Tend secures cash flow via new purchases

5 min read
Martin Johnson

2 February 2022

As featured in New Zealand Doctor

Tend Health’s purchase of a large Auckland medical centre will have given it cash flow through primary care capitation from the Government, business adviser Pam Newlove points out.

The company, which relies heavily on its proprietary online health consultation app, announced in December its acquisition of Pakuranga Medical Centre in south-east Auckland, Symonds Street Medical in the central city and the patient register of Holistic Medical Centre in Ponsonby.

Pakuranga Medical has about 14,000 patients, 13 GPs and is in East Health PHO; Symonds Street has some 2500 patients and is in Auckland PHO.

The Pakuranga clinic was created from the merger of three general practices in 2009. In 2018 it moved into new, purpose-built premises. Then-health minister David Clark told the official opening in 2019 it was a “truly integrated” health centre.

“This is the model we are wanting to move to more and more around New Zealand,” Dr Clark said.

“Having a multidisciplinary team working together is invaluable for patient outcomes; this is what patients need, this is what patients want.”

Mrs Newlove, a business adviser at Grant Thornton, says the Pakuranga purchase gives Tend a big foothold in a rapidly growing part of the region.

“The advantage of acquiring a big practice like Pakuranga Medical Centre is there’s a substantial amount of infrastructure there. That would help, no doubt, a business like Tend to accelerate their growth. And there will be a certain amount of capitation flow that they’ve purchased as well, which is quite important with these types of businesses.

“If you are going to have the substantial part of your business being online, you have to manage how much you invest in bricks and mortar versus your IT investment and growth in that area, which I’m sure is significant and no doubt pivotal to their business.”

Tend launched in 2020 – amid a flurry of online and app-based health offerings – with its own app and a physical clinic affiliated with Auckland PHO and based in Kingsland, Auckland.

Early last year, Tend announced it had raised $15 million to buy practices and hire more clinical staff. It is looking nationally for more practices to acquire.

In an interview, Tend co-founder Cecilia Robinson says the Pakuranga practice will be integrated into Tend this year. The Symonds Street practice reopened under the Tend brand in December after refurbishment.

She says staff from those practices and Holistic will work across the Tend group, which now employs more than 100 people. Most doctors from the acquisitions are staying on.

In a Tend media release, former co-owner of Pakuranga Medical Centre and specialist GP Eileen Sables says, “We are very excited to work with the Tend team over the coming years to build the future of primary healthcare in this country and to continue to serve the local Pakuranga community.

“We were impressed by their vision and technological capabilities to deliver high-quality primary healthcare services that make it easier and more convenient for people to access a GP. Tend’s also about utilising technology to reduce admin so we can spend more time with our patients – in-person or on line.”

Mrs Robinson, in the release, says New Zealanders for too long have been expected to live with an outdated primary care model. Technology allows patients to be put at the centre and access care on their own terms, and will deliver better outcomes, she says.

Since November 2020, Tend has enabled more than 80,000 patient interactions, the release says. Twothirds of patient concerns have been treated via online app consultations, with over 95 per cent patient satisfaction. In the release Mrs Robinson highlights the rising average age of the GP workforce and says many practice owners struggle with succession planning as they
approach retirement, with a shrinking pool of potential GPs willing or able to buy in. Tend wants to help solve that problem.

Asked about Tend’s financial progress, she says in the interview, “We are still a start-up in that way. We raised capital to be able to do the right thing… We are focused on being able to make the right acquisitions in the right area, to be able to ensure that we can deliver the
best patient experience. We are not really focused on anything else other than that at present.”

Asked about competition for the two new practices, she says about 50,000 people in the Auckland health district are not enrolled with a GP: “It’s not really about the competition in the area; it’s about servicing a population base.

“We are seeing a significant amount of people who are not enrolled with another practice come to Tend, from an accessibility perspective.”

Tend’s acquisitions came in a year in which Green Cross Health bought all or part of nine clinics and upped its stake in a tenth, and Third Age Health bought one. Mrs Newlove says selling to a corporate primary care business can make sense as an exit option for GPs wanting to sell in a market with a limited pool of buyers.

“Even often in large practices, it’s still left to individual practitioners to go and find someone to buy their shares, or buy their patient base if it’s still owned individually.”

Young practitioners may be put off by the need to borrow to buy a practice stake, leaving a challenge for older practitioners wanting to sell. “You do see corporates more and more coming to the party.”

The RNZCGP’s 2020 Workforce Survey found 10 per cent of respondents worked in a practice in full or partial corporate ownership, up from 7 per cent in 2015. With the increasing numbers of GPs intending to retire imminently, Mrs Newlove says it is becoming a buyer’s market.

“The corporate buyers will probably already be at a situation where they can choose the best practices, the ones that have the greatest growth opportunities, to meet their ambitions.”