… and how will it shape the connectivity market?
Why would Telstra Health sell secure messaging and e-referral player Argus to HealthLink, and for how much?
The company said the sale reflected its “commitment to interoperability and open-source standards for healthcare data exchange, by continuing to partner with secure messaging and eReferral providers”.
“Existing customers of Telstra Health’s messaging solution will receive the same level of support through HealthLink, including access to the extensive HealthLink nationwide network,” the announcement said.
“They can also anticipate benefits from HealthLink’s substantial investments in its technology platforms, particularly in API and FHIR-based messaging solutions. These advancements illustrate HealthLink’s commitment to continuous innovation, ensuring ongoing value for its expanding customer base.”
Strategically for Telstra Health Argus is pretty old technology and it would take a lot of work to update its tech stack, which would likely be sunk money, because secure messaging, which makes up a lot of the Argus business, is somewhat of a sunsetting technology in the healthcare sector.
Telstra possibly had an option to rev up Argus as a middleware service provider in the connectivity game by extending its range well beyond secure messaging into more cloud-based FHIR enabled connection services, which are going to become vital to the federal government’s “sharing by default” plan over the next five to 10 years.
The other likely factor influencing Telstra’s decision to offload the business is the market share of Argus relative to Healthlink: its relatively small.
HealthLink is the largest secure messaging player in Australia, probably having a share of the market close to larger than all the other existing players – Medical Objects, Global Health and Argus – put together.
Argus will provide HealthLink with some sort of list of clients in both NSW and Victoria, and the overlap will turn into synergy savings.
That probably means that although Argus is a company without a super long-term future, the client list and short to mid-term synergy savings would mean that HealthLink would have had to pay something reasonable, like maybe one times revenue – whatever that is for Argus (Telstra would not say).
The Argus technology is also a lot older and less flexible than the HealthLink offering, so in some respects, those Argus clients that get transitioned to HealthLink should end up with a better service, albeit it may end up being more expensive.
The sale does underline some fundamental likely changes to the market for connectivity providers on the horizon.
If you look at sunset industries like secure messaging in other markets you can see some parallels as to what might happen next.
A possible parallel industry is printing magazines, a sunset sector par excellence. As a result some printers have got backing to buy up every other printer as the industry gets smaller, other suppliers lose their clients and margin, and economies of scale in a declining market become more important.
The other thing that printers who decided to stay in the market do, which HealthLink and anyone else in the market is going to need to do, is diversify into emerging adjacencies. One of the big remaining printers in Australia, Ive, has diversified into digital marketing by taking all their existing printing clients and moving to their future adjacent needs, for example.
This is something we will likely see a player like HealthLink do.
So in addition to setting up to buy the smaller players out as time goes by, HealthLink can take all their client relationships, their core premise of making healthcare data flow more effective between providers – as they have done with secure messaging and e-referrals – and spend some of the additional margin they can make as a market consolidator and move into the FHIR and Open API-based connector game.
In the US – which is like looking into the future of digital health in Australia thanks to the 21st Century Cures Act – this much more modern connector role is now a multi-billion dollar and fast growing enterprise.
It’s very different technology which would require a group like HealthLink to invest a lot in something that they probably still don’t have a good core skill set in. Australian health tech groups in general don’t have a good grounding in FHIR and cloud-based sharing technology – ironically perhaps Telstra Health is one group that does.
Related
But what HealthLink has is a long-term customer base with a value proposition that they’ll sort out connectivity for them.
The horizon for secure messaging disappearing is still fairly long – maybe five to 10 years – so there is plenty of time for HealthLink to pivot. The biggest challenge is tracking an old technology base and building a new one, while presumably some smart new younger players are going to have a go at you.
But like Best Practice in the GP patient management game, having the lion’s share of the market and a customer base that has known you forever and you have a connection to is a great starting point to the future.
If this does turn out to be the strategy at HealthLink, do not be surprised if Medical Objects, which dominates share of the secure messaging market in Queensland, but is still a relative market share minnow to HealthLink, thinks what Telstra Health has obviously worked out, and decides to sell to the big guy.
