Medical merger could spark flurry in healthcare investment
The merger between Oresa Ventures and Medicover Holding last week could be the deal that helps launch a flurry of investment in the medical services sector, industry analysts said.
Oresa Ventures, an investment company listed on the Stockholm Stock Exchange (SSE), said it merged with Medicover Holding (of which Oresa holds a 95% stake) to devote its resources to the region's burgeoning medical services industry. Meanwhile, Medicover a private international medical-care company established in 1995 and with operations in Poland, Romania, Hungary and Estonia will be listed on the SSE.
"(Listing on the SSE) will make it possible to obtain capital for long-term investment in medical services," said Agnieszka Szpara, director-general of Medicover Polska. The company is also setting up a venture capital fund, Oresa Venture II, that will concentrate on healthcare sector investments.
"According to our estimates, the private medical services market will develop in an unusually dynamic way in Central and Eastern Europe," said Frederik Ragmark, managing director of Oresa Ventures. Figures compiled by the Boston Consulting Group (BCG) said Poland's medical services market will grow by 50% to $15 billion in 2005 from $10 billion last year. Moreover, private companies are expected to provide 40% of all healthcare services by 2005.
"I agree with those estimates of potential growth when talking about the total market for medical services," said Krzysztof Bobrowski, sales director of Falck, a Danish medical services company with Polish operations. "However, we are going to invest in basic and one-day healthcare services, and I think Medicover will do the same because growth trends will concern selected segments of the market, and hospital services, for instance, might suffer a significant drop." Falck has seven outpatient clinics and more than 10 smaller clinics across the country. It also runs nine private emergency services in southern Poland.
Apart from Falck and Medicover, Medycyna Rodzinna, which is 90% owned by Enterprise Investors (EI), also plans to build a network of outpatient clinics in Poland. Under its plan, fees for medical services will be paid by state-operated Patients' Funds and the patients themselves.
Last year, zl. 27.3 billion ($6.65 billion), more than 4% of Poland's gross domestic product, was spent on public healthcare, according to Health Ministry estimates. And even though BCG said healthcare spending per capita would still amount to less than $400 in 2005 compared to $1,100 in Spain and Portugal the overall size of Poland's medical services industry justifies substantial investment.
"Concentrating investment (on medical services) will allow us to benefit from our position on the market," said Ragmark of Oresa.
According to Medicover's Szpara, the company plans to plow $10 million into two new facilities. In 2000 alone, Medicover invested o9.9 million, bringing the company's total investment in Poland to o30 million. Also last year, Medicover racked up sales of o19.8 million, 77% higher than the previous year.
The company also has 60,000 registered clients in 17 medical centers across the country.
"What we still need for the creation of a friendly investment environment for medical services is an independent private health insurance system," Szpara said. "That would be independent from the public Patients' Fund system."
When Poland's healthcare system was overhauled in 1999, a network of 17 regional public Patients' Funds were set up across the country. The Funds allocate cash to hospitals and medical centers, and patients pay 7.5% of their monthly income to the Funds.
While most Poles use public and private healthcare services, the country still has no law permitting private competition within the public healthcare insurance system. "Such a system was supposed to be introduced by the end of 2002, but considering the political situation in the Sejm, its launch will be postponed," said Falck's Bobrowski. "However, all international medical services providers expect that such a system will be introduced, and that expectation is also reflected in the figures describing the potential growth of the market."
