The (Virtual) Doctor Will See You Now

Both Doctors And Patients Have Long Been Wary Of Efficacy Of Virtual Healthcare Appointments And Whether They Can Match Quality Of Traditional

By Nilushi Karunaratne

Both Doctors And Patients Have Long Been Wary Of The Efficacy Of Virtual Healthcare Appointments And Whether They Can Match The Quality Of Traditional, in-person consultations. But with Covid-19 making visits to the doctor more difficult – and potentially dangerous – the past year has created the ideal conditions for telemedicine to take off.

From the UK and US, to China and Japan, digital healthcare has become part of the ‘new normal’. The leading telehealth providers in the US and China, Teladoc (US:TDOC) and Ping An Healthcare and Technology (HK:1833), have seen their shares rise by 79 per cent and 47 per cent, respectively, over the past 12 months.

Hoping to capitalise on this momentum, virtual GP platform Babylon is considering a possible $4bn (£3bn) listing in the US, potentially joining the craze of going public via a merger with a ‘special purpose acquisition company’ (SPAC). At its last funding round in 2019, the company was valued at around $2bn. It’s yet another lofty valuation for a loss-making, growth-focused start-up. Despite its eye on the US equity markets, Babylon is UK-based, and its most recent filings with Companies House show a £99m operating loss in 2019, almost two-thirds higher than a year earlier.

Babylon: disruptive or destructive?

Founded in 2013, Babylon’s mission statement is “to put accessible and affordable health service in the hands of every person on earth”. It’s certainly a noble goal and the company currently has a presence in the UK, US, Canada, Rwanda and parts of South East Asia.

In the UK, Babylon’s app promises 24/7 access to healthcare professionals across two channels – one public, the other private. On the private side, users pay an annual fee of £149 for unlimited GP consultations, or £49 for a one-off appointment. But a contract with the NHS means that patients in London and Birmingham can use its ‘GP at Hand’ service as their official primary healthcare provider for free, and around 91,000 people in England have made the switch so far.

Health secretary Matt Hancock – a strong proponent of adopting technology in the NHS – said back in 2018 that he uses GP at Hand, and he is likely hoping that Babylon can help the NHS achieve its goal of every patient in England having access to “digital first primary care” by 2024. Indeed, Babylon secured a 10-year partnership with the Royal Wolverhampton NHS Trust last year to develop an app that co-ordinates the digital healthcare of 300,000 patients.

Beyond the exceptional circumstances of a pandemic, it’s easy to see the appeal of virtual consultations. Patients can enjoy shorter waiting times and greater flexibility around their schedules. Meanwhile, healthcare professionals can be more productive as minor issues are often resolved more quickly.

But while technology is often seen as a panacea for addressing the inefficiencies and inadequacies of public systems, digital healthcare is not without problems. While telemedicine offers convenience, it is not always an appropriate solution, particularly for more complex health conditions. So, Dan Mahony, who leads the healthcare team at Polar Capital, believes that unlike e-commerce, where Amazon (US:AMZN) has made the retail experience entirely virtual, the technological disruption of healthcare will be different.

“When someone is ill, they get scared and they need human interaction – you can’t replace all of that,” says Mahony. “You’ve started to see the use of telehealth in places where it does work – in what we call ‘low acuity medicine’ – but it doesn’t eliminate the need for doctors.”

There are also concerns over the quality and safety of remote care and whether private companies can be trusted with sensitive health information. Babylon has already slipped up on this front, with a software error allowing three users to view video recordings connected to other patients’ accounts last year.

And amid the fierce debate over the role of private companies in a state-funded healthcare system, the growth of telehealth providers could have unintended consequences. For example, with Babylon’s patients skewed towards those below 40 years old, traditional GP surgeries could be left shouldering the higher costs of caring for elderly patients.

Beyond ‘Doctor Zoom’

Telemedicine is about more than just virtual consultations, however, as technology shifts towards wearable tech that can remotely monitor a patient’s health. These devices could enable earlier interventions before a crisis point is reached, with such preventative care reducing the costs for healthcare systems.

“But it’s not just a simple matter of collecting data,” says Mahony. “You also need to be able to curate and interpret that data and then find ways of intervening with the patient. So, it’s a combination of data, technology and humans that can actually extract quite a lot of cost out of the system.”

Advancements in artificial intelligence (AI) should aid this process, as well as the more efficient allocation of resources. For example, Sensyne (SENS) has developed an AI algorithm based on anonymised clinical data that can help hospitals predict demand for intensive care beds and ventilators during the pandemic.

We are still very early in the health tech story. “The level of digitisation in healthcare right now is actually very low, so there’s a very long runway for digitisation and productivity gains,” says Jeremie Capron, director of research at ROBO Global. “That’s why the tech firms are now going after healthcare.” Indeed, ‘Big Tech’ is muscling in on everything from dispensing medication to health insurance.

But this relatively recent pivot means that healthcare is currently a small part of the tech giants’ businesses. And for those sceptics of telehealth companies – or their eye-watering valuations – there are less flashy ways to invest in the digitisation of healthcare.

Providing software to the NHS, Emis (EMIS) is hardly at the cutting-edge of health tech. But more than 80 per cent of its revenue is recurring and it has captured a 57 per cent market share among GP surgeries. Meanwhile, Craneware (CRW) provides billing and financial management tools to US hospitals. With retention rates above 90 per cent, its customers are extremely ‘sticky’, and the company has visibility over more than $200m-worth of revenue through June 2023.

Still, those tempted by Babylon’s prospects might be interested to know that if it does go public, Polar Capital “would definitely look at it”, says Mahony. “We’re interested in any companies that are helping to improve the efficiency of healthcare. But at the end of the day, any investment comes down to valuation.”

This news was originally published at Investors Chronicle.

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