'You cannot do everything yourself:' Amwell's CEO hints at buying a mental health startup and shares his simple 2-part criteria for potential acquisitions

  • Companies that do online healthcare have had a good year thanks to the coronavirus pandemic.
  • But investors are worried that their success will end with vaccines as patients start returning to the doctor's office. 
  • There's pressure on telehealth companies to diversify the services they provide for more staying power. 
  • Amwell's co-CEO Ido Schoenberg said he was open to acquisitions, including in mental health.
  • Before buying a startup, Schoenberg looks for cultural fit and innovative technology, as opposed to how much of the market the company holds.
  • For more stories like this, sign up here for Business Insider's daily healthcare newsletter.

For companies that help people get healthcare online, 2020 has been a good year.

But investors are concerned that their success is tied to the coronavirus pandemic. 

One way to create staying power is acquiring companies that perform a wider array of services. For Amwell, the world's second-largest telehealth company, the strategy isn't off the table, co-CEO Ido Schoenberg said.

"You cannot do everything yourself," Schoenberg told Business Insider after Amwell's earnings call on November 12, when asked if he would acquire mental health startups.

Schoenberg noted that in the wake of the pandemic, people are more anxious than ever. In June, anxiety and depression symptoms were about three and four times more prevalent among US adults than a year prior, respectively, the Centers for Disease Control and Prevention found.

"People are in great distress," he said. "And I see behavioral health needs growing in the foreseeable future."

When looking at potential deals, Schoenberg explained the two criteria he's looking out for — technology and company culture — and why a big presence in the market isn't as important. 

Amwell's simple criteria for potential acquisitions

The first criteria for an acquisition is that the company in question fits Amwell culturally speaking. While simple, Schoenberg said it was a critical, gating factor.

"They really need to focus on the interest of providers and patients," Schoenberg said. 

The second requirement is that the startup is strategically creative in the sense that they need to bring something to the table that's truly improving Amwell's offering, he said. In other words, Amwell isn't interested in scooping up market share, but rather wants to differentiate what it can offer patients and doctors.

"We're not buying more of the same. We will need to add something that is truly helpful — something that is truly innovative, usually technological," Schoenberg said.

Deals might come sooner rather than later. Amwell entered talks to acquire Omada Health, a chronic care company best known for its diabetes management, Exits & Outcomes reported on November 13.

Not on the table: Amwell's medical group. In October, analysts told Business Insider that UnitedHealth was interested in buying Amwell, or at least its big doctors network, Amwell Medical Group. 

Schoenberg said that the doctors group is still a valuable asset and won't be sold anytime soon, even as the company moves away from running visits through AMG. Instead, it's increasingly working hand-in-hand with health systems to run their own telehealth set ups, which is a faster growing business, he said.

"AMG, per design, cannot grow too much," Schoenberg said. Over the past year, AMG providers have grown from about 2,000 in number to about 5,000; in comparison, non-AMG providers, so Amwell's customers, have grown from 4,000 to 58,000, he said.

The pressure is on telehealth companies to capitalize on the moment

Amwell provides online visits for urgent care and other areas, mostly through health plans and health systems. It's benefited from the coronavirus pandemic to the tune of an 80% increase in quarterly revenue, year over year. As doctors offices closed or adapted to new restrictions, people have turned to the internet in growing numbers for care, therapy, and prescriptions.

The same demand's fueled record investment in telehealth startups for two quarters in a row, and a huge proliferation of vendors, according to Rock Health, a digital health fund and advisory firm. 

Now there's pressure on those very vendors to beef up their services for the long haul.

When Teladoc, Amwell's rival, bought Livongo, a chronic care company, for $18.5 billion — Rock Health said it was the "starter's pistol" for a race to be the best and biggest online provider. 

When it comes to telehealth, the technology and networks are commodities that make them vulnerable to competition from hundreds of other companies, Lisa Suennen, a venture capitalist at Manatt, told Business Insider. To stand apart, telehealth companies have to help health systems out. 

"To create sustainable value, the largest of these have learned that the path to nirvana is by helping their health system clients capture new revenue and by helping all clients of every stripe solve problems that are otherwise very hard to solve," she said. 

The best ways to do this are by easing access to services that are under-resourced, like behavioral health, reaching hard-to-reach populations, or offering proprietary tech for home diagnostics or digital treatments, Suennen said.

Even with more bets, it remains to be seen whether Amwell or Teladoc can convince Wall Street that telehealth is part of the new normal. 

Despite a successful quarter for each company — Teladoc set a record for quarterly revenue and saw increased visits since the Spring — their shares have been trading somewhat down on the positive vaccine news, Sean Dodge, a healthcare analyst for RBC Capital Markets, told Business Insider.

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