The Teladoc Business Model – How Does Teladoc Work?

Teladoc is a telemedicine and virtual healthcare platform that provides online medical care. Customers can talk to licensed physicians about non-emergency, mental health, and dermatological conditions and receive remote prescriptions for medication.

The business model of Teladoc is based on its clients signing up for yearly or monthly subscriptions. Individuals can also pay a flat sum for an appointment.

Teladoc’s consulting physicians are paid per consult.

Founded in 2002, the company has grown into one of the largest virtual healthcare names in the United States. Its estimated 2016 market share was 75%.

In 2020 it was part of a merger with Livongo, an Applied Health Signals company. Its expected 2020 revenue was estimated at approximately $1.3 billion.

What Is Teladoc?

Teladoc is the largest virtual healthcare company in the United States. It offers virtual medical consultations with licensed state physicians as well as services based on AI, analytics, virtual care programs, and telehealth devices.

Users have open access to board licensed doctors via the Teladoc website or mobile app. The platform allows individuals to avoid surgery or clinic wait times while saving on logistical costs. Clients can offer the service as an important part of their employment package.

Teladoc has over 50 million members and 12,000 clients, serving over 170 countries. Its network has over 55,000 medical professionals (including 3,100 licensed doctors) working across 450 subspecialties.

Since the beginning, the business has grown to collaborate with international hospitals, over 70 global insurance companies, healthcare providers, and health delivery organizations.

In 2019, the business completed 4 million virtual care visits. During the COVID-19 pandemic, that number skyrocketed. As a result, Teladoc saw a 92% jump in visits during the first quarter of 2020.

How Does Teladoc Work?

Teladoc works by connecting you with certified board physicians via its website and mobile app. Users set up an account, provide basic details and complete a medical history survey. The survey provides the information necessary for doctors to accurately diagnose you and prescribe effective medication.

Through an account, users can request a “visit”. You can do this on your own behalf or for others (if they share access to an account). You’ll have to select which state (United States users) you’ll be in during the consultation period.

Teladoc’s platform will connect you with a doctor in that area. You can arrange a consultation via video or phone call. You’ll also select the time you want the appointment and can upload photos beforehand (in the case of visual symptoms). Finally, you’ll be provided with payment options (if you’re not a paid subscriber).

Consultations are focused on non-emergency cases. If the consulting physician feels your condition is serious, they will refer you to your local ER hospital. Any prescriptions will be sent to a local pharmacy of your choice.

The cost of consults varies depending on the users’ benefit plan (more on how Teladoc makes money later).

How Does Teladoc Pay Physicians?

Teladoc physicians take a fee directly from the Teladoc service. According to, the average hourly rate for a physician signed up to Teladoc is around $100.

Physicians take a percentage of the consultation fee users of Teladoc pay.

Earning capacity is set by demand and physicians’ availability. There are many reports of doctors making a full-time income working exclusively with Teladoc.

Teladoc Company History

Teladoc was founded in 2002 out of North Dallas, Texas by Michael Gorton and G.Byron Brooks MD. The idea for the business came out of a trip both founders took to Mount Kilimanjaro in Kenya.

Gorton is a serial entrepreneur raised in Texas. His father, enlisted in the United States military, encouraged his creativity and business acumen from a young age.

Gorton met Brooks in Virginia, after having relocated there due to his father’s work at the Pentagon.

Teladoc faced several problems in its early days. Attracting physicians to the platform was a major problem, with retired or disabled physicians making up the core of their initial network.

Another stumbling block was the general public’s early view of telemedicine. Particularly over the question of quality of care and whether it could really be delivered remotely.

“That was a question that also translated to the board’s medical examiners who said you can’t do this, it’s illegal and unethical”, said Gorton in a recent interview.

Teladoc eventually worked through the problem by reminding regulators of the subject of “cross-coverage”, whereby a physician ‘covers’ for another physician when they’re not available. Something that’s been happening since the dawn of medical practice, regulators were soon convinced telemedicine could be a neat extension to traditional home doctor calls.

Despite overcoming these initial roadblocks, however, Teladoc’s journey has been anything but smooth. It took five years after the initial launch for the platform to reach 1 million members.

Something that helped its adoption (albeit relatively slowly), was the fixed fees set for patient consultations. Originally set at $35 to $40, the price point helped Teladoc launch nationally (with the announcement coming at the Consumer Directed Health Care Conference in 2005), as well as secure important contracts with the likes of AT&T.

“At the end of my time at Teladoc we had 2 million members. We were delivering doctors to patients for about 12 minutes at about $35 dollars. So essentially we were solving two problems; access and price”, Gorton adds.

But where problems were solved patient-side, the company still struggled to get physicians on board. Concerned by the threats of increased liability, increased working hours, and a medium with which they were unfamiliar, it was a challenge that took some time to work out.

“Our doctors actually made more money working for us than they did doing primary care. If you look at the typical primary care doctor’s life, they’re working 60-80 hours a week. And at the time they were making $138K a year. With our model they were working 8 hours a day, 5 days a week and would make about $250K. So we shortened their day and made them more income. And we did that through efficiency; they didn’t have all the bills to pay, they could do it from their house.”

Still, the concept of telemedicine was completely new and this message, for physicians at least, took a long time to get through. Early network adopters had an average of 14 years experience in medicine (something that’s grown to 20 years today) and there was also the problem of competition; especially from Boston-based American Well (who later filed a lawsuit against Teladoc which the latter eventually won).

In 2009 the company got more aggressive. Gorton left and Jason Gorevic (former CEO at New York’s Empire BlueCross BlueShield) stepped into the hot seat as Teladoc’s chief executive. Under his guidance, the company was able to score several million dollar rounds of private funding.

In an interview with D Magazine, Gorevic reiterated his desire to get involved. “I thought the time was right for telehealth and that it could make a big difference…I was looking at all of the big trends around healthcare reform, the shortage of primary care physicians, the cost trends in healthcare. I thought that telehealth was the right solution to a lot of these problems”, he was quoted as saying.

In 2011 Gorevic acted on this enthusiasm and negotiated Teladoc’s take up by healthcare insurance company Aetna. Rolling out the platforms’ service to their fully insured members across the United States, Aetna’s business helped fund the company’s first large acquisition, the purchase of Consult A Doctor for $16.6 million in 2013.

That business’s assets, coupled with Teladoc’s own growing member base, took its consult numbers to 120,000 at the end of that year. By the time 2014’s Affordable Care Act rolled out, and further acquisitions took place with online mental health service BetterHelp and analytics company Stat Health Services (StatDoc), things were going steady.

In 2015 the company finally went public. Becoming the only telemedicine company at the time to do so, the initial response to the IPO was positive. Things got shaky soon after when health insurer Highmark, a client making up 1.5% of Teladoc’s revenue, failed to extend their contract.

Despite the initial knock, the company made its largest moves toward resembling the multi-service offering it is today during the course of 2016. Its aggressive takeovers of companies involved in sexual health, dermatology, and behavioral health, meant it topped out with 15 million members at the close of that year. Then in 2017, it made its largest acquisition ever, buying medical consultation firm Best Doctors for $440 million.

Since then, growth has been on an upward trend. Shortly before the events surrounding COVID-19, Teladoc had already changed its name to Teladoc Health, extending its market capitalization to $4.1 billion. Even despite a scandal in late 2018, when the company’s CFO and COO Mark Hirschorn resigned after insider trading allegations, Teladoc continued growing. Expanding outside the United States with its acquisition of Advance Medical (an employer of doctors in Asia, Europe, and Latin America), its stock price bounced back.

The changed attitudes of the global pandemic and August 2020’s merger with Livongo perhaps leave Teladoc in its healthiest position to date. Chase Feiger, M.D., in his column at Forbes, called it the most “unprecedented event in digital health history”, arguing that it will drive down the overall cost of care and increase the number of patients able to receive treatment.

Teladoc closed out 2020 with projected revenue of $1.1 billion, doubling its 2019 revenue of $553 million. It also reported having delivered 10.6 million virtual visits in that same time period, growing its paid membership base to just over 50 million users.

How Does Teladoc Make Money?

Teladoc makes money by offering a subscription-based model. Clients (employers) pay annual or monthly subscriptions for access to Teladoc’s varying services and offer these to employees. Online physician consultations are the primary service offered.

Teladoc’s choice of this model is unconventional compared to competitors. Doctor-on-Demand, a rival telemedicine company offering a similar service, offers a flat fee per “visit” model. The advantage of this model is fairly obvious. If nobody uses the service, the company has no costs, while if everyone uses the service the company still saves (the flat fee is less than a face-to-face consultation).

The way Teladoc makes money is mostly dependent on signing up enterprise clients. At this point, employers are seeing utilization (especially thanks to the pandemic and global health concerns) and are happy to pay. But the model does leave them somewhat fragile if the future mood suddenly changes.

Teladoc’s one-time flat fee consultation payments, starting at $49 per feature, coupled with their international focus (205,000 out of 861,000 of 2019’s global visits), is something that helps minimize that problem.

Teladoc Funding, Revenue & Valuation

According to Crunchbase, Teladoc has raised $172.9 million across six rounds of venture capital funding.

Lead investors include Icon Ventures, Trident Capital, HLM Venture Partners and Silicon Valley Bank.

After Teladoc went public in 2015 it had an enterprise value of $620 million and a market capitalization of $758 million. Today’s data puts their valuation at $28.42 billion.

In the fiscal year of 2020, Teladoc posted annual revenues of $1.09 billion.

In the same year they incurred a net loss of $485.1 million, accumulating a total deficit of $992.7 million.

These losses are a result of investments acquiring new clients and expanding Teladoc’s networking and provider bases.