Nine things we learned at HBI 2021

Last week delegates descended on London for the first in-person HBI conference since the beginning of the pandemic. Here are a few of the things we learned.

1. Wage inflation is astounding – time is fleeting

And according to investors, the risk is already baked into hospital share prices. Payroll has always been the biggest cost – between a half and three-quarters of outgoings – but higher wages have already started to hit EBITDA margins and prices.

The pressure will hit small margin sectors like domiciliary care and nursing homes the hardest. Guillaume Richard, CEO of Ouicare, said wages account for two-fifths of revenue!

Rising nurse wages are ringfenced in Germany’s statutory insurance fund (to prevent cost-cutting elsewhere) but in private pay markets increases have been pushed on to customers – driving general inflation even higher.

2. And the sector is bearish on whether efficiency gains from digital will make up for it 

Acquiring digital health capabilities is expensive because of high valuations, building your own is expensive because you’re competing for tech talent, and partnering will rarely be EBITDA positive straight away.

3. €6.90 is the new €5

Hospitals and insurers are starting to experiment with digital-first subscription models at around a €7 per month price point. Fresenius Helios is perhaps the biggest – starting in Spain where it will have to compete with basic PMI starting at €20 per month. A four-month-old platform by Axa is slightly cheaper at €74 for a year and is live in Italy and Germany with 600,000 patients already.

Digital therapeutics are also getting in on this price range. Quin, which allows self-care for diabetes, will launch at about $7 in the US on a fee-for-service model. New public reimbursement mechanisms for digital therapeutics in Germany and the Benelux countries are yet to provide an adequate route to market. Schoen Clinic COO Christophe Schoen said that the private pay route for its spun-off digital mental health business is better, for now at least.

4. Low-income populations need daily benefits with subscription models

Or they won’t subscribe! Hospicash, which covers hospital expenses for up to 30 days in India, is run through a bank. It is a model that “has legs”, according to Leandro Cuccioli, from the UK’s development finance institution CDC. However, low-income populations will need to see more daily benefits like well-being if they’re to pay a chunk of their $8 daily income.

5. M&A multiples have likely hit a ceiling 

The highest M&A multiple in 2021 has so far been 17x in an imaging/radiology deal. They are frequently now coming out above 14x especially in highly consolidatable outpatient sectors. The 2019 average was 11.8x. Investors are warning that this will likely not continue – especially as inflation hits the wider economy.

6. Half of remote consultations result in a diagnostic test 

Creating new opportunities for digital health companies to partner with traditional lab services or B2C testing partners. This is happening widely already for STDs but wider testing regimes are expected to come into play as groups build digital health ecosystems. L.E.K. Consulting’s survey also found that up to four-fifths of remote consultations need a prescription. Here, providers can partner with online pharmacies.

7. COVID-19 testing will settle at about a quarter of its peak 

Think different lab companies. Wolf Kupatt from Amedes predicted volumes will be at 20-25% of the peak going into next year, after which it will trickle down to 10-15%. Unilabs CEO Michael Boehmer put his bet somewhere in the middle of that range.

“Every month we get surprised with higher volumes,” he said.

8. Polyaddiction diagnoses are on a steep increase 

Creating new demand for complex mental health care that can be delivered digitally and at scale.

9. Healthcare reforms are go – and so are new budgets 

SOTE in Finland, new procurement procedures for NHS England, social care reform in England, elections in Germany, a new left-wing government in Norway, directives from the EU on medical devices, data sharing, and whistleblowing, foreign investment control across the whole of Europe. Plus the €50bn that EU member states are claiming for healthcare infrastructure spending.

All that could result in some big upheavals of business models.