well because there's a huge amount of care that needs to be done in person and so the need for us to really seamlessly integrate
00:17:39
Speaker
with some of those in-person or hybrid solutions is essential. We've already announced a few partnerships around medication delivery, in-home testing, mobile blood draws. We're piloting some things right now to send providers into the home, and hopefully we'll be able to talk more about that in the coming year.
00:17:57
Speaker
We're working really closely across all of our teams to find the right sequencing of products and services that put us more directly into the home. These hybrid models, whether it's things that enable us to take risks more effectively, that's something we haven't talked about as much, but is another big focus for us.
00:18:14
Speaker
Look, I think we're trying to be really creative about how to build on a lot of the work that we've done to integrate all the different solutions that we have to partner where we don't see the ability to buy it, and then ultimately to continue to do M&A as well. I mean, I'm still focused on driving, helping drive growth through acquisitions, and so I think you'll continue to see us do that heading into 2023. You feel that the current environment makes it more challenging to get deals done? For instance, your index is down 50% year over year.
00:18:43
Speaker
Yeah, I mean, look, it's a lot easier to get deals done when you're we've been really disciplined over the last year. So I think we've done a lot of work internally, are really well positioned heading into 2023. I think we've got a lot of dry powder, right? We've got nearly a billion dollars on the balance sheet. I think we've done a lot of the hard work. So I think we're definitely started to be a lot more proactive. And I think
00:19:05
Speaker
For the right deal, our team and our board are excited about looking to M&A. And there's going to be companies that are going to struggle. And so I think it's been very much a seller's market over the last kind of two or three years. So there should be some really good opportunities.
Future of Value-Based Care and Technology
00:19:21
Speaker
So maybe one last question before we let you go, Drew. Value-based care, of course, has been a hot topic for a number of years. Do you feel that is now becoming a true reality?
00:19:30
Speaker
Absolutely. I think, I mean, we talked about my days in venture 10 plus years ago and even, and then we were sort of scratching our heads and sort of saying, I think it's really happening here. And 10 years later, we're in a lot of ways still in the same spots. Certainly the payers and providers are much more oriented to that. The technology allows much better measurement and analysis so that you can understand how to effectively and where to effectively take risk.
00:19:59
Speaker
There are so much innovation in terms of how we are both doing preventative care, mental health, longitudinal care. And so I think there's just so much more technology and data that allows for payers and providers to more effectively take risks. We're also very much headed in that direction. And so I think taking steps
00:20:19
Speaker
around some of the programs where we have the most results and the most impact and working with our customers to start more purposefully moving towards guaranteed outcomes and those value-based care models. You feel that easier access to data was the final barrier for VBC to really take off?
00:20:37
Speaker
That's a piece of it, right? Because really understanding on a population base, but also on an individual basis where you're having an impact and how you're having an impact, there's a lot you can do with just the most basic tools. But in order to drive results for value-based care on a broader scale, I really do think having the right technology and insights data is what enables that. So I think we're a lot closer to that than we've certainly been in the past.
00:21:03
Speaker
On behalf of our listeners, thank you again for having taken a time to share a perspective on the virtual care market. One of the key takeaways for me was that larger deals do not necessarily mean harder deals. Thank you also for having shared your insights on the shifting competitive landscape and the implications for the overall industry.