Tough times for hospitals in Europe
France and the UK are proving tough for hospital operators with falling revenues and margins, Germany, the Nordics and Spain are better. But across Europe, revenue growth is low thanks to budget ceilings, insourcing and DRG cuts.
In France we expect most of the big names will show falling margins when their 2017 results are announced. Operating in France means compensating for the continued and relentless tariff drops, and in some cases, dealing with inexplicable drops in footfall.
Capio CEO Thomas Berglund partially blamed last year’s 2% revenue drop for a 9% drop in EBITDA. This was compounded by that low footfall. Organic growth too dropped, from 2.4 to 0.4%. Ramsay struggled in France too, also citing issues with a penalising tariff in its half year results released last week. Revenue fell 1%, while EBITDAR was down 12%.
There is a small silver lining. The French government has just announced that tariffs to reimburse for-profit acute healthcare will be decreased by 1.2% for 2018 – better than most operators expected perhaps, but less than they would have liked. Note that Ramsay disagreed stating that it was worse than expectations.
Capio predicts market growth should be around 3% this year, although some will find that optimistic. but groups will need to find savings – by shortening treatment times, by specialisation, driving volumes and through better organisation – to make the most of that.
The UK is also tough. An increasing switch by NHS trusts to insourcing from outsourcing is hitting private operators, with Ramsay saying: “NHS demand strategies are currently impacting volumes significantly”. Conversely, however, “burgeoning” waiting times for treatment in the UK are expected to boost volume growth. PMI remains poor.In the UK, for the 6 months to December 31, Ramsay saw revenue drop almost 5%, with EBITDA down 4%.
Germany too looks to have its problems for the figures released so far.
Capio, again, struggled with close to zero growth – and again management blamed low volumes but could not explain them. With net sales down 2% and EBITDA down 9%, it is looking to cut costs to get back on track. At Fresenius Helios, it was a slightly better picture with sales up 4%, EBITDA up 6%, and organic sales growth of 3%. But despite that, Helios Germany (Fresenius’ German healthcare arm) has made no new acquisitions in Germany for almost two years, and the lack of privatisation opportunities is seen to be limiting growth potential.
DRG growth is set at a generous 2.5% – down from 2.98% last year. But tariff ceilings mean companies exceeding their targets face 35% discounts on this new business.The only sector where things might be a little brighter is labs – according to the Medicover at least – which painted a rosier picture in its presentation (see below).
Better news from the Nordics! At Capio Nordic, net sales were up 14%, with EBITDA up over 21%. It claims market growth in the Nordic region is around 5%.
In Finland, Terveystalo saw acquisitions driving 26% revenue growth, with organic growth of around 6% and an EBITDA margin of 13%. Finnish provider Pihlajalinna saw revenue up 6% and EBITDA up 20%. And looming large on the horizon is the (oft-delayed, admittedly) prospect of SOTE reform opening up freedom of choice under a capitation payment system.
Finally, we have Spain, where there is little so far to go on beyond the Helios Spain results from Fresenius which are impossible to judge accurately, as the acquisition of Quironsalud has so skewed the figures. But it is still worth noting that Helios reports “strong sales growth” in Q4 of 12%, and a 12.6% EBIT margin.
For more details of these results, see our individual stories online.
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.
