As in countries like the United States, Latin America is seeing growth in hospital chains, some national and others pan-regional, which shows an economic opportunity for large firms, especially with the vertical integration that allows the acquisition of clinics. , offices, laboratories and even pharmaceutical companies.
Amazon's recent announcement that it will offer low-cost primary medical care to Prime users in the United States through its One Medical health program should not be a surprise to anyone.
The fact that the world's largest retailer is ready to open health care for US$99 a year to its more than 100 million Prime members confirms that health can benefit from synergies and economies of scale.
For decades, there have been large consortia or chains of health insurance companies that have hospitals such as UnitedHealth Group, Cigna Corp, McKesson, Christus Health, among many others, that take advantage of this muscle to offer more clinical services, with greater savings and maximizing their profits. The advantages of synergy in hospital operations are evident, with economies of scale, purchasing capacity, learning and shared practices.
In Latin America, global and local names such as Quirón Salud, Christus, UnitedHealth and the Peruvians Auna and SANNA are present, where the interest of these groups in growing through mergers and acquisitions in the region is not small.
Quirón Salud, for example, belongs to the German group Fresenius and is the largest private hospital group in Spain, from where it controls activity in Latin America, where it has seven hospital centers in Colombia and Peru, since its arrival in 2016.
In May of this year, the healthcare group put its business in Latin America (Colombia and Peru) up for sale, where it has eight hospitals. Its business was valued at more than US$7 billion, with growing demand for its services in the region, which has boosted turnover by 12%.
While the Auna Group of Peru operates in three Latin American countries: it entered Colombia in 2018, when it acquired more than 97% of the shares of Promotora Médica de Las Américas, and together with operations in Peru, Colombia and Mexico , manages about 16 health centers. In this edition of the 'Ranking of Hospitals and Clinics in Latin America', the hospital network participates with three locations: Clínica Las Américas Auna (17) and Clínica IMAT Oncomédica Auna (32), both in Colombia and Doctors Hospital Auna (36), in Mexico.
MAC Hospitals are the second most important hospital chain in Mexico by number of units, and in July of this year they announced the signing of a strategic alliance with General Atlantic, for US$160 million to accelerate their expansion and growth plans through the execution of strategic initiatives, development of hospitals in new locations, investments in technological infrastructure and enrichment of the offer of medical services at affordable prices.
CREATING SYNERGIES
In Chile, the international Christus network is present as UC Christus, associated with the Catholic University and has a presence throughout the country. “We are a healthcare teaching network with a great social commitment (…) we provide care to the most vulnerable populations, and at the same time, we are also providing health care to higher-income patients,” details Cristián de la Fuente, General Manager of the UC Christus Health Network.
Born from the alliance of the Faculty of Medicine of the Pontificia Universidad Católica de Chile and Christus Health of the United States, the entity is a perfect example in which the company uses its network to generate both economies of scale and standardization of the experience of its patients.
In the case of SANNA, a private Peruvian health network, a care complex composed of clinics, clinical centers, occupational centers and home health care services is managed, with UnitedHealth Group, one of the largest companies in the world, as a partner. health of the world. In addition, its corporate structure is established in the company Pacífico Salud, dedicated to the health insurance sector and which is part of Credicorp.
“Our wide range of services, with more than 55 medical specialties and subspecialties and technological equipment, allows us to integrate the best of Peruvian medicine in terms of infrastructure, human talent, technology, good practices and resolution capacity,” indicates Francisco Feliu, Manager. SANNA General for the San Borja and El Golf clinics.
Currently, SANNA has various offices nationwide, five clinics: Clínica San Borja and Clínica El Golf in Lima, Clínica Sánchez Ferrer in Trujillo, Clínica del Sur in Arequipa and Clínica Belén in Piura, which offer emergency care. outpatient and inpatient; and six clinical centers: Chacarilla Clinical Center, Miraflores, La Molina and Los Olivos in Lima, Talara Clinical and Occupational Center and the Cajamarca Clinical Center, which offer emergency services, outpatient care and occupational health.
While the hospitals of the Americas Network, also from the American group UHG, are made up of 12 hospitals and 28 recognized medical clinics, distributed in five Brazilian states: São Paulo, Rio de Janeiro, Pernambuco, Ceará, Rio Grande do Norte and the Federal District, with a structure that totals 1,923 beds and more than 13,000 professionals.
“We drive growth consistently, aligning resources with strategic return for the business. We are a company guided by sustainability, focused on efficiency, offering more quality and safety to our patients, families and their companions,” indicates José Emílio Bueno, Executive Director of Operations of Red Americas , the hospital network of the giant UHG in Brazil, adding that they offer throughout their network from diagnosis to the completion of treatment.
It is also worth highlighting the applied scientific production and the integration with other national and international medical centers. “We work in an integrated and complete manner, providing solid services at all ends of the process. In this way, we offer even stronger quality and safety at each stage of care, which contributes to a better patient experience, in addition to an effective clinical outcome,” adds Bueno.
“When [these institutions] generate this type of chains, they can replicate all those strategies that are cost-effective and that can improve the level of access and innovation in health technologies,” explains Benjamín Ahumada, academic and researcher at the Health Institute. Public of the Andrés Bello University , in Chile.
In this way, it is much easier for hospital chains to manage costs and define prices, says the specialist, who has his own health observatory, called Faro Salud, and who also worked at Fonasa.
“We consider that the key to continuing to grow as a health network and position ourselves in the sector is to highlight the differentials and strengths of each of our offices, working transversally with the teams, making timely referrals and thus optimizing times (... ) Each of the SANNA headquarters is committed to the same purpose and we all work with an integrated service network model, [which] allows us to continue growing from different fronts and manage to completely close the circle of care, in order to provide prevention , health recovery and rehabilitation” declares Feliu.
In this sense, the Peruvian chain highlights its ability to digitize and automate processes, along with technological tools such as mobile applications, artificial intelligence, Big Data and Analytics to improve the patient experience, optimize commercial management and offer personalized services, in addition to teleconsultations. and automation in the scheduling of medical hours.
“On the customer service front, we seek to reduce waiting times and improve the experience at every stage, from scheduling to paying for consultations. Our goal is that the patient, from their mobile device, can manage all their interactions with our clinics easily and efficiently,” emphasizes the CEO of SANNA.
Even so, private clinics and hospitals are not immune to the problems of inflation, for example.
“As in the entire complementary health sector, inflation had an impact on rates, but it also brought us lessons. “Within our commitment to sustainable growth, with the delivery of quality medical care to patients, we are focused on efficient management of the operation to increasingly promote excellence in medical care in all our hospital and outpatient units,” explains José Emilio Bueno, from the UHG network.
In that sense, they also refer to the challenges and obstacles to growth that are currently imposed to maintain the sustainability of the health sector in their native Brazil: “Changes in post-pandemic Brazilian demographic behavior, aging of the population, incorporation of new medications and technologies high-cost healthcare, health plan crises, among others. aspects already known in the sector. Several initiatives are necessary as a result of alignment between all teams, to strengthen the integration of health solutions for our patients and their families in synergy with the ecosystem, capable of satisfying these multiple market needs,” he declares.
For UC Christus, in Chile, it has not been easy to reconcile the increase in real prices with the final prices for patients set by the country's public and private network, divided between the National Health Fund (FONASA) and the health institutions known as ISAPRES.
“Approximately 34% of our cost structure corresponds to staff salaries, which are adjusted according to inflation. However, the prices set by FONASA and ISAPRES do not always follow this same trend, and are often readjusted to levels below inflation. Therefore, our costs tend to increase at a higher rate than our sales revenue,” says UC Christus CEO Cristián de la Fuente.
To face this challenge, the entity uses two strategies. First, increase sales volumes, seeking to be more efficient. “That is where we rely heavily on the implementation of technology, the facilitation of the process, and the digital transformation of the organization. Being a health network allows us to face all this growth with the same cost, without increasing the number of collaborators too much, generating more volume, and thus achieving economies of scale. Additionally, we can carry out negotiations with suppliers to be able to access better prices,” explains Cristián de la Fuente.
And, secondly, UC Christus explains that they seek to be more cost-efficient to solve health problems, and, for example, transfer all surgeries that can be done on an outpatient basis to a medical center that has lower costs than a high-capacity hospital. complexity.
For Ahumada, what the three institutions describe - UC Christus, SANNA and UHG Brazil - has allowed an important development of private establishments, which grow not only with a specific clinic.
“To the extent that the establishments manage to be productive, as most of the hospitals' costs are fixed, when they manage to provide more benefits, these decrease,” he explains.
However, investments in health by these chains do not stop.
SANNA seeks to establish in the short term a 100% digital ecosystem that allows patients to manage their health needs from anywhere: through the web and the mobile application, the patient will be able to schedule and pay for their appointments, request a doctor at home , delivery of medications, review your laboratory results, among other functionalities.
“To obtain the maximum benefits of digital channels we have Susanna, SANNA's virtual assistant, a complementary bot in the application that seeks to accompany and guide the patient in managing their health. In SANNA clinics, we have implemented self-care totems equipped with touch screens to provide information on services and products quickly and easily,” states Feliu.
There are many projects and investments that AMIL has made in Brazil, which include, among many others, around R$ 140 million (US$ 28.7 million) in Oncology, state-of-the-art equipment and specialized equipment for the Medicine Center. Deportiva Samaritano, in São Paulo. More than 12 million (US$ 2.5 million) were also invested in orthopedics in the Alvorada Moema, Samaritano Higienópolis and Samaritano Barra hospitals, as well as in the Transplant Center of the Samaritano Higienópolis Hospital.
“We are always attentive to transformations and incorporating technologies that allow effective advances in diagnosis and treatment, such as the area of genetic oncology, for example, with individualized guidance for the dynamics of treatments, in addition to new services dedicated to high complexity” , indicates José Emilio Bueno.
Their plan is to remain dedicated to sustainable growth, providing quality to clients and expanding their hospital units, balancing internal talent and high technical standards. “We will focus on efficient management, given the health scenario as a whole, impacted by the crisis, but with efficient strategies we have the possibility of optimistic results in the medium and long term,” the institution reaffirms.
In the case of Chile, UC Christus already has a 2027 Strategy defined, “which fundamentally contemplates organic growth, but we are not closed to some type of inorganic growth,” explains de la Fuente.
Despite facing an uncertain economic outlook worldwide, the entity highlights its spirit of permanent growth and development, such as a new Cancer Center and the Clinical Innovation Center, among other inaugurations. “In April of this year, the Santa Lucía Medical Center came into operation, with consultations, procedures and major outpatient surgery pavilions, which has 14,000 m2 built and the capacity to add more than 150,000 new medical consultations within a period of three years. ”, emphasizes the CEO.
Its growth occurs in the capital, Santiago, but also in the rest of the country with the aim of getting closer to its patients.
“In recent years, UC Christus has made an effort to expand its investment and growth to all segments of the population. We understand that health is and will continue to be a priority issue for Chileans,” emphasizes Cristián de la Fuente.
HEALTH: INTERESTING BUSINESS
Just as medical entities invest in technologies and growth, there is an interest in Latin America to specialize in health center management.
At EAFIT, Colombia, there is both an MBA where health professionals attend, as well as a specific Health Administration and Institutions program.
“Within this program the content is much more specific and although we combine all the points that are transversal at the level of administration, the topics that we focus entirely on understanding the specific logic of the administration of those institutions that lead us to an economic sector called the provision of health services” comments Juan Esteban Escalante, director of the MBA, at EAFIT.
This occurs because, along with the specificities of hospitals and clinics in terms of management, it is usually the case that doctors are the ones who manage such institutions.
“The administration of health entities has been in charge of professionals who may not be trained and do not have sufficient skills to be able to face a dynamic, a reality that requires knowledge specific to administration. Being a doctor, an excellent physiopath, is not synonymous with being an excellent manager,” Escalante highlights.
Similarly, the master's degree in Health Services Management, offered by ESAN in Peru since last year, is focused on the management of institutions related to the sector. “That includes hospitals, clinics, some insurance companies as well. And it arose due to the management deficit that exists in that sector,” details César Neves, Director of the Master's Degree in Health Services Management at ESAN .
Again, the reason is that in Peru, as in other countries, there is a paradigm that a health institution must be managed by a doctor. “But good doctors don't know anything about management, that is not part of the expertise they are taught in school. So normally what happens is that hospitals lose a good doctor and gain a terrible manager,” warns Neves.
On the other hand, hospital management is, more than ever, linked to technology and hospitals and clinics are embarking on mega processes of digital transformation.
Artificial intelligence, telemedicine, patient clinical records, examinations and hospital management itself become in the cloud. And that is where companies like Tivit, formerly Synapsys, come in, which works on the digitalization of processes.
“There are many cases of large groups that begin to acquire other hospitals, to form large chains. And it often happens that these new hospitals have their legacy system different from that of the group that acquired them. The two are often not compatible,” explains Moisés Menezes, digital business executive at Tivit Brazil , in charge of the health sector.
And when those systems are not compatible, none of them meet the needs of the business.
Although the firm prefers not to provide figures, since each case will depend on the size of the transformation that each hospital or clinic needs, the firm assures that the return is much greater than the investment made.
“In many cases that we have witnessed, the return on investment occurred after six or seven months, because the number of problems it reduces is very large,” he says.
As for investors who choose the health sector, it has been at the center of attention since before the pandemic, shining a spotlight on unmet needs in many countries around the world.
“In Latin America, countries like Colombia, Chile, among others in the region, the health system enjoys an outstanding level of development, compared to many nations in the world, and that is why foreign investors continue to bet on it. ", indicates Marcela Chacón, institutional spokesperson for TTR Data.
According to the institution's records, 2020 had a record record in the health sector and, during the COVID-19 emergency, the health, hygiene and aesthetics sector was the fifth most prominent of the period in the mergers and acquisitions market. , surpassed by the technology, financial and insurance, internet and real estate sectors.
Which reflects the importance of this sector during the health emergency and during the current situation in the Latin American scenario, taking into account that between 2019 and 2023, more than 500 deals were given for a total of US$5,764 million.
“A large part of the M&A operations in this period have been led by private equity funds, a clear sign that investment in the sector is not only considered necessary, but also that it is highly profitable,” says Chacón.
Private equity funds have also played a key role in the recent M&A wave, with the Brazilian fund Patria Investimentos among the most active in the market, highlighting transactions originating in Colombia.
Some of the largest transactions have been the acquisition of Uniblue, the Leforte hospital, and the Santa Lucía hospital in Brazil.
In Peru, a country where there is a significant deficit in health services, compared to other countries in the region, there has been strong investment in M&A in the sector.
“We advised Unilabs on the purchase of Blufstein, then we also saw the purchase of Arias Stella, which has allowed this company, along with other acquisitions, to have a good participation in the diagnostics market,” details Guillermo Ferrero, partner lawyer at Philippi Prietocarrizosa. Ferrero DU & Uría (PPU) Peru.
His firm has advised various companies in the acquisition of health firms, especially laboratories. His experience is that the market is not just made up of clinics or insurers buying other clinics. There are also investment funds that move through all Latin American markets.
“The appetite is there. What happens is that the potential to convert something worth one into something worth three or four or five is quite great,” says Ferrero.
NEGATIVE OPINIONS
Despite the good prospects, not everyone agrees that business verticality and large health conglomerates are a panacea.
While a study published by the Journal of Health Economics says that prices for services provided by acquired physicians increase by an average of 14.1%, research published by Health Affairs states that "vertical relationships may be a way for physicians to doctors and hospitals combine their services and charge higher prices to insurers.
A study in the Medical Care Research and Review asserts, meanwhile, that “doctor-hospital integration did not improve the quality of care for the vast majority of these [quality] measures.” If patient well-being does not improve after integration, there may be other reasons why doctors and hospitals are establishing closer relationships, perhaps to increase profits.”
And although all the reports come from the United States, it is not impossible that something similar could happen here in Latin America.
In this regard, Benjamín Ahumada is cautious. “Always, all models have benefits and certain limitations or risks (…) For example, the problem that vertical integration could have is that using the resources of organizations that are being delivered to a certain population group could inflate prices” , he points out.
However, at least for the Chilean private sector the model seems to work.
“We have seen a continuous development of private medicine [in Chile] and the problem we have of a feeling of lack of protection is rooted in a failure that the current system has in the definition of prices that insurers have and the little power they have to generate real pressure on cost containment. These are things that can be modeled and that, regardless of what can be said about vertical integration, I think they could be beneficial to the extent that they are managed well,” Ahumada concludes.
