In a pandemic-era world, primary care is a hot topic in healthcare - and a hot business model. Its no secret that many healthcare providers have suffered financially from the virus and the resultant decline in elective visits to the doctor. However, one man gathers what another man spills, and innovative companies in the telehealth space have sprung up to serve patients who are no longer comfortable going to get an in-person check up. One Medical, which trades under the name "1life Healthcare Inc." is one of many innovative companies benefitting from this rapid adoption of digital health technologies.
Pre-covid, One Medical made waves by offering what's referred to as "concierge medicine". The basic idea is that as fewer and fewer doctors have gone on to practice primary care and family medicine, it has gotten harder and harder for patients to get in to see a primary care physician ("PCP"). The math is simple - fewer doctors and the same number of patients means more patients per doctor and less time spent with doctors per visit. One Medical has stepped in and established a system where patients pay a membership fee in order to receive priority access to One Medical's PCPs - effectively creating a premium healthcare service to those who are willing and able to pay for the privilege. One Medical IPOed back in January of 2020, and the market has embraced its premium healthcare model:
As the pandemic has dragged on, One Medical has doubled down on the telehealth portion of its services, allowing patients to see doctors on-demand via a digital interface. This capability has pitched One Medical against other blossoming telehealth-focused companies like Teladoc that have been attracting a lot of investor attention recently. However, what makes One Medical unique is the dual approach to premium healthcare - offering on-demand healthcare services digitally as well as in a premium, in-person setting.
So how do the numbers fall? The chart below paints an interesting picture of Teladoc, One Medical, and their relative stock performance. YTD December 2020, TDOC has risen ~150% compared to a ONEM's ~61%, a fact that reflects the difference in the two companies and how investors have responded to an all-digital vs. digital/in-person hybrid business model. Clearly Teladoc's market leading digital health platform has been popular with investors, but is this just a covid-bump?
Markets are always forward looking, and investors should be as well. Although Teladoc has been well positioned to benefit from the effects of the pandemic, how much of the benefit will stick as things return to normal? And how will the stock trade if patients stop utilizing telehealth as readily? This uncertainty highlights One Medical's value proposition: if patients prefer to go back to the doctors' office post-pandemic, they can provide care in an premium, in-person setting. If not, the digital option exists as well.
This hybrid model has kept One Medical's shares from trading as explosively as Teladoc's but it might provide One Medical shares with some protection from significant changes in patient behavior post-covid. It has also kept One Medical shares cheap relative to Teladoc shares. While neither company is cheap by traditional measures, Teladoc currently trades at a 32x Price:Book ratio compared to One Medical's slightly more pedestrian 16x. Of course, there is always more to the story than simple ratios, but One Medical's unique take on premium primary care and insulation from changes in post-covid patient behavior might make this growth stock worth paying for.