Amwell, a Boston-based virtual care company, may be well positioned to take advantage of well-documented provider challenges around labor and inflation.
“I think overall growth will accelerate from 9% this year to 18% next year,” said Jack Wallace, vice president of equity research at global investment and advisory firm Guggenheim Partners. “As long as you can offer the health system a solution to help with some of their labor problems — the most acute problems facing hospitals — you’d love to hear.”
Wallace said Guggenheim’s research found that vendors’ IT budgets are expected to remain “sticky,” with minimal reductions. This will help Amwell, which primarily sells products to hospitals.
Amwell CEO Ido Schoenberg addressed the opportunity during the third quarter earnings call.
“We know hospitals have limited budgets, but the challenges faced by 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 significant R&D funding — saw a 7% increase in total visits in the third quarter of this year compared to 2021. The company’s subscription revenue was $31.9 million, an increase of 19% compared to last year.
Experts said that the main development project of the platform is expected to wind down, which will reduce the expenditure cost. That shift, combined with the increase in traffic, has in part led the company to slightly raise its EBITDA forecast for the year by $10 million.
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Despite this, Amwell’s adjusted EBITDA in the first nine months of 2022 expanded to more than A loss of $131 million. It posted a net loss of $70.6 million.
In an analyst note, Goldman Sachs’ Cindy Motz said 2023 will be another fraught year for Amwell due to macroeconomic conditions. A challenging year, especially as it has many hospital clients.
But analysts are largely bullish because the company is expanding its customer base beyond hospitals and has reserves that can help it get through the coming year.
Wallace said: “If this process takes longer than expected, their cash reserves can provide them with an additional few years.”
The impact of the company’s recent partnership with CVS Health was not mentioned on the call. The telehealth company announced in August that Amwell was working with the pharmaceutical giant on its new virtual care platform.
CVS Health’s offerings will include tele-primary care, chronic disease management and mental health care, and will be rolled 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 begins offering on-demand virtual care for low-sensitivity health concerns, Chairman and CEO Dr. Ido Schoenberg said in 2020, with plans to transition A technology company with tools to connect with patients, and no longer provides healthcare services.
On Monday night, Amwell also named former UnitedHealth Group executive Robert Webb to its board of directors.
This story first appeared on Digital Health Business & Technology.