How Telemedicine Can Significantly Lower the Cost of Care

Americans spend more than $3.5 trillion on healthcare each year, and this number continues to grow as the population ages. Bringing down the cost of care won't be easy, but Teladoc Health (TDOC -2.40%) believes that it can be a big part of the solution.

In this episode of The Motley Fool's Industry Focus: Healthcare, host Shannon Jones and Fool.com contributor Brian Feroldi talk about the potential cost savings of telemedicine and why Teladoc Health could be a massive winner from here.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Sept. 25, 2019.

Shannon Jones: All right, the last and final company that is driving, hopefully, healthcare expenses down is none other than Teladoc, ticker TDOC. This is a company that I think combines the latest tech in video conferencing with access to quality medical care. For me, that's a winning strategy that I think is a win for all. Brian, tell us a little bit more about the awesome company that is Teladoc.

Brian Feroldi: I think this is the one that probably our listeners are most familiar with, if for no other reason than Jason Moser has been banging the drum on Teladoc basically since it came public. Teladoc is the leader in the virtual doctor's visit. The ability to have a video conference consultation with a doctor, no matter where you are, on any device, at any time. Teladoc's services enable patients to be connected to a qualified physician within minutes just by pushing a button from the comfort of their own home. Virtual visits can be used to treat a huge range of disease states, including depression, tobacco cessation, dermatology issues, basic healthcare like the flu or respiratory conditions, skin problems, or if a patient just wants a second opinion on a diagnosis. Doctors, over the internet, can actually order tests to be done. They can provide prescriptions to local pharmacies. The number of services that Teladoc offers patients is growing. So far, more than 3,000 doctors are signed up on Teladoc's platform. This is a big network that continues to grow.

Jones: This is a company that's really about scale. When you think about investing opportunities, good stocks to invest in, I like to see that there are multiple tailwinds that will drive and propel this company forward. For Teladoc, there's so much driving this. Of course, people are looking for access to quality medical care. There's a convenience factor. There's also a physician shortage. It's not even just stopping with physicians, it's just healthcare professionals in general. And then, of course, you've got the healthcare expenditures that are also driving people to try this. From a scale perspective, you're getting more and more doctors who ultimately want to be on a platform like this because ultimately, they can hop on, they can control their own hours. I think what that is doing is driving more patients to get on this platform.

Brian, I don't know about you, I tried telemedicine for the first time last year. The interesting thing was, it was not my first choice for healthcare. It just so happened that I was coming into work, I had a sick child, and my first thought was, "Oh my goodness, how quickly can I get over to the pediatrician?" And then my husband just so happened to say, "By the way, we actually have an app through insurance. Why don't you try that?" As a parent, I was a little hesitant, Brian. [laughs] But I can tell you, from the very first visit that I had, I was hooked. Now it has become the first line of defense, if you will, whether it be for my child or for me, when I'm thinking about going in for something that's more acute care -- not anything that's chronic nature, something where I feel like a doctor is going to have to do some work. But now, I'm thinking, what can I not go into a doctor for? What can I use for telemedicine?

Have you used it at all? You, your kids, your family?

Feroldi: We actually just got access to it this year, and I'm itching to give it a try. To your point, this is incredibly convenient to use. As a parent, my kids come home with runny noses, coughs, all kinds of skin things going on. It's incredibly compelling to me to be able to just hold a video conference rather than having to put my kids in the car, take them out of school, drive up somewhere, wait in the waiting room, and go through that whole rigmarole. If we can get that done in a matter of minutes from the comfort of our home, I can easily see how that could become a standard-of-care process for us.

Teladoc is the far and away leader here. They also recently struck up a partnership with CVS. They can actually put these video conferencing things right into a CVS. Even if you don't have access to video conferencing at home, through CVS's vast network, it won't be long before you can go in there and hold one of these virtual conferences -- and then, by the way, you're in CVS, so you can get a prescription filled. That's a win-win for both.

Let's talk about cost savings. Not only is there a huge convenience for patients, it's actually much cheaper to hold a virtual conference than it is to an office visit. Teladoc claims that it saves $141 for using its platform versus an office visit. That number can be as high as $2,500 in savings if you use a video conference versus an ER. But when you blend everything together, Teladoc claims that the average visit leads to a cost savings of about $472, which is huge.

Jones: That is huge. It's easy to see why you can very easily get hooked into this platform. Teladoc is seeing this on the topic of member engagement. They're seeing visit volume actually grow faster than membership itself. So once you get people using Teladoc, they continue to come back. This is something I like to see as an investor. I also like, with Teladoc, of course, recurring monthly revenue streams. They have a subscription offering. They also have some long-term license-based fees to supplement that. They've got a predictable sales cycle. And their retention rates have been in the 90% range and have been holding pretty steady. All in all, I think Teladoc makes for a very compelling long-term investment, especially if you're looking to add to your portfolio stocks that are going after the problem of healthcare expenditures.