Swiss Medical Network ‘open to new shareholders’ as it seeks HMO model
Conglomerate Aevis Victoria is open to selling a stake in its hospital chain Swiss Medical Network to an insurer to help it move towards an integrated payor-provider model, co-founder and delegate of the board Antoine Hubert tells HBI. We catch up on pre- and post-COVID developments in the Swiss hospital sector.
Integrated care
“We are open to having other shareholders alongside Aevis Victoria in Swiss Medical Network (SMN) to create an integrated care provider and HMO (health maintenance organisation) model. It could be a financial investor who helps us acquire players in different healthcare sectors – homecare, outpatient practices etc – or by acquiring those players through share exchanges. It could also be an insurer which would help us move to being a HMO/payor-provider,” Hubert says, though adds the latter would probably need to come from outside the Swiss healthcare system as local players are verticalising on their own.
We think a good candidate could be the world’s biggest healthcare company UnitedHealth Group which we are told may buy more in Europe soon. Aevis Victoria has good US connections through Medical Properties Trust, a REIT which owns a small stake in Aevis and 46% of SMN’s real estate value, and Switzerland is the next-biggest spender on healthcare after the US (HCA used to own a Swiss hospital). Are we onto something?
Hubert: “There is interest from US players but they are more interested in simply acquiring us outright and I think any player like that would probably back off at the due diligence stage once they realise how complicated the Swiss landscape is.”
Pre-COVID trends
Any new entrant would be entering a hospital market in a period of upheaval as the country attempts to belatedly outmigrate its very expensive hospital care. Hubert says four-fold price differentials between in- and out-patient care mean the proportion of surgeries done as day cases lags behind others, at 20% versus 60-65% in France, for example. This is because outpatient care is 100% covered by statutory insurance while the cost of inpatient care is covered by cantons, statutory and private insurance.
“If Switzerland really wants to achieve a shift from inpatient to outpatient surgery then it has to unify the tariff system for inpatient and outpatient procedures, which politicians are currently discussing and for which we expect something to be passed soon.”
Antoine Hubert, co-founder, Aevis Victoria (KEYSTONE/Cyril Zingaro)
SMN is a number two hospital player by revenue behind Hirslanden which is doing more and more of its work on patients who only have statutory insurance, who now make up 50% of its patients versus only 20% a decade ago. Hubert says he isn’t seeing a substantial shift in SMN’s statutory-private mix outside of doing more outpatient work which by default – as it currently stands at least – means doing treating more statutory insurance patients.
The group is active in 13 cantons (region) in Switzerland and in 10 of them it appears on cantonal lists, where the canton funds 45% of the DRG tariff for inpatient care. At these hospitals, 80% of patients have only statutory insurance. At its seven unlisted (contracted) hospitals 90-95% of patients have private insurance which funds the treatment alongside their basic insurance policy.
Hubert: “If you open your private-focused hospital to basic insurance then there is little interest in the local population to take out private insurance, which has happened at some of our competitors who want all their hospitals to be on cantonal lists.”
“Our unlisted hospitals need to be in large cities as that is where the demand is and they need scale in order to ensure they have contracts with the private insurers, who are trying to reduce their costs and in some instances cancelling contracts with non-listed hospitals.”
This happened last year with a dozen private hospitals including some of Hirslanden’s and we were then told to expect another round of de-listings this year. If true, COVID-19 may have delayed it.
COVID-19
Hubert confirms that, like competitors Hirslanden and La Tour, activity in July and August is ahead of last year’s levels “..but that does not mean we will catch up on the losses of Q2. It will probably be a single-digit full-year fall but it’s hard to be more precise at this point.”
A big indeterminable factor in forecasting volumes is how willing patients are to return to hospital. Hubert says that infection control measures, alongside reducing productivity in outpatient and diagnostic departments, have the unintended consequence of making some patients more reluctant by making the pandemic’s seriousness apparent, though for others it’s a reassurance.
He expects that the pandemic may slow the outpatient reform mentioned earlier but that “Switzerland has to reduce its capacity and costs and this will happen once we have a single tariff system for in- and outpatient care.”
Aevis Victoria also owns a 40% stake in international telemedicine player Medgate. “It is an independent company but we have used its know-how to develop our digital processes during COVID-19, though we can see that both patients and doctors prefer to see each other physically,” Hubert says, although he can’t say how many of SMN’s consultations are now done digitally.
Privatisation, digitisation and workforce optimisation
In January, SMN acquired a 35% stake in the public Hopital du Jura Bernois which Hubert says is the first hospital privatisation in Switzerland. It has an option to acquire a majority in the next three years. He hopes more privatisations will happen but says it is not a trend, yet. Swiss sources told us privatisations were imminent seven years ago.
On workforce, Swiss hospitals generally have less of a problem recruiting thanks to very high salaries and standard of living, though specialist nursing positions (theatre assistant, for example) can still be hard to recruit for.
We bring up the visiting consultant model which dominates in the sector and has been blamed for failed attempts to rationalise aspects of hospital management like procurement. But Hubert is an ardent proponent: “We think medicine is a liberal profession and we want our doctors to be independent. We’ve seen a negative impact on efficiency and profitability for some public and private hospitals in Switzerland when they started putting doctors on their payroll. A salaried doctor will not push for a more productive working environment as hard as a self-employed one.”
Swiss Medical Network grew net revenues 7.7% to 534.8m CHF (€500m) of which acquisitions – Rosenklinik in St Gallen and Klinik Belair in Shaffhausen from competitor Hirslanden – was around half leaving organic growth at 4%. Aevis Victoria also has a substantial hotel holding business.
Our Analysis: However, his inability to say how many of SMN’s consultations are now being done digitally because of the independence of the doctors highlights the major weakness of the visiting consultant model. How can you talk about integrated care and controlling costs when you don’t know what your doctors are doing?
We would welcome your thoughts on this story. Email your views to Cameron Murray or call 0207 183 3779.
