American Well's latest funding caps big year for telehealth startups

Telehealth startup American Well announced a $80 million funding round Tuesday, capping a big year in funding for telehealth startups.

The capital injection will be used to serve a number of big projects the firm has underway, company co-CEO Dr. Ido Schoenberg said in an interview. Among those are campaigning to ease regulatory constraints, scaling its provider networks and customer outreach, working with insurers to secure more favorable reimbursement and working on its technology, he said.

American Well provides a network of physicians, through its app and website, and video software to partners.

While the firm is not yet profitable, it has seen significant growth, particularly in mobile, which accounted for 1.1 million downloads year-to-date in Android and iOS devices. Enrollment, which American Well defines as downloading, signing up and providing credit card information, grew close to 1,000% year over year, Schoenberg said.

Telehealth and video visits have been perhaps the hottest growth area in digital health recently, said consultant Lisa Suennen. The growth comes primarily because of increased reimbursement for video visits from insurers. “The tech has been around for years but the payers just arrived,” she said.

With major growth expected and a still limited field of existing competitors, 2014 has been a busy funding year for startups specializing in video visits.

MDLive, which recently announced a partnership with Walgreens, received $23.6 million in funding in January. Doctor on Demand raised $21 million during the summer. And Teladoc announced a $50 million round of funding in September. That firm has between $25 and $50 million in revenue, according to an SEC filing.

Startups aren't the only entrants in telehealth. Google, for example, is embarking on a video visits pilot with providers such as Scripps Health.

With so much competition, Schoenberg believes his firm can differentiate itself by moving beyond simple acute services.

“Some look at telehealth as a way to connect consumers with unknown physicians in the cloud, for very transactional, primary-care reasons,” he said. “We believe that the true value of telehealth will emerge when we use what we've built to take care of the chronically ill patient in her home.” That requires investment in devices like wearables and connections between a virtual team and the analog team.

Those connections will require the company and its partners to determine how to feed data gathered online into the patient's primary electronic health record. Through collaborations with providers such as Cleveland Clinic and MedStar, his firm can help accomplish that goal, he predicted.

Follow Darius Tahir on Twitter: @dariustahir