opportunities in brazil's healthcare sector

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Guillaume Corpart +1 (305) 4419300 x302 [email protected] www.globalhealthintelligence.com May 2015. © 2015, Global Health Intelligence. All rights reserved. Global Health Intelligence on: Healthcare in Brazil Opportunities ahead

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Guillaume  Corpart  +1  (305)  441-­‐9300  x302  [email protected]  www.globalhealthintelligence.com  

May  2015.  ©  2015,  Global  Health  Intelligence.    All  rights  reserved.

Global  Health  Intelligence  on:  Healthcare in Brazil

Opportunities ahead

About the Presenter

Guillaume  Corpart    Managing  Director  

Founder  of  Global  Health  Intelligence  Co-­‐Founder  of  Americas  Market  Intelligence  15+  years  in  consulOng  in  La:n  America  

SERVICE  EXPERTISE  

•  Market  strategy  •  Market  sizing  and  

segmentaOon  •  Monitoring  •  CompeOOve  intelligence  •  Customer  segmentaOon  •  Market  research  

PROJECT  EXPERIENCE  •  400+  consulOng  engagements  •  200+  CI  assignments  

INDUSTRY  EXPERTISE  

•  Medical  devices  •  Capital  equipment  •  Consumables  •  PharmaceuOcals  

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Global Health Intelligence

Hospital  demographics  

The  world’s  largest  hospital  demographics  database  focused  on  emerging  markets  

Medical  import  data   The  most  expansive  healthcare  equipment  import  staOsOcs  in  LatAm  

Tailored  research  

Refined  with  15+  years  Market  Intelligence  experience:  •  Market  sizing  and  segmentaOon  •  Partner  search  &  market  due  diligence  •  CompeOOve  profiling  •  Pricing  and  cost  analysis  •  Best  pracOces  •  PosiOoning  and  opportunity  idenOficaOon  

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Provides  advice  to  guide  investment  decisions  in  emerging  markets.  

Table of contents

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1.   Brazil’s  economy  and  what  it  means  for  healthcare  

1.  Brazil’s  economy:  Boom,  Boom  …  2.  …  Bust?  3.  Healthcare  is  an  economic  priority  

2.   Overview  or  Brazil’s  healthcare  system  

1.  The  gap  between  aspiraOon  and  reality  2.  A  perverse  and  interdependent  relaOonship  3.  The  balance  between  SUS  and  Private  care  4.  Fragmented  private  care  

3.   Recent  developments  and  outlook  

1.  Foreign  investments  and  ConsolidaOons  2.  Private  hospital  income  &  expenditure  3.  Trends  &  Outlook  

4.   Q&A  Session  

•  The  Brazilian  economy  grew  at  a  CAGR  of  15%  between  2003  and  2014.  

•  During  this  Ome,  the  middle  class  grew  from  44%  to  60%  of  the  populaOon.  

•  This  translates  to  42  mi  people  entering  the  consumer  class.  

•  There  are  140  mi  people  in  SES  A/B,  C.  

•  Sustained  by  the  high  price  of  commodiOes,  rising  wages,  strong  credit  growth,  lower  interest  rates.  

•  2013-­‐2014:  nega:ve  growth  and  consistently  revised  downward  forecasts  for  2015.  

Brazil’s economy: Boom, Boom …

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0%  

10%  

20%  

30%  

40%  

50%  

60%  

70%  

$0  

$500  

$1,000  

$1,500  

$2,000  

$2,500  

$3,000  

2003   2005   2007   2009   2011   2013  

GDP  (US$  bi)  

Middle  class  (as  %  of  society)  

Sources: The World Bank, IPEAD, IBGE, Ministerio de Desenvolvimento Social, PwC, FGV.

Middle class: HH earning between R$ 1,395 and R$ 4,650 /m

GROWTH OF THE BRAZILIAN ECONOMY AND ITS IMPACT ON THE MIDDLE CLASS

•  The  slowdown  in  the  Chinese  economy  resulted  in  downward  pressures  on  the  price  of  commodiOes  and  thus  a  plumme:ng  of  the  Real.  

•  The  price  of  commodiOes  dropped  by  66%  from  July  2011  to  March  2015,  during  which  Ome  the  Real  dropped  by  a  corresponding  51%.  

•  Infla:on  is  at  8.2%  per  year,  the  highest  since  2005.  

•  Unemployment  is  at  6.2%,  rising  trend  since  2013.  

•  Civil  protests  of  2013/14/15  –  healthcare  is  a  cornerstone  of  the  manifested  anger,  along  with  corrupOon  scandals  (Petrobras).  

•  Is  Brazil’s  :me  over?    Unlikely.    But  it  is  a  rude  awakening  with  considerable  consequences.  

… Bust?

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Sources: www.xe.com, IndexMundi (Iron Ore)

51%  drop  in  value  

The  fate  of  private  healthcare  is  intricately  Oed  to  that  of  the  middle  class.  

F/X RATE: US$ 1 = R$ X

Healthcare is an economic priority

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Sources: World Bank, World Economic Forum, IPEAD, IBGE, Ministerio de Desenvolvimento Social, PwC, FGV, Datafolha.

•  While  the  Brazilian  economy  is  expected  to  slow,  Healthcare  will  remain  strong  (and  possibly  even  grow).  

•  Other  key  sectors  include  Natural  Resources,  Agriculture,  Manufacturing  (dropping)  

•  Health  is  the  #1  priority  in  public  opinion,  ahead  of  issues  such  as  violence/security,  corrupOon,  educaOon,  unemployment  or  poverty.  

•  80%  of  new  healthcare  users  come  from  the  new  middle-­‐class.  

•  Insurers  have  low-­‐cost  plans  for  the  new  middle-­‐class.  

•  The  “demographic  dividend”  will  play  in  the  country’s  favor  through  2029.  

•  Government  policy  will  anract  investments,  focused  on  increasing  the  availability  and  quality  of  care  to  the  populaOon.  

POPULATION  

PopulaOon:  200  mi  Upper  +  Middle  class:  140  mi  (70%)  UrbanizaOon:  89%  

ECONOMY  

GDP:  US$  2,245  bi  Healthcare  expenditure:  9%  of  GDP  (Priv.:  4.9%,  Pub.:  4.1%)  Medical  device  market:  US$  5  bi  Clinical  trials:  2,000+  

HOSPITAL  STRUCTURE  

Number  of  hospitals:  6,950  Number  of  hospital  beds:  452,000  Hospital  admissions  (SUS):  11.5  mi  

INSURANCE  

Private  health  insurance:  54  mi  (27%)  Geographies:  65%  of  contracts  in  South-­‐East  

RANKINGS  

Ease  of  doing  business:  120  (out  of  189)  Global  compeOOve  index:  57  (out  of  144)  

The gap between aspiration and reality

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•  It  is  a  cons:tu:onal  right  for  all  ciOzens  to  have  healthcare  coverage  through  the  Unified  Healthcare  System  (SUS  –  Sistema  Unico  de  Saude).    

•  Inequali:es  are  high  in  a  system  meant  to  provide  care  for  all.  •  The  SUS  has  been  underfunded  since  its  concepOon  –  lack  of  

equipment  and  doctors,  lack  of  geographical  coverage.  •  Private  plans  (originally  conceived  as  supplemental  to  public  

insurance  -­‐  PPP)  have  become  a  parallel  system  for  those  who  can  afford  it.  

•  Private  plans  offer  a  higher  quality  of  care,  but  revert  back  to  SUS  for  not-­‐covered  (expensive)  procedures.  

•  63%  of  private  plans  are  hired  through  businesses.  •  Consumers  are  willing  to  pay  for  bener  healthcare.  

•  The  government  accounts  for  46%  of  HC  spending,  down  from  75%  in  2000  and  compared  to  70%  in  OECD  countries.  

Sources: The Economist, The Lancet.

A perverse and interdependent relationship

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Sources: The Lancet, PwC.

INFECTIOUS  DISEASES  

Dengue  fever  Visceral  leishmaniasis  

Repeated  epidemics,  out  of  control  Increasing  

NON  COMMUNICABLE  DISEASES  

Overweight/obesity  Diabetes  Hypertension  Psychiatric  diseases  Asthma  Cancers  of  the  breast,  lung,  prostate,  colon  

Rapid  increase  Increasing  High  prevalence,  sOll  increasing  High  prevalence  High  prevalence  Increasing  

EXTERNAL  CAUSES  

Homicides  Traffic-­‐relates  injuries  and  deaths  DomesOc  violence  

Decline  but  sOll  at  epidemic  levels  Decline  but  sOll  at  epidemic  levels  High  prevalence  

•  There  is  a  perverse  and  interdependent  rela:onship  between  the  SUS  and  Private  insOtuOons.  

•  The  private  does  not  make  money  from  the  SUS  yet  ~2/3  of  procedures  conducted  are  hired  by  SUS.  

•  Without  the  SUS,  many  private  hospitals  would  go  out  of  business.    Without  private  insOtuOons  the  SUS  could  not  deliver  care.  

•  Despite  its  limitaOons,  the  SUS  can  be  credited  for  its  achievements.  

•  Increased  access  to  primary  and  emergency  care,  reach  universal  coverage  of  vaccinaOon  and  prenatal  care,  and  invest  in  the  expansion  of  human  resources  and  technology.    

“The continuous expansion of the private subsector is subsidized by the state, while the public sector is often underfunded, thus

compromising its ability to guarantee quality of access to care.”

The balance between SUS and Private care

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•  Public  insOtuOons:  Primary  care  clinics,  Emergency  units.  •  The  SUS  depends  on  contracts  with  the  private  sector,  especially  for  diagnosOc  and  therapeuOc  support  services.          

•  Private  insOtuOons:  Hospitals,  OutpaOent  clinics,  DiagnosOc  and  therapeuOc  services.  •  Provision  of  secondary  care  by  the  SUS  is  problemaOc,  because  service  supply  is  restricted  and  oten  given  

preferenOally  to  individuals  with  private  health  plans.  

Public  Sector  (SUS)  47%  

Private  HC  

insurance  23%  

Out-­‐of-­‐pocket  30%  

Public  (SUS)  36%  

Private  for  profit  33%  

Private  non  profit  

31%  

COVERING HC EXPENSES HOSPITAL BEDS: 452,000

“Brazil is not for beginners” - Tom Jobim

Sources: The Economist, The Lancet, PwC.

Fragmented private care

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•  The  private  hospital  market  is  regional  and  fragmented  •  The  largest  private  hospitals  in  the  country  are  philanthropic  and/or  

nonprofit.  •  No  private  hospital  group  owns  more  than  1%  of  the  market  based  on  

number  of  beds.  •  No  private  hospital  group  has  naOonal  coverage.  

•  The  7  largest  private  health  insurance  companies  (all  with  more  than  1  mi  lives  insured),  hold  less  than  30%  of  all  beneficiaries.  

•  There  are  over  1,000  private  insurance  plans  covering  ~46  mi  people.  

•  Private  hospitals  oten  leverage  their  experience  to  manage  marginalized  insOtuOons  –  due  to  economic,  insOtuOonal,  or  geographic  reasons.  

•  Demand  for  new  investment  in  hospitals  –  to  increase  access  and  coverage.  

•  13,000  hospital  beds  are  needed  by  2017.  •  Avg.  occupancy  rate  of  private  hospitals  (2012):  77%.  

LARGEST  HOSPITAL  GROUPS  &  INVESTMENTS    EXPANSION,  RENOVATIONS,  ACQUISITION  OF  MED.  EQUIPMENT  –  2012    

•  Rede  d’Or:    US$  143  mi  

•  Sirio-­‐Libanes:    US$  116  mi  

•  Albert  Einstein:    US$  112  mi  

•  Beneficiencia  Portuguesa:    US$  82  mi  

•  Amil:    US$  128  mi  

Sources: The Economist, The Lancet, PwC.

•  Three  months  ater  President  Dilma  Roussef  announces  that  foreign  players  can  now  have  ownership  in  Brazilian  hospitals,  Carlyle  invests  US$  600  mi  to  hold  an  8%  stake  in  Rede  d’Or.  

•  Rede  d’Or  is  the  largest  independent  hospital  operator  in  Brazil,  with  4,500  beds  and  29  hospitals.  •  The  money  will  be  used  for  new  construcOons,  expansion  of  current  faciliOes  and  the  financing  of  new  acquisiOons.  

•  Further  M&A  ac:vity  is  imminent  increasing  industry  consolidaOon  and  standardizaOon.  •  GIC  holding  of  Singapore  is  looking  to  buy  14%  of  Rede  d’Or.  

Recent developments: Foreign investments and Consolidations

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April 28, 2015

January 26, 2015

Sources: The Wall Street Journal, Latin Lawyer.

Private hospital income & expenditure

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•  The  ANAHP  (NaOonal  AssociaOon  of  Private  Hospitals)  seeks  to  encourage  and  empower  hospital  members  to  use  standardized  indicators  (management  tool  and  as  sector  benchmarking).  

•  Metrics  include  Financial,  OperaOonal,  Human  Resources,  Healthcare  Services  Management,  Clinical  Care  Quality  and  Safety,  Clinical  Care  Protocols,  Sustainability  

Personnel  costs  42%  

Hospital  supplies  25%  

Other  supplies  

3%  

Tech.  and  Op.  

contracts  8%  

Support  &  LogisOcs  contracts  

5%  

UOliOes  3%  

Maint.  and  Tech.  support  3%  

DepreciaOon  4%  

Other  expenses  

7%   Daily  rates  &  fees  25%  

Hospital  supplies  48%  

DiagnosOcs  and  Therapy  

unit  16%  

Other  Services  /  OperaOonal  

5%  

Other  /  OperaOonal  

6%  

Sources: ANAHP, 2012 data.

PRIVATE HOSPITAL EXPENDITURE PRIVATE HOSPITAL INCOME

Trends & Outlook

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MARKET  DYNAMICS   HOSPITALS   HOSPITAL  SYSTEMS   DAY-­‐TO-­‐DAY  

•  Government  regulaOon  to  anract  investment  

•  PE  money  to  flow  into  Brazil  –  Strong  M&A  acOvity  

•  Expansion  /  ConsolidaOon  of  private  groups  

•  ModernizaOon  of  public  infrastructure  

•  Growth  of  home  care  •  Growing  elderly  

populaOon  

•  Cost  reducOon  •  Regulatory  compliance  •  Technology  •  InnovaOon  •  InternaOonal  

accreditaOons  •  Increased  accountability  

and  transparency  •  Management  informaOon  

systems  

•  InternaOonal  benchmark  •  Engagement  to  improve  

data  collecOon  and  sharing  •  Standardized  metrics  on  

cost  /  quality  /  outcome  •  Increasing  informaOon  

exchange  between  stakeholders  

•  Cost  of  procedures  

•  Healthcare  IT  •  Medical  imaging  •  InterconnecOvity  /  

Smartphone  boom  •  Medical  records  •  Equipment  updates  •  Training  

•  Healthcare  needs  to  be  more  effecOve  and  innovaOve.  

“Brazil is the country of the future; and always will be.”

www.globalhealthintelligence.com

To  learn  more  about  Global  Health  Intelligence,  our  services,  consulOng  engagements  and  speaking  opportuniOes,  please  contact:    Guillaume  Corpart,  Managing  Director  +1  (305)  441-­‐9300  x302  gc@globalhealthintelligence  

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