You don’t have to like the profit-driven quasi-healthcare/tech Eucalyptus, but understanding it will improve your future in healthcare.
I first sat down for a coffee with the CEO of rapidly growing (largely) single indication medical platform group Eucalyptus, Tim Doyle, five years ago.
When I left that meeting I thought two things: these guys (he was with his business partner) have no idea about how risky and complicated healthcare is so they’re likely going to crash and burn, and, if they don’t, God help us all.
Five years on we’re firmly in the God help us scenario – and Tim Doyle rang me last week wanting to catch up for another chat over a coffee.
We’ve been pretty critical of the company and the concepts behind it over the years, in particular, how loose it was originally on clinical governance around digital patient consults and how poorly it seemed to try to connect patients back into proper longitudinal care, so I was intrigued as to why he wanted to talk.
When I first met him five years ago he was outwardly cocky and arrogant – he thought that healthcare was unusually backward and ripe for the sort of technology disruption he felt he knew how to deliver.
I’d seen this a lot before with people relatively new to healthcare. He didn’t seem to have done much due diligence on just why healthcare was the last major sector to be digitally disrupted.
This time around, Mr Doyle showed nothing of that initial hubris and arrogance. He even looked a just bit weary and battle worn.
Healthcare will do that to you of course.
Probably running a big scale-up, dealing with venture capital masters of the universe and being at the whim of your investors most days of the week wouldn’t help much either.
But he’s still here five years on, he’s still smart, and he’s definitely a bit wiser on the complexity and risks implicit in trying to build a business in healthcare.
I don’t think he is going away any time soon.
While it feels like healthcare has at least challenged him a lot more than he probably ever contemplated it might, he and his company are adapting, and perhaps faster than some of the other clunkier new wave healthcare platform model plays, such as InstantScripts (owned by Wesfarmers) or Hub Health (owned by NIB).
Mr Doyle maintains steadfastly there is a place for what Eucalyptus does in the system.
But what he says it does and what doctors feel it is doing are still largely two worlds apart.
Most doctors hate Eucalyptus for what they feel it ultimately represents – profit from disrupting medicine and doctors with technology and scant regard for important traditional system thinking or even the fate of patients.
Tim Doyle, of course, sees it very differently.
He says (although I’m not entirely sure he really believes it) that he is creating access in a modern way for a modern world and by doing so benefiting large cohorts of patients and through that the whole system (go read the webpage for more).
If the group is going to stick around and be successful, you suspect that winning over the haters is going to be its most important challenge.
Which is maybe why Mr Doyle rang me.
The Eucalyptus journey was never going to be like how Google, Facebook and the like ploughed through the existing established media and advertising world in the early part of this millennium.
Today, our major TV stations and newspaper businesses are literally on fire as a result of disruption from these platform plays and may not make the end of the decade.
But healthcare works differently. It is about people’s quality of life, and death, and balancing these fundamentals, mostly with government money and certainly via government regulation.
The establishment isn’t going to be ploughed away by breaking the rules and re-stablishing a new ecosystem once the old one is in flames behind you.
Do that in healthcare and you’ll kill people at scale.
Mr Doyle almost admits that he didn’t quite have his head around this dynamic at the start.
He tells me that he knew he was breaking the rules on stuff like doing asynchronous consults on weight loss for what are Schedule 4 drugs, without doing any proper checking of who the patient was at the other end.
He says he was going fast to get the business established and learning as he went, but eventually he learnt that clinical governance wasn’t something you could toy with for too long before killing someone, something that wouldn’t be all that good for the business build.
Today, a key strategy for the group is to lead the country on clinical governance and standards for telehealth.
If you try to get Ozempic on the platform now, it’s much harder to scam the doctor at the other end of the telephone. You used to be able to do it all on text and no one could be certain there really was a doctor at the other end of your text. You have to show photo ID and be identified properly within the Medicare system.
Mr Doyle has smartly flipped the script on responsibility in respect to his major technology, telehealth.
He’s now the one championing much more rigorous governance and standards, and is spending money on good people and funding research to establish that position for his company firmly.
Of course, there’s another really good business reason to be doing this.
Having got to the leading position in market, with not that many competitors to date, he’s literally closing all the loopholes he exploited so someone else with money and ambition can’t easily follow him in.
It’s clever and highly adaptive, something you’re likely to keep seeing of the group while Mr Doyle is at the helm.
But it still won’t have done enough to dispel fears about whether the business model is simply plucking low-hanging fruit from reasonably rich people, without contributing much or anything to the overall healthcare system in terms of impactful patient care.
The two key issues major physician lobby organisations have with Eucalyptus are – first – that it disconnects patients from the continuity of care they get from seeing their regular doctor,
This is very important with a medication like Ozempic – which is treating several co-morbidities other than type 2 diabetes and obesity that doctors have the real information on.
Second, its cheap and fast-access model is likely siphoning much needed easy consult money from its members’ businesses in a time when those businesses are highly stressed.
Mr Doyle believes Eucalyptus is doing all it can and will do more to create better connection back to doctors when it acquires a patient.
Indeed the group has in place a lot of protocols during sign-up, after which there is an attempt to link a joining patient back to their doctor.
So far, despite a few requests, Eucalyptus won’t release the detailed numbers to us on how many patients actually say they don’t have a regular doctor when asked, or tick the box saying they don’t want their doctor to know. It would be pretty interesting data.
Mr Doyle says that the group entirely gets that continuity of care in the main system is important and is working on it.
But for what seem like obvious reasons, it doesn’t feel likely that in the near term the number of patients who undergo a Eucalyptus program will be connected back to their regular doctor.
Those reasons include:
- Most patients don’t want their usual doctor to know;
- Some actually don’t have a regular doctor;
- Many younger ones don’t have a regular doctor and don’t care.
The reasons are used by Eucalyptus to help justify its business model of course.
“We are helping those people who fall outside the traditional system … we are meeting an important need.”
It’s probably debatable how important that need really is.
After all, the demographic of patient that Eucalyptus targets is educated, young and well off. It’s not really the demographic that is crying out for a lot of help.
But the argument for Eucalyptus detractors cuts both ways.
If the cohort of patients it is targeting are largely educated, wealthy and more than capable of looking after themselves, while you’d love everyone to be properly connected to their doctor when they go on drugs like Ozempic, you can probably be sure that if anything goes wrong they will get connected promptly.
The other argument from the traditional physician lobby groups, that the group is harvesting much needed low-hanging fruit from a struggling primary care sector, increasingly does not stack up these days either.
For one thing, general practices are not short of patients, and the GP workforce doesn’t look like it is going to grow fast enough any time soon to remedy this situation.
For another, when you add up how many consults Eucalyptus might actually be taking out of the traditional primary care market, it’s miniscule.
You can ask me for these numbers if you like – it’s back of envelope stuff, but I’m factoring in the net number of ongoing patients the group has, the fact that most don’t want their doctor to know they are doing it so wouldn’t go there anyway to start with, or don’t have a regular doctor, and that Eucalyptus is no longer growing much in Australia.
That last point might turn out to be that the group is tapping out on the specific cohort of wealthy educated patients they are targeting, at least for the current indications they are offering.
According to Mr Doyle, 65% of the group’s revenues are Australian and 35% are based in Europe – mainly Germany and UK – but the main growth at the moment is in the non-Australian operations.
The UK might turn out to be a very good market for Eucalyptus. Telehealth governance is far more mature and advanced, well accepted by patients and the government, and GP access is a nightmare.
But if Eucalyptus isn’t growing that much in Australia with its current indications then its relatively small, but presumably very profitable current client base, shouldn’t really be that much of a problem for the detractors at the RACGP, ACRRM and the AMA.
On that point, all these lobby groups tend to ignore the fact that Eucalyptus provides work for up to 70 GPs at a time, and if it does grow it will likely be more.
When you do the math on how many GPs will pass through the place in a 10-year period, and then you add up all the other GPs working for similar set-ups around the country, you are getting to a lot of GPs – in the many thousands.
At some point of time all these organisations are going to have to acknowledge that these new care models are giving work and careers to many of their members, and start representing them in that respect.
With Australia slowing down, Eucalyptus could start expanding its product line.
But what to?
The seemingly obvious expansion based on its current client base, and its advanced platform infrastructure and governance, would be medical cannabis.
Interestingly, Mr Doyle flatly rules out such an expansion.
Ironically perhaps, he makes mostly medical establishment arguments for his position on the matter.
He says that there is no evidence base for the indications cannabis is being used for, like there is for all the medications the group currently works with, and that is not an acceptable basis for Eucalyptus to operate on.
That could be that Mr Doyle genuinely believes and supports his new positioning of evidence base, standards and governance, or there might be the odd business reason not to try it.
Medicinal cannabis is lucrative. It is believed the market leader Montu has revenues above the $300 million market, which is about double what Eucalyptus’s current revenues are.
But the vendors are rapidly getting a very bad name, something that Mr Doyle might now want to steer clear of, especially if he has genuine expansion opportunities overseas.
A key issue is the vertically integrated business model of growing, distributing and – eeek – prescribing and dispensing, all in a line.
That business model just shouldn’t exist in Australia in medicine given the line we have consistently drawn between doctors prescribing and pharmacists dispensing.
Maybe Mr Doyle sees the risk in that.
Certainly, there is a lot of discontent among the regulators about just how out of control the sector seems to already be, and there are regulatory storm clouds starting to form.
Or maybe, given the main players in Australia are already established and vertically integrated it’s simply too late and risky to get into, despite the pre-existing synergies their processes, people and platforms might bring to such a move.
In any case, while admitting that the board had discussed the idea a few times, the group and Mr Doyle aren’t going there. Not for now anyway.
But he still does have some ambition to grow in Australia (he has to, otherwise his backers wouldn’t be happy).
He didn’t say he was thinking of any other indications outside what his various vertically branded groups already do – mainly weight loss, erectile dysfunction, contraception and baldness – and it’s hard at the moment to think of any new drugs coming that would lend themselves to the Eucalyptus model.
He did let go that they are looking at the idea of expanding into health insurance.
Now there’s an industry you’d think that doctors might like a group to disrupt, which might be an advantage for the group.
And it seems to have a well-aligned customer base to try such a leverage play.
Are you starting to like Eucalyptus a bit more yet?
No?
That’s probably because if you’re a doctor not working with one of the new platform care model plays, there’s not really anything particular to like still about what it does from a healthcare perspective.
But is it a danger to the system or GP viability anymore?
It’s looking increasingly like it isn’t, at least at this point of time.
In fact, one other expansion possibility Mr Doyle mentioned was establishing bricks and mortar centres of some sort (more on that below).
Would you invest in Eucalyptus based on what you see so far?
That’s a pretty interesting question.
My sense is that Mr Doyle now understands acutely that he needs to keep de-risking his company’s future at speed, probably by taking his customer base and offering them other things to keep them sticky, like health insurance.
One possible obvious future problem as things stand for the group is what I’m going to call the Dr Max Mollenkopf factor.
Dr Mollenkopf, a Newcastle based GP and small practice owner, is what I’d call a wholly traditional, bricks and mortar, virtual, new wave thinking GP (you get the jokes right?).
He is looking at the future quite a lot and being very creative with both technology, branding and customer service.
He’s thinking a long way outside the box of where groups like the RACGP and AMA seem to hub their lobbying efforts – mostly in bricks and mortar family GP practice models.
He’s written a fair bit about platforms like Eucalyptus and said that GPs can easily fight off such apparently disruptive plays by being more patient-centric and creatively utilising rapidly evolving digital technology to transform their patient experience.
He says GPs have a lot of unique selling propositions for their patients that the big platform groups don’t have and never will, and while they will take away some low-hanging fruit consults for sure, the unique ability to manage someone’s health intimately and in a longitudinal manner should never be supplanted.
When I think about that, and about all the huge changes to the technology base that the government is planning for GPs and is going to support a lot, I think that if Eucalyptus stood still with what it has in Australia, it might well be in a fair bit of trouble within a few years from a smart traditional GP sector.
Certainly, the very large telehealth platform plays overseas have all fallen from Grace: Teledoc in the US and Babylon in the UK.
That might be why Mr Doyle is thinking he should entertain the idea of expanding into bricks and mortar as a part of a portfolio offering.
One very interesting thing he didn’t rule out if you think about the Dr Max Mollenkopf factor, is partnering somehow with traditional GP practices.
A key weakness of Eucalyptus at the moment is price and its reliance on selling Ozempic – it will of course start selling more and more better drugs in the class as they come through the pipeline, but the same principles are going to apply.
When push comes to shove, if you do happen to go to your local GP and that GP is bulk billing, and you can get them over the line that you need Ozempic – and now supply isn’t a problem, a lot more GPs are a lot more sanguine about the idea because it does look like losing weight for a lot of people is going to sort a lot of other problems out going forward – then it’s going to cost you only $130-160 per month, as opposed to going through Eucalyptus and paying $400 per month.
Depending on how things pan out with the weight-loss drugs moving forward I’m going to say that it’s going to become increasingly socially acceptable to get on one of them and as that happens GPs are going to be far less concerned about prescribing such drugs for weight loss.
In fact, so long as the data on the safety profile remains reasonably robust, it could become the responsible thing to start doing as a GP because getting weight down avoids so many other potential chronic care issues.
In other words, in the not-too-distant future, if patients and GPs get more comfortable about everyone knowing they are on these drugs or in the GP’s case, are prescribing them, what is the unique selling proposition of Eucalyptus and some of its rapidly emerging lookalikes?
It’s not price that’s for sure.
Is it really the digital experience then?
Eucalyptus says that 80% of its patients use its app to track their weight daily and 50% use the additional features on the app to optimise their weight-loss journey.
Eucalyptus won’t give us this data yet either but say it’s coming.
Is that a unique enough proposition to justify a more than 100% price premium?
And the way technology is going, how long until Dr Mollenkopf adopts a white label version of software which does a lot of what the Eucalyptus software does, something which Dr Mollenkopf already looks into most weeks as a digital means of making his patients’ experience much better.
Or maybe Dr Max will partner with Eucalyptus for an all-round better outcome?
I’m not saying that suddenly GPs and patients will abandon Eucalyptus.
But it’s apparent that the fundamentals of why patients use Eucalyptus now might easily start unravelling fast in the coming years as technology becomes much more accessible to GPs.
Do you feel even a little bit sorry for Eucalyptus now?
No?
I didn’t think so.
And I don’t think God really needs to help any of us anymore either, at least with respect to the Eucalyptus problem.