SGS_Healthcare_Case_Studies_Hospital_investment

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Market Assessment Overview of the Greek Hospital Market Market Assessment

Š 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com January 10, 2013

1


Acute Hospitals Market, Greece Client • The client was one of the leading private equity investment firms considering investing in hospitals in Greece

Client Ask • 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

Sutherland’s Solution • 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

•Benefits to the Client • 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

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com January 10, 2013

2


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

€ 7.8 bn

€7.0 bn

€7.4 bn

€8.8 bn

€8.9 bn

€7.1 bn

€9.2 bn

€9.9 bn

% CAGR (2000-’07)

5%

4%

• 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

Source: National statistics, SGS research

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

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Though number of hospitals have declined over the review period, beds per hospital have increased Number of Hospitals – Private vs. Public

Beds per Hospital – Private vs. Public % CAGR (1999-’06)

% CAGR (1999-’06)

112

133

115

132

114

135

116

137

117

132

117

136

115

136

115

138

0.01%

-0.2%

1999 2000 2001 2002 2003 2004 2005 2006 Private

214

215

216

217

220

221

222

223

0.1%

42

46

48

47

47

48

49

50

1.2%

1999

2000

2001

2002

2003

2004

2005

2006

Public

Private Hospitals

Public Hospitals

Key Observations • 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

Source: SGS estimates, OECD

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

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

Inpatients per Thousand People 32 47

33 48

34 49

35 50

36 51

37 52

38 53

39 54

0.3 1.4 2.6

0.3 1.5 2.7

0.4 1.5 2.5

0.5 1.6 2.4

0.6 1.6 2.3

115

116

117

118

119

119

121

0.2 1.2 2.4

0.2 1.3 2.5

120

0.1 1.1 2.3

4.5

4.4

4.6

4.7

4.8

4.8

220

222

225

226

227

240

250

4.4

245

4.3 2.1 3.1

2.2 3

2.3 3.2

2.3 3.3

2.4 3.4

2.5 3.3

2.6 3.2

2.7 3.1

121

120

123

126

127

128

129

130

1999

2000

2001

2002

2003

2004

2005

2006

102

103

104

105

106

107

108

109

1999

2000

2001

2002

2003

2004

2005

2006

Greater Athens Thessalia

CAGR (‘99-’06)

Macedonia Kriti

Peloponnisos Rest of Greece

Greater Athens Thessalia

Macedonia Kriti

Peloponnisos Rest of Greece

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%

Key Observations • 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

Source: SGS estimates, OECD

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

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Primary pillars of the Greece healthcare system 1. Government Body

2. Healthcare service providers

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

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

Controls following healthcare aspects:

Employs physicians and operates hospitals primarily in semiurban and rural areas

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 Four for funds Pillars of Greece Health3. Social insurance funds care 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)

IKA primary care: Significant presence in urban area Private players: Private hospitals and private doctors either work independently or contracted by social insurance funds

4. Individuals and Employers Individuals contribute to social insurance funds through payroll tax and general tax They also pay out-of their pockets as a part of copayments (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

Source: SGS research

Š 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com January 10, 2013

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Drivers influencing healthcare industry Drivers

Impact

Explanation

Indication

Increasing per capita disposable income

Increasing per capita disposable income will boost private healthcare spending

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

Number of people who can afford private healthcare services, increase

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

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

Euromedica acquired facilities in Rhodes and Kriti for medical tourism

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

Source: SGS research, OECD

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

7


By 2011, hospitals in Greece are estimated to witness a shortfall of ~8% Beds – Available vs. Required 600 500

496

489 438

400 300

530

515 24%

24%

456

469

489

20%

200

26%

r) u H s(in d e B

100 0

2008E

Required beds

2009E

2010E

Available beds

2011E

Gap as a % of Available

Year

2008

2009

2010

2011

Sustainable utilization

55%

51.30%

50.50%

50.07%

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

5,038

3,929

4,571

4,076

Estimate Utilization

Additonal Capacity Required Source: SGS research, OECD

Š 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

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