Optum’s Telehealth Shutdown Is Just the Tip of the Iceberg

By Sergei Polevikov, ABD, MBA, MS, MA 🇮🇱🇺🇦

Telehealth is collapsing, but you already knew that.

I’ve written four research articles on the telehealth industry:

The Telehealth Masquerade: How Corporate ‘Geniuses’ Sold Us the 1876 Wine in a New Bottle. November 17, 2023.

Digital Health 2024: 7 Predictions & 50 Names You Don’t Want to Miss. January 1, 2024.

Livongo Killed Teladoc. February 21, 2024.

Livongo Killed Teladoc, Part Two: CEO Out. April 8, 2024.

As I predicted in all these articles, telehealth, as we know it, is collapsing, with the market value of standalone telehealth products gradually moving to zero. I thought the death was going to be by a thousand paper cuts. However, things may be moving faster than I expected.

“As we know it” is a key phrase here. We’re witnessing one of the biggest transformations any industry has experienced.

The truth is that venture capital “sugar daddies”, the COVID pandemic, and the “zero interest rate policy” (ZIRP) all end at some point, and what’s left is the Emperor with no clothes.

Standalone telehealth has never been an innovation, and it never made a profit.

No patient wants to see a random doctor from the Amwell Medical Group network (yes, it’s a real thing!) every time they schedule a telehealth appointment.

I’ll be honest, I did not expect things to unfold so quickly. I actually had Amwell and Teladoc Health collapsing much quicker on my bingo card than Optum‘s telehealth. I didn’t anticipate the collapse to happen during one of the Goldilocks periods in the U.S. economy, famously characterized by the three “3s”: 3.3% real GDP growth, 3.1% inflation rate, and 3.7% unemployment rate. Not to mention that the stock market is making new highs seemingly every week. I was actually waiting for some kind of market correction.

But if the telehealth collapse is unfolding during good economic times, it tells us things are bad.

Also, don’t believe anyone who says they can predict the timing of an event in financial markets. I’ve known plenty of people who have been predicting a market crash every year (which means that, historically, they were wrong 11 out of 12 years), and then the year we’ve had a market crash, they are all over the media being proclaimed as the next Nostradamus. 😉

So Why Is Optum Shutting Down Its Telehealth Business?

Optum is reportedly closing its telehealth business, known as Optum Virtual Care.  (Sources: Endpoints, Becker’s Hospital Review, Business Insurance, PYMNTS, Seeking Alpha.)

The announcement followed closely after Optum employees began sharing on social media starting April 18, 2024, about a workforce reduction they claim affected the entire organization. Many believe these two developments are interconnected. (Source: Becker’s Hospital Review.)

While there are numerous theories, it’s difficult to definitively state the exact reason for the closure. (For instance, there’s a notable article by Christina Farr, featuring insights from Rebecca Mitchell, MD and Matthew Sakumoto.)

Here are a few hypotheses of my own:

In the latest edition of AI Health Uncut, I explain why Optum‘s decision to shut down its telehealth operations is just the tip of the iceberg of what appears to be a massive collapse of telehealth industry, as we know it.

The “champagne and cocaine” era of venture capital “sugar daddies”, the COVID-19 pandemic, and the “zero interest rate policy” (ZIRP) have all ended, which is particularly painful for the telehealth industry that struggled to turn a profit even during what could only be called the era of “easy money” for the U.S. economy.

Telehealth should be viewed as an integral component of comprehensive patient care, not as an isolated service. Comparing it to a stethoscope is apt. Sure, a stethoscope was a marvel to brag about a couple of centuries ago, but in today’s healthcare landscape, it’s one of many tools. Similarly, telehealth is now a standard element of the patient care experience.

This is the reason why physicians are increasingly abandoning standalone hashtag#telehealth services like Amwell and Teladoc Health and are instead integrating telehealth tools that are already available on their computers, such as EHR systems or Doximity. Doctors don’t want more apps, especially shitty apps. They want to focus on caring for their patients.