Amwell, a Boston-based virtual care company, could be in a good position to take advantage of well-documented provider challenges surrounding labor and inflation.
“I’ve got the overall growth accelerating from 9% this year to 18% next year,” said Jack Wallace, vice president of equity research at Guggenheim Partners, a global investment and advisory firm. “To the extent that you can offer a health system a solution that can help solve some of their labor problems—and that is the most acute issue facing hospitals—you’re going to get a willing ear.”
Wallace said research at Guggenheim found provider IT budgets are expected to remain ‘sticky’ with minimal reductions. This will help Amwell, which primarily sells to hospitals.
Amwell CEO Ido Schoenberg spoke about this opportunity on the third quarter earnings call.
“We know hospital budgets are constrained, and yet the challenges facing providers and payers drive an urgent need to leverage technology to achieve their operational goals,” Schoenberg said.
The company’s Converge telehealth platform—which has absorbed a significant amount of research and development funding—experienced 7% growth in total visits in this year's third quarter compared with 2021. The company had subscription revenue of $31.9 million, representing growth of 19% compared to last year.
Experts said the platform’s major developments are expected to wind down, which will lower costs in spending. This shift paired with the growth in visits, in part, led the company to modestly improve its earnings before interest, taxes, depreciation, and amortization projections for the year by $10 million.
Still, Amwell’s adjusted EBITDA for the first nine months of 2022 swelled to more than $131 million in the red. It had a net loss of $70.6 million.
In an analyst note, Goldman Sachs’ Cindy Motz said that because of macroeconomic conditions, 2023 will be another challenging year for Amwell, particularly because it has a lot of hospital clients.
But analysts were largely optimistic because the company is broadening its client base beyond hospitals and has reserves that can help it navigate through the coming year.
“Their cash pile affords them several extra years should the process take longer than expected,” Wallace said.
Not mentioned during the call was the impact of the company’s recent partnership with CVS Health. Amwell is working with the pharmacy giant on its new virtual care platform, the telehealth company announced in August.
CVS Health's offering will include remote primary care, chronic-condition management and mental healthcare, and will roll out to Aetna and CVS Caremark members next year, the company said. The platform will also help members find in-network specialists and other providers for in-person care.
Amwell, which got its start providing on-demand virtual care for low-acuity health issues, plans to transition to primarily being a technology company that sells tools healthcare providers use to connect with patients, and move away from providing healthcare services, Chairman and CEO Dr. Ido Schoenberg said in 2020.
Amwell also appointed Robert Webb, a former executive at UnitedHealth Group, to its board of directors on Monday night.
This story first appeared in Digital Health Business & Technology.