Brazil will need an
additional 13,000 hospital beds by 2017.
BY GUILLAUME CORPART
is an economic and social priority in Brazil; and will remain one for the years
to come. Since 2014 healthcare has become the number one priority in
public opinion, ahead of issues such as violence, security, corruption,
education or unemployment.
80 percent of new healthcare consumers come from the emerging middle
class. In light of this, private insurance companies and care providers
have adapted their offering to meet the demands of their “first time
foreign companies have operated in Brazil for many years, the government has
only recently opened up the hospital market to foreign entities (see section:
“Recent developments”). Such a move will increase interest in the sector
and attract investors eager to capitalize on Brazil’s underfunded hospital
favoring investment in Brazil is the long term (20-30 more years) trend of
favorable demographics. The demographic dividend created by fewer mouths
to feed in a household, frees up disposable income to i) consume more health
insurance and ii) utilize the private healthcare system which provides superior
service to the public one. Brazil is only now commencing its phase of
optimal demographics, which, if enabled to flourish in a prosperous political
climate, could result in the fastest growing healthcare opportunity in Latin
is estimated that by 2017 Brazil will need an additional 13,000 hospital beds.
light of this, one must keep in mind that Brazil is a complex market in which
to do business. The World Bank’s Ease of Doing Business ranking positions
Brazil 120th out of 189 countries. Brazil also has the region’s most
complicated tax code, with up to 70 different taxes to comply with. Part
of this complexity can be seen in how the healthcare system is managed, in part
private and in part public.
AN INTERTWINED RELATION
law, every Brazilian citizen has the right and access to public healthcare,
provided by the Unified Healthcare System (SUS – Sistema Unico de Saude).
However, there are vast discrepancies between public care facilities.
Depending on location, a patient may have access to world-class care or a
rudimentary countryside clinic.
biggest problem facing the SUS is the lack of funding. The system was
initially conceived to rely on additional taxes, which were never
implemented. The private sector was invited to provide supplemental
coverage to the public infrastructure through Public-Private-Partnerships
(PPPs). Today, the largest hospitals in the country are philanthropic and
have a public ward (SUS) as well as a private ward.
public sector now focuses on offering primary care, such as clinics and
emergency units. Through outsourced service contracts, the public sector
relies on private institutions to provide care in hospitals, outpatient
clinics, diagnostics and therapeutic services. Given the discrepancy in
the quality of care, the private sector has grown to supplement and even
replace public care – at least for those who can afford it. In 2000,
government spending accounted for 75 percent of total healthcare expenditure;
in 2014, this number dropped to under 50 percent.
public and private healthcare sectors are so intertwined that they have become
interdependent. On the one hand, the SUS could not give coverage to the
population without relying on the private sector. At the same time, the
private sector could not exist without the volumes contracted by the
insurance has become commonplace, covering 27 percent of the population.
While insurance plans remain expensive for individual contributors, private
insurance is most often contracted in group plans; becoming a valuable perk in
corporate employment packages. However, private insurance is also a
source of contention. Many of the private insurance plans do not cover
some of the more expensive procedures, shifting the burden back to the
FRAGMENTED PRIVATE CARE
private hospital market is regionalized, with no group owning more than 1
percent of the market based on the number of beds, or having national
coverage. Such fragmentation becomes problematic when dealing with issues
such as electronic medical records (EMR), information exchange, patient files,
system compatibilities and other IT elements. The southern part of Brazil
is generally wealthier and has access to a wider range of hospitals and doctors
– over 70 percent of Brazil’s doctors are in the South and Southwest regions of
private insurance market is also fragmented, with the 7 largest private health
insurance companies (each with over 1 million lives insured) holding less than
30 percent of all beneficiaries.
combination of these factors results in the need for greater access and
coverage to healthcare, fueled by lower operating costs. It is estimated
that by 2017 Brazil will need an additional 13,000 hospital beds.
Achieving broader coverage can only be attained through a more efficient
recently foreign businesses were not allowed to have ownership in Brazilian
hospitals. This impaired the sector’s ability to fully develop.
However, this changed in January 2015 by announcement of President Dilma Rousseff. Weeks later,
private equity funds such as Carlyle Group and GIC Holdings began investing
hundreds of millions of dollars in acquiring minority shares of private
hospitals in Brazil. Further M&A activity is imminent and will likely
strive at increasing industry consolidation.
industry consolidation will bring with it the need for the integration of
management systems, increased standardized metrics and reporting, greater
emphasis on international benchmarks and more transparency. Health
IT, Medical imaging, EMR and interconnectivity will also benefit from these
trends. Pressure to keep costs down will continue to exist and will also
be a determining factor in the ability to win voluminous SUS contracts.
In light of this and the ageing population, home care is expected to become
more common moving forward.
Guillaume Corpart is the
Managing Director of Global Health Intelligence and a veteran of market
intelligence and strategy consulting in emerging markets.