Telehealth was once the pandemic healthcare darling, saving the industry from plummeting to zero amid the abrupt shutdown of in-person care — and becoming a must-have investment.

But now, the must-have investment is the one nearing zero, as telehealth companies right-size or downright shutter in the face of lower demand.

UnitedHealth Group (UNH) is ending its telehealth offerings. Market leaders Amwell (AMWL) and Teladoc (TDOC) have suffered layoffs and seen their stocks plummet more than 50% in the past year. Amwell once had a market cap of nearly $6 billion; today it is less than $200 million.

But don't count out telehealth just yet, some experts say.

"Telehealth 1.0 is dead," said virtual health platform Included Health CEO Owen Tripp.

"It's being chopped down and run through the woodchipper. But when we do that, we create the mulch that's necessary for a lot of really interesting and big things to grow," he told Yahoo Finance.

The digital health company has been on its own post-pandemic roller coaster, from reportedly readying for an IPO at the end of 2021 to laying off about 6% of its workforce in mid-2022.

Tripp said the problem with basic telehealth is that it's primarily a single point of contact without any long-term health monitoring.

"The problem with telehealth 1.0 is it's just a — put a quarter in the jukebox, listen to one song, and then it's over. You don't see the same doctor again," Tripp said.

His company has launched a specialty virtual care strategy in an effort to connect the dots of the disjointed care system. It includes a hub that patients can return to and interact with doctors they have already seen.

The future of telehealth

Despite pullbacks in the telehealth business, digital healthcare is still in demand, according to a survey published in March by investment firm Rock Health. The survey found that for the third consecutive year, more than 75% of respondents had reported having ever used virtual care, of which 83% said they had used it in the past year.

However, the survey showed that even people who use virtual care prefer in-person care for certain things. For example, 69% said they prefer virtual care for a prescription refill, while less than 20% preferred it for emergency care or physical therapy and only 24% said they preferred it for an annual physical.

Rock Health chief commercial officer Sari Kaganoff likened the burgeoning telehealth industry to the dot-com era, when websites were popping up everywhere, "and for a while, that was enough."

"Nowadays, would anyone say that the internet is dead? No, obviously not. Every single company has a website. It's a part of what you offer. You can't only have a website," Kaganoff told Yahoo Finance.

Similarly, she said, telehealth needs to evolve and grow on top of the current capabilities to do more. And how companies differentiate themselves is going to be key, she said.

For Kaganoff, that means it could be a small company with a specific purpose, like filling a prescription for a common illness.

Tripp, however, says there should be an even bigger goal.

"Your primary care, your behavioral health, your specialty — these things all have to be connected," Tripp said, adding that it would be hard to achieve at a national scale and as a 24/7 service.

"That's a new expectation coming out of the pandemic. Very few players are able to meet it," he said.

Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.

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