Medicare is making a big change that will kick in at the end of the month. Through Jan. 30, Medicare will cover telehealth services, delivered to you wherever you are, including in your home. But as of the next day, coverage will end -- unless you live in a rural area and go to a medical facility for the appointment. There are a few other exceptions, but overall, Medicare is no longer broadly covering telehealth services as it did in the past.
Considering this shift, will Teladoc Health (TDOC +1.12%) stock -- a stock that's already faced significant headwinds in recent years -- be in trouble? Let's find out.
Image source: Getty Images.
Teladoc's early pandemic successes
First, let's consider the Teladoc story over the past several years. The company soared to the forefront during early pandemic days as it offered people something they needed: the opportunity to see a doctor without going into a crowded medical office. Teladoc's revenue climbed, as did its stock price, as investors saw it as a pioneer, developing a new way to organize healthcare.
But several factors upset this potential growth story along the way. Teladoc's acquisition of Livongo added chronic conditions care strengths to the business, but the purchase was made at a time when valuations were high. Meanwhile, as medical offices reopened, Teladoc faced competition from this traditional way of seeing doctors as well as from others who had joined the telehealth space, such as tech giant Amazon. At the same time, BetterHelp, Teladoc's online mental health offering, expected to be a significant growth driver, has seen revenue decline. And all of this has resulted in overall revenue falling and failure to reach profitability.
As a result, the stock also has tumbled, dropping more than 70% over the past three years.
NYSE: TDOC
Key Data Points
Teladoc's biggest customers
So, now, does this news from Medicare suggest more trouble ahead for Teladoc? Not necessarily. Though Teladoc hasn't said how much of its business comes from Medicare versus commercial customers such as employers, the latest annual report offers us a clue. Teladoc says, for its integrated care segment, its core business, "a significant portion of our revenue is derived from large enterprises, mainly health plans."
This suggests that commercial customers are the biggest contributors to Teladoc's revenue, and that means that this new shift in Medicare coverage may not greatly impact Teladoc's growth in the quarters to come.
This doesn't mean that Teladoc is out of the woods, however. Though the Medicare change is unlikely to weigh on the stock, the company is struggling to grow due to the challenges I mentioned above. And that means it still carries a good deal of risk.
