Capio Annual Report 2017 Capio Annual Report 2 0 1 7 Digital when possible Physical when needed Contents This is Capio 2017 in brief 4 Comment by the President and CEO 6 Value creation model 8 Healthcare trends 10 Strategy and targets 12 Basic strategic elements 14 Strategic priorities 16 The Capio model 20 Capio’s financial model 22 Financial targets and development 23 Capio as an investment 24 The European healthcare market 26 Market overview 26 Sweden 30 Norway and Denmark 31 Value creation model France 32 8 Germany 33 Business overview Capio Nordic 34 Capio France 42 Capio Germany 46 Capio’s role in society 52 Sustainable society 52 Quality 54 Business ethics 56 Employees 57 Environment 61 Strategy and targets Risk management 62 12 Contents of financial reports 64 Administrative report 65 Group Financial reports 74 Notes 81 Parent Company Financial reports 113 Notes 117 Auditor’s report 122 Definitions 126 Sustainability statements 127 50 Capio’s role in society Corporate Governance Report 142 Group Management 149 Board of Directors 150 The share 153 History 154 Contact 155 The digital consultation on the cover image shows a fictitious dialogue. An innovative and reliable partner ... Our mission is to cure, relieve and comfort anyone seeking medical care from Capio. Depending on the patient’s diagnosis and circumstances in life, we typi- cally provide care during a care episode lasting between ten minutes and ten days. The aim of our work is always to achieve the best possible quality of life for every patient. Capio’s activities are based on three fundamental values, quality, compassion and care, which guide our day-to-day work and how we act in rela- tion to patients, relatives, colleagues and society in general. MISSION Cure. Relieve. Comfort. VISION The best achievable quality of life for every patient. VALUES Quality. Compassion. Care. ... to the public healthcare system We are organized in three operational segments: Nordic, France and Germany 4,865 224 13,314 15,327 thousand thousand FTE MSEK No. of outpatients and No. of inpatients and No. of employees (FTE) Net sales share of Group share of Group and share of Group and share of Group • Capio Nordic • Capio France • Capio Germany We operate at most care levels Sweden Norway Denmark France Germany University hospital Emergency hospital Complexity Local hospital Specialist clinic Primary care center Volume We mainly provide healthcare in the publicly financed system Publicly and Agreement structure Remuneration form privately financed healthcare 87% 73% 86% 13% 27% 14% • Public 87% • License/authorization 73% • Tariff 86% • Private 13% • Contract 27% • Capitation 14% Capio creates long-term value At Capio, we work to achieve the changes and improvements needed to maintain and develop quality and increase productivity in healthcare. This work not only ben- efits patients and funders, but also ensures that Capio creates value for employees, shareholders and society at large. Efficient, high-quality healthcare, with responsible use of resources, is vital to the long-term development and sustainability of our society. Capio is an innovative and reliable healthcare provider that contributes to developing healthcare. Patients Employees For patients For employees High-quality healthcare based on patient needs. High A patient-focused and developing working environment ambitions for quality and method development, patient with clear and short decision-making channels. High ambi- experience and availability. A broad healthcare offering tions for leadership, working conditions and professional that now also includes digital support for consultations development. Digital tools which support higher quality and and virtual consultations online. more efficient use of the time spent with patients. Society Shareholders For society For shareholders High-quality healthcare services at a lower or equivalent Stable growth following such factors as the demographic cost to the public-sector alternative. Capio contributes to development. Improved results also as a consequence developing healthcare and meeting society’s increased of higher productivity and contributions from acquired need for healthcare. operations. We take care of the patient in all phases of life 4 2017 IN BRIEF Key events Entered the Danish market Capio became established in Denmark in 2017. In January, the acquisition was completed of the Danish healthcare group CFR Hospitaler, and in June and October, respectively, a further two acquisitions were made of operations in Aarhus and Viborg. The Danish operations, called Capio CFR, are a good match for Capio’s main medical specialties, and share the Group’s ambition to deliver healthcare of high quality. Capio CFR has expanded Capio’s Nordic home base and strengthened the Group’s pan-European presence. Medical breakthrough in Norway During 2017, Capio achieved a medical breakthrough for hip and knee prosthesis surgery in Norway, after sharing knowledge primarily from Capio France. Previously, Capio’s length of stay for these procedures in Norway was around three days, but after changes to the care processes, the length of stay has been reduced significantly, and some patients can now even leave hospital on the same day as their surgery. Expansion of Swedish primary care In March 2017, the primary care group Backa Läkarhus became part of the Group, strengthening Capio’s presence in the growing western region of Sweden. The acquisition added around 83,000 listed patients to the Group and has further positioned Capio as a leading care provider within Swedish primary care. In February 2018, the acquisition of the primary care group Novakliniken was announced, which expands Capio’s footprint in Skåne, Sweden, and adds a further 45,000 listed patients to the Group. Including the acquired operations, Capio has around 800,000 listed patients and 93 primary care centers in Sweden, which gives a large platform to further develop and operate digital healthcare services. CAPIO AB (PUBL) ANNUAL REPORT 2017 2017 IN BRIEF 5 Development towards increased specialization To support increased specialization, during the year Capio gathered its Swedish orthopedic activities into one com- Increased acquisition activity bined business area. The aim is to support knowledge shar- The higher acquisition activity that commenced in the second ing and speed up the introduction of new methods, leading half of 2016 continued during 2017, and seven acquisitions to higher quality for the patient and more efficient use of in total were completed during the year. The acquired entities resources. As from 2018, the French organization is being operate high-quality activities and support both Capio’s special- adjusted from a geographical to a specialized organization, ization and the target to grow partly through acquisitions. The that can more effectively attract patients and doctors to our entities consolidated for the first time during 2017 contribute Rapid Recovery concept. annual net sales totaling approximately MSEK 1,000. Launch of new digital services During 2017, Capio launched new digital services which entail digital support for consultations based on dynamic medical questionnaires (algorithms), and virtual consultations online. The new tools support both quality and availability, with focus on the needs of the patient. The services were initially introduced in primary care in Sweden, and as from the second half of 2018 the services are available to all of Capio’s listed patients in Sweden. Consultations Online is available to all Swedish residents requesting primary care via Capio. In 2018, digital services will also be introduced in Norway. Challenges in France Capio in figures Operational development 2017 2016 2015 In France, the operations were challenged by a further No. of patient visits, millions 5.1 4.7 4.6 price reduction of more than 2 percent as from March Number of employees, FTE 13,314 12,435 12,360 2017. Development during the year was also affected by Average length of stay excl. geriatrics, lower growth than before for the French private healthcare days 3.92 4.01 4.15 market. Capio’s ongoing medical improvements had a positive impact on development. To support the develop- Financial development Net sales, MSEK 15,327 14,069 13,486 ment in France, during autumn an action programme was Total sales growth, % 8.9 4.3 2.2 implemented with such measures as adjustment of Organic sales growth, % 2.4 3.3 2.9 resources to the current volume development. In combina- tion with the new, more specialized organization, and other EBITDA, MSEK 1,114 1,061 1,001 measures taken, going forward this programme is EBITDA margin, % 7.3 7.5 7.4 expected to support the development in France. EBITDA growth, % 5.0 6.0 3.0 Net capex, MSEK 477 458 391 In % of net sales 3.1 3.3 2.9 Net debt, MSEK 3,691 2,872 2,936 Financial leverage, x 3.3 2.7 2.9 CAPIO AB (PUBL) ANNUAL REPORT 2017 6 COMMENT BY THE PRESIDENT AND CEO Digitalization and specialization show the way forward • Healthcare where you are and when you • The Group’s financial development in 2017 need it. During 2017, we started our digital was challenged once again by significant development by helping our patients either price reductions in France and lower market on a fully digital basis, or in combination with growth in the French market during some our primary and specialized physical health- parts of the year. Our efforts to counter this care. Digitalization is an important route to resulted in sound development in the fourth better and faster healthcare. quarter and we are now ready to speed up the rates of digitalization and specialization • Specialization will ensure healthcare of throughout the Group, in order to increase higher quality without waiting time. We took growth and margin development. some important steps in 2017; in Sweden, we created fully specialized orthopedics activities under shared management; and in France we commenced the transition towards specialization and streamlining of our 22 hospitals and specialist clinics.