Who can successfully build international hospital chains?
A lot people want to be big in hospitals internationally. The latest to enter the market is US operator Steward Health Systems which acquired in Malta in January, is in talks in Croatia and has a strategy of being number one in 7-8 slightly obscure countries.
We think the key differentiator is skin in the game. Some groups Ramsay, the Big Three South Africans, IHH have to be international players or they are nothing. The option of slinking back to Australia, South Africa or Malaysia doesn’t exist. To this group, we think can now be added Fresenius, number one in Germany and Spain and talking of entering a third market – Italy perhaps?
Then we have a bunch of others. Academic medical centres such as Cleveland, Mayo and UPMC are taking equity stakes and spreading their wings. Other big US groups include Steward and Centene, owner of Ribera Salud in Spain.
And some big insurers are multinational hospital owners. Bupa is big in Chile, Spain and Poland and still has a presence in London. UnitedHealth is the largest hospital operator in Brazil, Chile and active in several other Latam countries with integrated HMOs.
Finally around a third of the top 25 national groups in Europe have gone, or are about to go, international. Elsan is in Morocco, GVM in half a dozen European countries. Schoen is having a crack at London.
We think the winners will be those who have scale and commitment. Size matters. With scale comes higher EBITDA. And we are not sure that you can go international on the back of one or even three specialisations. What distinguishes Mediclinic, Ramsay and Fresenius is that they are number 1-3 in every market where they are present and normally number one.
The idea that there is no retreat is also important. For Centene, Steward and the US academic medical centres the rest of the world is a sideshow. The big insurers don’t need to own hospitals – Bupa sold almost all of its UK chain a few years back. And we question how many European national operators have the management capability or patience to build capacity in new countries.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
