Teladoc Health (NYSE: TDOC), a pioneer in virtual care, saw its growth accelerate in the third quarter of 2022, with its direct-to-consumer platform, BetterHelp, emerging as the key driver. However, while BetterHelp has expanded rapidly, Teladoc’s leadership cautions that the platform’s consumer-focused model is sensitive to the nation’s broader economic environment, and maintaining sustainable BetterHelp growth remains a key strategic focus.
Unlike Teladoc’s business-to-business (B2B) offerings, which are largely contracted and predictable, BetterHelp operates in a direct-to-consumer space where users pay for services out of pocket. “If we see economic recovery next year and inflation coming down, and the consumer feeling more confident, that could be helpful for us,” said Teladoc CEO Jason Gorevic during the company’s Q3 earnings call. Conversely, rising inflation and economic pressure could negatively affect demand, as BetterHelp is “one of the more expensive things that the consumer buys. It doesn’t come in a box.”
This reliance on consumer confidence highlights the unique challenges of scaling a direct-to-consumer mental health service. While demand for mental health services continues to grow, discretionary spending—especially on higher-cost services like BetterHelp—can fluctuate with economic cycles. Teladoc plans to navigate these uncertainties with a balanced focus on both growth and margins, ensuring sustained BetterHelp growth.
BetterHelp’s Journey From Acquisition to $1 Billion Run Rate
Teladoc’s acquisition of BetterHelp in 2015 for $17.2 million marked a strategic move into the consumer behavioral health market. Since then, the platform has experienced rapid expansion, helping Teladoc establish a strong foothold in digital mental health. BetterHelp provides online therapy sessions with licensed counselors, making behavioral health more accessible to people who may not otherwise seek traditional in-person care.
Gorevic highlighted that BetterHelp has reached a $1 billion run rate, emphasizing its significance within Teladoc’s portfolio. “That business has grown and scaled incredibly fast,” he said, noting the platform’s ongoing focus on efficiency and profitability alongside growth. Despite economic headwinds, the company remains committed to expanding BetterHelp’s reach and maintaining its leadership position in the direct-to-consumer mental health space. This dedication to strategic planning supports continued BetterHelp growth across multiple consumer segments.
Innovations in Delivery: Group Therapy and Digital Efficiency
To improve operational efficiency, Teladoc is increasingly exploring digital innovations, including virtual group therapy sessions. Unlike traditional one-on-one therapy, group sessions allow a single counselor to interact with multiple clients simultaneously, improving gross margins while maintaining service quality.
“We’re leaning more into digital interactions with consumers as well as group therapy, which is a more efficient way of interacting with the consumer,” Gorevic said. “It actually has the effect of depressing our visit volume, which is actually good because it improves gross margins while enabling us to serve more people with fewer professional resources.”
By embracing group therapy and other virtual solutions, Teladoc is not only improving efficiency but also fostering BetterHelp growth by expanding the number of consumers it can serve without proportionally increasing costs.
Advertising Challenges and Stabilization
Direct-to-consumer mental health services face unique marketing challenges, particularly when it comes to customer acquisition costs. Historically, BetterHelp has grappled with advertising efficiency, as high spend on digital campaigns sometimes exceeded the revenue generated from new users.
Gorevic noted that while advertising yield remains below initial expectations, it has stabilized, allowing the platform to deliver strong revenue and margin contributions. “We continue building upon BetterHelp’s significant leadership position in the direct-to-consumer mental health market while driving both growth and margin,” he said.
This stabilization is particularly important as smaller competitors face economic pressures. High advertising costs, combined with a tightening economic environment and rising capital costs, may slow the growth of newer digital mental health startups, giving BetterHelp a sustained competitive advantage. All of these factors contribute directly to BetterHelp growth in the current market.
Leadership Expansion to Support Growth
To strengthen its operations and drive further growth, Teladoc announced that Laizer Kornwasser, former COO of CareCentrix, will join as COO. Kornwasser will oversee all client channels and product lines, supporting both B2B and B2C offerings. His experience in scaling healthcare operations and managing complex client relationships is expected to complement Teladoc’s strategic focus on efficiency and growth across its platform.
This leadership addition underscores Teladoc’s commitment to operational excellence as it balances expansion in BetterHelp with ongoing investments in chronic and value-based care services. The guidance provided by Kornwasser will help sustain BetterHelp growth while improving margins and scalability.
Expanding Into Value-Based Care
Beyond BetterHelp, Teladoc is actively pursuing value-based care opportunities, particularly within its chronic care segment. Value-based care models focus on improving patient outcomes while controlling costs, rewarding providers for efficiency and effectiveness rather than service volume.
Teladoc has already demonstrated success in this area. In 2021, the company launched a chronic care shared-saving pilot with fully insured members at a Blue Cross Blue Shield plan. The pilot exceeded medical cost savings targets by 60%, proving that Teladoc can deliver meaningful outcomes while generating financial benefits for payers.
“Our team just concluded a study with this partner’s actuarial team, who determined that we have exceeded our medical cost savings target by 60%,” Gorevic said. “Not only do we drive better outcomes for our members and drive more savings for our clients, but we’re able to realize a small shared-savings bonus. We believe the outcome of this pilot and others like it validate our ability to move further toward value-based contracting over time.”
This focus on value-based care complements the direct-to-consumer growth strategy. While BetterHelp addresses mental health needs for individual consumers, Teladoc’s value-based programs demonstrate its ability to manage complex chronic conditions for insured populations, creating diversified revenue streams that further support BetterHelp growth indirectly.
Q3 Performance Highlights
Teladoc’s Q3 2022 results reflect strong growth, despite a challenging economic backdrop. Revenue increased 17% year-over-year to $611 million, marking a rebound after a slower first half of the year. BetterHelp was a standout performer, growing 35% quarter-over-quarter. The company also added 1.2 million members, bringing total membership to 57.8 million.
These results highlight the strength of Teladoc’s dual approach: leveraging consumer-facing platforms like BetterHelp while expanding value-based care solutions for chronic conditions. The combination allows Teladoc to remain resilient even as economic pressures affect discretionary spending, ensuring ongoing BetterHelp growth.
The Road Ahead for Teladoc
Looking forward, Teladoc aims to continue scaling BetterHelp while improving operational efficiency through digital and group therapy innovations. Advertising strategies are stabilizing, competition in the consumer mental health space may slow, and the company is deepening its commitment to value-based care models.
For BetterHelp, the focus will remain on balancing growth with profitability, serving more consumers efficiently while navigating potential economic headwinds. For Teladoc overall, leadership expansions and innovative care delivery models are expected to strengthen its position as a leader in both virtual mental health and broader healthcare management.
Teladoc’s performance demonstrates the evolving landscape of digital health. As consumers increasingly turn to virtual care solutions, companies that can combine accessibility, affordability, and operational efficiency are well-positioned for long-term success. BetterHelp, now a $1 billion business segment, exemplifies this model and underscores the growing importance of digital behavioral health in the U.S. healthcare system. The continued focus on BetterHelp growth highlights Teladoc’s strategic commitment to scaling its consumer mental health offerings in a sustainable and profitable way.
