The maths behind the sector
Getting a clear picture of profitability and perhaps more importantly what level of profits is really attainable is a fascinating exercise in health care services.
The reality is that there are huge international differences with reimbursement rates still often varying in sectors such as dialysis and labs by as much as 5-6 times. And you don’t need to go to the extremes to find huge differences. The Synlab IPO document reveals, for instance, that in diagnostic labs its adjusted operating profits as a percentage of revenue in 2019 before Covid hit were 20.4% in France compared to just 9.6% in Germany.
To that end, we are now adding ratio reports to our HBI Intelligence service. These not only look at key revenue data but also at EBITDA margins in each sub-sector and the larger countries. We’re about to publish them for assisted living, dialysis, domiciliary care, imaging, hospitals, nursing homes, post-acute rehabilitation and teleradiology.
Among the early gems we’ve discovered is that the cost of rent and services for assisted living facilities in Switzerland at €3,640-7,280 is more than twice France at €1,500-3,000.
Avlos in nursing homes varies enormously and is now as low as 9-11 months in the UK public paid sector, that compares to 18 months in Germany and over 2.5 years in the UK private pay sector where the patients are not only richer but also enter the homes in much better physical shape. Interestingly, EBITDA margins in France, the supposedly “safe” licenced market, are often lower than those in the UK, the wild west unlicensed market after rents are taken into account.
And in imaging, as you might expect there are massive differences. Within the UK, private-facing machines with the same modalities often generate three times the revenue of machines outsourced to the NHS because private prices are 4-5x higher. High-price Switzerland shows figures twice that of other West European countries and around four times higher than Poland, although high-end CT scanners in the UK private sector generate up to 60pc more revenue than their Swiss counterparts.
Tracking numbers like this also means that our estimates, whether for groups that do not disclose their revenue or for the size of different markets, becomes increasingly accurate. But don’t take my word for this. To get your demonstration of the platform which now has reports covering 20 sectors across up to 24 countries in EMEA backed by a database of 4,000 operators and over 1,000 investors just click here.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
