Concentration Ahead of Consolidation on Healthcare Market

Deals

The private healthcare market in Hungary has become considerably stronger in the past couple of years. This steady growth, however, may be curbed if proposed cuts of tax-free fringe benefits (Cafeteria) including health take effect.

András Kirschner

Driven by demand for better services from people and bolstered by higher levels of investment from market players, Hungary’s private healthcare sector has been expanding dynamically in the past few years. The largest players have seen double-digit growth in the last couple of years and reported an increase in both out-of-pocket and corporate health insurance expenditure.  

In 2017, the growth rate of the biggest players exceeded 20%, which is well above past five years’ average of 15%, writes Heal Partners, a consultancy, in an article based on companies’ public data. Profitability has also improved: mean EBIDTA increased to 13.3% in 2017, up from 11.6% a year earlier, the article writes.  

“This rate of growth will last for a few more years,” says András Kirschner, owner/general manager of Swiss Medical. “Yet, we will feel the impact of the upcoming global recession as of next summer,” he warns.  

Swiss Clinic is among the largest players on the Hungarian market and also claims to be market leader in the corporate health sector. From 230,000 patients treated in outpatient care in 2015, it estimates it will have 340,000 by the end of 2018. The company has doubled its revenues in the past five years to HUF 2.2 billion in 2017 – 70% of which came from corporate health insurance.

The planned cuts in the tax-free cafeteria system will curb expansion from 2020, according to Kirschner. It also remains to be seen how the planned separation of private and public healthcare, announced by the government in the past few weeks, will affect the system, says András Kiss, marketing director of Budai Egészségközpont, another complex facility whose revenues were more than HUF 6.5 billion last year and are expected to increase by a further HUF 1 bln in 2018.

Gábor Karai

Healthcare as a Service

Current growth is spurred, to a large extent, by people starting to look at healthcare as a service. Dissatisfaction over general conditions in public healthcare is also a factor. As a result, ever more people are turning to private facilities in order to cut down on waiting time or to get more human-centered treatment in a wider sense.

“Private healthcare is no longer the privilege of the more well-off,” says Gábor Karai, managing director of Advance Medical Hungary Kft., the Hungarian subsidiary of an international virtual care provider and healthcare organizer. The circle of people has widened to those of lower wages, notes Karai, who also works as a GP in District XIX.  

“I have several patients who may not earn much but are still willing to pay to get access to care without having to wait and under nicer conditions.” The possibility to choose one’s physician is also a consideration. So is better access to fields, for example endocrinology (the treatment of hormone-related diseases), where the national shortage is the highest.

Today the market is quite fragmented with thousands of small practices including those operating in apartments; consolidation is yet to come. If there is trend to spot, it is more of concentration.  
The past 1-1.5 years have seen a number of acquisitions. In 2017, Sándor Csányi’s Bonitas 2002 Befektető és Tanácsadó Zrt. become the majority owner of Budai Egészségközpont. Earlier this year, diagnostic imaging company Affidea Diagnosztika acquired peer Főnix-Med, a private healthcare provider. Zsolt Knoll, a renown orthopedic surgeon opened a private clinic with one billion forint capital.  

Wider Spectrum

The largest facilities are also expanding the spectrum of their services and the number of locations they operate at. Swiss Medical has opened a new center in Pest, Budai Egészségközpont is planning to open one next year to provide better access for citizens living on either side of the city, it told the Budapest Business Journal.

As for services, the majority of private healthcare providers still focus on outpatient care. The most established also offer day surgery, inpatient care and more complex services. Some facilities now provide urgent trauma care for outpatients. But there are more innovative features as well:  

Advance Medical is involved in corporate healthcare plans that go beyond general occupational health and focuses on the long-term well-being of corporate employees. The company, recently acquired by Teladoc, an international telehealth company traded on NSTE, now offers remote on-demand voice/video medical care and consultancy.

Unlike most, Swiss Medical is owned and run by physicians, which allows the management to focus on the well-being on their employees. “We forego the profit and would rather pay our physicians well,” Kirschner says. This results in less fluctuation and, eventually more satisfied patients, he claims.  

The ability to retain professionals is crucial as growing demand for private care also means physicians becoming more sought after. At this point, we can’t yet talk about a labor shortage, but we are pretty close to it, warns Karai. What private clinics can do is extend the availability of the doctors working for them while trying to recruit new ones. This translates into higher fees; inflation in the sector has been much higher than general at more than 10%, Karai notes.  

“Facilities compete for physicians or nurses not only with domestic, but also with their Western European peers,” he explains.

Primus Private Healthcare Association

To give patients greater assurance they are in good hands, many of the most established players on the private healthcare market have created an organization, Primus Private Healthcare Association, which issues a certificate to service providers operating according to the standards it sets. Primus also aims to represent the interests of patients using private healthcare services and to promote a sector that meets ethical and safety requirements.

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