- As the delta variant surged in the third quarter, virtual care giant Amwell saw its urgent care volumes spike, while specialty care and behavioral health visits came in below expectations. That's a sharp turnaround from the first half of the year, when urgent care volumes, specialty care and behavioral health visits grew together, analysts noted.
- Urgent care visits are cheaper, however, so the higher urgent care mix had an unfavorable impact on total revenue per visit. Amwell's revenue was down less than 1% year over year to $62.2 million, lower than Wall Street expectations though the Boston-based telehealth vendor's earnings squeaked in slightly above forecasts.
- To account for expected decreases in visit volume and the shift in visit-type mix toward urgent care versus specialty due to delta, Amwell lowered its full-year revenue guidance.
Perhaps no one sector benefited from the coronavirus pandemic last year like telehealth. Vendors reported historic growth in 2020 as patients turned to digitally delivered care to avoid potential virus transmission in a doctor's office and receive needed treatments and therapy amid business lockdowns. But some market watchers worried that growth would seesaw in 2021 as COVID-19 cases eased and lockdowns were lifted, allowing for the widespread return of in-person utilization.
Demand for telehealth has generally continued in 2021, albeit at slightly lower levels as COVID-19 cases dropped. The rise of the highly infectious delta variant in the third quarter helped bolster volumes once again, resulting in an increase in quarter-over-quarter visits for Amwell as more people used its urgent care services, the vendor said in its third quarter financial results released aftermarket Wednesday. Specialty visits remained stable versus the second quarter.
This dynamic has continued into the fourth quarter, management said. As a result, Amwell is maintaining a conservative view on fourth quarter visits, also assuming a relatively soft cold and flu demand due to masks and social distancing, CEO Ido Schoenberg told investors.
Accounting for the "unexpected and significant decorrelation" of urgent care growth with specialty and behavioral, Amwell confirmed its annual visit expectations to be between 1.4 million to 1.5 million visits, but at the lower end of that range, CFO Keith Anderson said.
It was Anderson's last earnings call with the vendor, as the CFO role is being taken over by Morgan Stanley's Robert Shepardson.
Virtual care companies have scrambled to build out their offerings as clients increasingly look for a one-stop-shop for their digital health needs, instead of contracting with myriad point solutions. Amwell's answer to this trend is its Converge platform, a new open architecture platform launched in April that combines all its own products and technology while supporting other digital health applications like remote monitoring.
A larger number of clients have committed to upgrading to Converge, but some customers are waiting to expand the contract or implement additional care points or modules until their transition to Converge is final. Amwell expects its fourth-quarter revenue growth to come mostly from higher subscriptions revenue, but that would be even higher if customers weren't deferring the transition, management said.
Despite the delayed rollout, Amwell has received an "extremely favorable, almost surprising, very violent market positive reaction" to Converge, Schoenberg said. Currently, roughly 4,000 providers are already using Converge, in addition to 43 enterprise clients.
"We continue to believe Converge will meaningfully fuel our results in 2022 and beyond," Schoenberg said. "There's no question that what we see in the market is much better than we expected or even dared to hope."
In July, Amwell acquired two digital health startups for a combined $320 million to bolster its longitudinal and behavioral health capabilities. The products of those companies, text-based telehealth platform provider Conversa Health and digital cognitive behavioral health provider SilverCloud Health, are currently being integrated into Converge, and Amwell is already seeing cross-selling within its customer bases, Schoenberg said.
Amwell's platform had about 80,000 total active providers at the end of the third quarter, versus 71,000 last quarter and 62,000 same time last year. That growth has mostly been due to clients adding their own providers to Amwell's platform, while Amwell Medical Group providers have remained steady at 4,000.
Some analysts expected providers to drop off Amwell's platform this quarter due to a surge in COVID-19-related onboarding last year that could have flowed off the platform as interest in facilitating virtual care abated.
But the opposite illustrates the "historical" shift to digital tools becoming more mainstream in healthcare, Amwell's co-CEO and president Roy Schoenberg said.
Schoenberg said he's sure the platform has seen attrition in such "one-and-done" providers coming on during the pandemic, so the 9,000 sequential growth reflects "an even bigger change" given those providers are likely now out of the mix. Those that remain are committed to a hybrid care model, Schoenberg said.
Amwell, which went public in September last year, has yet to be profitable, reporting a net loss of $50.9 million in the quarter, compared to a loss of $64.6 million in the same time last year.