Emerging Markets

September 2017

NEWS New Falck CEO “systematically

Global examining business” after first half World Bank looks at health 5 losses South East Asia Jacob Riis, new CEO at Falck, the international ambulance, fire service and Consolidatory moves 6 healthcare group, admits H1 2017 results were “not satisfactory” and says he is Malaysia looks to Kazakhstan 6 “systematically examining” the business. Could this be with a view to a sale? Indian diagnostics expands 6 HCN speaks to an informed source amid speculation that we might soon see a sale of Falck’s healthcare services business – which unlike the rest of the busi- China ness is doing rather well. Strong Wenzhou posting 7 Private market catches break 7 With a proud history going back over 100 years, Falck is active in 46 countries Arrail Dental raised $90m 7 on six continents, and has the world’s largest international ambulance fleet (and to be the largest provider of fire services). It is Scandinavia’s largest provider India of occupational health solutions, and provides almost 5 million people with Healthspring partners 8 healthcare services, with a presence in Asia, Latam and elsewhere in Europe. Government hits profits 8 On top of this, it runs roadside assistance. Warburg eyes Indira IVF 9 Medicover spends $21m 10 Yet something has gone wrong. H1 revenue was up by less than 0.5% to DKK Sodexo outsourcing sights 10 8,058m (€1,083m). And EBITDA dropped by 54% to DKK 309m (€42m) with IDFC takes slice of ASG 10 the EBITDA margin more than halving to 3.8 per cent, and pre-tax losses plum- meted from DKK 8m to DKK 366m (€49m). There were write downs relating Latin America to receivables from the “more challenging” US emergency market and from a Orpea gets a Brazilian 11 new customer management system, totalling DKK £382m (€51m). Page 2 Middle East & Northern Africa 10,500 new beds? 14 NMC Health flashing cash 14 United Health creates largest Healthcare city 15 emerging markets provider Africa US insurer United Health has agreed a friendly deal to buy Banmedica, the Joburg acquisition hunt 15 integrated payor-provider that covers Chile and has moved into Colombia and Abraaj in Kenya 16 Peru. The deal values Banmedica’s equity at US$2.8bn. INTERVIEWS The move complements United’s 2012 US$4.9 billion acquisition of a majority Dr Katherine Tulenko, of big Brazilian integrated payor-provider Amil. Healthcare Business Interna- IntraHealth 17 tional estimates the combined group would give United private hospital reve- Nico de Waal, nue of around US$3.3bn, giving it more revenue in Emerging Markets (defined PSG Alpha 18 as everywhere excluding Europe, North America, Australia, Japan and Korea) Teo Sandra, than any other player. Sphera Global 20 Wilson Mayor Mogollon, United is due to speak at Healthcare Latam 2017, in Sao Paolo, Brazil, the first Fasecolda 22 Pan-Latam event focused entirely on healthcare services.

INSIGHT Chile-listed Banmedica had revenue of US$2.3bn in 2016, of which its CEO Flurry at Fleury 12 told us at HBI 2017 that $1.5bn was from its hospital and health- Page 4 Educating Drs 24 Future of insurance 25

www.healthcarebusinessinternational.com HCN news HCN news Emerging Markets The Top 900 Falck CEO “systematically examining business” - cont Database For the first time ever, you can buy a database which covers ALL So is Falck – or part of it – for sale? that it had itself put in at 15% under there were problems. The company the largest private sector players in healthcare services across What companies does the database cover? its going rate, the source says. was heading to the point of no return Emerging Markets.... One source says there are interested and was trying to have some kind of parties looking to carve off healthcare “That confirmed the original bid was Ambulance and Air Ambulance Services 3 global dominance. There was around Hospitals, nursing homes, psychiatric, imaging, labs, medicalised services and making enquiries. too high.” Cosmetic Surgery 13 zero bottom line in the US ambulance homecare – all are covered and classified by type from Chile to China He tells us: “If I were the owner He claims: “Steps were taken to make service. Sweden, money was lost. and from Morocco to Indonesia. For each company, you will find a Dentistry 25 short profile plus contact details, including phone numbers, physical of Falck, I’d instruct the CEO to sell the situation for Baus difficult. Falck Germany, money was lost. Spain and Dialysis 10 address, a link to their website and 1-3 contacts. These normally off the healthcare business immedi- could have rented the stations. And it Latam were ok but in total it was a include the company’s CEO. We include the most up to date actual or Fertility 7 ately. People must be looking at Fal- offered staff higher salaries in other disaster.” estimated sales for all companies. We also record all known Hospital (Private) 429 ck’s healthcare services. But whether parts of Denmark and paid travel re- Then in December 2016, CEO Allan private equity investors, listing private equity participation for Imaging Services  they will sell it off is another thing.” imbursement.” Søgaard Larsen stepped down after nearly 100 operators in total. The database also identifies the 100 Insurer 11 operators who are listed on stock exchanges. He adds that to understand Falck’s Falck had been enjoying appar- 25 years with the company, to be re- Laboratory Services 57 present predicament, you have to look ent huge success with “astonishing placed in May by Jakob Riis. This sophisticated online database is updated during the year. Medicalised Homecare 4 at its history. growth” from 2004 until 2015. Our source claims that the writing Additions mean it will continue to grow. As the industry changes, Nursing Homes 5 He explains: “Falck in Denmark (in The source claims: “Falck used mo- was on the wall for Søgaard when so will this database during the course of your annual subscription. Oncology  You can search online using pre-set searches or buy a power-user ambulance service provision) has had nopoly money – taxpayers money Lundbeck parted ways with its for- Ophthalmology 24 an incredible monopoly. Over the from Denmark – to acquire compa- mer non-executive board chairman version, which allows Excel downloads. Outpatient 18 years it has used that monopoly and nies all over the globe without enough Lars Nørby Johansen who enjoyed a How we built this database taxpayer money to buy up the oppo- strategy about how to operate them, “symbiosis” with Larsen. Primary Care  The product of a four month programme, the database is built on our sition. without enough strategy to harvest Rehabilitation 4 Other departures have followed, the contacts across Emerging Markets and on original research. We the synergies, and without enough Other types 15 “It was scared by the competition source claims, with “more than 50% have also used other proprietary databases and web research to strategy to govern those companies. from (Swedish company) Ulfab so it of senior management” having de- ensure the database is comprehensive. bought it. It bought a German compa- “During the (private equity investor) parted the company. In which countries? Page 4 ny, and 9Lives in Denmark, again to Nordic Capital era of the company Use this database to.... protect the monopoly.” before 2011, it had a clear vision: Angola 4 Malaysia 1 Grow as fast as possible then IPO. Swiſtly identify ALL potential investments or acquisitions What it didn’t do, our source claims, Argentina 25 Mexico 2 It was very successful but although You can swiſtly identify all potential targets, safe in the knowledge that is consider synergies as much as they Bangladesh 5 Morocco 5 things seemed in order on the surface you are working with a complete data set. For example, you could could have. Brazil 19 Nigeria 18 it was sowing the seeds of disaster for search for all hospital groups in India with sales of over $30m. Or all lab groups in Asia. Chile 18 Pakistan 4 There was also an unforeseen chal- the future. Nordic Capital got out pre- At a glance China 8 Peru 14 lenger, Baus in Holland which bid for cisely at the right time. Falck operates medical services Falck’s director of group communi- Analyse markets and marketshare and won the contract to run ambu- and clinics in Denmark, Sweden, Colombia 20 Philippines 10 “In 2011, the Lundbeck Founda- cations, Kaspar Bach Habersaat, tells This data gives you a clear picture of how consolidated different lance services in Southern Denmark, Costa Rica 10 Saudi Arabia 10 tion took over. By 2015 it was clear us:Norway, “In May, Poland, Jakob Russia, Riis was Slovakia, appoint - markets are and enables you to understand real market share. undercutting by 15% a bid from Falck edUK, CEO Australia, of Falck Papua and New defined Guinea, and Ecuador 11 Singapore 28 appointedIndia, Malaysia, his new Colombia, senior executive Uru- Understand strategy Egypt 20 South Africa 18 team.guay andThe Venezuela.group was Inadjusted addition from Used in conjunction with the interviews and news stories carried in Hong Kong 15 Sri Lanka 7 Falck delivers doctors-on-call Healthcare Nova, this product enables you to understand the corporate close to 30 people to ten who were all India 97 Tanzania 4 services in Colombia, Ecuador, strategies being pursued by different companies. in different positions in Falck or have Indonesia 17 Thailand 9 broughtEl Salvador, expertise Panama, to Falck Uruguay from other Israel 5 Tunisia 5 companiesand Venezuela. in related industries. Save time and money www.healthcarebusinessinternational.com It operates emergency Anyone who has tried researching the healthcare services market in Jordan 5 UAE 44 “Likemedical other services companies, (ambu- we make no Emerging Markets will know how complex it is. None of the existing Kazakhstan 5 Uganda 4 +44 20 7183 3779 comments to speculation regarding proprietary global databases provide comprehensive, up-to-date lances) in 22 countries, Aus- Kenya 12 Vietnam  Editor David Farbrother, [email protected] specifictralia, Colombia, Czechia, transactions. We remain ded- coverage by healthcare service category. Buying this database will save your company hundreds, if not thousands, of man hours in Kuwait 4 Rest of the World 59 Marketing & Subscriptions Lee Murray, [email protected] icatedDenmark, Ecuador, El to developing our Salva- global lead- research. And we are a great deal more cost-effective than big Design & Layout ADOREDWORDS&PICTURES, London www.adoredwordsandpictures.com ershipdor, Finland, France, Germany, In- in the healthcare-related core database suppliers! HEALTHCARENOVA is published 10 times a year by Healthcare Business International Limited, 4B Thane Works, London, N7 businessdia, Malaysia, Panama, Papua areas Emergency, Health - A single user version of the database 7NU. © Healthcare Business International Ltd 2017 care and Global Assistance. Acquisi- No responsibility can be taken by the publisher or contributors for action taken as a result of information provided in this publication. Readers are New Guinea, Poland, Slova- Who will use the database costs £1,265* and a single user licence strongly recommended to take specific advice when dealing with specific situations. All rights reserved, no part of this publication may be reproduced, tions have played a significant role up stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the kia, Spain, Sweden, Switzerland, Investors – identify the universe of investable companies with the ability to download to Excel prior written permission of the publisher or a license permitting restricted copying issued in the UK by the Copyright Licensing Agency Ltd. until now. We will continue to grow UK, Uruguay, USA and Venezuela. Acquirers – identify all potential targets costs £1,540* (prices excluding sales taxes). Sellers – identify all potential purchasers Suppliers – identify buyers, analyse markets To buy now visit the website, or call us Advisers – for due diligence, consultancy, marketshare analysis on +00 44 207 183 3779 Policymakers – understand the private healthcare sector www.healthcarebusinessinternational.com Month 2016 3 2 September 2017 www.healthcarebusinessinternational.com + HCN news Emerging Markets HCN news The Top 900 Database For the first time ever, you can buy a database which covers ALL the largest private sector players in healthcare services across What companies does the database cover? Emerging Markets....

Hospitals, nursing homes, psychiatric, imaging, labs, medicalised Ambulance and Air Ambulance Services 3 homecare – all are covered and classified by type from Chile to China Cosmetic Surgery 13 and from Morocco to Indonesia. For each company, you will find a Dentistry 25 short profile plus contact details, including phone numbers, physical Dialysis 10 address, a link to their website and 1-3 contacts. These normally include the company’s CEO. We include the most up to date actual or Fertility 7 estimated sales for all companies. We also record all known Hospital (Private) 429 private equity investors, listing private equity participation for Imaging Services  nearly 100 operators in total. The database also identifies the 100 Insurer 11 operators who are listed on stock exchanges. Laboratory Services 57 This sophisticated online database is updated during the year. Medicalised Homecare 4 Additions mean it will continue to grow. As the industry changes, Nursing Homes 5 so will this database during the course of your annual subscription. Oncology  You can search online using pre-set searches or buy a power-user version, which allows Excel downloads. Ophthalmology 24 Outpatient 18 How we built this database Primary Care  The product of a four month programme, the database is built on our Rehabilitation 4 contacts across Emerging Markets and on original research. We Other types 15 have also used other proprietary databases and web research to ensure the database is comprehensive. In which countries? Use this database to.... Angola 4 Malaysia 1 Swiſtly identify ALL potential investments or acquisitions Argentina 25 Mexico 2 You can swiſtly identify all potential targets, safe in the knowledge that Bangladesh 5 Morocco 5 you are working with a complete data set. For example, you could search for all hospital groups in India with sales of over $30m. Or all Brazil 19 Nigeria 18 lab groups in Asia. Chile 18 Pakistan 4 China 8 Peru 14 Analyse markets and marketshare Colombia 20 Philippines 10 This data gives you a clear picture of how consolidated different Costa Rica 10 Saudi Arabia 10 markets are and enables you to understand real market share. Ecuador 11 Singapore 28 Understand strategy Egypt 20 South Africa 18 Used in conjunction with the interviews and news stories carried in Hong Kong 15 Sri Lanka 7 Healthcare Nova, this product enables you to understand the corporate India 97 Tanzania 4 strategies being pursued by different companies. Indonesia 17 Thailand 9 Save time and money Israel 5 Tunisia 5 Anyone who has tried researching the healthcare services market in Jordan 5 UAE 44 Emerging Markets will know how complex it is. None of the existing Kazakhstan 5 Uganda 4 proprietary global databases provide comprehensive, up-to-date coverage by healthcare service category. Buying this database will Kenya 12 Vietnam  save your company hundreds, if not thousands, of man hours in Kuwait 4 Rest of the World 59 research. And we are a great deal more cost-effective than big database suppliers! A single user version of the database Who will use the database costs £1,265* and a single user licence Investors – identify the universe of investable companies with the ability to download to Excel Acquirers – identify all potential targets costs £1,540* (prices excluding sales taxes). Sellers – identify all potential purchasers Suppliers – identify buyers, analyse markets To buy now visit the website, or call us Advisers – for due diligence, consultancy, marketshare analysis on +00 44 207 183 3779 Policymakers – understand the private healthcare sector www.healthcarebusinessinternational.com Month 2016 3 www.healthcarebusinessinternational.com Month 2016 + 3 HCN news

in these areas building undisputed Our Analysis: Falck has enjoyed tre- strengths, dedicated employees and leadership in our core businesses. mendous growth and had a fantastic fantastic growth potential. But our reputation in its domestic market but business is commercially complex “Falck welcomes competition and be- that reputation is now under threat. and we need to simplify and gain effi- lieve that fierce competition benefits The new CEO has been allowed to do ciencies over the next 12-18 months.” our industry, our customers and soci- some pretty big write offs. And he has ety in general. “Efficiencies” could, of course, in- made no secret that he is spending his clude sale. “It is correct that Region Syd has time touring his new business empire insourced its emergency services at and analysing exactly what is happen- The cautious approach might be to a price equivalent to Falck’s price. ing (reading between the lines, what cut the business’ losses and to stick Since the take-over, Region Syd has is going wrong). to the core business model which has added significant extra costs making served Falck so well in the past – sell- As he puts it in a press release: “We their business case less promising and ing off healthcare and roadside assis- must increase our profitability con- most likely more expensive. tance, selling its businesses in the US siderably and ensure stable revenue and Asia and anywhere it can’t make “We report financial numbers by ser- growth going forward. We are in the profitable, and putting that back into vice area, but not on a contract or process of systematically examin- the domestic emergency market. country level. We are pleased with ing the business and are expecting to running a USD 2.5 billion business complete our analysis and the strate- But that would mean accepting that building on dedicated people and a gy process sometime during the au- Falck’s ambitions to be a truly inter- significant growth potential. Our first tumn of 2017. national company had failed. Falck half 2017 has not been satisfactory may have other plans – and no doubt “Since taking office, I have spent my and we working on increasing our when its new CEO’s review is com- time at Falck going around visiting profitability considerably and ensur- plete we will hear about them. Mean- our different divisions and getting ing stable revenue growth going for- time, Falck isn’t commenting on the to know and understand the busi- ward.” speculation. ness. Falck is a company with unique

United Health creates largest provider - cont care services business, and the rest nual US revenue, leading one analyst Skolnick earlier told Forbes it’s mak- from insurance. HBI estimates Amil’s to suggest South America is perhaps ing healthcare systems in emerging 2016 sales at $3bn and we estimate most valuable as somewhere for the markets “more efficient earlier” than that roughly US$1.8bn came from its insurer to learn how to cut healthcare the mature U.S. market. chain of hospitals and other health- costs. Those lessons can then be recycled care service provision. It has 5,700 “I find it interesting that they are so back into its US business, despite beds. inclined towards a vertical integration United being very unlikely in Skol- The deal means that United is by far in other markets,” Sheryl Skolnick, nick’s view to ever take on a conven- the largest hospital operator in Chile an analyst with Mizuho Securities tional provider business domestically. and Brazil and nearly twice the size USA, told HCN. “What United has been striving to- of Rede D’Or, its nearest competitor “What it says to me is that they want wards and has greatly improved on is in Brazil. to understand how to successfully learning from the activities of Optum. But while the $2.8bn deal is a run what you might call a healthcare Integration, for example, which the valuable learning opportunity for the holding company. US health system really lacks, is one US giant, others are unlikely to of the things which Optum is really “They want to learn how to provide follow, we hear. good at.” the right care in the right place at the In conjunction with the Brazilian right cost and that’s a very intriguing “I think that’s part of the strategy group Amil it bought in 2012, the model that, in my opinion, fits into the within every deal that United does deal would give America’s largest strategy of its Optum arm.” but particularly within these integrat- insurer UnitedHealth more than $5bn ed systems. If you were to ask them Optum is United’s more provider ori- in sales and almost complete straight out, they would say: “well the ented arm with lines in population coverage of the fast-growing South US system is very different”. health, drug benefit management and American market. outpatient care delivery. “It is, but the lines begin to blur with- Those revenues pale into comparison, however, with United’s $200bn in an-

4 September 2017 www.healthcarebusinessinternational.com HCN news in Optum care. The growth of Op- Obamacare at home. Could they fol- The share price jumped to 1,920 Chil- tum is the big difference between the low United’s lead? ean pesos which is still some way be- United that bought Amil and United low the 2,150 pesos offer price from Skolnick says that’s unlikely: “I don’t today and it’s a learning experience United. There is a good argument think this United deal is related to for what used to be a simple health that it should be higher than the of- Trump or Obamacare reform, and the plan to be in the provider business.” fer price. At these prices it is not in- others probably feel they have enough conceivable that another bidder could Amil itself has struggled in recent on their plate at home anyway.” enter the fray. Assets as large as this years with a long-running recession Our Analysis: The Latin American in Emerging Markets are extremely in Brazil leading to a fall in the take- market is seeing rapid M&A as ma- rare. Whilst a counter bid would be up of private medical insurance, and jor hospital groups move in. We have too big and too high for the big three possibly motivating more provider seen Bupa buy first in Chile and more South Africans and Ramsay, it would acquisitions. recently in Brazil, although on a scale not be impossible for a big Chinese “I think the performance of Amil has far smaller than United. We have also group or a PE house. improved though it has never really seen Helios Fresenius, Europe’s larg- What does this mean more general- achieved its original targets for it,” est hospital chain enter the market ly for how Emerging Market private said Skolnick. “The deal was compli- buying in Peru. healthcare will be reshaped over the cated by the challenges of the Brazil- These deals may partly reflect price. next decade? It highlights the power ian economy but it’s still the leading United is generally regarded as hav- of the big US insurers. Companies market share plan and it’s been a val- ing overpaid for Amil ahead of the like Aetna and United could domi- uable experiment.” recession, but this latest deal looks nate emerging markets if they were In the US, some providers have pretty sweet. United is paying just willing to bid for big hospital assets. been looking abroad in recent years 1.2 times 2016 sales. EBITDA came But this is far from certain. EBITDA with the academic medical centres to $227m in 2016 giving a historic multiples in South East Asia are in (AMCs) particularly active in centres EBITDA/market cap ratio of around the range of 25 to 30 which would be of medical tourism such as London 12.3, a year in which EBITDA grew earnings diluting. Crucially, the inte- and the GCC. 17%. That is a low price to pay for grated HMO model which is well-es- the only serious platform to cover the tablished across most of Latin Amer- America’s insurers face disruption West Coast of South America. ica is not a feature of Asia or indeed from Trump’s attempts to dismantle the Middle East.

which was launched a few years ago tor. We hear that this is very much a Global but will be re-emphasised in 2018. British preoccupation. “The British We are told that this basically means see healthcare services through the World Bank moves measuring education and healthcare eyes of the NHS and are constitu- towards including assets in each country. tionally opposed to private sector involvement,” we were told. ‘That the private sector in We hear Kim is arguing forcibly for is all very well, but you can’t build healthcare the inclusion of the private sector in NHS organisations in Africa in this both sectors. ‘It is generally known, There are clear signs that the World decade.” Bank increasingly favours working given current national debt levels, with the private sector in healthcare that the private sector has to be in- Our Analysis: Given that the private services. But there is a way to go yet volved in education and healthcare,” sector, warts and all, makes up over and British NGOs remain intransi- said one source. half of all provision in many emerg- ing markets, excluding it from devel- gent. Despite this, there remains considera- opment plans seems odd. We hadn’t ble internal and external resistance to Last autumn World Bank president Jim realised the extent to which British the move. ‘There remains a loads of Yong Kim, a South Korean-American NGOs led by outfits such as Oxfam people in the World Bank who want physician and anthropologist, talked are the main opponents of private in- nothing to do with the private sector,” about how to maximize financing volvement. for development (mffd). Insiders say said one source, echoing a comment this is code for leveraging the private we first heard several years ago. A problem for many development banks is finding private operators who sector. This is particularly true for the Many international NGOs are also do not merely serve the wealthy or the World Bank’s human capital index forcefully opposed to the private sec-

www.healthcarebusinessinternational.com September 2017 5 HCN news new middle classes. A few years ago, in Manipal Hospitals, prompting director of investments, told the Ma- ex-IFCers told us that the IFC, the in- speculation that Manipal could be- laysia-Kazakhstan Energy Forum in vestment arm of the World Bank had come a consolidator. Astana on Wednesday, that Khazanah become much more stringent about was looking for investment opportu- Based in Bengalaru, Manipal is an In- this investment criteria. Gone were nities in Central Asia and did not rule dia-based chain of 15 hospitals, with the days when the IFC could uncrit- out the possibility of investing in Ka- around 5,000 beds. It operates mainly ically invest in a lavish hospital chain zakhstan specifically. Various sectors in the south of the country, and has aimed at the rich. were mentioned with a particular em- one hospital in Malaysia. phasis on healthcare. More recently this appears to have re- It will take a 16% stake in Manipal laxed again. Note that in 2017 the IFC “We are looking for opportunities in from current PE investor True North, lent $15m to Acibadem City Clinics, this region,” he said. “We are already which exits its five-year investment the Bulgarian offshoot of Acibadem, well established in Turkey through making a threefold gain. TPG Cap- the big Turkish hospital chain, which various investments such as hospi- ital, rumoured earlier in the year to in turn is part of IHH, a bling-laden tals and airports, and we can expand be interested in buying Indian group Pan-Asian hospital chain that mainly our healthcare business here (Central Fortis leading to the spectre of a For- meets the needs of the rich. Asia).” tis-Manipal super group, remains a Such a move may reflect the fact that significant minority shareholder with Mr Ghani, who oversees the Turkey there just aren’t many large vehicles a 22% stake. office’s activities, said Khazanah has in which development banks can use- already expanded throughout South- The deal values Manipal at Rs 6,500 fully invest. You can also deploy the east Asia and is now hoping to be- crore ($1 billion). argument that a provider for the rich come a pan-asian or global healthcare will gradually lead to a trickle down True North also has minority shares investor. effect to the poor. Although we would in GCC-based healthcare provid- “The company has invested in hos- argue that the opposite is more likely er Aster DM, which refilled for an pitals in Malaysia, Singapore, Hong to apply. If the rich are cocooned in IPO last month. Kong and soon in China. It is better their own excellent private healthcare Our Analysis: As HCN reported in if we are located in all geographical system, they are much less likely to January, speculation was rife that locations and Central Asia is our fo- want help pay for healthcare for the TPG, which bought its stake for cus.” poor. A better argument perhaps is US$146 in 2015, was looking to cre- that private hospital groups will be Our Analysis: With a population of ate a super-group to rival Apollo. By gradually forced to address the mass 17.8 million and growing Kazakhstan June however, it appeared they had market as provision for the very rich remains a sizeable and relatively un- bowed out of the race leaving Malay- gets saturated. tapped market. But its healthcare ex- sia-based IHH as the only, unhurried, penditure as a percentage of GDP has In truth, it is really hard to say who contender. actually decreased since the 1990s does what and for whom. Across the The combined ambitions of TPG (now 4.3%, placing it 157th world- world large private and not-for-prof- and Temasek, however, could prove wide according to the WHO). it providers give some poor people a force to be reckoned with and we some services in exchange for tax This is a similar story to that of other wouldn’t be surprised to see Manipal breaks (Brazil) or land (India). One’s Central Asian Countries. Aside from making acquisitions in the coming suspicion is that they will do the very a few international giants like Falck months. least they can get away with. (emergency services) and Diaverum (dialysis) the small private healthcare Malaysia’s sovereign markets in these countries are made wealth fund looks to up of even smaller players. Growth South East Asia Kazakhstan, and beyond capital from a large investment fund like Khazanah could change this. Sovereign wealth Malaysia’s sovereign wealth fund is fund acquisition could interested in investing in the region’s turn Indian chain into healthcare sector. Khazanah was the Indian diagnostics consolidator main backer of Pan-Asian hospital company raises cash to group IHH - and remains a big share- Singaporean sovereign wealth fund expand into Singapore holder. Temasek Holding has agreed to ac- An Indian diagnostics company is quire a Rs 1,000 crore ($155m) stake Datuk Mohd Izani Ghani, executive planning expansion into Singapore

6 September 2017 www.healthcarebusinessinternational.com HCN news and beyond after raising $6m from a half-year profit increase of 12.4% bled-down on that support and an- investors. on revenue that is up 49.3%, while nounced a further package of reforms. increasing its minority stake in a hos- OncoStem Diagnostics, an oncology “Finance and tax authorities should pital in Sichuan. diagnostics specialist company start- study preferential income tax policies up based in Bengaluru, raised the The group, which operates psychiat- for private healthcare and elderly care growth capital from VC firm Sequoia ric hospitals in mainland China, has enterprises,” said Chinese Premier Li Capital India Advisors. CEO Manjiri impressed the market with its finan- Keqiang after a State Council Execu- Bakre says the funds will be used to cials for the first six months of 2017. tive Meeting in August. fast-forward the company’s national Share price rose 12% following the The government will focus on an and international expansion, as well release of the results. action plan to develop the industry, as developing new types of tests. Post-tax profits to June 30 were cutting red-tape, R&D training and It plans to open a new central labora- 31.7m Yuan ($4.8m), up 12.4%. Rev- education of health professionals and tory in Singapore, while introducing enue was 283.1m Yuan ($42.5m), up the integration of healthcare with el- test collection sites in new markets 49.3%. derly care and other sectors, said a Thailand, Malaysia, Indonesia and statement released after the meeting. Breaking the figures down, 84% of South Korea. It will also start pilot programmes in sales came from hospital operations homecare and community-based el- Oncostem says it will expand the while 16% was real estate income. derly care. breadth of its tests from its current fo- Much of the growth in hospital reve- cus on breast cancer, to include oral, nue came from its 300-bed hospital in Foreign investors and local providers brain and colon cancer as well as au- Linhai city, according to local press. will bother be supported by favour- tomation of these tests. able policies, it added, though there The group is the only listed company is little concrete detail on what those “There are no affordable tests in In- in its speciality in emerging markets, policies are. dia to accurately predict the risk of and is mulling a second listing on the cancer recurrence,” Bakre claims, Shanghai Stock Exchange, which Our Analysis: Further proof that the adding that expanding the range and could see it raise as much as RMB Chinese government wants the pri- cost-effectiveness of their tests for 193 million ($29 million) in order to vate sector to play a major role whilst recurrence will help “provide doctors fund expansion. retaining the majority of provision with an actionable blueprint for per- within the state sector. In fact, private Meanwhile, the group has increased sonalised treatments.” capacity is lagging behind govern- its stake in the for-profit Chengdu ment plans - hence this package. Sequoia Capital already has several Renyi Hospital from 27% to 42%. It investments in the Indian healthcare reportedly paid RMB 15m ($2.3m) sector. These include leading $30m for 15% additional equity in the 299- rounds of investment in MedGenome bed geriatric and psychiatric hospital China’s Arrail Dental Labs, a pan-Indian network of diag- in Sichuan province. raises US$90m to fund nostic centres, and Practo Technolo- ambitious expansion gies, a telehealth company. It has also Chinese dental group Arrail Dental invested in ASG Eye Hospitals, Vasan Private healthcare raised US$90m in Series D funding Health Care (also eye care), Innov- catches a break in China last week, aiming to open than 1,000 care Lifesciences and Cloud Nine, a clinics over the next five to eight The Chinese government has reiterat- chain of maternity hospitals. years. ed its support for the private health- care in a meeting of the State Council Arrail was founded in 1999 by Zou last week. Qifang an American-educated dentist who wants to bring high-end care to China In July, the government announced middle-class Chinese and expats liv- tax-breaks for buyers of private ing in the major cities. As of now, it medical insurance (PMI) amounting Wenzhou Kangning has over 40 clinics and 250 dentists to CNY 2,400 (US$370) per year, hospital group posts according to its website. strong half-year figures boosting a private healthcare sector and ups stake in Sichuan which is gaining real momentum in Investment Bank Goldman Sachs and centre the country. private equity firm Hillhouse Capital led this latest funding round which HK-listed psychiatric hospital group A statement by the government’s sen- takes its total raised capital to above Wenzhou Kangning has announced ior decision-making body has dou-

www.healthcarebusinessinternational.com September 2017 7 HCN news

US$200m. Previous investors include Healthspring is piloting a scheme laborations, not the other way around, Qiming Venture Partners, Kleiner where audiologists from the com- Sen says. Perkins Caufield & Byers (KPCB), pany, which has a 9% global market Part of the planned expansion will GL Capital Group and New Horizon. share, will operate out of its clinics. also be through mergers and acquisi- Private dentistry is growing in popu- On the retail clinic side, Sen plans to tions of smaller corporate health and larity in China despite the first clinics be in 200-250 total locations over the occupational health groups: incorpo- opening just 15 or so years ago. In the next four years, up from 32 currently rating other retail primary care clin- funding conference, Zhou predicted (with 50 additional on-site occupa- ics, the seemingly obvious choice for the market will be worth trillions of tional healthcare clinics). Further ex- Healthspring, is problematic. yuan in the future, though he has pre- pansion will partly target the low-in- “Healthspring’s model is unique and viously said it will take China another come 30% segment of India’s urban successful. It can be hard to incor- 65 years to reach a dentist to patient population by working with local porate other, similar clinics, as you ratio of 1:5000, the norm in most de- government agencies, a market that need to adapt their business model veloped countries. has proved challenging up until now. to your own. In this area it is better “The main issue is pricing: deliv- to expand via greenfield projects in- ering the same medical quality at a stead. Existing smaller occupational India more affordable price,” says Sen. To health groups align better with our succeed, Sen advocates a fresh per- own models.” spective. “Analysing pricing mecha- Our Analysis: It will be interesting to Healthspring partners nisms, skills, behavioural patterns of see whether Healthspring can raise with India’s biggest consumers.” company as it prepares this sum. Historically, primary care to raise capital He says that India is crying out for in India has low margins thanks to a solid, pan-national primary care competition from single practition- Indian primary care chain chain as it finds itself in the midst of ers (some of whom are quacks). This Healthspring has begun a partnership a crisis in the sector and points tothe is why the big hospital groups have with India’s largest private workforce, recent tragic death of 100 children steered clear of primary care. Sen at Tata Consultancy Services (TCA), at an over-burdened hospital in Go- claims that thanks to his business’s to provide annual health checks and rapkhpur and the government’s own fixed cost model, once past break- wellness across all of its 90-plus lo- damning report on its efforts to spread even the steady-state EBITDA level cations and 300,000 employees. We primary health care to the wider popu- for Healthspring clinics is 30-35%; caught up with Healthspring CEO lation. Sen has spoken at length about but it is the investors he will have to Kaushik Sen as his company begins the corruption plaguing the sector. convince. talks to raise $45-50m in growth cap- ital over the coming weeks while ex- He is also in talks to collaborate with panding its offering. several insurance companies – one large US player – to launch man- Indian groups seek new The voluntary annual health checks aged insurance for long-term chron- areas as government will be paid for by TCS and Sen tells ic care and diabetes. And for exist- price ceilings hit profits us that 65% to 70% of employees ing Healthspring retail customers, Government regulations mean hos- have chosen to take part in completed he wants to create a bundled health pitals have been forced to cut their locations so far. insurance product to cover all their charges for drugs and devices in that “The partnership with Tata is part healthcare needs. cardiology and orthopaedics. Pace- of a wider strategy to become an makers are to be hit next, with falls “The value of a platform like ours lies all-purpose hub of consumer-facing of 50-70% in pricing. These price in its focus on identification and pre- healthcare, focusing on primary care, cuts apply even for wealthy private vention, reducing how often people dentistry, and diagnostics while add- patients paying cash. Small wonder go to the hospital, which also helps ing new audiology and dermatology the largest player, Apollo Hospitals, with insurance companies’ loss ra- services to our primary care clinics,” is down 29% on the year with Fortis tios.” Health insurance companies he says. off 18%. So how are Indian hospital have identified the potential of prima- groups reacting? Audiology is being introduced ry care to both better deliver health- through a partnership with another care outcomes for patients and reduce Mudit Saxena, CEO, CARE Hospi- multinational, listed Italian group their medical loss ratios. They ap- tals, the fifth largest chain in the coun- hearing aid manufacturer Amplifon. proached Healthspring for these col- try, reckons that government moves

8 September 2017 www.healthcarebusinessinternational.com HCN news are behind falls in EBITDA margins operations there. These cities used ed 20,000 IVF cycles in the last six for large groups from around 22pc a to send patients to us, now the flow years. Assuming, a quarter of cycles few years ago to around 15% today. could be reversed.” are successful and a cost of US$3,000 So what is the impact of this? each, that gives total sales for IVF of None of this is stopping Care’s ex- US$240m over that period. Saxena sees six impacts: pansion. The group is now owned by Abraaj and is providing advice and The market as a whole is growing at Consolidation As in France, where medical services to Abraaj hospitals around 21% CAGR and is predicted the govenment has squeezed the main in Nigeria and Kenya and even to fa- to reach 260,000 total cycles across tariffs paid to private hospitals by cilities in Myanmar. Recently it has the country by 2020. A very conserv- nearly 2pc a year for five years, the built two more hospitals adding them ative estimate might suggest Indira cuts are leading to consolidation. “A to its chain of 14 in India, one of 160 grew at the same rate over the last lot of smaller family run groups are beds and the other of 180. “Both are six years, giving total IVF sales in now for sale. And we see a concentra- in regions where our bed occupancy 2016 (or the last period of growth) tion. PE invested US$700-US$800m levels are 90pc plus and we’ve got of roughly US$60m. Slap a margin in Indian private health care servic- to 35-40% bed occupancy within 7-8 of 30% on that and you get EBITDA es last year which was a record fig- months,” he claims. of US$18m and a valuation of about ure but the number of deals has also 28 times 2016 EBITDA at the lower dropped.” bound. New focus on unregulated Warburg Pincus eyes This is probably an overestimate giv- areas Everyone is moving into areas stake in Indira IVF en Indira’s position as a market leader such as IVF where there are no caps Yet another investor has taken a lik- with faster growth, higher prices and on charges. Oncology is another area ing to the fast-growing Indian fertility a broader range of services beyond which groups are exploring. sector, with global private equity firm IVF. But even as a ball-park figure it AI and big data He says that Indi- Warburg Pincus set to pay more than points to a high price. So, why is In- an groups like CARE are starting to US$100m for 20% of the Indira IVF dira worth so much? use big data and AI to identify specif- chain. For one, fertility is a large and ic patient groups which need lots of Indira is a large Indian chain with fast-growing market fuelled by In- treatment. “We are seeking to identify clinics right across the country in dia’s vast population and the 10- people with cardiological problems around 20 locations, including Jaipur, 15% of couples who are reportedly and diabetes so that we can put to- Indore, Nasik, Delhi, Kolkata, Pune, infertile. Changing gender roles also gether effective low cost packages.” Ahmedabad and Agra. It was founded means people are starting families Poorer quality care Operators are in 1988 by Dr Ajay Murdia, who this later. selecting lower cost older pieces of month announced plans to add an- Then there’s the sparse competition. medtech and consumables rather than other 50 centres within the next two Indira’s main rivals are UK-based going for the more expensive ver- years in a US$35m investment focus- Bourn Hall, Mumbai-based Bloom sions. That means Indians may end sing on South India and tier-2 cities. Fertility Centre, Bengaluru-based Mi- up with less good stents or artificial In February it was reported American lann, Mumbai-based Morpheus IVF, hip and knee joints. multinational PE group Carlyle and Nova IVI Fertility, New Delhi-based Efficiency drives In France the larg- American investors TPG were strug- Ridge IVF and Jaipur-based Shivani est groups have managed to maintain gling against Warburg for a stake in In- Fertility and Mother Care. Medi- or almost maintain EBITDA margins dira, which was seeking a staggering cover, the Pan-European group, also at 20-21%, thanks to becoming more valuation of around US$600-800m. has bold plans in the market, but little efficient. Indian groups are seeking to It’s no surprise that was thought to be presence on the ground just yet. do the same. excessive by the first two investors, There are many chains, but none with who dropped out of the race, before Medical Tourism could rise. Saxena a true national presence. India is huge Indira reconsidered and dropped its says that Indians are exploring the and diverse and moving into the tier-2 value to around US$500-600m. possibility o doing the operations out- cities is a gamble. The market is also side the country. “We are in Chennai, Our Analysis: Financials for Indira still fragmented with as many as 500 which is a 20 minute flight to Colom- are not available but there are clues chains taking up 75% of the market bo the capital of Sri Lanka and not out there that give some indication of and the rest owned by the mum’n’pop much more to Dhaka, in Bangladesh. a sales figure. shops euphemistically known as “un- Doctors are talking abut performing organised players” in the country. It says it’s successfully complet-

www.healthcarebusinessinternational.com September 2017 9 HCN news

So, even if there are 70 IVF clinics potential market though there may be largest groups like Apollo, Fortis, in Bangalore alone, the opportunities several hospitals already functioning Manipal and AIIMS are clients. across the country for a well-respect- there. By next six months we hope to Sodexo’s business in India has more ed brand, back by private equity or a have plans ready,” he told India news than doubled in the past 5 years, ac- foreign group are huge. Perhaps even outlets. Longer-term, MaxCure hope cording to Sambit Sahu, healthcare 28 times EBITDA huge. to triple bed capacity from 1,600 cur- director at Sodexo Onsite Services rently to 3,500-4,000 by 2019/2020. India, and he forecasted double-digit It had a turnover of around €40m in growth going forward. Medicover expands FY2017 and EBITDA of €4m, giving in India with two an EBITDA margin of 10%. Sodexo Asia Pacific’s healthcare CEO, Stuart Winter, said: “India is acquisitions totalling Medicover Fertility India, the com- strategically important for us from €21 million pany’s first venture into the country a growth point of view. Personally, Swedish healthcare and diagnostics as part of a spending spree there last I see a market for hygienic environ- provider Medicover AB has bought year, reported a revenue of €0.3m for ments within Indian health care sys- a 22% stake in India-based MaxCure 2016 across its seven clinics in Del- tems and technical maintenance ser- Hospitals, and completed the acqui- hi. Its consultations and bookings vices around biomedical engineering sition of Medicover Fertility India have been growing at almost 40% a and facilities management.” Sodexo which it has run for over a year. month, and Medicover will expand will target both the public and pri- the chain to Punjab while opening The listed company, which is active vate healthcare systems, Winter con- new locations in Delhi over the next in Sweden and Central and East- firmed. year. EBITDA stands at €-1.7 mil- ern Europe, last week paid a total of lion, forecast to grow to €-3 million The Indian public healthcare sys- €13.2m for the partial stake in Sahru- in 2018. tem has been rocked by the death of daya Healthcare Pvt. Ltd, the compa- more than 50 children in a hospital ny that owns and operates the Max- Medicover AB’s share price is down in Gorakhpur, blamed on supplies of Cure brand of hospitals. A potential 5% since the acquisitions were an- liquid oxygen running out due to its increase in ownership over the next nounced - 64.5 SEK to 61.5 SEK at failure to pay the supplier. The trag- two years has been agreed as part of the time of writing. edy rapidly developed into a scandal the deal. and opened debate about the lack of At the same time, the company has funding for healthcare in the country, paid $7.4m to complete the acqui- UK-based Sodexo as well as the level of corruption and sition of Medicover Fertility India, to target the Indian poor management within the public which it has managed since April outsourcing market sector. 2016 without owning it outright. The global outsourcing group Sodexo Medicover says the figure is equiva- has named India a strategic market lent to the amount it initially invested for its healthcare business and claims IDFC Private Equity last year. there are opportunities in facilities takes minority stake in management. CEO Fredrik Rågmark describes ASG Eye Hospitals these deals as getting a foothold in Sodexo Healthcare, based in the UK, A former investor in Manipal Hospi- a fast-growing market: “The private provides a range of auxiliary services tals and HCG has spent US$11m on healthcare services market in India is to healthcare providers. That includes a minority stake in Indian eye care growing about 15% per annum and customized services for senior cit- chain ASG Eye Hospitals. we anticipate that we can through our izens, team motivation services for ASG is present in 18 cities across expertise and knowledge, be an active hospitals, efficiency enhancement nine states in India with 23 hospitals player in this market. There is clear and smooth operation flow manage- and claims to have treated 700,000 room for many providers in such a ment to 4,300 hospitals in 39 coun- patients to date. It has also expanded growing market for many years to tries. to Africa, opening a centre in the cap- come.” In India, it performs patient/visitor ital of Uganda this year. Private equi- MaxCure operates nine hospitals dining, technical services, cleaning, ty Sequoia Capital is its main backer, across Andhra Pradesh and Telenga- housekeeping, clinical technology having invested around INR 50 crore na, with plans to expand to Bengalu- management and prevention of hos- in the company in 2013. ru, Chennai and Pune, according to pital acquired infection services at Arun Singhvi, founder of ASG, said: CEO Hari Krishna. “We see them as roughly 45 hospitals. The country’s “We plan to utilize this fund to go

10 September 2017 www.healthcarebusinessinternational.com HCN news deeper in these states as well as ex- in Portugal over the next 2-3 years. said that Orpea can set the bar for do- pand in nearby states. We talk to Orpea and to its Brazilian mestic players. rivals. “We have been expanding slowly and “To have a big international player purely organically, as we feel that in This is the company’s first foray into coming in and setting standards is patient care delivery, it takes time, ef- Latin America. Orpea will own 49% hugely important. Brazil’s market is fort as well as continuous good work equity in each of the two joint ven- nascent and fragmented with a huge to make people appreciate. We would tures and more than half of the real discrepancy in quality of care and for- look for opportunities in south India estate, in line with its global policy. It mality of operations.” with a few good clinicians to get our has the right to buy control at a later Ricardo Soares of Brazil Senior Liv- footprint there.” date. ing, the largest domestic nursing The hospital chain plans to open 20 Investment Relations Officer Steven home operator by some distance, add- more full-facility eye hospitals in the Grobet told HCN that both Orpea and ed that “It will be good to be playing next three years, he added. SIS have been laying the groundwork alongside a large European operator for a development in Brazil for some like Orpea,” although he disagreed Our Analysis: Indian eye care is strik- years. Orpea will take charge of op- that Orpea can set the standards for ing both for the amount of capital it erational management and all 2,000 domestic players, as BSL is doing continues to attract, fuelling the rapid beds will be covered by the Brazilian just that. “Orpea entering Brazil is an development of numerous chains, and joint venture. Construction on some advertisement for the industry.” the extraordinary ambition of those of these has already started. groups in making the jump into new The over-80s population in Brazil is markets. Grobet added that going into Brazil’s set to increase from 3.3 million to complex market alongside a partner over 15 million by 2050, but there are ASG, a relatively small chain, ex- with expertise in greenfield projects only three care home beds per 100 of panded into a new continent before it has allowed Orpea to fast-forward its them compared with 20 in Europe. had even opened 20 centres in India. international expansion. The market is dominated by the pub- That’s extremely fast, especially for lic sector, not-for-profit and mom- a business that claims to be growing “Without the joint venture we would and-pop operators. Fonseca cites a conservatively. Its rival Dr Agarwal, only be able to build two or three local report that said 70% of private however, already has clinics in more small facilities; going through this nursing home beds in Sau Paolo are than ten African countries, the giant route has allowed us to make that unregulated. Aravind has a JV in Nigeria and the 2,000 beds. These will start to open in troubled group Vasan Healthcare had 2019 and 2020,” he told HCN. Meanwhile, the 1,000 beds across 10 bold African plans before its implo- facilities being constructed in Portu- The joint venture will target the high- sion, but is still in the Middle East. gal will cement Orpea’s position as er-end segment of Brazil’s urban Europe’s largest nursing home opera- That shows the confidence these population, with construction taking tor by total beds. It will bring its total groups have in their model, the lack place in Sao Paulo, Rio de Janeiro, to 80,000 (77,000 currently according of competition present in Africa and Fortaleza and Belo Horizonte. Grobet to its most recent annual report). the urgency they feel in racing to beat added that, within these cities, it is other Indian groups to gain a foothold building in prime locations and will Our Analysis: Brazil is a large and on the continent. charge a similar rate to that in Europe: interesting market for elderly care €75-100 per bed per day. with a substantial and wealthy middle class. This is not the first foray into Philippe Austruy is known in France Latam by European elderly care op- and wider Europe as a pioneer in Latin America erators – Belgian player Senior Assist healthcare ventures. He founded and has successfully opened a chain of built up General de Sante, Medidep new-builds in Chile and is planning Orpea entering Brazilian and Medibelge, which have been ac- more elsewhere. It has told us in the market with 2,000-bed quired by Ramsay Health, Korian and past that it avoided Brazil because of joint venture Orpea, respectively. high property prices in the big cities. French nursing home behemoth Or- The news was well received by our pea has announced two joint ventures The main problem is that you can contacts in Brazil. Marcelo Fonseca, with fellow countryman Philippe only expand in Latam by building former CEO and now board member Austruy’s holding company, SIS new build as there are no chains with of Dal Ben, a significant operator in Group, that will see 2,000 nursing decent nursing home assets to buy. the post-acute and homecare sectors, home beds built in Brazil and 1,000 Greenfield expansion like this calls Page 14

www.healthcarebusinessinternational.com September 2017 11 HCN news focus Advent sells its shares in Fleury

Private equity firm Advent International has sold all of its has less of a recognisable brand and works more closely shares in Fleury, the second-largest diagnostic lab and im- with the public system, especially in Sao Paulo. aging group in Brazil, pocketing 1.3 billion real ($408m). Alliar and Hermes Pardini are the newcomers. Alliar was We take a look at the big four listed diagnostic groups in the built up by PE firm Patria Investimentos, and focuses on country, whose aggregate market cap comes to $7.5bn with imaging while increasingly working with the public sector 2016 revenue of $2.23bn. – a recent large contract in Salvador to name one exam- The growth of Fleury, which now has a market cap of 9.24 ple. Hermes Pardini is mainly an outsourcing medical labo- billion real ($2.9bn), means Advent has scored a health re- ratory group that does little to no work with the government. turn on the investment it made almost exactly two years Together with Sabin, an as yet unlisted group with yearly ago. At that time the market cap was 2.68 billion real revenue of around $100m, these groups have a 20% market ($680m) making the investment worth around around share of private laboratory tests in Brazil. Market share of $91m, meaning more than 400% returns on this sale. revenue is much harder to calculate as for some groups – Below is a chart of the share performance of the big four DASA and Alliar in particular – much of it comes from the Brazilian groups – Fleury, DASA, Hermes Pardini, and Al- government. liar – in the last two years. The latter two have only recently Such a low market share for groups of this size explains, IPOed, and Alliar saw its price fall after an IPO that many according to our contact in the country who is an expert agree was over-valued. It is the only one not to have outper- on the industry, why they are not looking outside of Brazil formed the Brazilian stock market as a whole. as of yet. “There is still plenty of consolidation to be done Fleury and Dasa (Diagnosticos da America), the two here,” he says. long-standing listed groups, have grown through different Advent’s sale of its shares is not surprising, either: “This is strategies. Fleury is the most recognisable brand in Brazil, a private equity group fulfilling their mandate. They made operating in all the major cities in Brazil and rarely, if ever, a healthy return on their investment which, to be sincere, working with the public system. DASA, on the other hand,

Brazilian big four Share performance

12 September 2017 www.healthcarebusinessinternational.com HCN news focus

Brazilian big four Market cap, revenue and EBITDA

probably exceeded their expectations. Healthcare is a sector Advent has left Fleury, but other PE players are staying put that is resilient to crisis as there is plenty of space to grow while their asset grows in value. See the shareholder struc- and growing demand.” ture of each company below (obtained from 4-traders).

Brazilian big four Shareholder structure

Fleury DASA

Hermes Pardini Alliar

www.healthcarebusinessinternational.com September 2017 13 HCN news

for deep pockets and a long-term per- moved to the bottom of the Europe- cialist real estate assets and are not spective better suited to a listed com- an average, or the mid-point of the likely to appeal to all real estate inves- pany such as Orpea than to private NHS, what would that give you? Or tors, clinics and other less specialist equity. American levels of productivity? On medical facilities can be successfully a mediocre basis, you wouldn’t need incorporated into more generic forms Soares cites research presented at the nearly as many hospitals as has been of real estate such as office buildings National Investment Center for Sen- suggested. That would make a big and retail malls,” says Plumb. iors Housing and Care (NIC) confer- difference.” ence in Chicago last year that showed “The strong demand and current when a new operator enters an elderly Report author Plumb explained the shortage of hospitals, clinics and care market, the overall market size basis of his report to HCN, saying: other healthcare facilities makes this grows more than the share taken by “What we are seeing, with the low- one of the most attractive sectors of the newcomer. Orpea’s entry to Bra- er oil price and lower government the MENA real estate market for in- zil, therefore, is good news for every- revenues, is the burden of funding vestors, developers and contractors to one there. of social infrastructure, things like consider over the next five years.” hospitals and schools, shifting to the Dr Bobby Prasad, former Dubai-based private sector. The government are global chief medical officer at Abraaj, budgeting for lower oil prices, re- added: “There is a clear need in the MENA maining between $50 and $60 a bar- region for increased provision of val- rel which is obviously a lot lower than ue-based quality healthcare, given the the last few years.” Do MENA’s five major current supply and future needs. This cities really “need Who will be best placed to take ad- is underscored by the rising burden 10,500 new hospital vantage of this? Plumb says: “I think of disease, particularly given the dual beds by 2022”? we will find, as we have with the challenge of an ageing population and A new report suggests the MENA physical infrastructure, consortiums non-communicable diseases.” region’s five major cities will need put together of three parties – fund- You can obtain a copy of the re- 10,500 new hospital beds over the ing, construction, and an operator port here. next five years – the equivalent of 70 who will be the long-term tenants of new hospitals. HCN speaks to the re- the project. Our Analysis: The point our anony- port author and to a government ad- mous consultant makes a good one. “The three groups will come together viser who thinks he is wrong. A lot of the acute sector in the GCC and we are already seeing a number is corrupt. It will treat a patient not According to report author, Craig of the hospital operators coming to to get him better but in order to max Plumb at JLL, there are going to be do JV with developers and financiers, out his cover. It is against this back- major opportunities around Dubai, and we might see more funding from ground, and with this understanding, Abu Dhabi, Riyadh, Jeddah and Cai- property trusts or REITS, a new ave- that capacity should be considered in ro over the next five years. He sees nue that’s not currently in this health- the region! huge growth. But a consultant who care sector.” advises governments across the re- The report, entitled Healthy Returns, gion strongly believes what is needed states the number of people aged over in MENA is better run hospitals – not NMC Health goes on 65 years in MENA is forecast to in- more. spending spree in Saudi crease by 4.4% pa over the next five Arabia He told HCN: ” Do you need those years, more than twice the increase in UAE-based NMC Health is expand- hospitals on the basis of current the overall population (1.9% pa). As a ing in Saudi Arabia with two hospi- practice? If you continue with ineffi- result, the number of people over 65 tal acquisitions and two recently-ap- ciency, very long length of stay and years will increase from 21 million to proved greenfield developments. inappropriate admissions then yes, 26 million by 2020. population growth will have an effect. The group, which is the third-largest The per capita spending on healthcare But you could see this as an oppor- healthcare provider by revenue in the in the UAE alone is only 17 per cent tunity to improve your practise, and UAE, has reached agreements to buy of what is being spent in Switzerland, productivity, going from say 6 days two medium-sized hospitals, in deals and MENA has an average of only 1.9 the average length of stay in Qatar on that should be finalised late this year. beds per 1,000 population in compar- insurance to something more like the It will acquire 100% of a 60-bed mul- ison to an OECD average of 4.8 beds. European average would be a good ti-speciality hospital in the northwest- first step. (They should ask) if you “While hospitals are extremely spe- ern city of Ha’il and 60% of a new

14 September 2017 www.healthcarebusinessinternational.com HCN news

100-bed hospital in the southern city central hospital, creating a “complete Osman tells us that the syndicated of Najran. healthcare city”. Each will be 50-60 loan came about as each bank had the beds, but Osman is not yet saying common goal of developing the Sau- The Chronic Care Specialty Medical what specialist healthcare they will di German Hospital to increase the Center in Jeddah began to receive provide. city’s position as an international hub. post-acute patients on September 26 after it was given the go-ahead by The money is being loaned by by Jamal Bin Ghalaita, Emirates Islamic Saudi authorities. It will expand from Emirates Islamic Bank, Mashreq CEO said the expansion would boost 50 beds currently to 220 by the first Bank, Dubai Islamic Bank and the “the regional and global profile of the half of 2019. A 170-bed multi-spe- Arab Africa International Bank. country’s medical institutions and po- ciality hospital is also planned in Al sition the UAE as the healthcare hub She tells us that the new facilities, Khobar, Saudi Arabia’s most westerly of the wider Middle East region.” which will bring the total number of province. beds at the Dubai complex to up to Our Analysis: NMC has been fast- 500, will be operational by late 2019 est out of the gate when it comes to or early 2020. The first stages of con- Africa taking advantage of the privatisa- struction began earlier this year to en- tion drive by the Saudi government sure the timeline was stuck to. that included a lifting of restrictions Black-owned healthcare Osman adds: “We have some poten- on foreign ownership of healthcare investment company tial specialities but prefer not to an- and education companies in August. lists in Johannesburg, nounce them for now. We are study- These latest moves by NMC will is on the hunt for ing the market to see where the gaps bring the group’s bed count in SA to acquisitions are, which could easily change over 700 in total, almost half of their UAE RH Bophelo is South Africa’s first the next few years,” she says. operations. black-owned healthcare acquisition The expansion has been undertaken company. It floated on the Johan- NMC is clearly doing well. Between with the 2020 International Expo in nesburg Stock Exchange in July, and this month’s expansion plans and last mind, which will be held in the city. thinks it has found its niche – target- month’s results, which saw net prof- The six-month event will see at least ing perviously uncatered for lower it up 39%. Concerns have been ex- 15-20 million people visit; 73 million to middle income families, and con- pressed generally about the long-term went to Shanghai in 2010. solidating the small players operat- sustainability of growth in the UAE, ing in a highly fragmented domestic but for the moment, we see nothing With that in mind, it’s natural to ask market working in the shadow of the but positive signs coming out of this if the expansion aims to attract more big three. HCN caught up with CEO company medical tourists? “Of course, yes.” Dr Quinton Zunga to find out more. Osman answers. “Lots of people will come in 2020. This expansion is be- “We identified an opportunity in the Saudi German receives ing carried out in line with expansion low end of the market which has funding for “healthcare of the whole city itself [in preparation been ignored by the big three (Life, city” for 2020]. Netcare and Mediclinic): 20% of those using the public system can af- The Saudi German Group Hospital in “We have many international patients ford and would be happy to pay for Dubai is planning to build a “health- already, from 25-plus countries. The private, affordable healthcare,” says care city” over the next three years, biggest groups include the UK, Nige- CEO Quinton Zunga. and has just received funding from ria, China and other East Asian Coun- several Emirates banks to make it tries, and of course the GCC coun- When the company listed on the JSE happen. HCN speaks to the group’s tries. Russians are a also fast-growing on July 11, it raised 500m Rand (al- UAE CEO Dr. Reem Osman about demographic for our hospital.” most $40m) of equity capital in the the company’s plans. process. At the time of writing shares Medical tourists from other coun- are up 10% from that date. Osman tells us financing talks have tries make up 10% of the hospital’s been ongoing since the expansion customers, which Dr Osman says Investors are a mix of pension funds plans were first approved by the Du- will double with this second phase and asset managers looking for social bai Healthcare Authority last year. of expansion. If you count patients impact as well as financial gain, says from other Emirates within the UAE Zunga, who has almost 20 years’ ex- A total of 370m AED ($100.7m) will as medical tourists too, the figure is perience in private equity investment be spent on adding three new speci- already 20%. in South Africa. Prior to RH Bophelo, ality facilities to the existing 316-bed

www.healthcarebusinessinternational.com September 2017 + 15 HCHCN Nnews news he ran RH Managers, a private equity form better suited to working with firm that invested 1.4b rand ($105m) them [than the big three]. Large exist- in hospitals in South Africa. ing groups are already set in method- ologies that are more expensive and So what is its strategy? less adaptable.” Zunga says: “We are looking to invest And other care sectors? in small to medium-sized for-profit hospitals, of around 50 beds. There Zunga does not rule out areas like are a few hundred of these in the specialist outpatient, dentistry or oph- country, making up a very fragment- thalmology. “But first, we need to get ed market of players that are too small a good footprint in the hospitals sec- and independent to grow alone.” tor. Then we can look elsewhere.” Going the greenfield route is too cost- The big three dominate South Afri- ly, he says, at 3-4m Rand ($230-300k) ca’s private hospital market, collec- HEALTHCARE EUROPA per bed. The brownfield acquisitions tively holding a 75% to 85% market subscribe today RH Bophelo is looking at will cost share. Zunga plans to announce RH around 1m Rand per bed to acquire. Bophelo’s first hospital acquisition by Private healthcare services across This first acquisition, details of which the end of the year, and boldly claims Europe and Emerging Markets are Zunga does not wish to reveal un- it should have 15 by the end of 2018. experiencing massive growth with til it is formally announced, will be expansion in a wide number of areas between 50 and 150 beds he says, and forms. Healthcare Europa and though reading between the lines we Abraaj acquires majority Healthcare Nova bring clarity to this suspect it may be towards the lower stake in Kenyan hospital fascinating industry. of those two estimates. chain The front section of each edition is a How do you compete with the big Dubai-based private equity group comprehensive overview of all the main three? You don’t. Zunga explains: Abraaj has had its 52.6% stake acqui- news. While at the back, you will find “We are not competing. We are tar- sition in Kenyan hospital chain Ave- interviews on business models and geting the lower to middle income nue Group approved by the country’s detailed features. segment of South Africa which for antitrust watchdog. now has little in the way of affordable If you believe the sector deserves The Competition Authority of Kenya private care options.” greater transparency, then why not approved the buyout after concluding support us by subscribing? Running him through the small to me- that it would not negatively affect dium-sized $1-10m revenue hospital competition. It builds on the minority To find out more about subscription players in Africa on HBI’s database – stake in Avenue that Abraaj inherited plans contact us on +44 (0) 207 183 KwaDukuza Private Hospital, Circle when it acquired Aureos Capital in 3779, or Healthcare, Capital Hospital Group, 2012, a year after the company in- [email protected] Hibiscus Private Hospital and others vested $2.5m in the group which is – Zunga confirms they are looking at one of Kenya’s largest private health- smaller opportunities, for now. But care chains. HEALTHCARE NOVA he does not rule out moving up the Avenue Group runs two hospitals subscribe today ladder later on to groups like these in Nairobi in Kisumu and 15 clinics as their balance sheet grows over the throughout the country, as well as next year. homecare and corporate occupational From the government, Zunga wants healthcare. to see more flexibility. Abraaj has been working out a deal “The government spends a lot on with Narayana to build a hospital in healthcare with relatively mixed out- Kenya but we heard in June that it comes. Where it is cheaper or more might have gone flat. It has $1 billion efficient to do so, it should invite the fund to invest in South Asian and Af- private sector in. Less idealism, more rican Markets, with healthcare a large realism.” focus of the company. “We have a unique and flexible plat-

16 + September 2017 www.healthcarebusinessinternational.com HCHCE interviewN news

Dr Katherine Tulenko, Vice President of Health Systems Innovation, IntraHealth International

The world needs to produce more surgeons than have ever lived in the next decade. That statistic highlights the massive medical shortage that the world faces today. Our annual Siemens Healthineers survey found that staff shortages were the number one problem for private operators in Emerging Markets and the second most important in Europe. In some western countries over half the current doctor population is due to retire in the next decade. In some emerging markets there are handful of specialist doctors and nurses for serious and widespread chronic problems in populations of tens of millions. Kate Tulenko has been looking at this problem for 15 years, first at the World Bank and now at big US NGO IntraHealth International. Why is there a shortage and what are the solutions?

HCN: What is the problem with training medical staff? ical school. The idea of an integrated HMO training doctors really concerned the authorities! KT: They are many and varied. Regulation is often lax in Emerging Markets. There are The core problem is that the public sector has little moti- many colleges in India producing doctors who are not really vation to train more. Poor countries know that up to 80- adequate. And I often see a lack of resources. I’ve seen a 90pc of their newly qualified doctors will leave shortly after medical college in Mali with fewer books than I have in my training. Rich countries avoid training costs by recruiting home! doctors from poor countries. HCN: So you are pessimistic? Then there is the medical profession itself. We see coun- tries where local medical professions want to limit new KT: No, I am optimistic. There are plenty of solutions. trainee numbers because they worry about their own posi- HCN: What do solutions look like? tion and salaries. That is true across many countries, wheth- er in Africa, India or Europe. For the same reason in many KT: One is to have simplified courses leading to useful med- countries such as India doctor unions severely limit the role ical skills that can be applied within 6 months, a year or two of the nurse. years. Often, medical qualifications are not recognised from one Another is to allow qualified nurses to take over from doc- country to another. tors in certain roles. The tendency for training inflation also imposes massive You can improve high dropout rates. We are looking at so- costs. This “credential creep” occurs when self-regulating cial bonds where investors are rewarded if the nurses, who professions require a much longer period of academic train- are financed, complete the course. The aim here is to cut ing than was originally required to enter the profession. We that 60pc dropout rate dramatically. see this with nursing in the UK and the USA where all new As for training, some African countries, notably Ethiopia, nurses have to have bachelor’s degrees, for instance. The are following a flooding strategy. The state wants to train cost of training a doctor in the west is simply prohibitive, so many doctors that they are guaranteed to retain some of particularly in the USA where specialists qualify with sev- them. This is coupled with a system whereby doctors do eral hundred thousand dollars of personal debt. That may not get their qualification until they have done at least two force them into lucrative, but not very useful sectors, such years work in-country. So that, to some extent, means the as plastic surgery. state gets a return on its investment. In many African countries there is a huge dropout rate from We are also seeing a greater willingness to recognise quali- health professional schools. Take nurses. Recent studies fications internationally. The West African College of Sur- have shown that 60% drop out for a variety of reasons – geons and East African community have united the regula- family circumstances, marriage, economic issues. 6% is an tion of their medical schools. Asean has mutual recognition enormously high rate. for nurses. I don’t think we need a global standard but I There is also a lot of resistance in many countries to private can imagine we can end with a pan-Sub-Saharan African providers entering the market. It is seen as wrong even in standard or a Pan LATAM qualification. some western countries. Kaiser Permanente even faced this But I think the way forward is to involve the private sector in the USA, when they announced their plan to open a med- more. That reflects the fact that poor countries don’t want to

www.healthcarebusinessinternational.com September 2017 + 17 HCN interview

spend public money training doctors who are immediately sicians often waste a lot of time on activities that can be recruited by wealthy countries and wealthy countries often performed well by others. Scribes can cut administrative would prefer to recruit rather than train. and write up time. A cardiac surgeon should not be doing the pre-survey physical. That should be delegated to a GP The private sector holds the key to this. or a nurse. India is very good at this. Sometimes the patient Look, there is no shortage of families with clever children never meets the surgeon. All this can double or even triple who would be willing to pay for them to become doctors or productivity. nurses. What is lacking is the capacity to do this. I think that it is only by building a for-profit sector, where it is possible to train a nurse or a doctor sustainably that we can build the necessary capacity. If the demand is there then the capacity will be built. Laure- ate, the for-profit international university group with cam- puses in five continents is planning to become one of the world’s largest trainers of nurses. HCN: What about online training? KT: That plays an important role in all this. And of course telehealth and texting can enable people in remote and poor areas to get access to medical expertise. But we need to massively build capacity. HCN: I suppose the other response is to improve produc- tivity? KT: Precisely. And time and motion studies show that phy- Dr Katherine Tulenko, IntraHealth International

HCE interview Nico de Waal, CEO, PSG Alpha South African investor PSG Alpha took a 50% stake in nursing home/assisted living group Evergreen Lifestyle for US$50m this month. The elderly care opportunity in the country is huge, says CEO Nico De Waal, but the problem is knowing where to start with precious little to consolidate.

Evergreen Lifestyle is South Africa’s third-largest elderly market which begs the question where South Africans have care chain. But that’s not saying much as the country is been getting care all these years. I think the wealthy get a short of capacity and there are few major chains. According lot homecare and the rest go to individual old-aged homes to De Waal, Evergreen has about 500 units while the CPOA, which are dotted around the place and usually not-for-prof- an NGO, has about 2,000 residents, and the Belvedere Park it. By and large, these are not the type of places I’d like to group has 850 units. Interestingly, De Waal says PSG were find myself in.” nervous about calling Evergreen the largest because that Evergreen, by contrast, is building high-end retirement could create problems when it comes to getting approval homes or assisted-living facilities for the upper-middle from the Competition Commission at some point in the fu- classes in wealthy areas near major cities. It offers “re- ture. sort-style facilities” in all its facilities, says CEO Arthur “It’s debatable who’s the largest,” says de Waal, “but there Case. Prices start at around one million rand (US$55,000) are no really large players like in the US, New Zealand or for a single-bedroom unit and go up to around four times Australia. It’s clearly still a fragmented and under-served that under what’s known as the life-right model. Life-right is used widely in South Africa as well as New

18 + September 2017 www.healthcarebusinessinternational.com HCN interview

term though they have plans to bring it in-house. Geograph- “Life-right developers put in ically, in the Cape and Gauteng regions at the moment but expensive fittings as well as wants a national brand eventually. The Amdec Group, a property developer, and Evergreen’s other shareholder, al- solar panels that will only pay- ready has developments across the country. The total value of its current assets was estimated at R1.8bn off over the long-term getting and it’s set a three-year target of nine operating villages with an asset value of about R7bn or more than 20 villages the service cost down while with a gross asset value of more than R20b in five years. That will require more capital in the coming years and that keeping it a desirable place to could mean a JSE-listing, says de Waal. live.” De Waal says PSG is in a hurry and making up for lost time in healthcare. The investor is backed by the Mouton family, a rival to the Ruperts, the major driver behind Mediclinic. “The Moutons did very well with schools,” says de Waal, “but we kind of Zealand, Australia and the US, says de Waal, who points feel that we missed the boat on the private hospital market to the Ryman Group as one of its largest backers. Under that closed about ten or twenty years ago. We’ve been look- the model, residents pay a fee to purchase the right to the ing at healthcare now for the last few years, but were to we property which they then own for the rest of their life or do anything more in the sector it may be a digital play rather until they opt to move out. This capital is returned to them than a bricks and mortar business.” at that point. The operator pockets the net growth on the capital, keeps ownership of the property which may also appreciate and may also charge a care fee for services ren- dered and a management fee for maintaining the property. Typically each assisted living centre has a frail elderly unit with 20-30 beds. “The advantage for us in keeping hold of both the property and the whatever growth we can make off the occupation right in South Africa where inflation is 6-7% and property growth 8-9% is obvious. The developer will develop these villages make a margin on that then get all the capital back in the form of interest-free loans within a year or two. So, as you can imagine, it’s fairly good business.” Why does it make sense for the resident? “Well, it may be better for the resident to buy rather than rent because they get the security of knowing it’s theirs for as long as they need it. If they buy the unit outright they may also get the capital growth, but at that point the de- veloper walks away and the ongoing maintenance, for ex- ample, is left in the hands of people with not much capital behind them and an operator with no long-term goal.” De Waal claims the difference between an Evergreen vil- lage and one that’s not a life-right model is immediately apparent. Life-right developers put in expensive fittings as well as solar panels that will only pay-off over the long- term getting the service cost down while keeping it a desir- able place to live. “That’s what makes good business sense for us,” he says. Care is outsourced to a local operator though over the long Nico de Waal, PSG Alpha

www.healthcarebusinessinternational.com September 2017 + 19 HCN interview

Teo Sarda, Sphera Global Health Care

Operating in 25 countries and across four continents, Sphera Global Health Care is building a global network of local expertise. Working mainly with insurers, the group acts as a middle man to assist access to international-standard medical services through local infrastructure – if it is not available. We speak to CEO Teo Sarda.

HCN: Sphera was founded in Brazil to facilitate medical countries like Brazil. tourism. Tell us a little about why it was set up? HCN: Who are your main clients? TS: It was set up to bring people to Brazil, and mainly to TS: Our main clients are insurance companies. We have em- São Paulo because healthcare system there is so good they ployers and partner with governments too. get people coming for treatment from many countries – in- cluding from Africa. HCN: And why do they hire you? It had a network of hospitals and acted like a medical con- TS: One, to reduce costs and claims. We filter cases. We cierge, and set up travel arrangements, in the middle of the offer them the option to triage, and direct patients to the transaction. service they need avoiding unnecessary visits. We use call centres, apps and big data to filter people and give them the As it developed, it built an international network helping right option whatever they need. companies or governments to take care of their insurees and employees. And two we provide a higher level of connection between patients and the insurers – they can use our tools to get a From that, we started moving into medical second opinions bigger level of interaction. That builds a relationship and and telehealth services. brand loyalty. HCN: So you are running the network but not generally pro- HCN: How big are you? viding medical services? TS: We’re treating 50-60,000 patients per year. We’re grow- TS: We have a team managing the network, but generally ing and I’d expect next year that number might triple. we don’t provide the medical services. We don’t employ the doctors, we partner with local players and create more I think we’ve created the model, that works, and we have business for them. We’re bringing them clients. Our team is the technology. We can replicate it and deploy it now. composed of a medical staff that oversees the quality of the HCN: And what of revenue and EBITDA? services and, if needed, carries out a previous triage. TS: We have Sphera, and Oshen Healthcare (our hospital HC : Where do you operate? N part). We’ll close this year with around €20m revenue. We TS: Today we’re in many countries – in Brazil, in Russia, in have Sphera, the service part, which will be €5-6 million, Europe in Spain and Portugal, in Africa in many countries and Oshen Healthcare will be around €15-16m. We’re in- like Angola, Rwanda, Morocco, and we have offices in all vesting a lot at the moment so we’re not earning positive these places. We’re also entering the Middle East through EBITDA in Sphera, we are in positive for Oshen Health- an office in Dubai. care. But we’re consolidating and expect to be completely positive in the coming months. We’re mainly in emerging markets. That’s not to say we’re not in places like Europe but there’s a greater need else- HCN: And you’re looking for investors? where. In fact, we now begin to operate in European coun- TS: We’re looking for investors – like everybody. We need tries bringing telehealth and complementary services and them in both parts in order to rapidly expand our business. growing in this segment is Sphera´s priority. HN: Where might you look at next? HCN: But you do operate some services? TS: We’re looking at other Latin American countries, and In some countries, we have had difficulties partnering TS: from our Dubai office we’re looking at other countries in with local players because there’s a lack of infrastructure so the Middle East. we’ve had to create another entity, called Oshen Healthcare. Through that we have a clinic in Luanda and we have a And we want to start exploring Asia next year. hospital in Kigali and we’re building a network in Africa. Where we can we partner with local players, if we can’t we create our own facilities but this isn’t needed in developed

20 September 2017 www.healthcarebusinessinternational.com HCN interview

Wilson Mayora Mogollon, Colombian insurance union Fasecolda Colombia has universal and generally well respected public healthcare coverage, yet there are still millions who take out private insurance. Healthcare Nova talks to Wilson Mayora Mogollon, who is responsible for healthcare at Fasecolda, the body which represents private insurance companies, to find out more about the market.

HCN: Tell us about what you do. fourth kind of private is insurance is for treatment at home – and the potential use of an ambulance when you need it. WMM: We are a union of insurance companies responsible for making representations to the government and public There’s almost 2.5 million people in Colombia getting one institutions about private insurance. of these four kinds of private health insurance. HCN: There’s been massive change in Colombia since 1993, The first of these has 1.8 million people, prepaid is 1.3 mil- with the introduction of mandatory health insurance and the lion, and complimentary is perhaps 1.3 million. setting up of an NHS. How is the public healthcare system The growth rate of premiums is near to 12% per year. The in Colombia? real growth rate is 8% if you discount inflation. The number WMM: Public insurance covers almost any medical treat- of new insurers in this area is low. And the growth of new ment that you need, it’s very good which is one reason why customers in the private market is lower than 5% per year. private insurance doesn’t have a higher growth rate. The reason is that private health insurance is not a cheap Public insurance has two components – “contributory” in- option even for a middle class household it’s expensive. surance where employees and employees pay a premium So the real growth rate is low because of the price. The idea – 25 million people are covered by this. that people have about private health insurance in Colombia And “subsidiary” insurance for people with low income is that it is a luxury. who get coverage without payment. HCN: Are there any issues with the public insurance system. Together that provides almost universal coverage for 42 You seem to be saying it works well. million people. WMM: It does. Sometimes the owner of the hospital and the HCN: And yet despite this there is a market for private insurance company, on the public side, are the same, and health insurance. Why is this the case? that can cause issues. WMM: Private health is like additional coverage that people, Payment can be delayed. It’s simpler with private insurance if they want to avoid public insurance, use. The difference as there’s a contract between two private parties – there’s no is quality – you get a better service – and speed. delay on payment. There is a comprehensive public system in Colombia. It’s HCN: Is there a focus on prevention built in to the Colombi- not like in Chile [for example} where coverage is basic an insurance system? in the public system and if you want more, for a specific WMM: Prevention is the first objective of public insurance illness, you need to buy in additional cover. In Colombia companies. Every public insurer has to develop prevention that’s not the case. Everything is covered but you might campaigns for specific diseases. It’s different in private have to wait for it. health insurance as the scheme is more aimed at treatment HCN: And your members are the private insurers? and coverage. WMM: Yes. ACEMI is the union of public health insurers. Prevention is not the main objective. There are four kinds of private healthcare insurance in Co- HCN: Colombia is quite a mountainous country. Does ge- lombia. First, there’s current insurance. What you’d get the ography play any substantial part in how healthcare is de- world over. Second, there’s pre-paid service, where you pay livered? a fee for coverage limited services with a specific health WMM: No. In Colombia there are almost 48 million people institution. but 75% are in the cities and urban areas. Bogota has 9 mil- Third, there’s complimentary insurance where you pay an lion people and there are 10 cities with over 1 million peo- additional premium – a top up – for better service. And the ple. Health coverage, the main hospital network, is centred on the main cities.

www.healthcarebusinessinternational.com September 2017 21 HCN interview

HCN: And where do you see growth coming from over, say, the next five years? WMM: I don’t see big changes in the market, or any new companies offering private health insurance, being creat- ed as the almost everyone is covered by the public system. Growth over the next five years will be similar to the last five.

HCN interview

Jos Lamers, CEO, Unilabs

Switzerland-based diagnostics group Unilabs appears on track to meet its target to become a €2bn giant, after buying four companies based in three continents in just 48 days. CEO Jos Lamers tells us why it is becoming increasingly important to diversify internationally.

Unilabs has been busy acquiring very different assets in est in growing its radiology platform. several geographies, including Portugal, Peru and the UAE, The common denominator, according to Lamers, is the de- a move that Lamers explains will help Unilabs to become mand for oncology services which “will continue to be a “number one, two or three” in all of the markets where it is great underlying source for further expansion of our cus- present. tomer base, organically and un-organically.” “We will continue to buy mainly in Europe but also other However, contrary to competitor Synlab who entered the areas. The way we choose assets is based on whether we’ve environmental testing segment in May through the acquisi- been historically tied to the countries where they are pres- tion of ALcontrol, Lamers says Unilabs has “no ambition” ent. to look outside of the healthcare sector for now preferring “The reason why we invested in Latam and the Middle East to focus on medical testing and radiology. is simply because we already had customers there and an Meanwhile, the group managed to sign a large outsourcing initial business to build on,” he says. contract in Spain to provide clinical laboratory testing to 17 Unilabs typically buys companies showing 20% EBITDA organisations (12 in Madrid and five in Barcelona). margins – the same as the group itself. Lamers would not Can this success be replicated elsewhere at a time when reveal how much the group actually intends to spend in to- governments can be reluctant to collaborate with private tal. companies? One thing of particular interest about the recent acquisi- “We are in an environment where pressures on cost will tions is the breadth of segments targeted. In Portugal alone, continue and will increase. Countries are looking for ways Unilabs bought a genetics testing specialist and a radiology to mitigate the effect of higher volumes with price decreas- group in less than a month. es and private companies offer a good quality service at an Unilabs has traditionally had a strong position in imaging attractive price. There will, over time, be more demand for across Scandinavia and Switzerland. The expansion in Por- outsourcing.” tugal “clearly” confirms, Lamers says, Unilabs has an inter- But there is a downside. There can be a lack of political

22 September 2017 www.healthcarebusinessinternational.com HCN interview willingness from the public sector to understand that their partners will also be required to ensure cost efficiencies. “We are in an environment “It depends on what government is in place and what ne- where pressures on cost will cessities may drive cost savings, including in local hospital settings. continue and will increase. “You have to take a decision on how low you are willing to Countries are looking for ways go and you can make decent margins if you run operations efficiently,” says Lamers. to mitigate the effect of higher The European laboratory and imaging market has a total value of “well above €70bn”, showing it is still largely un- volumes with price decreases consolidated so “bigger groups will benefit here”. Lamers says that’s why Unilabs has the ambition to become a €2bn and private companies offer group in three years. a good quality service at an Decreasing tariffs though, remain a challenge. “One way to protect yourself is becoming more diversified international- attractive price. There will, ly, which is what we are doing,” adds Lamers. over time, be more demand for Meanwhile, Unilabs is watching the B2C space though Lamers reckons it is not “a wave that will come as a tsu- outsourcing.” nami”. Point Of Care Testing (POCT), in particular, is developing but he would not disclose further details on Unilabs’ inten- tions in that segment.

Jos Lamers, Unilabs

www.healthcarebusinessinternational.com SeptemberMonth 2016 2017 + 2323 HCN insight

Can you make a successful business educating doctors and nurses? You can if the growth of the world’s largest higher education network, Laureate, is anything to go by. HCE catches up with Dr. Francisco Gutierrez, senior vice president of medicine and health sciences.

Can you build a business on educating doctors and nurses?

Baltimore-based Laureate Education operates largely out- tion] - and there is insufficient supply by the public sector. side the United States and is the first public benefit- cor We strive to be in the top quality range to attract the best poration to go public. Founded in 1999, the group raised students.” US$457m of net proceeds with a February IPO, and its pub- He says there is an established pattern of students travelling lic benefit status means it has to balance profits for its share- from certain countries for training elsewhere. This is the holders with making a positive impact on society. Since it well-studied movement of health professionals and students listed, and at the time of writing, the share price is up 10% from one country to another. He explains: “A lot of Ameri- since it listed. can students train in the Caribbean to become a doctor. It’s a Its complete portfolio of programs covers most educational hugely important supply of doctors for the US. And Cubans fields, and on the health sciences front it offers degrees in have trained doctors for decades now. They have a couple dentistry, medicine, nursing, physiotherapy, nutrition, phar- of medical schools that have bilateral agreements that at- macy, psychology, and most health professions and scienc- tract students from overseas, primarily from other Latin es. Laureate has more than 200,000 students studying in American countries but reaching as far as South Africa.” those fields. As well as its owned universities, Laureate is also partnered Gutierrez explains: “We offer degree programmes from with third party educational institutions to help provide an technical to PhDs. Most of our universities existed before international presence and online education. As part of its joining Laureate. In the network our main objective is for mission, Laureate also operates a large number of free or the schools to grow, increase quality and become visible low healthcare clinics, which provide hundreds of thou- and prestigious in the markets where we operate sands of services annually. “We’re not in the labour market. We graduate students in the different fields, and despite our excellent employability rates, we’re not in the business of marketing our gradu- ates.” The company is particularly focussed on expanding ac- cess to higher education to the middle classes in emerging markets, though it has a presence in the US, Australia, and Europe. They have a presence in 25 countries, and 69 in- stitutions. Gutierrez adds: “Our universities play an important role in the countries we’re in. In Brazil, for example, we have over 70,000 students in health fields. As for how our students are funded generally, it’s a different mix. Many use self funds, others have private loans; and in some countries govern- ment loans or our own scholarships allow bright students to join our schools. Brazil [for example] has a big programme for government scholarships. A lot of our students belong to the middle class and many are the first generation to go to university. There is demand [for this kind of educa- Dr. Francisco Gutierrez, Laureate

24 + September 2017 www.healthcarebusinessinternational.com HCN insight Old and obese health insurers must adapt or die

“Fat, 65-year-old gentlemen who don’t realise they have a land-based huge problem.” That was one speaker’s description of in- dacadoo, which surers at the Global Health Insurance Conference in Am- assesses your health sterdam at the end of last month. Worryingly, most of the and scores it, says, insurers delegates agreed they had a problem. need to be part of “the something for some- The reason for this panic? Pretty much all the speakers said thing economy [built that the big tech guns are riding in, armed with more than a on] the personal re- few fistfuls of dollars. In fact, they have billions. The usual lationship”. Gen- bar to entering the market – and one of the reasons stal- erally, this means warts of the industry have felt secure – was capital. But to rewarding those the likes of Google, Amazon and Microsoft, that bar looks doing their best mighty low. to stay healthy Microsoft is currently hitting the headlines, launching a – monitored new healthcare division based on artificial intelligence soft- by the lat- ware – it’s already planning monitoring systems and large est tech, of scale studies into conditions like diabetes. course. The new world order will see traditional players, the large That insurance companies, jostling for position with clinicians / means providers and tech companies (perhaps in league with each rewards other) in an increasingly crowded market. like free Starbucks Ron Buchan, former CEO of Allianz Worldwide Care, coffee summed it up thus: “The day of the health insurer has gone. which The day of the health manager – which is how I suggest according health insurance should be moving – is dawning.” to Klint- This means insurers learning new skills to stay competitive, worth and using technology to gain and retain that all-important scores constant contact with the customer. And they need to learn particular- one size doesn’t fit all as, increasingly, contracts are person- ly highly alised to the customer. or even, according Telehealth, mobile health, wearables, AI, machine learn- to Ohnemus, ing – a fourth industrial revolution is dawning and insurers for the most need to work out where they are going. All the insurer del- healthy, free bi- egates agreed but almost all privately conceded that they cycles and even needed to do more and to pick up the pace if they are to see time off work! off the new competitors. And what of insur- Another take out was that you have to make insurance sexy ers who choose not and to extend the lifetime value of the customer. to embrace this tech- Too often health insurance is seen as “a grudge purchase” ac- nological revolution? As cording to Dr Keith Klintworth, deputy CEO of health score one speaker said “Just ask company Vitality, something consumers don’t value. Or as Nokia, or as future genera- Peter Ohnemus, founder, president and CEO of Switzer- tions might ask, ‘who?’”

www.healthcarebusinessinternational.com September 2017 + 25