The Telehealth Bubble Has Burst

The telehealth bubble has burst. Time to figure out what’s next

Telehealth took off during the pandemic, but 2021 was a brutal awakening. The healthcare industry is still figuring out how it fits into the big picture.


When the U.S. raced to lock down the country in the face of a quickly spreading novel disease, telehealth provided a lifeline. Using technology such as video calls, healthcare organizations were able to screen individuals for COVID-19 before there was any testing infrastructure. But now in this later stage of the pandemic, Americans are coming out of their homes and going back to the doctor’s office. Stocks for big telehealth companies are down.

While telehealth remains an important tool for doctors, it no longer seems likely—as online pharmacy Hims CEO Andrew Dudam once posited—that the vast majority of healthcare is going to happen online,. And going into 2022, it looks like the more exciting developments will be on-the-ground healthcare.

In February 2021, Teladoc, a major telehealth platform with a focus on chronic care, stock hit a high of $293.66 per share. It has since careened back down to earth, at $89 per share. Telehealth company Amwell’s stock was at $35 per share in February and is now hovering around $5 per share. Stock for Hims rallied to $23.99 per share at the beginning of this year and now sits under $6 per share. Even Zoom is down from its 2020 peak (investors are displeased with its slowing growth, an issue for other companies on this list as well).

Meanwhile, funding for health care startups has exploded, though the money isn’t focused on telehealth. CB Insights data shows that in 2021, healthcare funding reached $97.1 billion in the third quarter, representing 22% of the capital raised all year. Much of that money is going into biotech companies and newfangled drug development. One exception to that trend is CityBlock Health, which raised $400 million this year at a $5 billion valuation and provides care to Medicaid recipients.


What has brought the telehealth market back down to earth? At the height of the pandemic, the value proposition of remote care was obvious. But now, everyone is trying to figure out where telehealth fits into the overall healthcare landscape.

“Telehealth has been in the crosshairs,” said Adam Gale, CEO and cofounder of Klas, an organization that rates Health IT companies, on the podcast Healthcare Is Hard, hosted by venture firm LRVHealth. “Everyone had one or two solutions they went into COVID with and came out with five or six or seven.”

Now, he says, companies are trying to reconfigure their telehealth strategies for the long term. That may mean dropping all the products these companies bought during the pandemic, because they no longer fit. Where in April 2020, health care was largely happening online, now roughly 13%-17% of care happens online, according to McKinsey, with psychiatry comprising the majority.

“The bigger macro trend here is that telehealth is starting to see some declines from the peak during the pandemic where we didn’t have much choice other than to see our providers virtually,” says Christina Farr, a venture capitalist at OMERS Ventures (and former Fast Company writer). “Where we don’t see those declines as acutely is in the behavioral health space—and I expect that’s why we are seeing record funding moving into the sector.” She also says that there’s a lot of interest in telehealth platforms that specialize in a specific demographic, such as LGBTQ patients.

Farr adds that there’s an opportunity to be a core technology for an evolving health care system: “Digital health seems to be more mature now and the playbooks are being written.” Next year—and possibly the next decade—will be all about defining how telehealth is best deployed, integrated, and used.


Some of this will be dictated by what the Center for Medicaid and Medicare Services (CMS), and insurers broadly, will reimburse patients for. About 40% of primary clinicians said they will not be able to support telemedicine if CMS goes back to its pre-pandemic rules and stops reimbursing for telemedicine and phone visits, according to a recent survey from The Primary Care Collaborative and The Larry A. Green Center. In its updated guidance for 2022, CMS agreed to cover audio-only behavioral health services, tele-addiction treatment, and in-home health visits. That means that there are opportunities for companies to provide healthcare in both remote and in-home form.

Some are already making moves in this direction. For example, earlier this year, tele-pharmacy Ro acquired a company called Workpath that does at-home blood draws and ran a small in-home vaccination pilot for seniors. It’s unclear whether couch-side phlebotomy will become de rigueur, but it touches on the need for telehealth companies to move offline to fully address patient needs.

In addition to at-home services, there’s a growing abundance of at-home testing. Rapid COVID-19 tests are sold over the counter at pharmacies and online (though they’re hard to find right now) and there’s a wealth of at home tests for fertility, urinary tract infections, and kidney disease. There are also a growing range of in home devices such as smart thermometers, mats that detect diabetic foot complications, and pulse oximeters—basically anything that helps doctors continue care after a regular visit. We can expect that going forward, more care will happen in the home. But perhaps more interesting is the way in which digital health startups are moving into retail clinics.


Smart companies are recognizing that telehealth is just one piece of a much larger whole. Carbon Health, an early virtual care provider, now has physical locations in 17 regions around the country and is getting into clinical trial research. Amazon Care, which launched its virtual care platform in 2019, has opened 17 in-person clinics for Amazon employees with Crossover Health. Companies such as Rezilient Health are also thinking about the ways in which spaces such as parking lots can be repurposed to house health clinics.

This movement is part of a coming wave of retail health clinics. This year, Walgreens agreed to invest $5.2 billion into VillageMD to put 1,000 of its primary care offices next to Walgreens pharmacies. CVS is making similar investments. At its recent investor day, CVS Health CEO Karen S. Lynch said the company would be expanding services to include primary care, both in person and virtually. Even Dollar General is marketing itself as a health care destination.

This all-around surge in retail clinics has to do with health care companies experimenting with the patient experience. Care needs to be convenient and easy. Originally, many people thought that virtual care could be the simplest possible patient experience. But it seems that people do want to see a doctor in person, so large scale companies are now experimenting with that scenario. That’s why you see pharmacies co-locating with primary care offices.

As for the fate of telehealth, a comparison I’ve heard frequently is that its present state is like the early days of ecommerce back in the 1990s. “Digitally delivered care is analogous to retail on the internet; it levels the playing field so individuals anywhere can get access to the best care for them,” says Alex Morgan, an investor at Khosla Ventures. The pandemic accelerated the use of technology in healthcare. Now healthcare companies have to figure out how to use the tools they have to create the ultimate patient experience, much like Amazon did in ecommerce. Telehealth is not a bust, says Morgan—it’s just in its infancy.