SOC Telemed acquires acute telehealth vendor Access Physicians for $194M

Dive Brief:

  • SOC Telemed has acquired Dallas-based telehealth provider Access Physicians in a cash and stock deal valued at $194 million, resulting in what the companies say is the biggest pure-play acute telemedicine provider in the U.S.
  • The acquisition, which was completed on Friday and announced Tuesday, significantly expands SOC Telemed’s national footprint and clinical service lines amid growing demand for acute telemedicine during COVID-19.
  • With Access Physicians, SOC Telemed is adding infectious disease, cardiology, maternal-fetal medicine and nephrology to its core services of neurology, psychiatry, critical care and pulmonology.

Dive Insight:

The coronavirus pandemic created a sea change in healthcare delivery through unprecedented utilization of telehealth as consumers looked to access their doctors while avoiding the potential for contracting the virus. Providers quickly raced to ramp up their telemedical capabilities last year to reach patients and recoup lost revenue as in-office visits flatlined in the early months of COVID-19.

SOC Telemed and Access Physicians say their union will make them well positioned to address this growing market and challenges, including a shortage of specialty physicians and inequities in access to specialized care.

Reston, Va.-based virtual care vendor SOC Telemed was already a major player in acute telemedicine. Founded in 2004, SOC Telemed brought in $58 million in revenue last year, mostly derived from contracts with facilities using its Telemed IQ software platform and clinical provider network.

The acquisition of Access Physicians grows its client list to almost 1,000 facilities in 47 states, including more than 700 hospitals, and results in a combined roster of 750 available clinicians spanning numerous medical specialties.

SOC Telemed is acquiring 10-year-old Access Physicians for $94 million in cash and 13.9 million shares of stock valued at $100 million, per a filing with the SEC. Access Physicians could earn an additional $20 million if it meets certain revenue and performance goals for 2021, and another $20 million if certain executives stay on at the combined company, resulting in an aggregate purchase consideration for SOC Telemed of $234 million overall.

The combined company expects to bring in $107 million to $113 million in pro forma revenue in 2021.

Relying on inorganic growth to drive sustainable revenue could be a bit of a gamble for SOC Telemed, which took on a considerable amount of debt to fund the purchase and is facing a flagging topline. Additionally, it operates in an increasingly competitive market, as telehealth behemoths like Teladoc Health are also investing heavily in their provider-focused businesses.

Full-year 2020 revenue for SOC Telemed was actually down 12% from 2019, mostly due to lower consultation volume and the negative impact of COVID-19 on hospital-based specialty services, the company said in annual paperwork filed with the SEC on Tuesday.

“The Company expects that its operating losses and negative cash flows will continue for the foreseeable future,” SOC Telmed wrote in the filing. It reported a net loss of $49.8 million last year, significantly higher than 2019’s loss of $19.2 million. The vendor chalked rising losses up to growth investments and costs related to transitioning to a public company.

SOC Telemed, formerly known as Specialists on Call, went public over the summer in a blank check merger with a special purpose acquisition company, an increasingly popular way to enter the public markets for health tech companies giving founders and investors guaranteed access to capital without ceding managerial control.

It was one of the first in a flurry of SPAC deals last year among digital health players — over the past few months, numerous tech-focused health startups have taken this route, including Hims & HersClover Health, Butterfly Network, Talkspace, 23andMe and ShareCare.​