Dive Brief:
- Telehealth vendor Amwell and technology firm Leidos have been awarded a contract worth up to $180 million with the Department of Defense’s Health Agency that aims to digitize the military healthcare system, the companies announced Thursday.
- Under the task order, the partners will replace the military’s telehealth product with Amwell’s Converge virtual care platform. The contract also includes some Amwell automated care programs that guide patients through treatment plans.
- Amwell alone could capture up to $54 million from the contract over its 22-month term, TD Cowen analysts estimated based on a past DOD contract with Cerner, where the EHR vendor received 30% of the deal’s value. Amwell could also see some additional recurring maintenance revenue.
Dive Insight:
Amwell, one of the nation’s largest telehealth providers, has been steadily migrating its clients to Converge, a new platform that aims to consolidate offerings and integrate third-party tools.
About 43% of Amwell’s telehealth visits in the second quarter took place on Converge. The vendor said this summer that it expected the majority of its health provider business to be migrated by the end of this year.
The DOD contract represents a “further validation” of the Converge platform and could signal opportunities for Amwell to expand into the government market, TD Cowen analysts Charles Rhyee and Lucas Romanski wrote in a note on the deal.
The new system will start at five initial sites and then roll out to the entire enterprise in phases. The military healthcare system includes 9.6 million active duty service members, family members, retirees and health professionals.
Amwell lowered its 2023 revenue outlook during its second quarter earnings results in August after missing Wall Street expectations on revenue. It posted a net loss of $93.5 million, including a $27.3 million goodwill impairment charge to make up for the “sustained decrease” in Amwell’s stock and market capitalization, according to a filing with the Securities and Exchange Commission.
Amwell reports third quarter earnings on Nov. 1.
