Perth-based HealthEngine has been ordered to pay $2.9 million in penalties by the Federal Court. It comes after the tech company achieved rapid growth but incurred big financial losses.
Perth-based HealthEngine has been ordered to pay $2.9 million by the Federal Court after being found to have published misleading reviews and sharing personal patient information.
The Australian Competition and Consumer Commission alleged the online health directory had given non clinical-information – including the names and phone numbers of more than 135,000 patients – to third party private health insurance brokers over a four-year period.
The information was provided only when consumers specifically requested a call regarding a health insurance comparison; however, it was not disclosed that their information would be provided to a third party, rather than a HealthEngine employee.
ACCC, which launched its investigation in July 2018, said HealthEngine made $1.8 million from its arrangements with insurance brokers.
The commission was concerned about the potential for consumer harm from the use or misuse of personal data, chairman Rod Sims said.
HealthEngine, which provides an online booking system for patients, was also found guilty of publishing misleading reviews of health practices and practitioners.
“The ACCC was particularly concerned about HealthEngine’s misleading conduct in connection with reviews it published, because patients may have visited medical practices based on manipulated reviews that did not accurately reflect other patients’ experiences,” Mr Sims said.
ACCC said HealthEngine admitted to the court that it had edited around 3,000 customer reviews and misrepresented reasons why it did not publish ratings for some practices.
HealthEngine chief executive Marcus Tan, who co-founded the company in 2009, apologised for the conduct and confirmed user databases were never sold to private third-party insurers.
"The only time we provide clinical information to third parties is to a consumer’s nominated healthcare provider to deliver the healthcare services requested by that consumer," Mr Tan said in a statement.
"When the ACCC commenced proceedings against HealthEngine nearly a year ago, we acknowledged that our rapid early growth had sometimes outpaced our systems and processes and we sincerely apologised that we had not always met the high expectations of the community and our customers. That apology still stands.
"Good intentions do not excuse poor execution and this process has given us a greater understanding of our operational shortcomings, which we’ve addressed."
Mr Tan apologised for mistakes made with two of HealthEngine's services, Practice Recognition System and private health insurance comparison services.
HealthEngine, which made joint submissions with the ACCC to the Federal Court, said it would cover some of the ACCC's legal costs.
The proceedings have now ended, with the court having ordered HealthEngine to contact affected consumers and provide details of how they can regain their personal information.
HealthEngine’s rapid expansion – and big financial losses – has been detailed in financial statements lodged with the Australian Securities and Investments Commissions.
The most recent accounts lodged with ASIC show the company increased revenue to $16.6 million for the year to June 2018, up from $10.2 million and $5.6 million in the two prior years.
One of its growing revenue sources was sponsorship and advertising, which increased to $2.7 million in FY18.
The company also had rapid growth in its operating expenses over the past three years.
Its employee costs jumped to $17.4 million in FY18 while its marketing expense surged to $9.7 million.
The net result was that HealthEngine recorded large losses in each of the past three years, including a net loss of $13.2 million in FY18.
Its balance sheet shows the company had accumulated losses of $45.9 million as at June 2018.
However, it still had net assets of $12 million after raising more than $52 million from investors and building up $5 million of reserves.
Investors in HealthEngine have included venture capital fund Sequoia India, Perth-based GO Capital and Larsen Ventures, and ASX-listed companies Seven West Media and Telstra.
Health Engine’s main competitor is ASX-listed 1st Group, which reported total revenue of about $5 million for the year to June 2020.
