Optum is shutting down its virtual care business after a three-year run. Industry experts aren’t very surprised by the news.
Healthcare leaders agree that this closure reflects broader trends in the telehealth market, in which saturation and differentiation challenges are leading some providers to struggle. In the future, experts believe the most successful virtual care companies will be those that provide personalized patient experiences and focus on niche community needs — as well as those that adapt to a hybrid model of care rather than relying solely on virtual.
What happened?
Optum’s virtual care unit offers virtual urgent and primary care visits and prescription refills across all 50 states. Optum, which is owned by UnitedHealth Group, founded its virtual care business in April 2021 — when pandemic restrictions were still prevalent and telehealth enthusiasm levels were high.
Former Amazon executive Kristi Henderson served as CEO of the virtual care unit until last June, when she departed to take over as CEO of musculoskeletal care provider Confluent Health.
News of the unit’s closure first emerged last week when Optum employees began posting on social media about layoffs at the company. Optum confirmed the news in a Tuesday email to MedCity News.
An Optum spokesperson wrote that virtual care “has been and will continue to be a core part” of the company’s integrated care delivery model.
“As an enterprise, we are committed to providing patients with a robust network of providers for virtual urgent, primary and specialty care options. We continually review the capabilities and services we offer to meet the growing and evolving needs of our businesses and the people we serve. As always, we will support affected team members with job placement resources and seek to deploy them where possible to any open roles within the company,” the spokesperson wrote.
At UnitedHealth Group’s investor conference last November, Optum Health CEO Amar Desai declared that Optum has nearly 90,000 employed or affiliated physicians, as well as another 40,000 advanced practice clinicians. Optum has not disclosed how many of these healthcare workers will be affected by the shutdown.
Has the telehealth hype worn off?
Health systems’ data shows that virtual visit volume has been decreasing since 2021, and market research reports released the past couple years have predicted the trouble in the telehealth space.
For example, a Trilliant Health report from August showed that the telehealth market is becoming oversaturated, making it harder for companies to stand out. Essentially, the boom of telehealth providers that came in 2020 and 2021 was a result of pandemic-era forced telehealth adoption — and now the market has to pick up the pieces, the report said.
Sanjula Jain — author of the report and Trilliant’s chief research officer — said that Optum’s decision to shutter its virtual care business comes as no surprise.
“The data suggests that virtual care is used by a niche segment of the population and within that small population, nearly half of users only used it once,” she said. “Moreover, more than 60% of telehealth visits were for behavioral health-related reasons with a small proportion of utilization attributed to primary care services.”
Jain also said it’s important to note that 30% of non-behavioral health virtual visits result in the patient needing to schedule a follow-up in-person visit for the same reason, which suggests a degree of service duplication or friction.
When considering these data points in tandem with the fact that employers are questioning the value that virtual care services are providing to their workers, it is “no surprise that Optum was likely struggling to generate a return on their investments in virtual care,” she declared.
Another healthcare exec — Anu Sharma, CEO of hybrid maternity care startup Millie — agreed with Jain.
“There was a lot of excitement around virtual care, especially with the surge in adoption during Covid. But there are very few use cases for virtual-only care, and patients like to establish long-term care where they can also be seen in person when needed. The future of healthcare is hybrid, not virtual,” Sharma wrote in an email.
Optum’s virtual care unit is certainly not the only telehealth provider that has struggled to find its footing in a post-pandemic world. For instance, two of the nation’s largest virtual care providers have already enacted significant job cuts this year. Teladoc Health laid off staff in January following a round of job cuts in 2023, and Amwell announced it had let go of about 10% of its workforce in February.
‘All virtual care is not created equally’
In the post-pandemic market, the virtual care providers that succeed will be the ones that personalize the patient’s experience around their needs and preferences, according to Define Ventures Partner Chirag Shah.
“Healthcare is incredibly personal, yet the average healthcare experience is often deeply impersonal. We have always believed in the power of virtual care to reach people beyond the four walls of a clinic, but all virtual care is not created equally,” he remarked.
This belief is reflected in the telehealth companies Define Ventures has chosen to invest in, Shah added. For instance, Tia offers care tailored to women’s needs, Found provides personalized weight loss programs, and Folx Health delivers individualized care to the LGBTQ+ community, he noted. Found and Folx offer virtual-only care, and Tia provides hybrid care.
In an email to MedCity News, Faatin Chaudhury, head of payer strategy and partnerships at Folx Health, pointed out that while telehealth adoption has decreased compared to the early days of the pandemic, usage remains higher than pre-pandemic levels overall.
In her view, telehealth providers aren’t headed into a world of doom — they just need to tailor care to the communities they service and recognize the importance of optimizing the patient experience.
“The virtual health industry has seen significant growth and evolution over the past few years, playing a crucial role in expanding access to care for many, especially for LGBTQ+ and marginalized communities. Virtual care is often a lifeline, providing accessible and inclusive healthcare to those who face barriers accessing traditional healthcare services,” Chaudhury wrote.
Because Folx provides care tailored to the LGBTQ+ community, it provides a differentiated experience to its users. More than half of transgender people in the U.S. live in states that are mainly rural — and where telehealth is critical for access — Chaudhury pointed out.
Not all telehealth providers have that kind of niche patient focus, though — Optum’s virtual care unit didn’t. That could be a key reason why the company has chosen to shut the business down, according to another healthcare leader. Rishi Gowda — CEO of healthcare AI company Crosby Health — agreed with Chaudhury, saying there is a noticeable trend of virtual care providers emphasizing their patient experience amid growing competition. That said, it seems that Optum is strategically adjusting its focus to “enter markets where it can have a larger footprint,” he wrote in an email.
“Given UnitedHealth Group’s partnerships with multiple virtual care providers across different specialties, it’s understandable that the organization is honing in on its approach to care management. By selecting specific lanes and refining its ongoing care strategy, I would believe UnitedHealth Group is aiming to improve the member experience by offering a more tailored and seamless virtual care service,” Gowda stated.
