When Teledoc Health (NYSE:TDOC) announced an upcoming merger with Livongo Health in August, the healthcare industry went a little crazy. People called the deal everything from a waste of shareholder money (because of the stratospheric valuation) to the future of healthcare, because of the combination of virtual primary care and chronic condition management. Now that each company's shareholders have sealed the deal, it's time to find out why everyone is still talking about Teladoc, and whether the combined entity is a worthy investment.

A person at the computer meeting with a doctor on their laptop.

Image source: Getty Images.

Two worlds collide

Teladoc offers virtual doctor visits and focuses on signing up health insurers and healthcare systems (think hospitals, clinics, and doctors offices) as clients. The company was in the right place at the right time during the pandemic, growing year-over-year revenue 85% and 111% in the second and third quarters of 2020, respectively. Similarly, Livongo's chronic disease management services were tailor-made for a pandemic that prevented people from making traditional office visits to their doctors. For its part, Livongo grew sales 125% and 126% in the second and third quarters. That's a lot of growth coming together.

Now that several vaccines are close to FDA approval and the world can see a light at the end of the pandemic tunnel, questions about Teladoc center on whether the new habits created during the pandemic will persist. For now, it's a moot question. Cases, hospitalizations, and deaths are setting records in the U.S. The country continues to struggle abiding to the basic safety measures that have helped curbed the spread around the world. But assuming one day comes when everyone is comfortable walking back into a doctor's office, how many will continue to choose to power up their video chats instead? It's the most important question Teladoc investors need to ask themselves.

They could fly even higher

Teladoc and Livongo were growing rapidly long before the pandemic. It would make sense if the two companies continued to add members and increase revenue on the other side of the crisis. Otherwise, you have to assume that there was only a set number of potential customers, and that they were all pulled to the forefront of the addressable market into the past two quarters because of shutdowns and distancing.

In Teladoc's case, member growth jumped from 43 million to 51.5 million in the second quarter this year, but remained there during the third quarter. Livongo's member count increased from 328,000 members to 410,000 in the second quarter and continued its climb to reach 442,000 in the third quarter. These stats highlight the importance of Livongo's growth to Teladoc. With only 25% overlap in their healthcare system and insurance customer base, many of these new Livongo members will be offered Teladoc's virtual visits for the first time. 

Never tear them apart

Livongo has a unique and positive relationship with its customers. The company's Net Promoter Score (NPS) -- a measure of customer loyalty -- is on par with Netflix and Amazon. This great score was in an industry that posted the lowest average NPS of any industry in a recent survey: healthcare.

Unlike Livongo, Teladoc's service is much more transactional. Instead of forming a meaningful relationship with the user, the company is more like a cable company or internet service provider offering the way you connect to the content or provider you choose. The 147 million Americans who live with a chronic condition offer significant growth potential for Livongo, and an opportunity for Teladoc to leverage the more meaningful relationship with its customers. As for the stock, I'm waiting to see how the integration of the two companies progresses. If Teladoc gets it right, and the employees and customers of Livongo can maintain the excellent customer experience as part of the larger entity, I believe the stock has the potential to beat out rival Amwell and become the future of healthcare. If not, there sure will be a lot of disappointed shareholders of both companies.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.