Teladoc Looks to Unlock BetterHelp’s Value via Group Therapy, Eyes Additional VBC Arrangements

BetterHelp was the biggest driver of growth for the virtual health care company Teladoc (NYSE: TDOC) in the third quarter of 2022. But the direct-to-consumer business remains vulnerable to the nation’s macroeconomic environment, according to Teladoc leadership.

Unlike Teladoc’s B2B offerings, BetterHelp is more directly tied to consumers’ financial health, Teladoc CEO Jason Gorevic explained during a Q3 earnings call on Wednesday.

“If we see economic recovery next year and inflation coming down, and the consumer feeling more confident, that could be helpful for us,” Gorevic said. “If the consumer sees significantly more inflation and pressure, that could pressure the consumer, since BetterHelp is one of the more expensive things that the consumer buys. It doesn’t come in a box.”


In light of that, Teladoc will “continue to take a more balanced approach to growth and margin in BetterHelp,” the CEO added.

Founded in 2013, Teladoc was one of the first virtual care providers to hit the public markets. In 2015, it acquired BetterHelp for $17.2 million, launching it further into the consumer behavioral health space.

Regardless of the economic headwinds, Gorevic noted that the company will continue to focus on growing its BetterHelp business segment.


“That business has grown and scaled incredibly fast,” Gorevic said. “It is at a run rate of $1 billion,” he said. “And I think it’s fair to expect us to focus on driving both growth and efficiency.”

Teladoc’s to-do list

To help with growth at Teladoc overall, Gorevic announced Laizer Kornwasser, former COO of CareCentrix, will be joining the company as COO to help all client channels and product lines. CareCentrix is owned by Walgreens Boots Alliance (Nasdaq: WBA), which announced it was acquiring an outstanding stake in the company for about $392 million on Oct. 11.

In particular, Teladoc is looking at group therapy sessions as a way to yield improvements in margin for the BetterHelp business, according to Gorevic.

“We’re leaning more into digital interactions with consumers as well as group — virtual group therapy sessions, which is a more efficient way of interacting with the consumer, [and it] improves the gross margins,” Gorevic said. “It actually has the … effect of actually depressing our visit volume.”

Fewer visits in the BetterHelp business are “actually good” because that, in turn, improves its gross margin and enables the segment to serve more people with fewer professional resources, he noted.

Advertising yield, or how much an organization spends on advertising to acquire a new customer, has been a historic challenge for BetterHelp. In Q1, Gorevic said that digital mental health newcomers were making “economically irrational decisions” in regards to advertising spend.

Gorevic shared additional color around that point on Wednesday.

“While yield on advertising spend remains below where we expected it to be at the beginning of the year, we’ve seen it stabilize as BetterHelp remains on track to deliver strong revenue and margin contribution,” he said. “We continue building upon BetterHelp’s significant leadership position in the direct-to-consumer mental health market while driving both growth and margin.”

Competition in the consumer behavioral health space may be slowing as the “tightening economic environment and high cost of capital” impacts smaller companies, according to Gorevic.

“I’m not sure that I would say that we’ve seen a massive shakeout yet,” he said.

Beyond BetterHelp

In addition to deepening its focus on BetterHelp, Teladoc is leaning into value-based care, with a focus around its chronic care segment. In 2021, Teladoc launched a chronic care shared-saving pilot with fully insured members at a Blue Cross Blue Shield plan.

While this arrangement focused on chronic care, the company appears to be looking for more value-based care opportunities in the future.

“Our team just concluded a study with this partner’s actuarial team, who determined that we have exceeded our medical cost savings target by 60%,” Gorevic said. “Not only do we drive better outcomes for our members and drive more savings for our clients, but we’re able to realize a small shared-savings bonus. We believe the outcome of this pilot and others like it validate our ability to move further toward value based contracting over time.”

In Q3, Teladoc’s revenue increased by 17% to $611 million. This comes after Teladoc reported a lackluster first half of 2022. BetterHelp specifically grew by 35% quarter over quarter. The virtual care company ended the quarter with 57.8 million members, which is an increase of 1.2 million members quarter over quarter.

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