Tuesday, 6 November 2007

Patientline UK: a Company as Sick as Its Customers

How is it that a company with a virtual monopoly on a convenient telephone and TV service for patients in UK hospitals can degrade financially to a state of life-support while antagonising the public with high and confusing charges and while attracting the ire of the telecoms regulator? Patientline UK is the company soon to provoke a crisis at the National Health Service when its seemingly inevitable slide into insolvency results in its demise.

Patientline has installed 75,000 bedside terminals (pictured on this post) throughout hospitals of the NHS all around the UK. The custom all-in-one terminal provides inbound and outbound telephone service, TV (with a fair range of channels), radio, Internet access (browsing and email) and games in some hospitals. On first impression and limited use so far, the unit appears to be very good from an ergonomic and functional point of view - the wall-mounted swivel arm can put the screen in any position and angle over the bed, the buttons are big and well-spaced, the right-hand handset has a full, albeit tiny, flip-open qwerty keyboard, the headphones (for TV/radio) keep noise levels down, the screen is bright, clear and plenty big enough for close range viewing/reading, the terminal is encased in such a way that it can be wiped and disinfected and the services are accessed through a 4-digit pin code that can be used anywhere in a particular hospital, very convenient for patients moving from ward to ward. Beyond this good stuff, it's all bad for Patientline.

On the surface, the problem is the charges, for TV and especially, for phoning. The BBC article from April 4, 2007, titled Hospital Phone Charges up 160%, describes the proposed phone rate increase, and the vociferous objections that aroused, from 10p per minute to 26p for outgoing calls at any time of day from the patient/hospital to UK landlines. Note my specifying ''outgoing'', ''UK'' and ''landlines'' because rates for incoming calls, to or from mobile phones, non-UK places, on/off-peak hours all are different, and higher. Complexity and confusion is part of the problem for the customer, particularly when everyone's primary concern is for the health of the patient. The various rates are not posted in the hospital that I have been visiting. Finding out later that things cost a lot more than they thought/guessed/feel-is-fair makes people much more annoyed because they feel exploited - ergo the harsher backlash - read reactions here at the Register and here as well, here at SayNoto0870. (Consider in contrast that people happily pay £1.50 per minute to call those adult chat lines.) Probably as a result of the press criticism, the phone rate increase has been rescinded - we are paying 10p now.

However, the TV rate decrease has gone through - it's now £2.90 per day instead of £3.50. So the company has done a good thing, but shot itself in the foot financially.

The charges for incoming calls, which are billed to the external caller, are the other source of phone-related ire. They are 49p per minute during peak 6am to 6pm hours Monday to Friday and 39p at other times. However, the last part of the rate story is untold - the fact that outbound calls to mobiles are 80p per minute during the peak and 40p off-peak. I don't know exactly how the revenue is split between Patientline and the mobile operators but I'm sure the latter are getting a healthy share. On the inbound side, I checked Orange and they charge 55p per minute for calls to Patientline according to a general tariff for calling 070 numbers. Thus, Orange treats hospitals no better than anyone else. Shouldn't the mobile operators be getting some of the criticism here?

What would be an acceptable price for phone calls? Perhaps in the order of 25p per minute, which is the Orange tariff for Pay-As-You-Go? I doubt few would expect rates to be as low as 3p per minute typical of mobile plans.

Closely connected to the cost as an irritant is the fact that most hospitals still ban the use of mobiles within the premises. Formerly this was justified by concerns about interference with sensitive medical equipment. However, this is now officially not a problem since mobiles are no longer believed to interfere with medical equipment (the Health Minister said so! though the studies continue to create doubt as reported at the Register). The remaining hospital ban on mobiles makes people believe that it is only a ploy to protect Patientline's monopoly. Whether the company has successfully brought pressure to bear on the NHS or on individual hospitals is for the walls of backrooms to know but the company certainly blames part of its woes on the loosening of the ban in this Sept.27 announcement.

The last element that acts as an irritant is the fact the NHS seems to consider bedside telephones as a luxury, part of an entertainment unit. Reading the flaming comments and knowing my own situation, being able to talk to family and friends is extremely important for the patient and others. It is more or less an essential part of the getting better process. TV is less essential in my view but this modern day ''opiate of the masses'' can play a big part in relieving the boredom of being in hospital for those awake enough to notice. It's dehumanizing enough to be poked, scanned, jabbed, stripped, drugged, cut open etc. that a little bit of normal outside life can be a big morale booster. The action of the NHS in allowing the service to be introduced, designed and priced as it has displays poor judgment and planning. Blogger Simon Howard struck the nail on the head way back in 2005 when he defended the position of Patientline and knocked the NHS.

seems to have off-loaded responsibility with a poor concept. Though outsourcing to private companies can be an extremely effective mechanism for reducing costs and improving effectiveness of service delivery, it won't work if the concept is wrong. Patientline obviously had (still has?) a vision for a complete patient interaction system at the bedside with the ability to order meals, view patient records, conduct satisfaction surveys and provide related health information. None of this seems to have come to pass. Instead the NHS/Patientline is delivering entertainment at entertainment prices but the customer/patient wants treatment support at NHS-level prices.

The question of the service concept affects the system design and the size and sophistication of the service put in place. If Patientline had the wrong over-blown idea about the future uses or applications, it is quite possible that the £160 million the company is now trying to recoup, is much more than it would have spent for a simple phone and TV system delivery system. Over 75,000 bedsides, that's £2133 each, quite pricey for a phone and a TV on a dangling arm, I would think (OK, there's Internet too but it comes free for TV users ... now why would Patientline go to the extra cost of a computer monitor just to offer it free??). Blogger Wayne Morgan posted this critique of the technology adopted by Patientline, saying it could have been much much cheaper to use IP telephony instead of what he describes as the ''classic digitally switched way''.

One thing for sure is that the company Patientline is not profiting from the high prices. It is a public company whose only business line is the hospital service so nothing is mixed up with it to conceal the truth. The financial reports are posted on the company website under the Investors tab. Losses have been considerable and constant. The BBC report cited above quotes a company representative as saying last April that the company only had sufficient funds to last another 12 months. Nothing seems to have improved since then and the September 28th Trading Update has an ominous warning: ''If the current revenue trends continue then the liquidity position of the Company will become increasingly tight towards the end of this calendar year.''

  • Patientline UK will go bust, provoking a crisis in hospitals
  • NHS will respond by allowing mobiles to be used in most areas of hospitals
  • Another company will take over the Patientline infrastructure for a pittance, thereby attaining a low fixed cost structure; the new company will eliminate phone service avoiding the controversy and concentrate on TV, which is cheaper and easier to manage and bill, and which constitutes 70% of the actual usage of the terminals by patients (ah yes, the sweet spot!); the new company will be a highly profitable cash cow
  • Hospital staff and patients will have to cope with lost/missing mobiles, a lot more ringing phones, battery chargers, some extra calls through staff for those few who do not have mobiles
  • Mobile operators will continue to make their healthy margins in the immediate future
  • In the long term, the adoption of VoIP by hospitals for internal use, such as has just been done by the Birmingham trust, will enable and entice (i.e. get money from) the NHS/hospitals to use this standard infrastructure, to solicit competitive service offerings from multiple providers for phone, TV, radio, Internet, anything digital, as well as medical and hospital admin functions through the bedside device (note the irony of the Patientline terminal image above, obtained from their own website, which shows a menu choice, a service that is not offered through Patientline).

The story could probably serve as a business school and public administration case study on how not to do things.

Update May 26, 2008 - The Interim management statement of February 15th shows that revenues had dropped another 25% in 2008 vs 2007 and includes these words: "Shareholders should note that it is unlikely that any value will be attributable to ordinary shares following any restructuring of the Company's debt." The company is now owned by debt-holders. With annual statements due in June, will the long, slow fall be interrupted by a conversion of all the debt into equity? That would still not make it a viable business however.


sjhoward said...

A very good article - but just to point out that menu choice is available via PatientLine in some hospitals.

The contracts have been agreed on a Trust-by-Trust basis, which seems to have resulted in some hospitals having the very basic service, where the units cannot even be turned off during daylight hours, whereas others seem to have advanced, partly bespoke systems according to the hospital's individual needs.

CanadianInvestor said...

Thanks for the clarification. btw, like your website's other content too.

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