The European healthcare market is changing

The total size of the markets in which Capio operates was approx- imately EUR 38 billion in 2014.1 Private providers still represent a small part of the overall market, approximately 13% of the addres- sable market in Sweden, 6% in Norway, 23% in France and 16% in Germany in 2013.2 Even though the different local markets have varying proportions of private providers, growth prospects and fun- ding conditions, there are a number of common factors shared by all of the markets in which Capio operates. Capio believes that these common factors create significant opportunities for private healthcare providers.

Development of Western European healthcare systems

Over the past decade, healthcare systems in Western Europe have developed at a faster rate towards the adoption of performance- based reimbursement structures, which incorporate fulfillment of quality indicators as a metric determining reimbursement. Simultaneously with this development, structural changes have been implemented in healthcare systems to enable independent providers to play a larger role in driving change in the healthcare sector. This transition has led to increased focus on productivity, incorporating both the volume and quality aspects of service delivery, and opened up the potential for best practice transfer between various Western European countries. This trend is evidenced by the transition from per-diem based to a DRG-based reimbursement system (Germany and France), the adoption of free healthcare choice (the Nordic countries) and the removal of borne basse thresholds (France).

Reform measures within European healthcare also include consolidation into more effective structures and increased focus on scale synergies such as coordinated purchasing and administrative costs.

The more dynamic market factors within Modern Medicine and Modern Management have made varying progress in the European countries. In the Nordic countries, among other things the early introduction of DRG-based remuneration has resulted in shorter average lengths of stay (AVLOS) via a far-reaching shift from inpatient to outpa- tient care and day surgery for many areas of medical specialization.

In France, a shift is taking place from inpatient to outpatient care, with the initial effect of shortening average lengths of stay, but there is still considerable potential to increase the outpatient share and significantly reduce average lengths of stay during the coming years. In Germany, the development in this area has barely started, mainly due to regulatory factors and a lack of incentives.

Other dynamic factors, such as the transfer of elective care volumes from large hospitals to independent specialist clinics, and the personal effectiveness of medical staff, show considerable variation between countries. In Sweden, free healthcare choice reforms within primary and specialist healthcare have contributed to the establishment of new primary care centers and specialist clinics, which has increased availability to patients, diminished average lengths of stay for various interventions, and significantly reduced the costs of the free healthcare choice within specialist care. On the other hand, Swedish healthcare faces major challenges in driving staff effectiveness via increased time spent with patients by medical staff, and more consultations and visits per doctor and nurse.

In France and Germany, conditions are very different to Sweden’s. The transition to lower care levels and specialization is not taking place on any large scale, mainly because healthcare is concentrated in hospitals and inpatient care. On the other hand, differences in working methods and reporting among medical staff have led to significantly higher staff productivity compared to the Nordic countries. In recent years, a major challenge and opportunity for both Sweden and Norway has been to drive the productivity of healthcare processes.

On this basis, Capio can identify six key trends for healthcare development comprising both medical development – Modern Medicine – and healthcare’s structural development – Modern Management – in Europe.

The market for private operators

The growth in private operators in Sweden is significantly influenced by the freedom of healthcare choice reforms within primary and specialist care, which commenced in the early 2000s. It is assessed that the estimated future growth will be influenced by additional volumes within freedom of healthcare choice, and certain contract negotiations.

In Norway, the market for private operators is mainly directed at insurance patients and private-paying patients. This segment is estimated to grow further in the coming years, as a supplement to public healthcare. The reform initiatives in 2015 indicate that, via the freedom of healthcare choice, an increased proportion of public contracts may become available to private operators.

In France, private operators have a right of free establishment within existing authorizations, so that shifts from public to private sectors are less relevant than in the Nordic countries. The private share below represents clinics for medicine, surgery and obstetrics. Independent primary care doctors represent a further approximately 25% of the market (not included below), but Capio is not active within this segment in France. The estimated growth is mainly assessed to be driven by a continuing shift from inpatient to outpatient care and day surgery – Rapid Recovery. The current price development in France is dampening the overall market growth for private operators. There is also a significant difference in remuneration to public and private healthcare providers in France. Capio estimates that this difference is more than 20% higher remuneration to public providers.

In Germany, the growth is primarily driven by alternative financing requirements for hospital investments (maintenance), which has led to consolidation and privatization of hospitals and care volumes. The estimated future growth is assessed to come mainly from the need to drive quality and productivity in the healthcare system.

The demographic driver of an ageing population and macroeconomic factors such as the limited payment scope under national budgets are shared by all countries in which Capio operates.