For-profit university hospitals: trophy assets or businesses?
Running a university hospital was recently described as a ‘dream’ of one hospital-owning billionaire in Europe. But the available data shows most such ventures in Europe are loss-making. So are they little more than a trophy asset for entrepreneurs – or a worthy attempt to give something back to the community for little to no (financial) reward?
A source close to Asklepios owner Bernard Broermann says running a university hospital has been his “second dream after running the largest hospital group in Europe” and a major driver of its takeover of Rhoen, which runs Germany’s only privatised teaching hospital, Giesen Marburg. But a separate source described the facility as a ‘poison pill’ for Rhoen in its early stages – though emphasised early problems were ironed out.
In Italy, virtually all large for-profit groups run university & research hospitals (IRCCSs). But HBI’s analysis shows that the top two group’s largest facilities by revenue – IRCCS San Rafaelle for San Donato and IRCCS Istituto Clinico Humanitas for Humanitas – are their biggest loss-makers, dragging down group-level results by 10-20%.
This is not surprising and arguably how it should be. Doctors involved in medical research probably can’t be conveyor-belt surgeons for whom maximising throughput is the priority. Medical innovation and experimental medicine are, by definition, unpredictable and costly. And just the fact of having a university hospital in your network can give your medical teams and patients confidence in the quality of care – an unquantifiable boost.
But every hospital strikes a balance between financial prudence and medical quality, and university hospitals and the private for-profit sector don’t have to be at odds. Many university hospitals in Europe have for-profit departments that subsidise the rest of the facility. Private NHS units are one-fifth of the Central London private healthcare market by revenue. France’s specialised cancer research hospitals are private non-profit establishments (CCLCs) partly because independence allows them to pay doctors the big bucks that keep them out the for-profit sector.
And the picture is very different in emerging markets like Turkey and India, where big for-profit chains run university hospitals profitably with more corporate-minded management than those in Europe. This works because they have more capacity than the public sector, they are often the only player in town, and crucially, there is also less political opposition.
In Europe, the for-profit-owned university hospitals will be likely considered different from other portfolio facilities. Any investors might not want to hold on to a loss-making asset even if does hold prestige. This could make life difficult for groups looking for those new investors, like San Donato.
We would welcome your thoughts on this story. Email your views to Cameron Murray or call 0207 183 3779.
