Private medical chains plan to break new ground this year

Newsroom 14/04/2015 | 17:42

Having exceeded EUR 590 million in revenue last year and with forecast growth of up to 12 percent this year, the private medical system looks set for a period of rude health, given that approximately 93 percent of Romanians have only public health insurance, according to a recent GfK survey. Currently, private medical networks are expanding their footprint and the range of medical services they offer at a very fast pace.

By Otilia Haraga

Only 2 percent of Romanians have taken out a subscription to a private clinic paid for partially or entirely by their employer, while another 2 percent of the public have private healthcare insurance. Nearly 4 percent of people do not have any type of health insurance, public or private, according to a GfK survey.

Bucharest inhabitants have more private medical insurance than their counterparts elsewhere, with 5 percent having private health insurance and 3.5 percent subscriptions to a private clinic, paid for by their employer.

For 2 percent of residents of the capital, their private insurance or subscription also covers their significant other or children. This does not happen in other parts of the country.

Dobrogea, Muntenia and Moldova are the regions with the highest number of people without medical insurance. In Dobrogea, 13 percent of inhabitants and in Muntenia and Moldova 6 percent have no insurance whatsoever.

The most vulnerable age band is young people aged 18-34, of whom 16 percent are not insured.

“Even though the public healthcare system is flawed, only a small percentage of the population have subscribed to private clinics. Since this sector meets needs that are not covered by the public system, this indicates that the market for private medical services has great growth potential. Furthermore, in Romania more than 3 million employees work in the private system,” said Ana-Maria Draganica, group account manager at GfK Romania.

Romanians’ main health habits are to maintain good hygiene (57 percent), adopt positive thinking and a positive approach to life (35 percent) and eat natural and fresh products (27 percent). More than half do not take any vitamins or supplements.

For a quarter of the population, taking regular physical exercise and moderation in alcohol and tobacco consumption are last on the list of healthy habits, according to the survey, which was carried out on a sample of 1,000 people via face-to-face interviews.

Women between 25 and 40 are the biggest contributors to the healthcare system in every country, according to Mihai Marcu, president of the administration board in MedLife.

“Right now, private medical services in Romania have medium and high prices. For this reason, such services and products are not accessible to everyone because their cost must be borne mostly by patients. A contract with the National Public Health Insurance House that covered 100 percent of the costs would allow everyone to access medical services in the private system. So private medical services could expand without incurring investment costs for the public sector,” said Luca Militello, general manager of the Monza hospital.

The private medical services market promises to be more dynamic in 2015 and is expected to grow by 10-12 percent. One of the catalysts for this growth may be the medical subscriptions segment, according to Marcu.

“We believe this year we will see renewed fast growth in medical subscriptions, to the detriment of insurance. This trend will take shape especially at local level where the market is in its early stages. Following the model of employers in the capital, employers in other parts of the country want to motivate their employees and a medical subscription is usually at the top of the list of benefits offered, especially during this period. Demand is growing and the number of contracts completed at the start of this year confirms this,” said Marcu.

Private healthcare networks are expanding not only their business model but also the range of medical services they can provide and the complexity of their medical equipment, which means that Romanian patients will soon no longer have to go abroad to get treatment for some conditions.

“While until a few years ago, Romanian patients could benefit from last generation medical equipment only abroad, currently more and more clinics are focusing on this, as well as on the continuous specialization of the doctors working here. Due to investments and medical programs, the private healthcare system will continue to post growth. Until 2014, this annual growth totaled approximately 20 percent. As we predicted last year, the private healthcare system exceeded EUR 590 million in 2014. We expect 10-12 percent growth for 2015,” Iulian Plescan, operational director of the Ares Excellence Centers in Interventional Cardiology and Radiology, told Business Review.

Every year, Romanian patients spend more than EUR 100 million on medical services abroad, he added. “Currently, patients prefer countries such as Turkey, Austria and Germany for treatment. However, in the past few years, the Romanian private healthcare system has been making continuous efforts to provide the most revolutionary treatments. There are certain illnesses in Romania that local doctors treat better than their colleagues abroad,” Plescan said.

He suggests that open collaboration with the public system to help Romanian patients get treatment at home instead of having to travel abroad would lead to a more responsible healthcare system.

“When seeking treatment abroad, patients are forced to pay exorbitant sums. In some cases, medical standards abroad have been surpassed by what has been achieved in Romania. The private sector is already making efforts in this direction, but better relations between the two sectors would substantially improve the quality of services offered to patients,” said Plescan.

One of the known and recognized pitfalls of the Romanian healthcare system is that doctors are badly paid and many look abroad where they can enjoy better salaries and living conditions. However, Marcu says the medic brain drain has been exaggerated.

“A doctor who goes abroad takes a step backwards in his or her career. Romania does not lack doctors, it just needs updating in certain specialisms, and there are not many of these. The main problem is whether the best professionals are leaving, and this may become clear in ten years. A doctor aged 40-45 years old who is at the peak of his or her career rarely chooses to leave Romania. Those who leave are mostly students. But Romania produces 5,000 doctors a year so we will still have doctors,” he commented.

Private health chains expand their scope

“Medlife has started to build up a fairly high cash surplus. We are left with EUR 8 million to EUR 10 million a year which we hope to invest,” said Marcu. The private healthcare network announced last week an aggregated turnover of EUR 80 million and an operational profit (EBITDA) of EUR 13 million for 2014, which represents 25 percent growth on 2013.

The results were in line with estimations and above the growth rate of the market which stood at approximately 7-8 percent last year, according to Medlife officials.

“In 2014, we continued to consolidate our position as national leader. We expanded in Iasi, Constanta, Galati, Targu Mures and Covasna, and recently also in Craiova, Slatina and Ramnicu Valcea. (…) We increased the number of operations and births, so that at the end of last year we performed 45,000 surgeries and assisted in 16,500 births. We also increased the number of subscribers to 330,000, the highest in Romania. Last but not least, we grew the number of fee-for-service clients to 4.3 million unique customers, which means that one in every four Romanians has been our customer,” said the president of the board.

For this year, MedLife targets 16 percent organic growth to EUR 93 million or 25 percent growth to EUR 100 million if some new acquisitions planned by the company are rolled out. A jump in the operational profit to EUR 17 million, up 31 percent on 2014, is also expected.

This year, the network will develop along three strategic directions: a new series of greenfield projects, new acquisitions and new business lines.

“2015 is an expansion year for MedLife. Over April-May, we will complete five major projects in Bucharest: a cross-disciplinary hospital in Titan, a new hyper-clinic in Berceni, a neurosurgery center in Ferdinand, a dental clinic in Unirii, and a cardiology and radiology intervention center in Grivita, representing three completely new business lines,” said Marcu.

Over the next 15 to 30 days, AngioLife, a new center of excellence specialized in cardiology and interventional radiology which targets severe cardio-vascular pathologies, will become operational.

NeuroLife, a center of excellence in spinal and cerebral surgery, is located in the Ferdinand area, within the Medlife Orthopedy hospital, and deals with complex neurosurgical pathology.

StomaLife is Medlife’s first dental medicine integrated unit.

BioLife is a premium product that will target only the corporate segment, giving a complete evaluation of employees’ health at the workplace. The program kicked off with a demo session and will become operational over the next two months.

“We also plan to expand the Grivita lab, which will have the first and most advanced automation line for medical samples in the Balkans, with Abbot equipment. In the second half of the year, we aim to complete another two extensive regional projects – the expansion of the Medlife Hyperclinic in Timisoara and the inauguration of a new large clinic in Cluj,” Marcu added.

Apart from these projects, he also revealed Medlife was leading discussions with “three or four medical operators to make new local acquisitions, the minimum value of the turnover per company being EUR 7-10 million”.

“We are convinced that all these projects will consolidate further our position as leader and will bring us closer to our goal, that of reaching 5 million unique customers by the end of the year,” he commented.

Currently, Medlife has 13 hyper-clinics in Bucharest, Timisoara, Brașov, Arad, Galati, Iasi and Constanta, 18 analysis labs, 7 hospitals in Bucharest, Brasov, Craiova and Arad, 3 maternity wards, 12 excellence centers with unique specialization and 8 pharmacies under the PharmaLife Med name.

In February, Medlife finished the acquisition of a 55 percent stake in the group of companies Sama&Ultratest in Oltenia.

Another major private healthcare chain on the Romanian market is Regina Maria, which will invest over EUR 5 million this year in expanding its network in cities where it is not present, such as Iasi, and estimates a 20 percent increase in turnover to EUR 67 million.

“Last year we strengthened our presence in Bucharest, Cluj and Constanta, we invested in equipment and opened a clinic in Craiova, as it was an opportunity for us. This year we will expand in other cities where we are not present. For the moment, I can only say that we have signed to do so in Iasi, where we will open a center with integrated services – clinic, laboratory, subscriptions, imaging – in a 1,200 sqm space in which we will invest EUR 1.4 million. The opening will take place in the second half of the year. We are aiming at other openings too,” said Fady Chreih, executive director of Regina Maria, according to Mediafax.

Chreih added that last year the company registered EUR 55 million in turnover and that for the current year it is aiming for a 21-22 percent increase in turnover to EUR 67 million.

Regina Maria, a network with 21 clinics, four hospitals, two maternity hospitals, three medical campuses, five imagistic centers, seven laboratories, one stem cell bank and over 140 partner clinics across the country, has 275,000 subscriptions, out of which 3,700 are at the highest price (EUR 60-65) – Premium Star.

The company has over 3,000 employees, after hiring about 300 people last year. This year, Regina Maria has budgeted an increase of over 300 in the number of employees.

Policlinico di Monza has also been developing on the local market. The group has one hospital in Romania and another ten in Italy that cover all medical specialisms. The Monza hospital in Bucharest is built on 18,000 sqm distributed over nine levels, has a capacity of 140 beds and treats more than 2,000 patients a month.

“This year, we will continue to expand the activity inside the hospital where we will open the Urology and Thoracic Surgery department. In the future, we plan to develop a network of medical clinics and continue to expand the hospital’s specialisms and services,” said Monza Hospital officials.

For 2015, the hospital forecasts investments of approximately EUR 1.5 million.

Due to the experience of Policlinico di Monza in developing centers specialized in heart conditions, the Monza Hospital was launched as a center of excellence in cardio-vascular surgery. Since it opened in 2012, the Cardiac Center, Cardiopediatric Center, Brain Institute and Cardiostructural Clinic have been launched.

Currently, the major medical services provided by the Monza Hospital are in cardiology and cardio-vascular surgery, neurosurgery and orthopedics both for adults and children with congenital malformations.

“In recent years, patients have been going to private chains for very niche treatments. Usually, niche centers and hospitals are extremely sought after, precisely because they focus on a restricted group of treatment or conditions, demonstrating extraordinary levels of performance,” said Plescan of the Ares private healthcare company.

Ares currently has two excellence centers in interventional cardiology and radiology, located in Bucharest and Suceava. The centers are specialized in angiography and have as their sole purpose treating via minimally invasive methods illnesses that could previously only be treated surgically.

Over the past five years, Ares has enriched its portfolio from 10 to 43-45 procedures and this year it aims to reach 50 procedures in its portfolio.

“We are continuously prospecting the market to expand the Ares network. This year we will definitely open a new center, maybe during the second quarter. We hope that over the next few years we will have five or six centers in Romania,” Plescan told BR.

“The Ares centers reached break-even point just three months after their inauguration. We have no reason to involve other shareholders in the company. (…) We are not thinking of investment funds,” added the official.

The private health chain has “a firm policy of reinvesting its operational profit”. The investments planned for the end of 2014 and for this year amount to EUR 600,000.

Some of the investment budget this year will go on acquiring a second angiography system and a top ultrasound machine that can perform a live 4D trans-esophagus cardiac ultrasound, which helps to correct cardiac malformations.

The diagnostics capacity in the private healthcare system is now higher than in state hospitals. There is just one thing missing in the range of services offered by private health networks, according to Marcu.

“Private medicine started from dental services, continued with gynecology and obstetrical services and now surgeries are being performed at the same quality level as in state hospitals. There is just one step for private healthcare to take, and that is emergency medicine,” he said.

 

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