Talkspace CEO: Company Positioning Itself to Serve Medicaid, Medicare, VA Patients

Government-backed health plans are a key part of Talkspace Inc. (Nasdaq: TALK)’s expansion strategy.

Doug Braunstein, interim CEO of Talkspace, said those initiatives are in the earliest stages of development. But, its future growth clearly includes serving Medicaid, Medicare and Veterans Administration members.

“We’ve literally just begun planning exercises for what are the most important next new markets that we can tackle and beginning to lay the seeds today of the investments we’re going to need to make … to begin that journey,” Braunstein told Behavioral Health Business.


Talkspace doesn’t have contracts with government payers, Braunstein added.

Braunstein also holds the title of board chairman of Talkspace. He is also the founder and managing partner of Hudson Executive Capital, the company that led Talkspace’s IPO.

The new vistas of government payers present a significant opportunity for Talkspace. But, Braunstein indicated that making government health plan members a focus was a long way off. Rather, the here-and-now dominates the company’s focus.


Braunstein holds two competing focuses in tension as he helms Talkspace.

On one hand, he seeks to inject discipline and better performance into the troubled company. He is the CEO in the first place because the company forced out the previous CEO, co-founder Oren Frank, in November. At that same time, Talkspace disclosed worse-than-expected financials for the third quarter of 2021.

On the other, Braunstein said he hopes to find ways to drive “a really attractive return on investment for our investors.”

And pleasing shareholders has been somewhat of a mixed bag for Talkspace.

Founded in 2012, Talkspace raised $111.7 million in three seed rounds and four series rounds. Its May 2019 Series D round included Revolution Growth, Norwest Venture Partners, Qumra Capital and Spark Capital.

In June 2021, it completed a $1.4 billion SPAC merger with an entity formed by Hudson Executive Capital. The merger gave Talkspace an additional $250 million of working capital.

Today, the company’s share price is down 82% from its IPO price of $10 to $1.81 as of June 24.

Still, Braunstein touts Talkspace’s growth, tech-savvy and the high demand for mental health as good signs for its ability to change. Braunstein also hinted Talkspace was preparing for another major initiative: launching value-based care.

By the numbers

A nascent shift to value-based care and government contracts revolves around a central theme. Talkspace is shifting its attention away from direct-to-consumer (D2C) and more to business-to-business (B2B).

Most of Talkspace’s revenue comes from those two sources. The D2C line generates membership fees. The B2B segment generates revenue from arrangements with health plans and employers.

In 2021, about 66% of Talkspace’s revenue ($73.6 million) came from its D2C business. The remaining 34% ($38.9 million) came from the commercial business, its annual financial report states. In 2020, the split between D2C and B2B was 81% and 19%, respectively.

In the first quarter of 2022, the shift towards B2B revenue deepened. The D2C business brought in 57% ($17.3 million) and the B2B business garnered 43% ($12.9 million). The shift may have been somewhat skewed as D2C revenue shrank year-over-year by 7%.

Despite the shift, Talkspace will always maintain its D2C business because of its powerful brand.

“Not only do we benefit from that [brand] on the D2C side, our B2B customers know our brand and we think that brand helps us in driving utilization,” Braunstein said.

But that D2C and B2B focus has ignored a major segment of the health care economy.

A year earlier, Medicare and Medicaid accounted for about $1.5 trillion, about 36%, of all American health care spending in 2020, according to federal estimates. These estimates didn’t include the VA’s spending on health care.

Medicaid, a state health plan for the vulnerable, is the largest payer of mental health services. Medicare and Medicaid account for 64% of spending on mental health and substance use disorder treatment.

About 146.7 million people get health benefits through Medicaid and Medicare.

The VA asked for $70.6 billion ($301.4 billion in total ) to fund medical services alone in its appropriation request for the coming federal fiscal year.

And these government payers are eager to see innovations such as value-based care take root.

Talkspace’s mission and preparations

The VA presents an opportunity that Braunstein is notably eager to address. He said the company’s products and services align well with the needs of the VA..

“If you think about the areas where our mission and these new opportunities come together, helping to serve the behavioral health care needs of our veterans is incredibly important to our mission,” Braunstein said. “It’s a huge market and opportunity.”

Talkspace’s services range from self-guided content and tools to therapy to psychiatric services. It does not and never has prescribed controlled substances like its ailing digital mental health competitor Cerebral Inc.

Braunstein also sees mission alignment with value-based care, which has the premise of arranging payment and care models in a way that improves patient health and drives down spending on health care.

He declined to talk about specifics around payer arrangements. But he also indicated that the company is making moves toward value-based care arrangements.

“I think Talkspace is uniquely positioned given our data and our analytics and our history to be where the puck is going to be as it relates to behavioral health care and value-based care over the next several years,” Braunstein said.

In its latest annual financial report, Talkspace says that it has “vast” clinical data. Patient data is a key to value-based care.

“Our data contain over 5 billion words sent by millions of users over 100 million anonymized messages,” the report states. “We have over 1 million completed psychological assessments.”

Talkspace also has over 500,000 diagnoses, 800,000 progress and psychotherapy notes, and 800,000 therapist ratings.

Braunstein reiterated in the interview what he has said in earnings calls. Talkspace’s focus remains on the turnaround plan revealed when he took over as interim CEO. But that work has the end goal of positioning the company to do and become more.

“The most important thing for the company to do in the near term is [to] build rigor and discipline and a performance culture around our existing business,” Braunstein said. “While we have to get our ducks in a row, we’re focusing on things where we can really make a difference.”

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