For anyone wondering what ever happened to Telstra Health, it’s still there, and if it gets anywhere near pulling off a very ambitious transformation, it’s going to be dangerous.
For the better part of a year and a half, Telstra Health has been pretty quiet.
There’s nothing sinister going on. No collapse. Not being readied for sale. No implosion of financials. Just … quiet.
For a company that is perhaps our largest digital multi-platform health play, with more assets across more healthcare sectors than any other single group, and which, for most of its life has talked up the idea of “connecting healthcare” loud and proud, the silence has been… well… intriguing.
What has been happening?
“We have been quiet for a reason,” CEO Elizabeth Koff told The Medical Republic.
“We’ve undergone such a big structural transformation … you do become a little bit introverted when you’re actually changing the whole structure of the organisation.”
In other words, Telstra Health is in some sort of transformation bunker – still.
It was in the second half 2024 that the group shed 300 jobs, did an internal strategic review which some saw initially as a “for sale” sign, but which turned out to be Telstra committing its health division to exactly what Ms Koff is describing above – an attempt at significant holistic structural transformation.
As Ms Koff put it:
“It was very paradoxical … we had the ambition to connect healthcare, but none of the products were connected.”
That portfolio is still enormous:
- GP systems (MedicalDirector, Pracsoft, Helix, Communicare);
- hospital systems (Kyra suite, PowerHealth, analytics);
- aged care platforms (Clinical Manager, CareKeeper, MedPoint and others);
- national medicines infrastructure (Fred IT, eRx, MedView);
- government platforms (registries, 1800RESPECT);
- and now My Health Record modernisation via Smile.
On paper, it’s the closest thing Australia has to a national digital health stack. In reality, it is, as Ms Koff admits here, a collection of products.
The rebuild (and why it’s taken so long)
The strategic reset is both structurally and technically ambitious: rebuild all the assets so they can sit on a single cloud native platform, make them all FHIR interoperable and create a shared data layer between the assets (using appropriate AI to assist) with a view to turning your “collection of products” into a suite of connected modular components that you can shape depending on your customer.
“A cloud native application layer with an intelligence layer with AI … interoperability … and a significant data spine,” is how Ms Koff describes it.
It’s a great idea. But how do you actually do that?
In a way it’s a microcosm of the problem our entire legacy health system has. If Telstra Health could actually pull its transformation off, it would not only be a good sign for the rest of the system, it would put the group in a great position to service that system at scale.
But big ideas are easy. Execution isn’t.
How do you run a series of legacy systems while rebuilding new ones over them and below them and keep your existing and not unsubstantial customer base intact?
What probably helps is that while Telstra Health does have a string of largely siloed legacy assets in play, some of them are pretty good assets, generating very good revenue. Some, like the national electronic script exchange project, will go for a long time yet.
You could, if you wanted, give the whole lot a really good paint job (that’s called marketing) and keep pretending it’s a great suite of products. No one would really notice for a few years yet.
But what Ms Koff understands very well is that there is no long-term future in sitting on this position, particularly given the government’s determination to connect the system via legislation and giant infrastructure projects such as the national health information exchange.
She has chosen to stay and do the hard work.
And if you stop to think about the complexity of what she is trying to pull off, both in technical terms, but probably more importantly in terms of people and culture, she’s one brave CEO.
Many would have done the paint job and quietly moved on at the right time given the nature of the challenge.
Ms Koff is not a usual technology CEO. In fact, she’s not really a CEO in the way we normally think of one.
She’s an ex-NSW secretary of health and one that has deep systemic knowledge of our system issues, and always had a penchant for making the system better.
You might imagine how hard this job may have been as the head of NSW Health.
It feels like in Telstra Health she sees a different way of fixing things.
The assets that matter
If you strip away the clutter, four parts of Telstra Health still look genuinely strong: it’s national prescribing infrastructure (FRED IT, eRx, MedView and AusDI), it’s national government registries (Cancer, 1800 Respect, and population health), the My Health Record modernisation contract (SMILE et al) and, perhaps, its hospital billing, analytics, revenue and lifecycle reporting product, Powerhealth.
eRx, which processes 160 million e-scripts per year and counting is not so much a software platform as essential national digital health plumbing. Even better, the contract is effectively a monopoly after the Department of Health, Disability and Ageing made the unusual decision to kill off its only competitor a year ago.
The Cancer registries, 1800RESPECT and other population health contracts, a bit like eRx, are long-term contracts with very few organisations that can compete for them, even when they come up next for tender. They throw off a lot of cash, and so far they are creating an aura of trust for the Telstra Health brand.
The My Health Record modernisation contract is not just a hugely strategic win for Ms Koff and her group, but it’s a project that could define the whole future of government-developed digital health infrastructure for the country.
Until now no matter what anyone tells you the My Health Record, which wasn’t such a bad idea, has been a spectacular failure on most fronts, at a cost of more than $2 billion and counting.
The Telstra Health contract, which it possibly won because of its partnership with Canadian FHIR based interoperability platform experts Smile, has the potential to release the potential of the latent data, brand and regulatory framework of the My Health Record.
The government wants its big sick puppy to actually be useful to patients and the system. God knows they’ve wanted it for more than a decade , so why give up on it now?
To do this Telstra Health will need to wrap the product with effective FHIR and open API protocols which will make it easy for anyone to connect and share data in real time – on the vendor side and the patient side. Stuff like, if the government says OK, a patient can ask its AI agent to ingest their record without consuming it (so use it not abuse it) easily at any time and place.
If Telstra Health and Smile can do that then they will go a long way to greasing the wheels of the government’s “sharing by default” ambition and at the same time actually make the My Health Record a relevant and important system asset.
More importantly for Telstra Health though, if it can succeed in this project, it will put the organisation in poll position to build out the much mooted national HIE.
Ostensibly, this is the main play in national digital infrastructure for the dream of “sharing by default”.
If both of these things happen what you may have is Telstra Health as the default developer and maintainer of the country’s most important digital health infrastructure.
That’s a good plan for growth and sustainability of a digital health group.
PowerHealth is not talked about much but is used by a large proportion of Australian hospitals for billing, analytics and costing. It’s a bit boring but it has good stable revenue and its footprint gives Telstra Health an in to one day try to get back into hospitals in a big way.
The problem children
Of course, not everything in the portfolio has the same potential of the above assets.
The group may have to make some hard decisions on these positions over time. It can’t do everything.
The Kyra suite of hospital EMR and PAS products, which are only so far in some private hospitals, has quite a few strategic issues for the group.
Hospital EMRs are a complex, capital intensive and a highly competitive business. Kyra has only a few instances in play in Australia, all in private hospitals.
And now, AI looks like it is coming for the main hospital EMR enterprise players, creating a lot more complexity for a group with such a small EMR footprint and so much other stuff with higher potential to do.
Likely, Telstra Health will just run its existing instances for its clients as long as they can, but not do much else.
Telstra has quite a few interesting assets in aged care and claims it services 60,000 residential aged care home beds with its Clinical Manager and Medication Management products.
It’s a much better position than the group has in EMRs but this is a big and fragmented market where revenue growth potential isn’t very clear.
Still, it’s going to be a big market in time and it might be that, like patient data flow and scripts infrastructure, the government will want some more control of interoperability in this sector sooner rather than later.
That is, the government might want national aged care digital health plumbing infrastructure soon – it should.
If that happens, Telstra Health actually has a coherent mini-ecosystem, especially around medication and resident workflows. With this and successful work on the My Health Record and maybe a national HIE, aged care could be good growth down the track for the group.
Related
MedicalDirector
If you had to point to one idea that Telstra Health really had right, and stuffed up royally, it would be MedicalDirector.
When the group acquired MedicalDirector in August 2021 for $340 million it had a share approximately equal to its major competitor Best Practice of about 45% of GP desktops.
It’s unclear what went wrong but here’s a guess.
When Telstra Health bought it management looked at a major competitor that was already rapidly building market share against it and had to make a decision.
Did they want share of GP desktops, or revenue?
Today that answer feels entirely obvious. You want as big a footprint as you can manage. With control of a giant footprint of access and distribution to GP networks, the money would always follow. It’s sort of classic software platform and network effect theory.
At the time – denied entirely by Best Practice founder Dr Frank Pyefinch but entirely obvious if you step back from what happened – Best Practice was significantly discounting its product in order to take share away from MedicalDirector. It wanted footprint.
MedicalDirector, previously owned by private equity, had at one point nearly doubled the price of their product. This is a classic PE play. They would initially create substantive new revenue and profit, but they wouldn’t be around to see the downside of this short-term financial hot shot.
Most GPs were locked in and swapping over to Best Practice was hard because of the data transition issues.
So, a lot of GPs were pissed off and this settled as a latent liability for MedicalDirector, and as it turns, out for Telstra Health.
When the next revenue cycle for PMS renewal came up, most of these GPs would abandon MedicalDirector for Best Practice, which among other things, had a much better reputation for customer service than MedicalDirector.
The CEO of MedicalDirector came over with the acquisition and seemed to have a lot of sway on how it positioned and developed the product.
That may have been a mistake for Telstra Health as although he knew where all the skeletons were buried in the business – he had come across from the previous change of hands from Primary Healthcare to PE – so he was probably already made rich through the sale to Telstra on a PE deal.
It’s anyone’s idea how he was incentivised, but if you’re already rich, and your new incentive scheme is tied to profit and revenue growth, which it probably was, then you optimise for that incentive.
The whole strategic problem here was – and I’m still guessing entirely here, everyone – in a big corporate like Telstra Health, it’s very tricky to set a strategic goal as share over revenue and profit. The acquisition plan probably had growth in revenue and profit cooked into it, in which case even retaining share against an aggressive Best Practice was going to be nigh on impossible.
It would have been a very difficult situation. At the time of the sale it is estimated that MedicalDirector had up to $20 million more in revenue that Best Practice despite the two having equal share. That would have felt fantastic, but if below the water line you are on a path to lose your footprint, it’s false value.
Dr Pyefinch, again denying he was doing what he definitely did, had no drama in pursuing share over revenue and profit. Best Practice made enough money and he knew that if he could dominate share – GP access footprint essentially – then Best Practice’s value would be much higher than if he had just equal share with a competitor but more profit and revenue.
So today, Best Practice has something like 70% of GP share and MedicalDirector only 20%.
That all but kills the original reason Telstra Health actually sought to buy MedicalDirector: own a large slice of the access gate for GPs in the country so you could connect all your surrounding products together, via this powerful hub.
Without a decent share (and GP hub) Telstra Health gave up a lot: GP access and referral control. With this surrender, Telstra Health has made its strategy of connecting all its assets and the system, with or without FHIR based interoperability in the middle of everything, a lot harder.
Can MedicalDirector make a comeback?
If it does it will be slow because not only did MedicalDirector lose share and distribution through share, it lost a lot of brand trust.
But if Ms Koff does pull off her ambitious transformation strategy MedicalDirector has some chance of regaining share over time through connectivity to other assets and possibly through some channels Telstra Health will have more control over interoperability and data such as electronic prescribing and MHR access.
Any sort of rebirth of MedicalDirector will of course also rely on how Best Practice moves from here.
At the moment Best Practice is a bit becalmed on its core development of a native cloud version of the product, but it is still moving full steam ahead on some very good and strategic integrations, including Lyrebird for scribing, admin and summaries, and now MedLuma for decision support and embedded CPD.
Also, the 51% controlling share of Best Practice, that owned by Dr Pyefinch and his wife Lorraine, is up for sale.
Unfortunately for Telstra Health Dr Pyefinch isn’t going to sell for the money (well, to the extent that he’s not crazy). He’s going to sell to see his legacy blossom. He wants the most sensible buyer to take the product to the heights of what seems possible – control of the general practice hub and all the power for the system that would mean in a new connected world wanting to somehow move to managing blowing out hospital costs through connected chronic care in the community.
What about AI?
As if Ms Koff’s job wasn’t hard enough.
Enter the AI dragons – patient-side (ChatGPt and Claude) and provider-side AI (Heidi and Lyrebird).
While Telstra Health is rebuilding and planning on a rejuvenated role for the My Health Record and the build of an HIE, workflow at the coalface of care is changing via a few innovative web-based integrations seducing hospital networks.
One important trend for Telstra Health to be watching is how Consultmed is connecting GPs, specialists and hospitals into an asynchronous network, in part based on the power of an idea big in the UK and only starting to get traction here, but which threatens a lot of traction: “advice and guidance”.
A lot of groups aren’t waiting for government promised infrastructure to work out better interoperability between hospitals and GPs and Telstra may have to contemplate this trend in its current plans.
Notably Telstra Health has embraced Consultmed in a few of its products so it’s not like they don’t know.
Another big trend which is probably seismic, but hard to understand is the impact in terms of building out software platforms to server providers of patient-side AI.
Patients are rapidly starting to use ChatGPT or Claude. They are arriving at their provider much better informed, sometimes better informed than their provider.
The whole doctor-patient information dynamic, once reasonably asymetric is flattening fast. This means the whole consultation and referral dynamic is in flux, and changing in front of everyone’s eyes.
Koff acknowledges this directly:
“Patients will be far better informed … it’s going to change the nature of consultation.”
With this dynamic in play, large US hospital networks are starting to hedge their bets on long-term enterprise EMR commitments.
If that is really happening there is big disruption in play.
If AI becomes the patient front door, as many people are predicting, a lot of provider platforms become back-end, but the data in remains as important system becomes fuel.
Most importantly, workflows become dynamic.
So what does Telstra Health become in this heady disrupted world?
Not sure.
But it feels like it’s now not so much about what assets it owns, but what role it starts to play.
If AI keeps on rolling through everything at speed it’s going to be as much about connectivity (interoperability) as orchestration (AI) – one connects, the other does.
Orchestration is a dynamic so far not really contemplated by a government and the Australian Digital Health Agency, both of whom have rightly been so far obsessed with connectivity – first things first, after all.
If the rebuild of Telstra Health works in its current form, it might manage to become become a connected data spine for certain sets of vital system and patient data, a medication intelligence layer, a government infrastructure backbone and possibly, a regional integration platform.
Not bad.
But it surely now needs to embrace AI and by that we mean “orchestration”.
Given its current position with government on building out connectivity and data infrastructure – eRx and, the My Health Record and registries – it’s natural evolution should be to an integrated AI layer, to get things done.
That I think is what some people would call a “BHAG” (look it up). Which would make two BHAGs for Ms Koff to be contemplating now.
