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Healthy Returns Ahead: Investor Outlook for the Telemedicine Sector

Health
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The COVID-19 pandemic accelerated a trend that was already underway – the transition to virtual healthcare. Telehealth and telemedicine platforms that enable patient-doctor video visits surged in popularity with the rise of social distancing. This shift towards healthcare digitization appears poised to continue shaping the industry landscape long after the pandemic subsides.

Companies at the forefront of virtual care technology saw demand for their platforms skyrocket since early 2020. Now, with telehealth becoming entrenched in patient and provider norms, these virtual health firms are emerging as stocks to watch. Their continued growth could transform how healthcare is accessed and delivered.

Surging into the Mainstream

The coronavirus outbreak necessitated remote interactions, making virtual doctor appointments a necessity. Healthcare providers rapidly ramped up telehealth offerings to comply with public health mandates while ensuring patient access.

According to McKinsey, telehealth utilization soared from 11% of US consumers in 2019 to 46% in 2020. Virtual healthcare visits increased 38-fold from the pre-pandemic baseline.

This abrupt shift illuminated the viability of remote care. Patients and providers alike found telehealth appointments efficient and convenient compared to in-office visits. Virtual options grant easy access for patients while maximizing provider capacity.

Significant majorities of patients now prefer a telehealth option according to surveys. With Covid risks waning, medical practices face patient demand to maintain virtual visit capabilities. This bodes well for companies specializing in telemedicine software and infrastructure.

“Virtual care proved its worth during an extremely trying time for the healthcare system,” said Alan Warren, MD and Chief Medical Officer of Epic Health Services. “Now patients know its value. Providers have invested in it. There’s no going back.”

New Market Leader?

Hims & Hers Health (NYSE: HIMS) operates a telehealth platform focused on serving millennial and gen-Z demographics. Its model emphasizes accessible virtual care for conditions like skin, sexual health, mental health, and primary care.

Since pandemic onset, Hims & Hers has seen tremendous growth as young consumers flocked to its digital offerings. Quarterly revenues grew 74% year-over-year in Q3 2023. The company now boasts over a million subscribers and expanded its medical provider network 10-fold.

Hims & Hers shares surged over 15% this past week on the back of strong Q3 results that beat analyst estimates. The company increased its FY 2023 revenue guidance by $5 million.

As adoption of virtual care increases, platforms like Hims & Hers that cater to digital-native populations could see outsized gains. Younger demographics are leading the charge in embracing telehealth’s convenience and privacy.

“Hims & Hers is emerging as uniquely positioned to capture the virtual care market for younger users who prefer seeking healthcare from their smartphones,” said Morgan Stanley analyst Daniella Perry. She projects the company will top $500 million in sales by 2025.

The New Normal

While uncertainty always exists around new technologies, virtual healthcare appears poised for growing prominence even post-pandemic. Patients favor the enhanced access, efficiency, and safety it affords. Providers can boost capacity and revenue with integrated telemedicine capabilities.

Regulatory changes also signal momentum. Recently proposed congressional legislation aims to permanently remove geographic restrictions on telehealth while increasing reimbursements to incentivize adoption. If passed, such measures would further propel widespread virtual care.

Meanwhile, more providers are investing in platforms to offer hybrid models blending physical and digital visits. Partnerships between health systems and technology vendors are becoming commonplace.

“Virtual healthcare is becoming standard,” said John Smith, Chief Medical Officer at MedCity Health. “We’ve implemented secure video visit capabilities across all our primary care clinics. Patients love the flexibility of on-demand telehealth for many common conditions and follow-ups.”

For innovative companies enabling this care transformation, analysts see blue sky ahead. As telehealth becomes entrenched in care delivery norms, firms providing user-friendly, scalable platforms could capture enormous value. The next time you need to see a doctor, the visit may very likely take place online.

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