- Major health insurer Cigna is buying telehealth company MDLive for an undisclosed amount.
- The deal is the latest effort by a virtual care company to ensure its future after the COVID-19 pandemic.
- It’s also a sign that insurers increasingly see telehealth as a way to make healthcare simpler and easier.
- Visit the Business section of Insider for more stories.
Cigna, a health insurer with a market cap of $74 billion, is buying telehealth company MDLive, the companies said Friday.
The telehealth startup, which previously said it was exploring a plan to go public in 2021, will be tucked into Evernorth, Cigna’s health services division that also includes its pharmacy benefit manager Express Scripts. The companies didn’t disclose financial details, but said the deal should close in the second quarter of 2021.
MDLive is one of the biggest telehealth companies with 60 million members, according to Evercore ISI. It offers on-demand video visits for urgent care, behavioral health, and dermatology to consumers as well as through employers and health systems.
Its deal with Cigna is the latest effort by a virtual-care company to ensure its future after the COVID-19 pandemic, which put telehealth companies at center stage as droves of people sought virtual care instead of going to the doctor’s office.
The deal is also another sign that health plans are taking telehealth seriously, as giants like UnitedHealthcare try to figure out how the internet can be used to make healthcare cheaper and less complicated.
The question for telehealth companies is what comes next
The pandemic shepherded in 1,000% increases in daily visits for some telehealth companies, as people turned to the internet to get their routine care during lockdowns. Virtual care visits have subsided since the early days of the pandemic, but remain higher than the pre-pandemic days, telehealth companies’ earnings show.
Experts are wondering what the companies’ futures look like in a world where people can go back into doctors’ offices.
That’s partially why Teladoc, the largest public telehealth company, bought Livongo, a chronic care company, for $18.5 billion. The deal was the biggest that digital health has ever seen and brought a lot of scrutiny from Wall Street for its size, but it made Teladoc different from its competitors because it could now provide care for patients beyond just one-time visits.
That spurred a host of mergers, acquisitions, and go-publics from the companies’ competitors as they also sought to take advantage of the virtual wave.
In November, Exits & Outcomes reported that Amwell, Teladoc’s key competitor, was in talks with Omada Health, Livongo’s key competitor. Several digital health companies including Amwell have gone public or filed to go public through blank-check companies or initial public offerings in the past six months.
In its current form, telehealth risks being a commodity that’s vulnerable to competition from hundreds of other companies, Lisa Suennen, a venture capitalist at Manatt, told Insider in November.
And as we get more information about the vaccine rollout, investors aren’t confident that the services Teladoc and Amwell will remain popular when things go back to normal.
It remains to be seen if virtual care can lower healthcare costs. Studies have shown that while seeing a doctor via the phone or video increases access to care, it may not lower healthcare spending.
Insurers have been looking for the best ways to use telehealth. UnitedHealthcare, the biggest health insurer, has been studying telehealth models through a research effort led by Optum Care, its wing of providers.
Dr. Deneen Vojta, UnitedHealth’s head of research and development, told Insider in February that it would be a mistake to merely use telehealth to replace things we already do.
“Telehealth is great, but technology used to completely re-imagined the way care is delivered is so different and that’s where we have to go,” she said.
Insurers have been deepening relationships with telehealth companies
It’s common for health plans to partner with telehealth companies to provide access to virtual care for members, and those relationships have been deepening.
UnitedHealth, CVS, Anthem, and Humana all partner with one or more of the major telehealth vendors, including Teladoc, Amwell, Doctor on Demand, and MDLive, Evercore analysts said. Cigna has long partnered with MDLive and has invested in the startup.
These relationships have helped drive a rapid increase in membership for insurers as they look to transform the way care is delivered, they said.
“We see further integration as likely (particularly for the smaller players) as the industry evolves post-COVID and looks for additional ways to develop new care models,” the analysts wrote.
The lines between health insurers and healthcare providers have long been blurring. Insurers have been branching out beyond processing paying medical claims into providing care as they look for ways to control ever-increasing healthcare costs.
Why Cigna is buying MDLive
Owning MDLive gives Cigna more control over how its members get healthcare, and it also allows the insurer to give them a more convenient way to see the doctor. Cigna serves 16.7 million members, mostly through employers.
Tom Cassels, the president of Rock Health, a digital health fund and advisory firm, told Insider that MDLive could function as the tech backbone for Cigna’s growing virtual care network.
“Think of this as an entirely virtual answer to UnitedHealth Group’s brick-and-mortar-heavy Optum Care unit,” he said.
During Cigna’s fourth-quarter earnings call on February 4, CEO David Cordani said the insurer sees a big opportunity to provide value, choice, and simplicity for patients through virtual care. He said that goes beyond providing just urgent care to primary care and behavioral healthcare as well.
Already, Cigna has been testing telehealth for primary care in partnership with MDLive. A number of other health insurers, including UnitedHealthcare, Humana, and Oscar Health, have also been launching virtual primary-care programs.
Still, bringing telehealth in-house doesn’t always work well. Analysts at RBC Capital Markets said LiveHealth Online, which is Anthem’s telehealth provider, has lost a significant amount of market share over the last 15 months.
The analysts wrote in a research note that MDLive may have a harder time marketing itself to other insurers once its owned by Cigna.