The Brazilian Healthcare Industry, despite still being insufficient to cover the large demand arising from its population, that surpassed 200 million people, is gradually receiving more investments. In this article, we will take a look at this Industry and examine its size and market forecast.
According to a Datafolha survey, a healthcare system that functions properly is the third most important thing for Brazilians, only behind owning a home and quality education. But, for 77% of those who answered the survey, the values with which this private sector operates are discouraging.
The public healthcare system, the SUS, is perceived as too time consuming and lacks quality equipment and doctors in some regions of the country. Due to this many Brazilians opt for private health care. From January 2004 to January 2014 there has been a growth of 57% of people that use some kind of private health care service: this number increased from 32 million to 50 million. This also reflects that the majority of the Brazilian population are now classed as being middle class.
The public and private sectors are joined in the PPPs, acronym for public-private partnerships, leading to a raise in investments and efficiency, as well as overcoming some shortcomings in the public healthcare system.
The private healthcare market is distributed among individual agents. In this case, those who use private services pay individually or collectively through health insurance plans administered by private companies.
The Agência Nacional de Saúde Suplementar, ANS, Portuguese for National Supplementary Health Agency is responsible for supervising health insurance plans and health service managers, whereas the health service providers are supervised by the Agência Nacional de Vigilância Sanitária, ANVISA, Portuguese for National Health Surveillance Agency.
In Brazil, no hospital group has national coverage: all the private hospitals operate regionally. The biggest proof of this sector’s fragmentation is that no private hospital owns more than 1% of the national market share based on the number of hospital beds. The largest Brazilian private hospitals are philanthropic and/or non-profit.
As mentioned before, most of the healthcare infrastructure in Brazil is held by private companies. Of more than 6,300 hospitals in Brazil, 69% of them are private, with only 38% of the hospital beds available under Sistema Único de Saúde, Portuguese for Public Health Care System, the SUS.
The healthcare industry moves around 9% of Brazil’s GDP, accounting for BRL 396 billion. Of this 54% - which correspond to BRL 213,8 billion - are investments made by the private sector. This situation puts Brazil in an uncomfortable position. As in other countries, the government invests much more heavily in the healthcare sector - the United Kingdom government for example invests 83% of the total in this sector, whereas Canada invests 70% and Argentina 61%.
Private laboratories also have an important niche in the Brazilian economy, adding BRL 20,2 billions to the annual healthcare market size. It is worth mentioning that these groups are those with the largest profit margins and the segment of healthcare industry where mergers and acquisitions are the most common.
The Brazilian private healthcare sector demands large investments, but Brazilian law forbids Foreign investments in Brazilian hospitals as they are considered strategic by the Brazilian government. There is an important movement around the modification of this law as foreign investments are already permitted in the pharmaceutical, health diagnosis and health insurance plan sectors. Donations from international organizations which are tied to the United Nations organizations for technical cooperation as well as financing entities are authorized. Non-profit healthcare services carried out by foreign companies for treating employees and their dependants are also allowed.
A bill of law was introduced through Brazilian Congress which aims to allow the participation of foreign investment and foreign companies into the healthcare system.
However, foreign investors always seem to find their way into the Brazilian healthcare industry: some hospitals, constituted as a limited liability company, have been receiving foreign investments through the issuance of debentures, given that those titles do not represent, strictly speaking, a participation in the capital of the companies that issued them.
Which companies are investing
The largest private hospitals in Brazil invested approximately BRL 1,6 billion in expansion, renovations and acquisition of medical equipment. Approximately 60 important health sector companies are investing in this sector, the ones that invested the most during 2012 are:
- Rede D’Or São Luiz which invested BRL 280 million
- Sírio-Libanês which invested BRL 227 million
- Albert Einstein which invested BRL 220 million
- Beneficiência Portuguesa which invested BRL 160 million
- Amil which invested BRL 250 million
Also in 2012, among the 45 partners of the National Association of Private Hospitals, the ANAHP, 35 invested BRL 600 million. For this group, the investments realized doubled those of 2011. The main reason for this increase in investments was due to an average occupancy rate for their hospitals of 77%, dangerously close to 80% which is when problems relating to customer services and hygiene start appearing. ANAHP hospitals had a turnover of BRL 9.4 billion in 2011.
Main difficulties and challenges for the Industry
Despite Brazil having a good proportion of physicians per inhabitant - two for every 1,000 people, double than what is required by the OMS - the regional distribution of physicians in Brazil is uneven. There is no shortage of professional physicians in Brazil, but the fact is that 72% of them are concentrated in the South and Southeast regions. The government created the Mais Médicos program, which aims to relocate more than 15,000 cuban physicians into Brazilian areas that are lacking physicians.
Thanks to Brazil’s GDP growth during the 2000s, their almost full employment status which lead to higher wages and more consumption, credit expansion and being Latin America’s top destination for Foreign Direct Investments, more than 50% of Brazil’s population is now in the middle class. These factors, amongst the following, led to a series of positive forecasts for the healthcare sector in Brazil:
- Increase in purchasing power
- Consumers willing to spend more for better health care services
- Favorable demographic conditions
- Growing elderly population
- Governmental initiatives that attract investments
- Consolidation of the sector, which boosts strategic planning