After Big Pharma and Big Medtech, welcome to Big Healthcare
Not so long ago, the healthcare services sector was full of almost Mom ’n’ Pop business. Hospitals were passive hoteliers for local doctors. Diagnostics was the preserve of a privileged branch of the medical profession. Insurers just paid the bills. Often, it is still like that. Recently, though, things have changed: and we can see clearly where the industry is heading.
Firstly, we are seeing a managerial revolution. Families have been replaced by professional management teams. In five years, I have witnessed huge changes in management quality in this industry across Europe. Operators are measuring patient outcome for the first time and the lab sector has gone through an industrial revolution.
Secondly, companies are emerging from the silos, which were often forced on them by out-of-date regulations designed to preserve the medical profession. Air Liquide now offers complete homecare solutions for a wide range of patients, not just oxygen. Nursing home groups are moving into homecare. Hospitals are moving from simple electives into oncology and cardiology, but also into outpatient. Bupa has spent £1.25bn buying dental chains, primary networks and diagnostic centres. The artificial barriers that stymied the industry for so long are breaking down.
Thirdly. we are seeing internationalisation. Some people still claim that healthcare services is a national business. This is rubbish.
Pan-European players dominate imaging, labs and homecare. The same has happened in the last five years in nursing homes, as the French have moved into Belgium, Germany, Italy and Spain.
The forces which drove the French to do this also apply in the hospital sector. Here regulators and investors in Australia and South Africa long ago forced private hospitals to internationalise. Regulators made it clear that their high marketshare meant they had to look elsewhere and investors wanted protection from regulatory risk. The same will happen in Europe.
Take Helios. It will have a 40% share of the German private hospital market, and sales of €5.5bn, if it gets hold of the 43 Rhoen hospitals it wants to buy. So it will be forced to look abroad. In the UK, the top five hospitals have an 85% stake and the majors dominate in France as well.
Meanwhile, there will be steady and consistent growth across the sector. How can there not be? Governments can not pretend to meet the increase in demand as citizens age.
Governments will increasingly turn to the private sector to cap costs and to provide high-quality, cost-effective healthcare, free at point-of-use, for their citizens. The economic case for this is compelling. German hospital privatisation, the Alzira model, the money saved from outsourcing lab and imaging tests demonstrate what is possible.
You’ve met big pharma and big medtech. Welcome to big healthcare services.
The only event, the only forum, which really explores these themes is our annual conference in March in London – the only Pan-European event dedicated to this huge and fascinating sector. Join us to explore the business models leading the managerial revolution and to understand the forces which are internationalising and integrating the industry.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
