Rideout says about 7,000 patients signed up for the RWT service. “It just doesn’t generate enough funds to justify the spending or system integration that the trust wants us to do,” says Rideout. “We just couldn’t afford to keep investing.”
The transition to a new provider will not impact patient care, RWT emphasizes, and Babylon will continue to support the trust until it finds a new provider and covers the cost of handing over the service, Rideout said. “It’s not like we cut and run,” he says.
Cost savings have caused the company to rethink the profitability of all of its contracts as it expands its operations in the US, Parsa noted in a recent earnings call with analysts. “Those two or three small NHS contracts you’re referring to — and those aren’t our significant primary care contracts — those are marginal contracts for us, more in that category of contracts where we couldn’t see a significant contribution to our profit margin,” he said. “And they also made a fairly small contribution to our revenue. And that’s why we saw them as a distraction and canceled those contracts.”
GP at Hand makes no money either, but is seen by Babylon as the core of its business in the UK. In 2016, Babylon took over a GP practice in Fulham, London, to run as a digitally-led practice, raising concerns that it favored younger, easier-to-treat patients and had too many people on its books – recently reaching 115,000 patients, when a standard general practitioner is smaller than one-tenth the size. The new model meant that Londoners from much of the city could apply, rather than stay with a local GP, leading to that £22 million shortfall in the budget of the local health authority in West London.
Babylon retains GP at Hand, although it does not make a profit. In the NHS, GP surgeries are run as private businesses and a flat fee is given out per patient, which works out to an average of £155 per capita per year. Rideout claimed GP at Hand patients have six appointments a year versus an average of three for patients with standard GPs; however, the Royal College of GPs suggests that patients see their GP on average seven times a year.
GP at Hand states that its system reduces the number of visits to secondary care, such as hospitals. However, Rideout says Babylon doesn’t benefit from those cost savings — which is true of other efficient GP practices — nor does it qualify for any specific type of financing related to buildings reimbursement.
That amounts to an operating loss for GP at Hand, and until that situation changes, the practice will close and not expand its Birmingham facilities, which treat 5,000 patients. “We are fully invested and committed to keeping GP on hand, and we will continue to work with the NHS to try and change the way they fund it so that it is more viable,” said Rideout. “Internally, we’re working to make sure we’re as efficient as possible, and once we get to a break-even point, we’ll start expanding.”
