Standout themes from HBI 2023
Four key themes stand out from this year’s HBI conference.
The first is the historically unusual situation the private health care sector currently finds itself in in terms of financing, investment and M&A. Deal activity has been muted in Europe for almost 18 months now, and borrowing costs, typically now around 11%, are making expansion difficult. Sellers are yet to adjust their price expectations downwards. On the other hand the Middle East and Asia are seeing much more activity.
But demand for health care services is continuing to grow, and the growth in private pay, which appears to be a long-term trend, is especially strong. It is particularly pronounced in the UK, Spain, Italy and most of Central and Eastern Europe, where the growth in both out of pocket and PMI is outstripping growth in the overall sector, as people become increasingly fed up with public sector waiting lists.
Take Portugal, where Isabel Vaz, CEO of the second largest group, Luz Saude says some 45% of the population now have some form of private medical insurance cover (that includes 1.4m or 14% of the population who are covered by a scheme for public sector employees and their families). As a consequence of this growth Luz Saude now gets just 3% of its revenue from contracts with the NHS. Other private Portuguese operators such as CUF are now eschewing public pay entirely. This growth is despite high medical inflation – PMI in Portugal has risen in price by 12% CAGR since 2014. Guy Blomfield at Affidea sees a similar trend with some 40% of its 1m patients in Romania now paying privately. Spire in the UK saw private revenue grow nearly 22% in the first half of 2021.
Another major trend is the move towards a more digitalised, consumer-centric, outpatient-heavy way of doing health care. Multi-sector platform companies like Terveystalo, Affidea and Medicover are focused on having a lot of touch-points with patients, and don’t have the same silos between primary and secondary care that you get in the public sector. The results, in terms of patient experience, outcomes and efficiency, can be miles better than what is possible in clunky public systems. These groups also enjoy high, sometimes double digit, organic growth.
And finally, perhaps the most recurrent theme was the race between implementing productivity and outcome-enhancing technological innovations, especially around AI and data-driven preventive health, and the workforce crunch. Everyone agrees that the workforce shortage will be the biggest supply bottleneck in the face of rising demand in the years to come. And most people seem to acknowledge that we already have many of the innovations and ideas needed to remedy it. But the hard bit will be actually implementing the necessary changes.
