Commentary
2010
UK
- Circle Claims Private Hospital Market ‘Completely Unfair and
Anti-Competitive’
Humana Acquires Healthcare Provider
Falck and Others Plan €1 B + Flotations
Medisave Allowed at Malaysian Hospitals
Fortis Healthcare to Buy 23.9% Stake in Parkway for $685
Columbia
Asia Group to Set-Up 14 Hospitals in
India by 2012
CEE Exposure Will Hit Austrian Insurance Groups VIG, UNIQA
UK - Private Hospital Market ‘Completely Unfair and Anti-Competitive’
December, 2010
Apparently, private hospitals are charging “unnecessarily high
prices,” according to one of the newest players in the UK’s hospital
sector.
Ali Parsa, a managing partner of Circle, is quoted as claiming the
formation of networks by the major private hospital groups, in
partnership with insurers, was driven by a need to protect “monopolies”
for which they had “paid over the nose”.
With this story, and too often when investors and hospital executives
are negotiating with insurance companies, we’re reminded of the old
adage…
“Be careful what you wish for.”
Mr. Ali Parsa states most insurance companies now recognise Circle, but
he filed a complaint with the UK’s Office of Fair Trading after
realising that “we should never have gone through this nonsense”,
describing it as “completely unfair and anti-competitive”.
The development and management of networks of contracted medical
providers, be they hospitals, home care, mental health services, etc.
is a long established method of managing healthcare costs, access, and
quality. It is one the complex administrative tasks insurance
companies have managed to do well over the years.
Might a hospital executive team, inexperienced in insurance contracting
and network development, find the contractual process unfair? Yes.
Will that provider find surprises once the contracts are in place and
the many industry standards and metrics begin to modulate
reimbursement? Most likely.
Apparently, like many players in the India and Saudi Arabia hospital
sectors, Circle is facing the harsh realities of private healthcare
contracting. The issue isn’t that contracting and network
developments are unfair, a common refrain in developing markets, but
rather the issue is the failure of sector players to fully understand
how private insurance works and its impact on their hospitals. And in
markets where hospitals have not learned from the past, such inaction
can be very costly.
Time and again investors and their executive leaders at hospital
companies have been advised, even cautioned, to gain a full
understanding of the private reimbursement model(s), especially private
insurance. The reason is simple: the insurance sector has a
full understanding of how hospitals operate, from commissioning to
billing, clinical outcomes to preventative care. This is not
a new experience for those private health insurance companies
negotiating with hospitals.
But for many hospital executives, the experience and processes are
new. Early in 2008, the director general of Dr Soliman Fakeeh
Private Hospital in Jeddah claimed the hospital was being “squeezed” on
payments by insurance companies trying to recoup costs on cut-price
premiums. As we wrote then, and we repeat;
“…Actually, the squeeze took place when the agreement was
executed…"
"Investors need to exert pressure on hospital management to better, no
fully, understand the changing market place and the realities on
private reimbursement. In 2007 Injazat Capital noted the…lack
of familiarity with third party payment as a sector risk.” March,
2008. PHM Emerging Markets Healthcare Monitor.
Humana Acquires
Healthcare Provider
November, 2010
We are not impressed with this move.
Human has announced its plans to
acquire Concentra, an
occupational medicine, urgent care, and physical therapy provider in
the US.
Humana CEO Michael McCallister claims the move “reinforces our core businesses…”
Unfortunately, we’ve seen this
picture before and it isn’t
pretty.
Health insurance companies seem to have an inferiority complex, the world over. Not content to focus on their actual core business, which is insurance, too many companies try to mash-up their growth strategies.
Over the years such mash ups have
included hospital
ownership, physician practices, out-patient surgical centers, disease
management, and so on.
Humana claims their competitors are diversifying, like CIGNA’s move to expand their international business. But CIGNA’s move is an expansion of their insurance business.
We would much rather see Humana put
its energies and
resources into growing its “core competencies,” including its life
insurance
and Availity lines………….HK
Falck and Others Plan €1 B + Flotations
January, 2010
Falck, Europe's largest fire-fighting and ambulance company is looking
towards a flotation.
H1 might be a busy one for healthcare IPOs - Nordic healthcare group
Ambea is also known to be considering floating and Medica, the French
care home group, is likely to list. And Netcare,
the South African is looking to spin off General Hospital Group, the
largest UK private hospital chain, in a flotation on the LSE.
Falck is the unique offering amongst the three and a winner.
Its targeted growth in Eastern Europe, and its emergency and ambulance
services are spot on. (Note: We very much dislike hospital
based ambulance services, e.g. Apollo. Falk is not using the
hospital owned ambulance model, which is worse than a loss leader.)
But we do think the real bright spot in Falck’s portfolio is their
training services. Targeting the offshore and maritime
sectors, this is where Falck’s global presence has the best opportunity
for significant growth. This growth should spill over into
growth for Falck’s emergency response services……….HK
Medisave Allowed at Malaysian Hospitals
February, 2010
Might this be the Asian equivalent to “Dying in London?”
Singapore residents will be allowed to use Medisave for hospitalization
and day surgeries at two hospitals in Malaysia.
Health Management International (HMI) has set up a processing
assistance to international patients seeking treatment at Regency and
Mahkota.
The Johor state of Malaysia is just across the causeway from Singapore,
so this is a logical, simple first step. And this is just the
type of borderless contracting that we will begin to see the world over.
But this does not indicate health plans will transport patients half
way across the world for cheaper medical care.
Singapore to Malaysia, on the patient’s own resources?
Yes.
Singapore to Jakarta? Ok.
Singapore to Dubai? Ah, no.
So, before investors start touting the next Bangkok on the Danube or a
world renowned cancer center on the Niger Delta, let’s take a sober
look at demographics, and the infrastructure beyond any one hospital or
“medical city.”
There’s a reason why many go to Paris, Frankfurt, or London for medical
care, and often times it is not the medical care that is driving the
choice.
The phrase (and reality) “Dying in London” is a status event preferred
by many, particularly the family members…..HK
Fortis Healthcare to Buy 23.9% Stake in Parkway for $685
March, 2007
The addition of Parkway’s 16 hospitals and over 3,600 beds in
Singapore, Malaysia, Brunei, India, China and the UAE will expand
Fortis’ network to 62 hospitals and 10,000 beds.
The Singh brothers (Fortis Healthcare) have been aggressively expanding
their healthcare and financial services businesses through a series of
buyouts.
The story here isn’t all Fortis Healthcare and Parkway, though the
combination does make for a compelling story. And, at a
valuation of $2.7 bn, this is quite the story.
For us, the real story here is Khazanah Nasional and Malaysia….
As was noted in this publication, June 2007, Khazanah Nasional’s move
into Parkway allowed Parkway to focus on managing and growing hospitals.
Malaysia’s healthcare sector sets the country apart from nearly all
others. With the realization, and concerted efforts to export
knowledge and experience, Khazanah Nasional, the state investment
vehicle of the government, choose not to allow provincial and national
biases to stand in the way of sound, long term investments.
As Parkway grew, so too did Pantai Hospitals Malaysia. As
experience was garnered by Parkway in Vietnam, (see PHM Emerging
Markets Healthcare Monitor, May 2007), Brunei, India and China, so too
did Malaysia’s overall healthcare sector.
Much of the emerging and frontier markets may not be able to replicate
Malaysia’s healthcare model. But we do think the structural,
committed efforts to private healthcare facility (and market)
development are a proven, effective path towards healthcare
reform………….HK
Columbia Asia Group to Set-Up 14 Hospitals in
India by 2012
The Kuala Lumpur-based hospital chain also plans to double its
headcount to around 4,600 by 2012.
The company is also coming up with a first-of-its-kind 'Neighbourhood'
hospital with 28-beds, to be built in a small town near Bangalore,
according to Columbia Chair Mr. Rick Evans said.
Well, were does one begin?
Well, we do like Columbia Asia Group, and we do like hospitals with
approximately 100 beds. So we’ll start with a question:
Where is Columbia Asia going to resource the human capital required to
double their current number of employees?
Very possibly Malaysia or Indonesia.
Next, 28 bed hospitals to keep costs down and ensure better
administration?
As I just wrote, we like 100 bed hospitals. 150 beds
too. 200 also positive. But 28 beds?
We do hope they seriously review any strategy that may include a hub
and spoke system of hospitals with the smaller hospitals feeding the
technology rich (read expensive) larger hospitals.
Their middle class demographic target is great………..HK
CEE Exposure Will Hit Austrian Insurance Groups VIG, UNIQA
May, 2010
Exposure in the region of Central and
Eastern Europe of the Austrian insurance groups, such as Vienna
Insurance Group (VIG) or UNIQA, could drag their profitability behind,
amid fewer sales, increases in fraud and currency translation losses,
warns the rating agency FITCH.
Exposure in Romania of the two groups is significant, local companies
of VIG generating here
15.5% of the group's CEE businesses, while UNIQA achieves over 10.5% of
operations in the region in Romania.
But, UNIQA is stagnating with 5.44% Romanian market share.
Without changes in leadership look to UNIQA to pull out of
Romania. We doubt that would happen, but maybe it should.
For today’s market leaders, taking on new entry status will only buy
its management a short amount of time to make good. And
rightfully so.
The Romanian insurance market, an established market with its own
unique challenges, has all the definitions of a sound, long term
investment. But not for companies with 5% market share…………HK
