Neither HotDoc nor HealthEngine are likely get anywhere near their asking price, if they sell at all, as they both are facing a near-term reckoning of their business models.
Today we learned about what looks like a classic advisor kite-flying exercise telegraphing that appointment booking platform HealthEngine is now on the block, along with its major competitor HotDoc, which started a sales process a few months back.
That’s about 90% of the country’s healthcare booking engine market on the market at the same time.
It’s not likely to be a coincidence that both would like to get out of Dodge about now if they can.
From the Australian Financial Review we get the basics of the HealthEngine sales pitch:
- With IPOs on the nose now, the group is shopping the group to private equity and possible strategics such as US-based booking giant Zocdoc;
- Revenues are supposedly $24.5 million, but apparently going to $48 million within three years (yeah, so’s my pay packet), so the asking price is over $200 million
- Booking engines are popular with PE at the moment, with a caravan booking engine being offloaded recently in Australia for a good return.
Get me the number of that PE group. They’re good sales people with good timing.
Booking engines aren’t growing anywhere around the world except by geographical expansion, or add-ons – see AirBnB ads for services with rentals now – and then only usually in single digits. The travel booking engine market has been a consolidation play and a mess for a few years now. And AI is coming for all of them.
HotDoc, also for sale, is reporting revenues of $30 million with a margin of about 30% and also wants north of $200 million.
HotDoc differs quite a bit in makeup of clients from HealthEngine in that it is heavily concentrated in the GP sector, whereas HealthEngine has a lot more income from across the board of allied health providers and some specialists.
What to do if you’re PE or Zocdoc?
Well, to put it bluntly, absolutely nothing, especially at the asking price. At least for now.
These two businesses aren’t going away in the short to mid-term. They both have a lot of paying and renewing clients and steady cashflow.
But they both have major strategic headwinds.
Neither group is really growing much. Certainly not enough to start asking for 10x revenue.
HotDoc is growing a little through pricing and some diversification into new subset revenue streams such as charging patients for repeat prescriptions and now attempting to sell telehealth to patients who can’t get their normal GP in the time they’d like.
HealthEngine is expanding a little further into more allied health, trying to take share off HotDoc in GP and doing the same revenue diversification tricks HotDoc is attempting.
Neither group is growing fast like they once did when they were laying down their initial internet booking footprint and neither have an obvious path to leverage their client base to vast new revenue streams.
In fact, it’s probably the opposite. A lot of market factors are coming for them.
Both groups remain hubbed around the (old) internet 2.0 and search. Both have pretty old tech stacks as a result – tech which doesn’t easily integrate with emerging health provider cloud-based admin and EMR platforms.
Search is dying off quickly to AI (ask, don’t search), if it’s not already dead.
This is going to significantly affect the ability of both groups to bring new patients directly to their clients because they did that through being internet directories.
But ushering in the end of the era of search isn’t the only way AI might hurt these groups.
AI can hurt old internet-based groups like these two in all sorts of ways people don’t see coming.
In the US, the largest consumer-based health knowledge base outside the Mayo Clinic is a group called WebMD. WebMD is 30% down year-on-year in traffic and more in revenue, all as a result of AI taking over its consumer function as a place for consumers to find health answers.
The owners of WebMD – a major VC internet firm, now also investing in AI – have virtually written off what was once one of their major US business arms. They’re moving on to health data and education that is AI defensible (they hope).
What can or will AI do to our two lovable booking engines? Probably a fair bit that no one yet fully understands.
At the very least you’d wait a year or two to see what might happen given the pace AI is killing off internet business models.
What else?
Well, the GP and healthcare market is changing rapidly underneath both booking engines, both of which have a giant Achilles distribution heel – they both rely massively on just two GP platforms for distribution – HotDoc a lot more so than HealthEngine because HealthEngine has a much broader base of clients into allied health where there are literally scores of clinical and admin platforms.
Worse, one of the GP platforms – Best Practice – now commands more than 70% of the GP market. One owner, one on/off distribution switch.
It’s like relying on Google search in the old days for your shop to be visible on the internet. It’s a highly risky game. Made much more risky now Google is even moving away from search as a business model.
Best Practice is rapidly working out how to integrate its old core server-bound EMR and billing code base with the web via an intermediate FHIR-based connector application called Halo Connect and it’s doing a pretty good job of things.
MedicalDirector is re-platforming for far better data sharing on the web via Salesforce.
As both groups become more cloud functional, both will bring the booking engines with them to some degree, but they don’t have to.
Booking portals are relatively trivial to build. Best Practice has its own. MediRecords, a small GP cloud-first EMR player, which hasn’t got a lot of bricks and mortar GP practices but does have quite a few virtual GP plays, has always had one.
At any point of time any GP practice that wants to switch off that part of HotDoc or HealthEngine that manages their main customer base for bookings, can switch to using their own branded app for their continuing clients. Such an app is likely to make their patients much stickier all round (see below).
They then might still retain the external booking engines to round up those ungrateful patients who aren’t with them and wander a lot between practices, just for that marginal income.
Most GP practices are always booked out these days. There’s a GP shortage, remember, and likely to be one forever. Most GP practices retain about 90% of the patient base on an ongoing basis each year and roll through an external 10% using the booking engines to fish on the internet for them.
Currently the main revenue for the booking engines is managing all the internal bookings for practices, the premise being they are highly visible on the internet so it makes it easy for practice clients to book, and then find an alternative if they can’t get a booking at their preferred GP.
But surely the days of this dynamic are numbered.
The federal government is pushing hard on a program called “sharing by default”, where they want all providers to be sharing their patient data far more seamlessly, both with other providers, and the patients themselves. It is forcing all providers to upgrade their systems to far more seamless cloud functionality for better data sharing and security.
A couple of things can happen here, none of them good for the booking engines.
Firstly, the federal government through Medicare is making GP practices register for a program called MyMedicare, which is supposed to tightly tie a particular patient to just one or two practices for the purpose of continuity of care for better chronic management of the population.
An obvious thing to happen as a part of this requirement is for practices to start using better developed white labelled apps branded to their practice to offer their patients much better services in order to tie them to the practice and to upsell them in time on things like chronic care programs.
If and when this happens such an app will have the following basics:
- A booking function, including a default to a telehealth service;
- A billing history function – tied to Medicare and whatever mixed billing is going on;
- A clinical record function – maybe tied to the My Health Record, maybe not, but a basic summary of the recent past;
- A test and results reporting function – pathology and imaging and follow up appointments;
- A referral function – to specialists which will be tied to the practice.
The booking function in this set won’t need to be done by the external booking engines. In fact, it would probably create a mass of confusion if it was because in the above app the real beauty is that you have one source of truth where booking, billing, reporting and referrals are all captured in one auditable chain.
The other thing that could happen here because quite a few people in the Department threaten it, is a single Medicare app “to rule them all” (good idea if they ever manage to be able to build stuff again), tied to all the practices in the country, that does all of the above for a patient.
It would likely also have links to aged care and the NDIS as well. All the plumbing for all of the above is being done now. It’s only really coordination between the DoHDA, Services Australia, and skill base in building good digital stuff preventing the government from pulling something like this off.
If they don’t the private sector will for sure though.
Ouch – that’s why no PE with half a brain (they’ve usually always got at least three quarters of one, with the quarter missing being the part that does empathy) won’t pay $200 million at this point of time for either HealthEngine or HotDoc.
If you had to buy one though? Probably HealthEngine.
Both businesses have good cashflow and with large subs bases this will be around for a while.
But HealthEngine is far more hubbed in the wilds of allied health practices, which may or may not have a lot of upside potential as the digital transformation of health reaches out its tenacles to this largely ignored and uncharted sector.
But even then, not $200 million.
