Primary healthcare providers rush to capture market for individuals in advance of expected health reforms
While private primary care providers have been growing fast in the wake of the public sector's chronic crisis, potential profits - at least so far - have been largely restricted to the corporate healthcare sector, thanks to a lucky loophole in the law. Signs are, however, that government reforms now under discussion may finally open up opportunities for the market in private health care for individuals.
Luxmed, a domestic company now largely controlled by the 'Central European Investment Fund', will soon add clinics in Łódź and Poznań to its existing five in Warsaw and in Gdańsk. It will also open three or four new clinics a year throughout Poland thereafter, directed at individual subscribers from the middle-income bracket, as well as small- and medium-sized company clients. At present, Luxmed controls nearly a quarter of the market for corporate clients and 12.9 percent of the market dealing with individual clients. While their clinics in Warsaw deal largely with companies, according to the company's vice-president, Dariusz Korecki, it's the Gdańsk model - which provides more services to individual subscribers - that they aim to recreate in other cities. Plans are to increase the company's total client base by several thousand individuals over the next two to three years.
This expansion will be funded partly by capital from the 'Central European Investment Fund,' a fund affiliated with Cornerstone Partners, which has a controlling stake in the company, and partly by a bond issue planned for next year.
"In the eyes of investors," says Marcin Halicki, a partner at Cornerstone Partners, "Poland is a safe haven compared to emerging markets in Russia, Ukraine and the Far East. And the future of private health insurance in Poland will be big." He goes on to add that, while healthcare in Poland will face competition in some specializations after EU accession, primary healthcare will remain a local market, making it a comparatively stable sector for investment.
Cornerstone is not the only investment fund that has spotted primary healthcare as a potential earner in this country. Central Europe's biggest investment fund, Enterprise Investors, has also bought up a control share in Luxmed's biggest competitor on the domestic market for individual healthcare, Medycyna Rodzinna.
Marcin Halicki, however, sees no threat from Medycyna Rodzinna. He explains this lack of concern when he says that Medycyna Rodzinna "can't offer the kind of specialist services that Luxmed can," going on to point out that the two clinics have different business models.
Medycyna Rodzinna, a beneficiary of the National Health Fund, offers free basic services on state funding, with the option of top-up services and faster access to specialists to those that can pay. Although it makes some money from its eight percent market share in the (tax-free) market for corporate clients, most of its income comes from the state and from clients in the market for individual health care.
Luxmed, on the other hand, has no state funding and is able to provide services to individual clients largely thanks to its income from corporate clients. It is able to do this because of a lucky loophole in the law, which states that corporate health services are currently tax-free.
Thanks to this loophole, it has been able to offer opportunities in private healthcare up until now. Yet a combination of recent governmental discussions and a chronically increasing deficit on the national healthcare system, seems to be moving the discussion more and more in favor of a mixed public-private system. The system that is being debated would be based on a combination of current British and French models. Such a move might serve to both socially legitimize and legally establish the private healthcare industry, which has until now, been confined to a semi-legal existence with limited possibilities, managing to survive only by its own ingenuity.
The expected reforms might explain this flourishing expansion in individual primary health services by all the main players on the market, with the exception of domestic corporate health services leader, Stockholm-based Medicover. Medicover says that it is not planning any changes until the legal and financial significance of the expected reforms becomes clear. Medycyna Rodzinna will soon be facing competition not only from Luxmed, but also from Centrum Medyczny LIM, another private clinic planning to increase its individual client basis.
According to the company's marketing specialist, Joanna Borczak-Trzeciok, LIM, which currently controls a fifth of the corporate market and nearly a quarter of the individual market, plans to open two new clinics in Gdańsk and Wrocław next year, in addition to one just opened in Kraków last month. The expansion will be funded from its own resources.
"Individual clients are now our main goal," says Joanna Borczak-Trzeciok. "We intend to increase the number of our individual clients by 40 percent."
Luxmed, a domestic company now largely controlled by the 'Central European Investment Fund', will soon add clinics in Łódź and Poznań to its existing five in Warsaw and in Gdańsk. It will also open three or four new clinics a year throughout Poland thereafter, directed at individual subscribers from the middle-income bracket, as well as small- and medium-sized company clients. At present, Luxmed controls nearly a quarter of the market for corporate clients and 12.9 percent of the market dealing with individual clients. While their clinics in Warsaw deal largely with companies, according to the company's vice-president, Dariusz Korecki, it's the Gdańsk model - which provides more services to individual subscribers - that they aim to recreate in other cities. Plans are to increase the company's total client base by several thousand individuals over the next two to three years.
This expansion will be funded partly by capital from the 'Central European Investment Fund,' a fund affiliated with Cornerstone Partners, which has a controlling stake in the company, and partly by a bond issue planned for next year.
"In the eyes of investors," says Marcin Halicki, a partner at Cornerstone Partners, "Poland is a safe haven compared to emerging markets in Russia, Ukraine and the Far East. And the future of private health insurance in Poland will be big." He goes on to add that, while healthcare in Poland will face competition in some specializations after EU accession, primary healthcare will remain a local market, making it a comparatively stable sector for investment.
Cornerstone is not the only investment fund that has spotted primary healthcare as a potential earner in this country. Central Europe's biggest investment fund, Enterprise Investors, has also bought up a control share in Luxmed's biggest competitor on the domestic market for individual healthcare, Medycyna Rodzinna.
Marcin Halicki, however, sees no threat from Medycyna Rodzinna. He explains this lack of concern when he says that Medycyna Rodzinna "can't offer the kind of specialist services that Luxmed can," going on to point out that the two clinics have different business models.
Medycyna Rodzinna, a beneficiary of the National Health Fund, offers free basic services on state funding, with the option of top-up services and faster access to specialists to those that can pay. Although it makes some money from its eight percent market share in the (tax-free) market for corporate clients, most of its income comes from the state and from clients in the market for individual health care.
Luxmed, on the other hand, has no state funding and is able to provide services to individual clients largely thanks to its income from corporate clients. It is able to do this because of a lucky loophole in the law, which states that corporate health services are currently tax-free.
Thanks to this loophole, it has been able to offer opportunities in private healthcare up until now. Yet a combination of recent governmental discussions and a chronically increasing deficit on the national healthcare system, seems to be moving the discussion more and more in favor of a mixed public-private system. The system that is being debated would be based on a combination of current British and French models. Such a move might serve to both socially legitimize and legally establish the private healthcare industry, which has until now, been confined to a semi-legal existence with limited possibilities, managing to survive only by its own ingenuity.
The expected reforms might explain this flourishing expansion in individual primary health services by all the main players on the market, with the exception of domestic corporate health services leader, Stockholm-based Medicover. Medicover says that it is not planning any changes until the legal and financial significance of the expected reforms becomes clear. Medycyna Rodzinna will soon be facing competition not only from Luxmed, but also from Centrum Medyczny LIM, another private clinic planning to increase its individual client basis.
According to the company's marketing specialist, Joanna Borczak-Trzeciok, LIM, which currently controls a fifth of the corporate market and nearly a quarter of the individual market, plans to open two new clinics in Gdańsk and Wrocław next year, in addition to one just opened in Kraków last month. The expansion will be funded from its own resources.
"Individual clients are now our main goal," says Joanna Borczak-Trzeciok. "We intend to increase the number of our individual clients by 40 percent."
