Technofile Europe

What price private sector diagnostics?

In spite of apparent hesitation by the Gordon Brown government in pushing ahead with Blair's healthcare reforms, a recent secondary buyout deal highlights investor expectations of continued private sector involvement in UK healthcare provision. 

Last week Bridgepoint announced the sale of Alliance Medical to Dubai International Capital (DIC) for a whopping £600m.   This crowns a very sucessful stewardship of the company by Bridgepoint, who bought the business for £86m in 2001 and led it through 16 acquisitions to build one of the largest diagnostic scanning services providers in Europe.  Today Alliance Medical runs 190 fixed and mobile scanners (MRI, CT, x-ray) for private clinics and public healthcare systems, benefiting from the increasing trend by hospitals to outsource imaging diagnostics.

The price paid by DIC represents 4.6 x 2006 revenues (£132m) or 16 x 2006 EBITDA (£37m), which is fairly rich for a business that is heavily exposed to the political flip-flops on reform that buffet the NHS on a regular basis.  DIC is clearly making a bet that the requirement by Western countries to improve diagnostic services and reduce patient waiting times will force them to involve the private sector in one guise or another. 

DIC is a new-ish guy on the block in the UK.  It is not technically a sovereign wealth fund like the China fund that recently took a stake in Blackstone, or the better known ones like Singapore's GIC or the Kuwait Investment Authority.  The DIC fund runs the personal wealth of Dubai's ruling emirs.  It has been active in the UK in the past 2 years and today owns Tussauds attractions group, Doncasters defence engineering group and the Travelodge hotels operator.

Whether there is any strategic interest by DIC to expand Alliance's services into the Gulf region remains to be seen.  But as a financial investment this deal rides continuing consolidation among pan-European providers of diagnostic and other healthcare services.  With or without the explicit consent of their health ministers, European hospitals are clearly finding ways to exploit private-sector solutions to their woes.

This is the era of telemedicine

If I'm perfectly honest, most of the investments we make don't have a visible impact on peoples' lives.  Financial compliance software?  eSourcing services?  Online ad networks?  No doubt accountants, procurement directors and ad sales reps benefit from these innovations, but what about the man on the street?

This morning we announced an investment in a company that not only impacts your neighbours directly, but also benefits from some of the strongest industry growth drivers I've ever come across.  The company is Barcelona-based Telemedicine Clinic (TMC), a provider of teleradiology services to public hospitals and private healthcare providers across Europe. 

TMC is at the forefront of the changes technology is bringing to modern healthcare provision.  Today's medical imaging techniques -- including digital x-ray, MRI and CT/PET scans -- are increasingly powerful diagnostic tools.  In fact, the most complex 'modalities' like CT/PET are growing fastest.  The problem is that most Western healtcare systems (a) don't have enough scanners, and (b) aren't training enough radiologists to meet this demand. 

This has led to long waiting times for patients, and in some cases government intervention to reduce them.  In the UK, for example, it has been widely reported that NHS patients can wait more than half a year for an MRI. Now NHS is working toward an aggressive new diagnostic target of no more than 18 weeks (sic) from first GP visit to the beginning of treatment.

Quicker scans lead to earlier diagnosis which in turn improves the success (and reduces the cost) of treatment.  A no brainer.  But how to address the scanning bottlenecks?  In the UK, the NHS is contracting with private healthcare providers (ISTCs) like Alliance Medical and Inhealth to provide extra capacity in the form of mobile scanning units.  But the shortage of qualified radiologists persists and the private sector struggles to recruit them without stealing capacity from the NHS. 

Enter remote diagnostics, or teleradiology.  Most scanned images are now digital to begin with, and tend to be connected to the hospital IT system or PACS.  So it's easy to send them to a remote location for interpretation.  That is the technical infrastructure TMC exploits.  From a base in Barcelona and from reading centres in Europe and Australia, TMC's radiologists report on thousands of diagnostic images sent each month from UK and Scandinavian hospitals. 

Because TMC's radiologists are totally dedicated to reading, they are several times as efficient.  Since they can aggregate cases in higher volumes than any one hospital, they develop stronger sub-specialisations.  Because they are more productive, they can double-read images at lower cost than a hospital can.  With resources in other time zones such as Australia TMC can provide on-call (night-time) cover for hospitals. As a result TMC not only increases the capacity and responsiveness of its hospital clients, but it is also setting higher quality standards for radiological interpretation.

In the UK, the introduction of private healthcare provision to complement (some would say pressure) the NHS is controversial.  But the technology which enables teleradiology is here and is truly agnostic.  Public hospitals can as easily exploit this innovation to become more efficient as private health centres can.  But there are big differences within Europe in how free hospitals are to take advantage of outsourced services like this.  Scandinavia and the UK are at the forefront of experimentating with these types of public-private partnerships.  We are betting on their success triggering similar reform in other countries.

Teleradiology is only the beginning of how the Internet can revolutionise diagnostic medicine.  Telepathology allows doctors to send images of tissue samples to experts abroad.  Teleophtalmology can be used to screen patients for diabetic retinopathy, and teledermatologists can test patients for common skin ailments without having to be in the room.  Already countries like Australia and Sweden are using these concepts to provider specialist medical care to inaccessible parts of their countries.  In future, all patients could have access to the global pool of specialised medical knowledge this way.

There are huge research benefits of digitising and aggregating medical cases from multiple hospitals and regions.  In future, a lot of cutting-edge medical research is likely to take place where the most experience resides -- and that may well be in a virtual telemedicine clinic like TMC plans to become.

Can you trust doctors? (Book review#1)

I actually managed to read a couple of books recently, for the first time since 2006.  Two major projects have gobbled up most of my spare time this year:

and

 

The latter will -- inshallah!-- be done if not exactly dusted by September.

The book I read on the plane last week was recommended by my colleague Javier Rojas (who has several of the little critters and still manages to read a book a week!).  Complications takes the reader into the hearts and minds of surgeons in their everyday existence.  Atul Gawande is a doctor and writer who questions our most basic assumptions about what doctors know and how they use it.  This is a book about the fallibility of surgeons, and also about a healthcare system (and culture) that is often at odds with patients' best interests.  It's not a new book (here's a review from when it first appeared, in 2002).

Told through real stories of familiar situations (pregnancy nausea, deep vein thrombosis) and extreme conditions (chronic flushing, necrotizing fasciitis), Complications makes for a gripping but sobering read.  Gawande's has an amazing ability to write effortlessly and totally without pretension, tackling the difficult topic of doctor-patient relations in a way both can understand and learn from.  The stories are human, riveting, sometimes tragic and sometimes uplifting, and all have implications worth thinking about. You won't interact with doctors the same way again.