RPG

Using hit points as a resource very quickly starts to feel less and less like spending health and more and more like you're spending your Cleric's spell slots, which isn't very fun for your Cleric. It works in some other games but I don't think I've ever seen an effective implementation in D&D.

You could maybe get around the begging-for-healing issue by having spells reduce your max HP instead, but I still doubt it would be balanced, it adds a lot of bookkeeping, and you end up getting constantly oneshotted and begging for healing later anyways.

Assuming we are talking about D&D 5e, you should know that using hitpoints to extend spellcasting like that is fundamentally opposed to the way that 5e is designed and balanced. You're getting into very dangerous homebrew territory when you start breaking the core design of the game like that. It's akin to homebrewing a spellcaster that gets access to 4th level spells at level 2. The game just isn't designed with that in mind.

Of course, none of that matters if you are homebrewing an NPC who will just be around for one fight as a bad guy. But it sounds like the NPC is intended to travel with the party based on your wording, which means you need to consider them like you would a PC.

Also, be wary of creating a DMPC. Your job as the DM is not to put someone in the party who can do cool stuff, it's to let the players do cool stuff in the environments you create.

Consider instead that "blood magic" could be handled as a pure flavour thing, where you describe each spell as your NPC cutting into himself and drawing out the magic. It just becomes his version of somatic components.

Simple solution is "resistant damage" - damage taken by burning your life force to power spells can only be healed by natural healing, not magical healing. It's tracked separately, and similar to subdual damage, you add it together with normal damage to determine if the character reaches 0HP. If you choose to go this route, I suggest that HP not be your primary fuel for spellcasting, but rather have the patron grant a class feature that allows "overcasting" by burning one's life force to power additional spells after you've run out of normal spell slots.

How about instead of just spending HP, you have spell slots similar to the D&D system. Then, once you run out of slots, you can choose to spend HP and/or roll against CON to cast more spells? That way in a normal situation, the player would cast as per normal and within limits. Once things get tough, they can be pushed to run the risk of casting to exhaustion or unconscious states.

You could make it more glass cannony, eg - that hit point loss after casting consecutive spells gets more dangerous and each cast increases a chance for a perils of the warp style head explosion?

Warlock is required to cast their spells at the highest level. Since this is a warlock patron it probably shouldn't be allowed to pick and choose which level of spell it can cast. Consider also converting the warlock spell slots it gives into bonus HP to fit the flavor, but probably at a less than 1:1 ratio for what it costs to cast that same spell since they have innate HP and healing.

As you've suspected, this is gamebreakingly powerful and absurdly difficult to balance. Every build in the game would benefit from having this ability and would be made stronger by multiclassing into it. Every other warlock would be pointless because choosing another one would lock you out of this patron. Any multiclass caster is an infinite spell slot source by itself.

You could try to balance it by making it once per day, but why? That's too fair and not the original intent of design, just accept the imbalance it creates and make it fun to use.

GURPS does this, maybe look that and convert

I worked up a custom template for a blood mage based on a homebrew I found and lost long ago. The basis was that the caster used spell slots as usual, but could expend hit dice for additional slots, or to use other class features or even boost some of their spells. It requires careful balancing, but is plenty of fun.

As I implemented it, it laid on top of their normal class, but it wouldn't be too hard to work it up as it's own class entirely. As another poster suggested, you could introduce a caveat that any health used to power a work can only be regained through natural means, or is only restored on a long rest, or something to that effect.