sgs_healthcare_case_studies_hospital_investment

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. www.sutherlandglobal.comApril 24, 2023 1

Market AssessmentOverview of the Greek Hospital Market

Market Assessment


Acute Hospitals Market, Greece

• The client was one of the leading private equity investment firms considering investing in hospitals in Greece

Client

• The client wanted to evaluate an investment opportunity in the acute hospitals market in Greece and engaged SGS to assess the market potential of the same

Client Ask

• Undertook exhaustive desk research and collected credible information from authoritative sources for market size, competitive landscape and market trends

• SGS analyzed the Greek hospital industry thoroughly using primary and secondary research techniques • Key indicators such as healthcare spending, bed to population ratio , occupancy levels were derived and taken into account to arrive

at the market size• Key insights on the pillars of healthcare system in the country, namely, government body, social insurance funds, healthcare service

providers, and individuals and employers were studied and their implications on healthcare spending were analyzed• The hospital bed supply shortfall was estimated for the future period• Regular updates were provided to apprise the client of the results

Sutherland’s Solution

• Based on the findings of our research, the client got an overview of the operational and profitability metrics of Greek hospitals in order to make a well-informed investment decision

• The report helped the client gauge the existing capacity of the acute hospitals in Greece and the time frame in which a paucity of hospitals beds would occur

•Benefits to the Client


% CAGR (2000-’07)

5%

4%

€ 7.8 bn €7.0 bn €7.4 bn €8.8 bn €8.9 bn €7.1 bn €9.2 bn €9.9 bn

Greece has very high levels of private healthcare spending owing to poor public healthcare infrastructure

• Private contribution to healthcare expenditure in Greece remains inordinately high

• Public healthcare spending as a percentage of total healthcare has declined from 75% in the early 90’s to 50% in 2007

• Poor quality of public healthcare services and elongated lead-times associated with public healthcare services has given a boost to the private sector

Greece Healthcare Spending

Source: National statistics, SGS research Note: Data has been randomized


42 46 48 47 47 48 49 50

214 215 216 217 220 221 222 223

1999 2000 2001 2002 2003 2004 2005 2006

Private Hospitals Public Hospitals

Though number of hospitals have declined over the review period, beds per hospital have increased

• Number of small private clinics have decreased significantly post 1990s owing to:

• Low utilization and high operating costs

• Inability to cope with competition from larger hospitals with better technology

• More than 40% of the planned medical positions have remained unfilled in public sector owing to low salaries, fewer opportunities for private practice and

abandoned living standards in rural areas where majority of hospitals located

Number of Hospitals – Private vs. Public Beds per Hospital – Private vs. Public

Source: SGS estimates, OECD Note: Data has been randomized

Key Observations

133 132 135 137 132 136 136 138

112 115 114 116 117 117 115 115

1999 2000 2001 2002 2003 2004 2005 2006

Private Public

% CAGR (1999-’06)

0.01%

-0.2%

% CAGR (1999-’06)

0.1%

1.2%


102 103 104 105 106 107 108 109

121 120 123 126 127 128 129 130

220 222 225 226 227 240 245 250

115 116 117 118 119 119 120 12147 48 49 50 51 52 53 5432 33 34 35 36 37 38 39

1999 2000 2001 2002 2003 2004 2005 2006Greater Athens Macedonia PeloponnisosThessalia Kriti Rest of Greece

3.1 3 3.2 3.3 3.4 3.3 3.2 3.12.1 2.2 2.3 2.3 2.4 2.5 2.6 2.74.3 4.4 4.5 4.4 4.6 4.7 4.8 4.82.3 2.4 2.5 2.6 2.7 2.5 2.4 2.31.1 1.2 1.3 1.4 1.5 1.5 1.6 1.60.1 0.2 0.2 0.3 0.3 0.4 0.5 0.6

1999 2000 2001 2002 2003 2004 2005 2006

Greater Athens Macedonia PeloponnisosThessalia Kriti Rest of Greece

Per capita availability of beds is higher in urban regions; developing regions are witnessing above-average growth

• Capacity has been concentrated in urban cities but recent expansions have taken place in other regions (Rest Of Greece). Rest of Greece witnessed highest

compounded growth rate of 4.66% for beds per thousands population between 1999-2006

• Thessalia has witnessed very high growth in inpatient numbers but only a modest growth in supply and could be a region with bright prospects

Beds per Thousand People Inpatients per Thousand People

Source: SGS estimates, OECD Note: Data has been randomized

Key Observations

CAGR (‘99-’06) Greater Athens Macedonia Peloponnisos Thessalia Kriti Rest of Greece

Beds/1,000 population -0.28% 0.99% 0.47% -0.72% -0.72% 4.66%

Inpatients / 1,000 population 3.54% 3.14% 2.88% 5.73% 3.05% 2.98%


Primary pillars of the Greece healthcare system

Four Pillars of Greece Health-care

Three main body: Ministry of Health and Welfare, Ministry of Labour and Social Affair and Ministry of Finance

Controls following healthcare aspects:

Hospital Infrastructure: hospital budget, number of personnel with specialty, salary levels, number of beds and purchase of technology

Social insurance funds: financing funds, defining industry specific funds, range of benefits offered by each funds, contribution rate, types of providers and allocation of doctors for funds

National Health Service (NHS): Governed by Ministry of Health and Welfare

Employs physicians and operates hospitals primarily in semi-urban and rural areas

IKA primary care: Significant presence in urban area

Private players: Private hospitals and private doctors either work independently or contracted by social insurance funds

Governed by Ministry of Labour and Social Affair

Institution of Social Insurance (IKA): Urban population (50% of total population covered)

Organization of Agricultural Insurance (OGA): Rural population (25% of population covered)

OPAD: Civil servants (7% of population covered)

TEVE-TAE: Fund for merchants and small businessmen (13% of population covered)

Individuals contribute to social insurance funds through payroll tax and general tax

They also pay out-of their pockets as a part of co-payments (like 25% of prescription drugs)

Employers contribute to the pool of employee – employer contribution and pay to social insurance funds

It also provides group private medical insurance to avail services at private hospitals

2. Healthcare service providers1. Government Body

3. Social insurance funds 4. Individuals and Employers

Source: SGS research


Drivers influencing healthcare industry

Drivers Impact Explanation IndicationIncreasing per capita disposable income

Increasing per capita disposable income will boost private healthcare spending

Number of people who can afford private healthcare services, increase

Per capita disposable income has increased at CAGR (’03-’07) of 10.4%

Ageing population with higher life expectancy

Ageing population will require higher healthcare services

Need for elderly homes and rehabilitation centers will be more, where private players like IASO, AMC, Hygeia and Euromedica are not operating

Percentage share of age group 65 and above will increase from 20% in 2010 to 33% in 2050

Public private partnership in healthcare

Government’s move to introduce public private partnerships into healthcare industry will increase investments, reduce bureaucracy and expand beds / hospitals capacity

Announcements of one Oncological and one General hospital

PPP in healthcare budgeted at Euro 1.5 bn

Lifestyle: prone to increase diseases

Higher proportion of people having daily smoking habits and eating habits to consume heavy fat food will increase chance of chronic diseases

Highest daily smokers amongst OECD and 21.9% adults are classified clinically obese

New avenues like spa and medical tourism are on rise

Improved healthcare capabilities along with attractive tourism locations put Greece in a better position for medical tourism

It has been successful to attract patients from developed European countries like UK and Germany

Euromedica acquired facilities in Rhodes and Kriti for medical tourism

Note: Data has been randomizedSource: SGS research, OECD


By 2011, hospitals in Greece are estimated to witness a shortfall of ~8%

Note: Data has been randomizedSource: SGS research, OECD

Beds – Available vs. Required

Year 2008 2009 2010 2011

Sustainable utilization 55% 51.30% 50.50% 50.07%

Estimate Utilization 60.60% 60.50% 60.30% 60.20%

Available Hospitalization days (At sustainable capacity)

13,134,362 12,324,259 12,222,569 12,569

Required Hospitalisation days 15,142,333 15,222,356 15,326,666 15,365,996

Hospitalisation days needed 20,203,336 20,333,256 21,597,444 21,899,789

Available Bed 43,821 45,621 46,952 48,936

Required Bed 48,859 49,550 51,523 53,012

Additonal Capacity Required 5,038 3,929 4,571 4,076

489 496 515 530

438456 469

48920%

24% 24% 26%

0

100200

300

400

500

600

2008E 2009E 2010E 2011EBed

s (in

Hun

dred

s)

Required beds Available beds Gap as a % of Available

sgs_healthcare_case_studies_hospital_investment

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