Analysis: Private health firms plan 'conquest' of Eastern Europe
29/08/2019 07:00
* Private clinics see surge in demand for services
* Invest in new hospitals, see strong revenue growth
* Polish, Hungarian, Romanian state health underfunded
* Employers increasingly offer private health benefit
By Gergely Szakacs
BUDAPEST, Aug 29 (Reuters) - Csilla Balla became anxious
after her doctor told her she would need surgery to remove a
benign skin growth on her face, and she decided to go back to
see her to discuss other options.
"They told me the next available appointment was two weeks
later," said the 46-year-old teacher from Budapest. "It would
have taken two weeks just to have another discussion on whether
surgery was really necessary."
Frustrated with the public health service, Balla sought a
second opinion from a doctor at a private practice, where she
was offered an appointment within a few days. The doctor told
her she did not need surgery and burned off the growth in five
minutes.
The treatment cost Balla 15,000 forints ($51) and she hasn't
had any problems since.
Her experience reflects a broader trend in Eastern European
states, from Hungary and Poland to Romania, where growing
numbers of people are opting for faster access to medical care
at private clinics and hospitals.
The change is being driven by low public health spending as
a share of the economy - which has often led to staff shortages
and longer waiting times for tests and surgery - coupled with
rising wages, which is making private care a viable alternative.
Employers are increasingly offering private medical cover as
a perk to attract or retain employees at a time of falling
unemployment and record labour shortages.
As a result, business is booming for private healthcare
providers.
"This is a period of conquest for private clinics," said
Peter Pal Varga, director of Budapest's Buda Health Centre, in
which billionaire investor Sandor Csanyi acquired a majority
stake in 2017.
Varga told Reuters his company planned to build a new
general hospital in Budapest, and modernise its one existing
hospital which specialises in spinal surgery, at an estimated
total cost of about 20 billion forints ($70 million).
"Our current private inpatient capacities are no longer
sufficient," he added.
There are no comprehensive figures for the size of the
private healthcare market in Eastern Europe, but four of the
biggest players in the region had combined revenues of almost
$660 million last year, up by nearly a fifth on average, and
forecast similarly strong growth in 2019.
Like Buda Health, all five major healthcare providers
interviewed by Reuters said they were expanding their operations
to keep up with demand.
Poland's top private health player Lux Med, for example, has
recently acquired two hospitals, in Warsaw and the southern city
of Katowice, which will bring its total to nine, pending
regulatory approval of its latest acquisitions. Romanian market
leader MedLife ROM.BX is meanwhile looking to make
acquisitions this year or in early 2020.
However the healthcare business is fraught with risk, with
companies having no guarantee of recouping the large initial
investments required for hospitals and clinics as the market
becomes increasingly crowded and competitive.
Major challenges include finding and retaining staff, due to
an emigration of doctors and other medical workers to western
Europe, and rising costs for equipment and maintenance.
In the social context, meanwhile, some analysts warn the
private healthcare boom could widen inequality in a region
where, in many parts, those on lower incomes already have lower
life expectancies.
UNDERFUNDED
Poland's health ministry said it was working to improve
access to medical services and cut waiting times, adding that
spending on state healthcare was expected to rise by nearly 9%
this year. The Romanian and Hungarian health ministries did not
respond to requests for comment.
Public health spending in Eastern Europe is well below the
EU average according to the latest European Commission surveys
in 2017, which said the health systems of Hungary, Poland and
Romania were underfunded.
Total health expenditure stood at 7.2% of GDP in Hungary,
6.7% in Poland and 5.2% in Romania compared with an EU average
of 9.6%.
Many Eastern Europeans, whose net wages pale in comparison
to Western Europeans', even after rapid rises in recent years,
have responded by shelling out their own money so they can cut
waiting times for procedures or screening services.
Private health spending amounted to 2% of GDP in Hungary and
1.8% of GDP in Poland last year, comparable or outstripping
wealthier nations like Germany at 1.7% and France at 1.9%,
according to data from the Organisation for Economic
Co-operation and Development.
There is no comparable OECD data for Romania, the poorest of
the eastern trio. However, private clinics there have also seen
a surge in demand for services ranging from check-ups to complex
surgery.
Romania's private healthcare industry reached an estimated
turnover of 11 billion lei ($2.6 billion) last year, up 13.8%
from 2017, according to consultancy KeysFin.
MedLife, a barometer of the Romanian private health market
because it operates the largest network of clinics, said it
expected to exceed 200 million euros in revenue this year after
making 170 million euros in 2018.
SOCIAL DIVISIONS
Lajos Fabian, chairman of Hungarian group MedAlliance
Holding, which acquired the Robert Karoly Private Hospital in
Budapest last year and plans further acquisitions, said private
health was expanding at a "break-neck pace" in Eastern Europe.
"Patients are voting with their feet," he added.
Vienna Insurance Group's VIGR.VI Hungarian division,
Union, said private health cover was becoming an essential
benefit for many employers to offer.
"In the current labour market environment, companies cannot
afford risking the loyalty of their workers," said Union board
member Gabriella Almassy.
However the EU Commission says the high private health
spending in Eastern European countries is leading to inequality
in access to medical services.
This is deepening divisions in a region where lower-income
people already have poorer health, according to analysts.
Life expectancy in Poland, Hungary and Romania remains below
the EU average according to the latest health survey, which said
inequalities in life expectancy by education level were
"particularly large" in Central and Eastern Europe.
In Hungary, Poland and the Czech Republic, 30-year-old men
with a low level of education, which the EU says is the most
widely available socioeconomic indicator, can expect to live
over a decade less than those with a high level of education.
"There is a layer of society, which will not be able to
afford this (private health)," said Akos Ujlaki, an adviser at
the Boston Consulting Group in Budapest. "If hot and cold water
are not blended together in a structured manner, that will rip
society apart."
The gulf is more pronounced in Romania, where only a
fraction of the population can afford private services. Private
clinics in Bucharest are overrun with patients, while access to
even state-funded care is limited in rural areas - home to
almost half the population.
However, for many of those Eastern Europeans who can afford
private care, it has become a necessity.
Michal Szolucha, a 29-year-old computer programmer in
Warsaw, said private healthcare insurance was a crucial benefit
for him to secure when negotiating with an employer.
"A while ago I suffered from persistent stomach pain and
despite several appointments in the public service over a
six-month period, no one carried out the tests I needed," he
said.
"However when I went to a doctor in a private clinic, within
48 hours all the tests were conducted and I got a diagnosis."
(Reporting by Gergely Szakacs; Additional reporting by Alicja
Ptak and Angelika Meczkowska in Warsaw, and Radu Marinas and
Luiza Ilie in Bucharest; Editing by Pravin Char)
((gergely.szakacs@reuters.com ; https://twitter.com/szakacsg ;
+36 1 882 3606 ;
https://www.reuters.com/journalists/gergely-szakacs))