The secret sauce that has this digital health pioneer on the cusp of greatness
Health & Biotech
Health & Biotech
Special Report: 1ST Group managing director Klaus Bartosch speaks to Stockhead about the seismic shifts that are creating vast growth opportunities in Australia’s healthcare sector and why the business is now excellently placed to deliver value in the long term.
COVID-19 has completely shaped the contours of Australia’s healthcare market, prompting an unprecedented shift to online in traditional customer-facing business models – everything from patient management and engagement to service delivery and provisioning.
That is the view of Australia’s leading digital health platform and marketplace, 1ST Group Limited (ASX:1ST), which released a business update with its FY20 results last week ahead of its AGM next month.
The company, whose Annualised Recurring Revenue (ARR) was up 30% from June 2019 to $5.45m, has overseen a significant period of sustained growth during COVID-19 as group revenue reached $4.95m (up 25% on FY19).
1ST Group’s multiple revenue sources have historically been driven by online appointment booking subscription fees. But managing director Klaus Bartosch believes the company is now on the cusp of a real growth opportunity – accelerated by the structural changes in Australia’s healthcare market – that has presented them with a significant first-mover advantage.
“Australia’s healthcare sector is a complex ecosystem … and what we’re building is more than just a marketplace or software-as-a-service platform, because we’re providing what ultimately will become a very valuable piece of healthcare infrastructure that supports wellbeing and efficiency in the healthcare industry in Australia and New Zealand,” Bartosch told Stockhead.
Bartosch co-founded 1ST Group in 2011 with Dr Rick Luu to simplify access to healthcare by leveraging online services. Little did he know that in 2013 his own platform would save his life.
“At 9:30pm one night suffering from arthritis in my right knee, I booked an appointment to see my GP the next day. This unrelated symptom led to the discovery that I had a rare form of leukemia,” Bartosch said.
He was immediately hospitalised for urgent life-saving treatment. He survived and is now cured.
This personal experience has further fuelled Bartosch’s passion for democratising access to quality healthcare and further developing the company’s “life-saving platform” MyHealth1st.com.au.
In an industry hampered by dated and inefficient patient management systems as well as poor collaboration between healthcare providers, 1ST Group saw a real opportunity to disrupt the entire consumer and patient experience, drive practice loyalty, improve retention rates and enhance lifetime customer value creation.
While acknowledging that the pandemic this year has caused unexpected delays to previously announced “landmark agreements” and interruptions to many of its customers’ operations, subscription revenues and usage fees have remained “largely intact”.
The company instead recognises that COVID-19 has meant the growth opportunity has been extended, enabling a first-mover advantage to provide existing and new customers with a significant range of additional value-added products and services.
The results speak for themselves. It has integrated with 45 existing Practice Management Software systems, helping to arrange over 12.5 million appointments to date, and signed agreements to support close to 12,000 sites or practices.
Partnerships form a critical part of 1ST Group’s growth, having successfully overseen platform integrations with leading telehealth software company Coviu and digital payments platform Medipass.
In addition, 1ST Group’s partnership agreement with Openpay and the launch of EasyTelehealth and EasyHealthPayments this year has meant the company now finds itself in a strong position to deliver returns to shareholders in the long term.
“What we’re doing as an organisation is helping consumers find and interact with healthcare services more easily – and that includes areas like proactive healthcare management.”
“The way we as consumers in the healthcare industry engage with health care fundamentally hasn’t changed in 100 years. We know that being able to get people to take action early means that they spend less time out of work; the cost to their lives is lower (in terms of actual costs), the cost to the community is lower because the cost of care is lower.”
“Long term, our goal is to put in place the AI technologies, payment systems, educational content and telehealth capabilities to enable consumers to both engage with healthcare services effectively and educate themselves 24/7 when it suits them. To do that, integration with practice management software is key.”
With a total addressable market of $2.2 billion, the opportunity for premium access to seamless digitised healthcare services in Australia is ripe for the taking.
The demand driving this has only accelerated during the last few months, as consumer preferences shift towards online and remote access to health solutions.
Bartosch notes, however, that we are still only scratching the surface of digital adoption among doctors and healthcare professionals, particularly as telehealth remains in its infancy.
“What COVID-19 has done in the first instance is that no longer has a health provider in Australia questioned the merits of going online. Over the last few months, we’ve seen it across all our customers and during the lockdown,” Bartosch said.
“There’s been more development in the last six months in healthcare technology in this country than probably the last 20 years and it’s been extraordinary.”
“Most probably the biggest disappointment to date, however, has been telehealth – video conferencing in health remains underutilised … doctors have avoided video-based consults, using telephone call because, for them, it’s perceived as more efficient. But there’s no way it’s as effective a clinical method of engagement with people.”
After a sustained period of continued quarter on quarter growth, the company will now look to increase its number of sites, deriving organic site growth through customer acquisition strategies and several strategic investments in additional verticals and products that will collectively contribute towards strong momentum and revenue growth in FY21 as deployments mature.
Bartosch told Stockhead the next 12 months will be a period of high activity for the company as it builds out its existing funnel of significant contracts. It will mature its relationship with OpenPay and the significant value creation it can bring to the firm, as well as continue 1ST Group’s acceleration into core target markets for growth – such as psychology, dental and specialist health.
“In my days at Hostworks … I watched the likes of Seek, REA, Carsales, Graysonline and how hard they worked on bringing new products and services to market. I watched various people that tried and failed in other organisations without learning from their mistakes,” Bartosch told Stockhead.
“The biggest failure an organisation like ours could make is to stop innovating. You just can’t stay still in the online world.
“The more experienced investors tend to understand it takes longer and costs more to be successful. There is no such thing as an overnight success.
“Failure to us is acceptable, failure is rivers of gold, as you long as you seize those opportunities in a big way.”
Entrepreneurship requires a “bloody-minded determination” and never resting on your laurels is key, Bartosch admits.
The company’s ethos is based on a culture of continually reinventing itself to be well-placed to lead in the current operational climate.
“Innovation is a really important part of what we do at 1ST Group and there are absolutely no sacred cows for our team as there are always better ways to do it.”
“I do see a future where AI (artificial intelligence) plays a really pivotal role in the future of a platform like ours. And I think it’s going to be really powerful.”
This article was developed in collaboration with 1ST Group, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.