UK health tech startup, Babylon Health is pulling in its horns in its home market, blaming challenging global and macroeconomic conditions for the cancellation of a couple of multi-year contracts it had signed in the past.
At the request of the Trust itself, the contract with University Hospitals Birmingham (UHB) will end in October.
The two trusts were contacted. The Health Service Journal reported that the contract had been terminated.
At the time the tie-up was announced, Babylon said its digital health services would reach as many as 300,000 patients in the city. Last year, in an apparent expansion of the arrangement, it signed up around 7,000 patients to what was billed as "an integrated digital care service".
According to Tim Rideout, the general manager for the UK, the company pulled the plug on the partnership because it didn't feel like it was worth it.
He said the economics didn't work out as he had hoped.
If you have a really good primary care service, the evidence is really good that downstream costs can be reduced.
The economics of the contract were very tight because of the funding pressures on the National Health Service. Since we entered into the partnership, the funding pressures have increased. Capital is getting more expensive. The cost of raising capital for development is getting more expensive.
The work that was required to develop the service in a way thatintegrated with their key operating systems, we just wouldn't. We reached an agreement with RWT that we would stop working together.
He said that the finances of the National Health Service are becoming more challenging. The government pay award for clinical staff is only going to be funded by the Treasury, so the National Health Service is going to have to find money to pay it. Capital has become more expensive for us.
In the original context, we were prepared to play the long game and try and make it work, but the way things are now, the cost of capital now, the pressures on NHS funding, we just concluded we wouldn't find a way to make it work economically.
According to Rideout, the Trust gave Babylon notice last month that it plans to end the virtual A&E contract they signed in 2019.
He pointed to the decision of the Trust to shutter the contract for Babylon's artificial intelligence-based triage as the reason for their decision. Patients can use the web-based symptom checker or call a toll-free number to speak to a human adviser.
He said that the issue of deployment was the reason why it had been superseded by what the National Health Service was doing with 112.
Rideout said it will continue development of the product globally, despite the fact that it has 24 million users outside of the UK.
According to Rideout, Babylon is not calling time on its other digital healthcare offering in the UK market, which has registered around 115,000 patients, the majority in and around London.
He told us that they are committed to keeping the GP At Hand service in London.
He confirmed an earlier report in the Telegraph that it will not look to expand service provision in the UK, blaming the economic downturn but also pointing to particular challenges for Babylon's approach being economically viable within the context of theNHS funding model.
He said that GP At Hand in the UK would not be expanded.
In the run up to 2010 the percentage of GDP that was spent on healthcare was increasing, but since then it has diminished... The systems that pay for healthcare are very different. The UK system has economic challenges that are hard-wired into it.
A spokeswoman for the company said last month that it would cut costs by $100M in the third quarter by reducing non-core activities.
Seemingly, the efficiency reductions have included some jobs cuts. He said that the process of "tightening up" staffing only affected non-clinical, non-frontline employees.
If the economics had worked out, Rideout said it would definitely have continued with the partnership.
He said the ending of the UHB deal was a case of changing priorities in the health service. The symptom checker wouldn't have been developed if the market hadn't changed and the National Health Service had its own free good.
Since it went public, the company's shares have plummeted in value from trading around $10 to less than $1.
This SPAC is betting that a British healthcare company can shake up the US market
It is turning years of hype about its health tech and digital-first approach as a winning formula for disrupting traditional healthcare provision into a profitable and sustainable healthcare service delivery business.
It appears that its model does not work in all places. The bigger question is whether it can find a service combination that can live up to billing for patients' health and deliver profitability. It is still not there.
Alex Wilhelm from EiC gave us a snap analysis of Babylon's financials. The company expects $1 billion in revenue this year, but at a level of profitability that makes it hard to comprehend when it will be able to cover its own costs. Costs related to insurance claims and care delivery made up a large portion of the revenue of Babylon in the first quarter. The company is effectively gross-margin negative. As a result of a general market tilt away from unprofitably growing companies towards those closer to self-sufficiency, Babylon has found itself operating in an effective manner in 2022. Maybe it can recover some of its value if it can correct its income statement. But it isn't done yet.
Rideout sums up the company's challenge by saying, "What we're trying to do is be, kind of, ruthless at focusing on the things where we can make a real difference."
The loss-making GP At Hand service in the UK is at least for now despite a pressing need to shrink its own costs.
The service won high profile publicity in its home market when it had a former health secretary sign up. Rideout is quick to point out that it is the fastest growing GP practice in the UK. shuttering such a flagship service in the middle of a UK primary care access crisis would be bad PR for Babylon. Maybe it wants to avoid taking a hit like that.
The government is being lobbied to change the payment framework for the National Health Service. It has more leverage if it is operating a patient-facing service.
Rideout of GP At Hand said that the model they run saves money. According to some peer reviewed work, our patients use secondary care between 18% and 35% less than the same group of patients in the National Health Service. Our model works but the framework doesn't adequately fund it A lot of private companies have had to make decisions about what they do or don't do in the National Health Service because of economics.
The question is, what are the government going to do to make primary care sustainable?
He said that they do a lot of economic modelling and that they can sustain the position for a long time. The service would save money and patients would have great access to primary care, but the economics just don't allow us to do that
The UK market is important to us. It's important that GP At Hand is there. At the point when the economics are right, we will expand it.
In recent years, Babylon has become more focused on the US market.
According to Rideout, the US insurance-based healthcare model is a better fit for Babylon, allowing it to achieve the kind of deeper integrations it apparently requires to stand up CEO Ali Parsa. He denied that it was lobbying for the UK to switch to a US-style insurance model.
In the US, we are able to support patients in staying healthy and getting treatment sooner so the model is economically viable when you look at the entire patient journey. We don't benefit from the savings that make the model viable because we don't manage the whole budget.
The UK market is still being looked at. We have to find a way to make it work within the economic frameworks that have been established and lobby for changes to those frameworks. GP At Hand is still being made as efficient as possible. At the point at which it stops losing money, we would be able to expand it again, and that includes the UK.
The way the economics are structured in funding primary care services and funding services in real terms is not about private or public healthcare. Incentives need to be put in place to help the system save money. The system is not prepared for that.
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