Telehealth profit margins: what a brand nets per patient at three sizes

Telehealth profit margin is one number that hides three decisions. A brand running a medication-inclusive membership has a gross margin set by what it pays for the drug and the consult, a contribution margin set by what it pays to acquire each patient, and a net margin set by how much fixed cost it carries. At 100 patients those three interact one way; at 2,000 they interact differently, and a brand that models only the steady state misses the stretch in the middle where most brands either find their footing or run out of money.

This post builds one hypothetical P&L and runs it at 100, 500 and 2,000 active patients. Every input is labelled and every input is an illustration. The value is in the shape: which lines scale with patients, which lines scale with revenue, and which do not scale at all. The last section runs the same book under a revenue-share agreement, because that is the comparison a founder is actually making when choosing infrastructure.

Gross, contribution and net margin for a telehealth brand

Gross margin is revenue minus the direct cost of delivering the service: the medication, the clinician's time, and for hormone programs the labs. It answers whether the product makes money on its own before anyone tries to sell it. In a medication-inclusive membership the medication dominates this line, which is why two brands charging the same price can have gross margins twenty points apart depending on their pharmacy terms.

Contribution margin takes gross profit and subtracts the costs that vary with each patient but are not part of delivering the service: card processing, the acquisition cost of the patients added that month, and any per-patient platform fee. Contribution is the number that tells a brand whether adding a patient makes it richer or poorer. A positive gross margin and a negative contribution margin is the signature of a brand that is buying patients for more than they are worth.

Net margin subtracts everything else: the fixed platform fee, staff, software, insurance, legal and the founder's time. Net margin is what the brand keeps. At small scale it is dominated by fixed costs, which is why a brand can have a healthy contribution margin and still lose money at 100 patients. At larger scale fixed costs shrink as a share of revenue and net margin converges toward contribution margin, minus whatever overhead the brand has added along the way.

The cost-of-goods lines

The example uses a GLP-1 weight-loss membership at $229 a month. The medication lands at $140 a month at wholesale, including delivery, with 0 percent markup; that is a hypothetical figure chosen for the arithmetic, not a market price. Consults are Tessic Health's published $25 per completed consult, and the book averages four consults per ten patients per month once it is past the launch bulge, which puts the clinician line at $10 per patient per month. Gross profit per patient per month is therefore $229 minus $140 minus $10, or $79, a gross margin of about 34.5 percent.

Below gross profit, the variable lines are card processing at an assumed 3 percent of revenue and acquisition. Acquisition is modelled at $250 per paying patient, a hypothetical within the range one paid-media agency has reported for compounded GLP-1 programs, and monthly churn is modelled at 10 percent, which is a round assumption rather than a benchmark. Ten percent churn means the brand has to add one new patient for every ten it has just to stand still, and that replacement spend is in the P&L every month. Studies of GLP-1 discontinuation suggest churn assumptions should not be generous: a JAMA Network Open analysis found that 64.8 percent of patients without type 2 diabetes had stopped within a year.

Fixed costs are the platform fee, taken at Tessic Health's published floor of $1,000 a month for the 100-patient case and at an illustrative $2,500 a month for the larger cases, with actual tiers on the pricing page; and overhead, modelled at $2,000 a month at 100 patients for part-time founder and support time, $10,000 at 500, and $30,000 at 2,000 when the brand has a small team. Overhead figures are placeholders. A brand's real overhead depends on how much it does in-house, and the real cost of launching a telehealth clinic covers the one-time costs that sit before any of this.

The P&L at 100 patients

At 100 active patients the brand is in the stretch where fixed costs matter most. Monthly figures, all rounded to the nearest hundred and all derived from the hypothetical inputs above:

• Revenue: $22,900 (100 patients at $229)
• Medication at wholesale: $14,000
• Consults: $1,000 (40 completed consults at $25)
• Gross profit: $7,900, or 34.5 percent
• Card processing: $700
• Acquisition: $2,500 (10 replacement patients at $250)
• Contribution after acquisition: $4,700
• Platform fee: $1,000
• Overhead: $2,000
• Net: about $1,700, or 7.4 percent

The brand is profitable on paper, narrowly, and only because overhead is modelled as part-time. If the founder is paid a salary at this stage, net goes negative. The more useful reading is that contribution after acquisition is $4,700 on $22,900 of revenue, about 20 percent, and that is the number the brand carries forward: every hundred patients added at these unit economics brings roughly $4,700 a month of contribution to cover fixed costs. Fixed costs at $3,000 are consumed by the first hundred. The second hundred is where the brand starts to keep money.

The P&L at 500 patients

At 500 active patients the book is five times larger, the acquisition line is five times larger because churn replacement scales with the book, and the platform fee has stepped up while overhead has grown to a small team:

• Revenue: $114,500
• Medication at wholesale: $70,000
• Consults: $5,000 (200 completed consults)
• Gross profit: $39,500, or 34.5 percent
• Card processing: $3,400
• Acquisition: $12,500 (50 replacement patients at $250)
• Contribution after acquisition: $23,600
• Platform fee: $2,500 (illustrative tier)
• Overhead: $10,000
• Net: about $11,100, or 9.7 percent

Gross margin has not moved, because nothing in cost of goods is cheaper per patient at 500 than at 100. Net margin has improved by about two points, and all of that improvement comes from fixed costs falling as a share of revenue. The acquisition line, at $12,500, is now larger than the platform fee and overhead combined. This is the stage at which a brand's attention shifts from vendor terms to churn, because a two-point change in monthly churn changes the acquisition line more than any renegotiation of the platform fee could.

The P&L at 2,000 patients

At 2,000 active patients the brand has real operating leverage on its fixed lines and none at all on its variable ones:

• Revenue: $458,000
• Medication at wholesale: $280,000
• Consults: $20,000 (800 completed consults)
• Gross profit: $158,000, or 34.5 percent
• Card processing: $13,700
• Acquisition: $50,000 (200 replacement patients at $250)
• Contribution after acquisition: $94,300
• Platform fee: $2,500 (illustrative tier)
• Overhead: $30,000
• Net: about $61,800, or 13.5 percent

The platform fee is now about half a percent of revenue. Overhead, even at a modelled $30,000 a month, is 6.5 percent. The two lines that matter are medication at 61 percent of revenue and acquisition at 11 percent, and neither of them got cheaper with scale. That is the structural fact about telehealth margins in this model: the brand grows into its fixed costs, and it never grows out of the drug or the ad rate. Whatever gross margin the pharmacy terms set on day one is the gross margin the brand has at 2,000 patients.

The brand grows into its fixed costs, and it never grows out of the drug or the ad rate.

What a revenue share does to the same P&L

Now run the identical book under a different infrastructure agreement: a 30 percent markup on medication and a 10 percent share of revenue, both within the range that appears in white-label agreements. To give the comparison every benefit, assume the revenue-share vendor charges no fixed platform fee and no per-consult fee at all. Price, patients, churn, acquisition and overhead are unchanged.

• At 100 patients: medication rises to $18,200, the revenue share is $2,300, and net falls from about $1,700 to about negative $2,800
• At 500 patients: medication is $91,000, the revenue share is $11,500, and net falls from about $11,100 to about negative $13,900
• At 2,000 patients: medication is $364,000, the revenue share is $45,800, and net falls from about $61,800 to about negative $45,500

At 2,000 patients the vendor's take under the revenue-share agreement is about $129,800 a month against $22,500 under flat fees, nearly six times as much, and the brand has moved from a 13.5 percent net margin to a loss that gets larger with every patient added. The book is the same book. The patients are paying the same price and receiving the same medication from the same kind of pharmacy. The difference is entirely in who keeps the pharmacy spread and whether the platform is paid a fee or a percentage.

Founders sometimes respond that the revenue-share brand could raise its price to compensate. On the example, restoring the flat-fee net margin at 2,000 patients would take a price near $290 a month, a 27 percent increase, which would have to be justified to the patient by nothing the patient can see. The other response is that the revenue-share vendor's absence of a fixed fee makes it cheaper at very small scale. On this model that is true below roughly 20 patients, which is a scale no brand intends to stay at. The unit economics calculator lets a founder run their own price, medication cost and churn through both structures.

Reading public company margins with care

A founder looking for a margin benchmark will find gross margins in the filings of the public consumer telehealth companies, and this post does not quote them, because the comparison is less useful than it looks. Reported gross margin depends on what a company puts in cost of revenue: a company that owns its pharmacy books medication at its own cost, while one that buys medication from a third party books it at the purchase price, and the two are not comparable even if the patient pays the same. Public companies also report blended figures across categories with very different medication costs, so a company-wide gross margin says little about any single program. And marketing expense, which is where a brand's acquisition cost sits, appears below gross profit in a public P&L, so a high gross margin can coexist with a thin or negative operating margin.

What is safe to take from the public filings is the ordering: for the consumer companies, medication and fulfillment are the largest cost of revenue, marketing is the largest operating expense, and the operating margin is far more sensitive to the marketing line than to anything else. That ordering matches the hypothetical P&L above, and it is the reason the three sizes were modelled on acquisition and medication rather than on the platform fee.

Questions operators ask

"Is a telehealth business profitable at 100 patients?" On the hypothetical, barely, and only with part-time overhead. The honest framing is that 100 patients is where the brand learns its real churn and real acquisition cost, and those two numbers decide whether 500 is worth pursuing. A brand should expect to be at or near break-even at this size and should plan its working capital for the acquisition spend it takes to get to the next hundred.

"What net margin should a telehealth clinic target?" The example lands at 13.5 percent at 2,000 patients with modest overhead and a $250 acquisition cost. The number is sensitive to churn above all: at 7 percent monthly churn instead of 10, the acquisition line at 2,000 patients falls from $50,000 to $35,000 and net margin rises about three points, with nothing else changing. Retention work pays better than any other line on the P&L once the vendor terms are fixed.

"How does the DTC telehealth margin compare to a physical clinic?" A physical clinic's largest costs are rent, staff and billing overhead, with a gross margin set mostly by payer fee schedules. A direct-to-consumer telehealth brand replaces those with medication cost and acquisition cost, and sets its own price. The telehealth brand has more control over its margin and more exposure to the two lines it cannot shrink with scale.

"What are the one-time costs before the P&L starts?" Entity formation, the MSO and friendly PC structure in states that require it, LegitScript certification, the storefront, and the first months of acquisition spend before revenue catches up. Those sit outside the monthly P&L and are covered in the cost to start a telehealth business guide. A brand should budget the monthly loss at small scale as part of the launch cost rather than as a surprise.