Teletherapy startups work to gain credibility as payers, employers sign on

So far this year, Kristen Engleman has cycled through three therapists in six months.

Engleman, 41, signed up for Talkspace in February, after breaking up with her partner, contracting COVID-19 and facing an unexpected pregnancy the year before. She had heard about the teletherapy provider through friends and decided to give it a try. Because the fine-dining restaurant where Engleman works does not offer insurance, she paid $275 per month for access to a Talkspace therapist.

The first therapist she messaged through the platform never responded. The second had a couple of sessions with Engleman before announcing she was leaving the platform. Engleman stayed with the third one for about three months, when she decided she needed to see a specialist in person. Although she had paid for phone, text and video visits, she said she only used texting with her providers, out of convenience.

"I guess with therapy, you get what you pay for, which is unfortunate because it's so expensive," Engleman said. "I don't have insurance, but even if I did, I think it would be kind of a hassle because it's always a nightmare to find a provider. This is cutting out the middleman on that."

While Engleman's experience with Talkspace may be unique, her decision to try digital therapy was not. In 2020, consumers rushed to digital treatments to soothe their anxiety over COVID-19, and investors watching the shift from in-person care opened their wallets. By the end of the year, investment in mental health startups reached a record of $1.5 billion, with no sign of a slowdown.

Teletherapy platform Ginger joined the unicorn club in March, after raising a $100 million Series E round that brought its valuation to $1.1 billion. LifeStance Health Group went public in early June, with an outsized IPO valuing the in-person clinic and digital therapy provider at $8 billion. Talkspace entered the public markets through a special-purpose acquisition company on June 23 in an IPO that valued its therapy services at $1.4 billion.

While teletherapy apps have traditionally been a cash-pay industry, employers, insurers and even government agencies are now partnering with these services to provide members access at scale. In April, Cigna announced it would offer Ginger as an in-network service for its 14 million members. LifeStance boasts contracts with more than 200 payers. City Council members in Reno, Nev., decided to spend the city's $1.3 million in CARES Act funding on a contract with Talkspace, offering the service free to any Reno resident over age 13.

"I think many people believe that this is the future of all kinds of care," said Hannah Zeavin, author of the forthcoming book The Distance Cure: A History of Teletherapy.

But as interest in these apps grows, companies are scrambling to prove their products actually work. Startups are partnering with research institutions to publish studies, but the companies' involvement in producing these reports raises some questions about their influence on the results, Zeavin said.

Without independent research on these tools' efficacy, she said most payers are relying merely on companies' marketing, and price, as a way to differentiate among the more than 20,000 apps available today. As more mental health and digital therapy startups enter the market, Zeavin said payers must demand that businesses compete to be in their networks based on verifiable patient outcomes.

"One of the problems with these proprietary platforms is that, because they're about scale and because they're about profit, it's much harder to adjudicate what's working or not working on the grounds of the unit that actually needs to be thought about, which is the patient," she said.

The modern mobile mental health industry launched around 2010, with Ginger, Talkspace and Lantern acting as the poster children for the young industry.

These startups were founded on direct-to-consumer business models, but facing limited long-term growth, they pivoted to target employers and health plans. Lantern failed to make the leap and closed in 2018, with CEO Alejandro Foung saying the startup should have focused earlier on partnering with insurers.

"After some trial and error in the direct-to-consumer and employer spaces, we ultimately pursued a strategy of alignment with traditional health insurance companies," Foung said at the time. "Healthcare moves very slowly and we made the mistake of misjudging the time it would take to achieve sustainable revenue through this approach."

Today, many of these companies are "therapy adjacent," Zeavin said, which allows them to avoid oversight by offering wellness services, coaching or mindfulness techniques. While several independent studies have validated that video therapy sessions are just as effective as in-person care over the years, Zeavin said more research around text therapy and other new care delivery models needs to be done.

"To prescribe it, or to offer it as a major dominant form of care today, is really premature," Zeavin said.

Despite the dearth of independent studies, insurers, employers and government customers are turning to these startups as a way to meet heightened consumer demand and improve employee retention, said Adam Block, a health economist and assistant professor at New York Medical College. But because large-scale, independent studies comparing the efficacy of these programs do not yet exist, Block said payers are deciding which app to add in-network based on startups' user experience, the number and credentialing of their providers, ability to integrate with their existing technology systems, and price. Brand also plays an important role, he said.

"They have a belief that it works," Block said. "Just because there is no proof that it works doesn't mean it doesn't work. It just means that there is no formalized evidence."

Insurer emphasis on mental health helped grow the number of Ginger users more than 350% in June, compared with pre-COVID averages. Today, the San Francisco-based firm offers services to 25 million people through partnerships with insurers and employers. After a decade of business, the company has ditched its direct-to-consumer line entirely.

"Ultimately, both employers and health plans are realizing this supply-demand imbalance in mental healthcare," said Dana Udall, Ginger's chief clinical officer. "They're realizing their existing networks are just entirely inadequate to be able to support the needs of their members fast and efficiently."

Cigna said it was attracted to Ginger's ability to meet its users where they're at—literally—as well as the company's use of behavioral health "coaches," allowing Ginger to catch patients earlier in their mental health journey, helping Cigna avoid more expensive care down the road. The partnership comes as more Cigna members demand mental health support, said Dr. Doug Nemecek, the insurer's chief medical officer for behavioral health.

"Right now, more than ever, individuals are seeking out mental health support, and our relationship with Ginger creates more access to that care," he said in a statement.

Ginger is in the process of transitioning its "hundreds" of clinicians from contract to full-time employees, as a way to add more predictability around its provider supply for its business customers, Udall said.

Ginger actively positions itself as a higher-quality alternative to companies' employee assistance programs. It regularly catalogs and reports qualitative changes in patient outcomes around depression and anxiety to its payer clients, Udall said, with individuals typically showing a better outcome after an eight- to 12-week period compared with other treatments.

As an example of the effectiveness of Ginger's care model, a spokesperson pointed to a January study published in the Journal of Medical Internet Research, which found that 60% of Ginger patients who used a combination of the company's text-based coaching, therapy and psychiatry services reported a reduction in anxiety. Udall was one of the main authors of the study.

"We're very invested in demonstrating outcomes," Udall said. "We have a whole research and evidence arm and we publish regularly. That's the way to really make sure that folks know about the great work that we're doing and, more broadly, that telehealth is highly effective, in some cases even more effective than in-person care."

At deadline, the company was finalizing its first contract with a state Medicaid agency.

Talkspace is also pursuing government customers. The New York City-based startup plans to target Medicaid and Medicare enrollees post 2021, said Mark Hirschorn, president and chief financial officer.

"The best way to reach the vast majority of the U.S. population is through the payer market," he said.

Although Talkspace continues to operate a direct-to-consumer arm, its business clients now make up the lion's share of its membership. In the company's first quarter ended March 31, Talkspace counted more than 90 enterprise clients, up from 25 during the same time last year. The number of members from those customers reached 41.8 million, up 340% from 9.5 million during the same quarter in 2020.

Hirschorn credited the company's technology platform with attracting business customers, saying it allows health plans real-time access to patient care and referral data, along with provider training, certification and credentialing. Another key to gaining coverage has been presenting outcomes data to prospective payer clients, he added.

A study published in June 2021 in the Journal of Technology, Mind and Behavior, for example, found that text therapy improved patients' post-traumatic stress disorder and depression symptoms in fewer days than traditional talk therapy. The study noted it was the "first examination of a structured, trauma-focused intervention delivered through a messaging therapy." The main author of the study received funding from Talkspace.

Criticism that the company's care delivery model is not backed by independent research is simply not accurate, Hirschorn said, noting that 80% of the company's members have found the platform to be as effective as traditional therapy.

"Our approach is currently backed by 14 independent, peer-reviewed studies in which several research teams at different academic institutions have replicated the same effective results time and again," Hirschorn said. "Ongoing research with 24 different universities reinforces Talkspace as a responsible leader in innovative therapy delivery and helps us maximize the value we bring to patients."

Although Hirschorn said Kristen Engleman's experience with provider hopping is not necessarily unusual for the platform, since new enterprise clients have strained Talkspace's 3,000-clinician network, he believes partnering with Talkspace is "still a far better option than attempting to find a therapist through the traditional means." The company recently transitioned 200 of its providers from contract workers into full-time employees, as a way to add more predictability around its service.

As mental health startups increasingly gain in-network coverage, digital prescription therapeutics firms are taking a cue from these companies to explain their value proposition to insurers. The companies—like Biofourmis, Akili Interactive and Pear Therapeutics—offer Food and Drug Administration-approved software systems that are used to treat a specific disease. Providers must write patients a prescription to use the product. CBInsights estimates the market for digital prescription therapeutics at $9 billion.

For these growing companies, health plans offer a larger pool of potential users and, occasionally, the ability to command a higher price. Akili Interactive, for example, which has gained FDA-approval for a video game that offers treatment for ADHD in children, reportedly plans to raise its price by $150 to $450 for a three-month subscription once it gains insurance coverage.

Pear Therapeutics is also targeting payers and other business customers. The startup has partnered with about 15 state Medicaid agencies, employers and regional health plans, such as Kaiser Permanente. It currently has three software programs the FDA has approved as a standard of care—two targeting opioid addiction and one that uses cognitive behavioral therapy to soothe chronic insomnia. Although its software has been prescribed to about 20,000 patients, the company has yet to ink any deals with large commercial insurers, CEO Dr. Corey McCann said.

By reducing users' trips to the emergency department, McCann said Pear's tools to address opioid addiction, partnered with medication, pay for themselves in six months. A December 2020 report by the Institute for Clinical and Economic Review disputed those claims, with the watchdog unable to find evidence that Pear's opioid app provided a net health benefit, and that it offers a "low long-term value" at its current price. If Pear can't show better outcomes compared with traditional treatments, ICER recommended the company discount its $1,200 price for the app.

As a way to prove its ROI, Pear is in the process of building a software tool that allows it to view commercial patients' claims data before, during and after they use its tools, McCann said. The company also plans to use the $400 million it recently banked in a SPAC deal to continue to commercialize its three products and develop a digital therapeutic suite of 14 tools, targeting everything from irritable bowel syndrome to migraines.

"It's really being able to showcase the patient data, as well as the health economic data, and prove the real-world application," McCann said. "That's something that has resonated with payers across the board."

Tech has always moved at a faster pace than the healthcare industry, and it makes sense that companies would be responsible for conducting the initial studies to prove the effectiveness of their products, said Dr. John Torous, director of the digital psychology division at Beth Israel Deaconess Medical Center. But he said it's time for these startups to provide their data to third-party researchers, like him, to conduct randomized control studies.

As more digital mental health tools and therapeutics firms enter the market, insurers, employers and government agencies are beginning to question companies' marketing claims, said Torous, who also chairs the American Psychiatric Association's Health IT Committee. These payers will eventually demand large-scale studies comparing the economic and clinical effectiveness of these products as they look to decide which to offer in-network.

"Insurers are struggling with it," Torous said. "They're seeing all the marketing, they're being told the same messages, but I think it's a tricky situation for them to figure out what's up, what's down, what really works and what doesn't."