The founders of today’s startup have a track record of successfully re-imagining healthcare services.

They have some interesting thoughts on how best to scale a venture-sized opportunity on healthcare…. while making the NHS more efficient without making patients pay out of their pockets for care.

Read on for the fascinating story of Paloma Health.

But first…

• We’ll be unveiling the findings from our study of the pre-seed landscape in the UK in early January, but there’s still time to take part!

• Founders, investors, programme managers… have your say on UK early-stage startups’ experiences in 2024: it only takes two minutes.

– Martin

Paloma Health is rethinking healthcare… can it help get rid of NHS waiting lists?

It’s no secret that the NHS has been struggling for years to balance demand for its services with incredibly tight budgets. 

Typically, the solutions proposed are ‘give the NHS more money’, ‘cut services’ or ‘increase efficiency’. But what if it might be more effective to entirely rethink how services are delivered from the ground up?

That’s the goal of Paloma Health, a London-based startup that believes “process innovation” is the key to improving outcomes for patients.

“Almost every single industry that you've seen innovation in in the last 10 to 15 years has seen process innovation. Businesses like Monzo or Treatwell don't do anything new. They just do what currently happens, much, much better, and that hasn't happened in healthcare,” says co-founder Mark Jenkins.

“Monzo revolutionised how you access banking and how it is delivered as a customer service, rethinking it… They didn't do anything new, they just created a dramatically better product within a heavily regulated environment. And that's basically what we are doing in healthcare.”

Paloma Health is beginning with a service that offers autism assessments for children without the normal long waiting list. 

In practice, Paloma Health acts as an NHS service provider that GPs can refer patients to. The service uses questionnaires and video calls, plus an observational assessment of the child that can be done in person or remotely. If they receive an autism diagnosis, the child and their parent or carer can go back to the GP to discuss next steps.

So what’s going on under the hood here that makes it so different?

“We have a proprietary toolkit which comprises a set of levers. We restructure services and to reorganise them using process re-engineering techniques. And what that allows us to do is to optimise the use of highly skilled professionals,” explains Jenkins’ fellow co-founder at Paloma Health, Darshak Shah. 

Shah says that the startup restructures existing processes, streamlines them, optimises who or what is doing which task, and then deploys technology to either automate or link together the workflows within that system. 

“We believe that by making care delivery more efficient in this way, we can satisfy a lot of the demand for healthcare, which is going unsatisfied at the moment, and therefore we eliminate a lot of the waiting lists that exist,” says Shah.

“We do recognise that there is a scarcity of skilled professionals, and so we will be then, in parallel, setting up an academy organisation to bring new workforce into the system to fill some of those workforce caps, because not everything can be done using technology.”

By way of example of its approach, Shah gives an example from ophthalmology, the field in which he worked with his previous business.

He says they studied how eye clinics typically work and figured out a way for doctors to go from seeing 10 patients per day to as many as 40.

“Once you apply that full set of toolkits around standardisation, automation etc, essentially, it's that same toolkit that we apply to autism, to ADHD and other specialties that we will be deploying in Paloma,” Shah says.

“With Paloma, there is a greater component of technology enablement which helps that productivity increase, but it's essentially that same toolkit.”

The story so far

Shah has a successful exit under his belt in the the form of Newmedica, the aforementioned ophthalmology company, which was acquired by Specsavers.

He then became an adviser to former doctor Jenkins’ medical weightloss company, Oviva. After Jenkins left that business, they began discussing how they could use their combined experience to explore other opportunities to better serve NHS patients.

Paloma Health was the outcome, and it launched to accept GP referrals at the start of last month. Jenkins says the aim is to assess thousands of children for autism over the next year. 

A second speciality, assessing children for ADHD, is planned to launch in the spring of 2025. Jenkins says they will make a decision early next year about other fields they could launch into.

Paloma Health is exclusively focused on NHS-funded services, and does not offer private consultations.

I tell the pair that it’s interesting Paloma Health launched as a service provider, rather than selling its technology and processes to third-parties. Wouldn’t that be more scalable, with less in the way of costs?

Shah says that wouldn’t be the case:

“My experience is that if you are a care provider and you don't use technology, you can't get the efficiencies to increase the volume of care. If you're a technology provider that has a better tool, you can't necessarily get the clinicians to use your tool, let alone buy your tool at the scale that you want them to. 

“And so our thesis is that you need to bring care provision together with technology, integrate all of that, and only then can you improve the system at scale.

Go deeper on Paloma Health

Funding:

Paloma Health was initially bootstrapped by Shah and Jenkins, Recently, it raised a £2 million pre-seed round from Triple Point Ventures, Heal Capital and angels.

Again, I’m struck by how an NHS healthcare provider doesn’t sound like the typical VC investment. Jenkins, however, thinks it makes perfect sense.

“Technologies require changes in clinical practice, which clinicians aren’t able or willing to do for many different reasons. And so the only way to scale and get to hundreds of millions of revenues is to be a tech enabled provider.”

Jenkins points out that many successful companies in the healthtech space are integrated providers, such as Livongo and Hims, are tech-enabled care providers. 

He also points to American VC firm General Catalyst’s acquisition of integrated care provider Summa Health, which has been agreed subject to regulatory approval.

“They’ve bought an entire care system, which is both the insurer and the provider, as a testing ground for technologies, because it is so hard to sell technology into existing healthcare providers. 

“The only way to successfully scale health technology, in our perspective, is to be the provider, and you also control the margin for what you get paid for delivering that service. I think ultimately, the hypothesis of investors is that pure software in healthcare is going to continue to struggle, and tech-enabled providers are going to win.”

Vision:

Based on his experience with Newmedica, Shah says he wants Paloma Health to reach 20% of market share in every speciality they go into.

The plan for now is to stick to the NHS, but Shah and Jenkins have plans to expand into other markets.

“It feels to me that there's plenty enough to do in England, and enough patients to help in multiple specialties. At some point there will be a conversation about other markets, but there's a lot of people to help first,” says Shah.

“All global health systems have the same problem, which is not enough clinicians, and more and more demand,” adds Jenkins. 

“In theory, it could be applied anywhere. The general problem on scaling healthcare companies is that reimbursement and regulation is so different from market to market. 

“I did that with my last business across Switzerland, Germany, France and the UK, and that was challenging. So it will be a long discussion for which other markets we go to. In the UK, there's probably somewhere between 10 and 15 million people waiting for care, so we've got plenty to be getting on with here.”

Competition:

Paloma Health’s main competition comes from traditional care providers, both in the NHS market and those seeing patients on a private basis. What the start hopes is that its efficiency will make it a more appealing proposition for GP referrals.

People wanting to skip the NHS queue can get a private diagnosis for conditions like autism and ADHD quickly if they’re willing to pay.

I know people who have received an ADHD diagnosis within days if they are willing to pay for it, and potentially pay on an ongoing basis for expensive medication themselves.

“One of the things that I struggle with is that in a country where we have a universal health system, where care is free at the point of use, the effective rationing of that care through waiting lists means that people are forced to put their hands in their pockets,” says Shah.

“We very firmly do not want to be that sort of provider. Yes, there are competitors out there but I think we have a different ethos.”

Challenges:

Jenkins sees availability of skilled clinicians to deliver its services as a potential bottleneck for growth. He sees AI as a potential solution to this.

“The scribe AI scribe market has about a billion companies in it doing exactly the same thing. So there's lots of potential partners there to drive efficiency so that we can focus on what is value adding for us.”

While the NHS might be crying out for ways to reduce its waiting lists, it is a political institution at its heart, and is continually having to deal with changing budgets and political priorities. Could this be a threat to a startup like Paloma Health?

“There are always going to be choices to be made about which services to fund and not fund. But it feels to us that the specialties that we are looking at are core NHS services that are not necessarily at risk of defunding. They're not cosmetic, they're not hyper-elective,” says Shah.

Jenkins takes a stronger tack:

“The NHS is catastrophically inefficient, and you could take the current budget and have no waiting list. 

“If you compare us to Germany, or France, or even Sweden, our GDP spend on healthcare is the same. None of those countries have waiting lists. Why? They clearly are much more efficient than us.

“There are some things that are different, like some small co-pays and other things that drive a dynamic market, but fundamentally, for the same GDP spend, they have no waiting list. That's the challenge to the UK Government.”

Back on Thursday

Fun fact: we had to run a check on today’s edition to make sure we didn’t accidentally write “Paloma Faith” anywhere. Thankfully, we didn’t… apart from that last sentence