One Health Group PLC [AQSE:OHGR] is a UK-based medical services provider established in 2004 that offers elective surgical care for orthopaedics, spine, general surgery and gynaecology. One Health Group has Any Qualified Provider (AQP) status, enabling GPs anywhere in England to refer patients to One Health for treatment.
The group works with the NHS to provide faster, local, and expert care in the treatment of musculoskeletal and gynaecological conditions.
The One Health business model
One Health Group provides surgical care to support the NHS in the management of patients, through a growing network of community-based outreach clinics and independent hospitals, which is a proven way to reduce the waiting list of the NHS.
One Health Group forms a fundamental part of the local supply chain to several NHS commissioners across the north of England, and its services are provided mainly through NHS e-Referral.
The company estimates that its average time from GP referral to the first appointment with a consultant is four weeks, with the average waiting time from consultation to surgery typically around six-to-eight weeks, substantially lower than the average waiting times within the NHS (only 60.1% of the patient gets treated within 18 weeks as of November 2022).
One Health Group’s patient pathway involves patients and consultants meeting in one of the 30 clinics owned by the NHS or the GP. The consultant then directs the surgical patients to the operating theatre capacities sourced from private hospital operators, which are booked months in advance.
The surgery is carried out by the surgeons and anaesthetists working for the NHS, though they are classified as self-employed working for One Health. Finally, One Health also provides outpatient care and physiotherapy rehabilitation locally by an outsourced partner. The company treats approximately 10,000 new patients each year, with approximately 50 consultants working across various specialities.
How does One Health Group make money? A quick hip replacement procedure helps to provide an insight. The NHS tariff is set at £6,300, £4,464 goes to the hospital providing operating theatre capacity and theatre support staff, a fee of £475 would be paid to the surgeon and a £250 fee to the anaesthetist, leaving £1,111 as gross profit, a gross margin of 18%. (data provided by One Health and SEAL advisors).
Competitive advantage in UK healthcare
The first thing we should acknowledge is the high-quality of service (99% of patients rating One Health as ‘good to excellent’) and the shorter waiting time compared to NHS, whilst being completely free for the end user. This can incentivise new patients to choose services provided by One Health instead of joining the default NHS waiting list.
Additionally, there are 7.21 million people on the NHS national waiting list, and independent service providers like One Health look like an essential component to reduce the size of this waiting list. On top of these factors, the ageing population will likely increase the demand for elective care. The incoming demand for One Health’s service will likely grow.
One Health operates in a nearly Blue Ocean scenario – the most direct competitors are the private hospital in the area or similar independent service providers.
Private hospitals mostly treat privately insured or self-paying patient, and the demand for such services varies by region, largely correlated to the wealth level of the households. One Health mitigated such competition by choosing clinics located in regions where the health insurance coverage is low, with a high number of local GP referrals. This ensured that One Health operates in areas with most patients only using the public health care system, avoiding direct competition.
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Also, when a private hospital provides services to NHS-funded patients, most of the consultations are carried out where the surgery would take place, meaning they would only attract patients that live near the hospital. One Health, on the other hand, has made consultation possible close to the patient, by utilising clinics in the community that are closer to patients, enlarging the range where their service can reach patients.
How about the competition with the other independent service providers? There aren’t any that are operating with a similar business model to One Health. A reasonably close competitor is called Pioneer Health Care, which also performs elective surgery for NHS-funded patients, though they use an ‘in-sourcing model’, meaning they perform the consultation and the procedures in NHS hospitals. Due to the limited availability, Pioneer is only one-quarter the size of One Health group. There are also small groups of surgeons and anaesthetists that provide similar services but lack the AQP certificates. Again, the AQP certificate allows One Health to provide service to NHS-funded patients from anywhere in the UK, which ensures the inflow of patients.
One Health risks and mitigations
Operating in the Health Care sector naturally comes with risks. The most impactful risk that should be considered are the following:
- The service quality must satisfy a set standard to maintain the AQP certificate
- Any regulation regarding private Health Care providing service to NHS funded patient
- Too reliant on private hospitals for surgical theatre space
- Possibility of surgical accident
But how One Health would mitigate these risks is crucial.
From One Health’s track record and reviews, we can see that the board probably have an emphasis on the quality of service. This is how they have kept the AQP status since 2011 and achieved 100% of the quality targets set by the NHS.
In a situation like today, with a swollen waiting list on the NHS and limited capacity to digest these patients, policies regarding private health care providers are unlikely to change to be more restrictive, as the private health providers are helping to reduce the patient queue.
Lastly, in One Health’s long-term growth plans, management say they are planning to open two fully owned surgical hubs in the next five years, which addresses the problem that the surgical theatre spaces are fully dependent on the private hospital. If this plan is executed accordingly, not only would One Health widen the bottleneck (the only limitation to their operation volume is surgical space), but it would also improve the profit margin, since more than half of the fees paid by the NHS are spent on renting private hospital space.
One Health recovery and growth
In the latest set of interim results, One Health has shown some recovery since 2021, which was a year heavily impacted by COVID, with a turnover of £9.83m, a significant increase of 17% compared to the same period last year. Additionally, the gross profit has also seen an increase of 20% to £1.65m. The underlying EBITDA has also shown growth, with an increase of 15% to £0.51m compared to the prior year. The company also maintains a healthy cash position, with £2.68m in the bank as of 30 September 2022.
One Health’s strong financial performance is further highlighted by the announcement of an interim dividend of 1.66p per share, yielding 0.95%. The company’s financial statement also indicates that it has more current assets than current liabilities, suggesting its healthy financial position.
Recent trading activities
On the 15th of March, One Health reported three major trades by the insiders: the Head of Finance and the Head of Service Delivery both exercised their options to buy 35,000 shares in the company at 66.7p and then sold these shares at the market for 175p per share. One Health Group Trustees LLP, sold 157,540 shares in the company and acquired 147,540 shares. On 31st March 2023, the medical director purchased 60,000 ordinary shares of 0.5 pence each by exercising their option.
One Health only floated at Aquis Exchange on 24th of November, 2022. It is trading now at 175p, in contrast to 156.5p since the IPO.