From HMO to IPO the Brazilian Experience. Luiz Kaufmann. IFC INTERNATIONAL HEALTH CONFERENCE 2007 April 2007

Transcription

1 From HMO to IPO the Brazilian Experience Luiz Kaufmann IFC INTERNATIONAL HEALTH CONFERENCE 2007 April 2007

2 IFC INTERNATIONAL HEALTH CONFERENCE 2007 April 2007 From HMO to IPO The Brazilian Experience Luiz Kaufmann

3 AGENDA - Health care in Brazil a sector in transformation Health care in Brazil The market The Industry The Regulatory Environment Medial Saúde Products Market segments Owned delivery network Expertise in managing medical costs Conditions for a successfull IPO

4 Medial is the only public HMO in Brazil Sept 2006 IPO Market with significant growth potential and supportive regulations Highly fragmented industry Efficient medical cost management supported by owned delivery network High growth and consistent operating performance

5 IPO resources will finance Medial s expansion From 1 to 3 million members by 2011 R$ 1 billion investments in owned delivery network Economies of scale are critical to compete effectively: Reducing costs Allowing for investments in technology Feasibility of a larger and more complete network of hospitals, clinics and diagnostic centers Solid actuarial basis Attracting managerial talent

6 How 184 million Brazilians get healthcare services São Paulo is Brazil s main health insurance market Private Healthcare System 36.6 million plan members Geographically concentrated R$ 35.5B (US$ 14.6B) in premiums in 2005 Private hospitals not required to service the general public. Public Healthcare System: Offers universal coverage Does not charge for usage Serious capacity and quality challenges Source: ANS Caderno de Informação da Saúde Suplementar - Dec 2006 Funded by taxation

7 The private sector has strong growth potential As of December 2005, only 20% of Brazil s population had private healthcare coverage, compared to 84.9% in the U.S. 146 million people rely exclusively on government healthcare services provided by the government System is overloaded and level of service is unsatisfactory Health Expenditure Per Capita Per Capita Expenditure (in I$ (1) ) Goverment Expenditure on Health Total Expenditure on Health 2,266 2,389 2,902 5,711 GDP and Health Expenditure Correlation $4,000 $3,000 Health Expenditure per Capita (in I$ (1) ) France Germany Australia R 2 = United Kingdom % % 49% 1,067 49% 1,269 72% 75% 85% 76% 44% $2,000 Argentina Portugal Hungary Mexico Brazil Chile Argentina Hungary Italy United Kingdom France USA $1,000 Uruguay Brazil Colombia Chile Source: World Health Organization as of 2003 Venezuela GDP per Capita (2) $- 1,000 10, ,000 (1) International Dollars: a measure created by the WHO to allow for a comparison of data of various countries (PPP) (2) In logarithmic scale

8 The managed care industry in Brazil is highly fragmented and is experiencing significant consolidation Number of healthcare coverage providers (2) (3) ,504 2,091 (3) 22.8% Reduction Enrollment 0 to 20,000 1,186 20,001 to 50, ,001 to 100, Total = 1, ,001 to 500, >500, (3) Includes dental care services providers (2) ANS - Caderno de Informação da Saúde Suplementar Dec06 The substantial management, technology and capital resources required to compete in the industry will continue to drive the consolidation trend

9 Favorable regulatory environment The Brazilian Healthcare Industry is regulated by the ANS (1), an independent non-political regulatory agency Minimum capital requirements based on revenues and medical costs Contract Termination Price Readjustment Establishes tariff adjustments to individual and family plans When necessary, carries out the transfer of clients Individuals Corporate At client s request only Unregulated Regulated Unregulated portfolios and liquidates operators unable to meet their obligations Establishes minimum coverage requirements Monitors the financial health of the industry participants, through quarterly reports Individual plan price readjustments IPCA inflation 9.3% 9.3% 11.8% 7.6% 11.7% 5.7% 8.9% 3.1% (1) Agência Nacional de Saúde (Nacional Health Agency) ANS is committed to strengthening the industry, which favors the consolidation trend

10 Medial Saúde is a leading managed care organization in Brazil R$1.1 billion gross operating revenues in thousand members enrolled in its plans as of December 2006 Approximately 13,000 corporate clients Broad range of products (PPO,EPO,HMO, POS) for all markets segments (companies and individuals) National healthcare coverage network in Brazil 1,200 hospitals, 2,700 diagnostic laboratories and over 9,300 independent practices and healthcare clinics Vertically integrated owned delivery network of 5 hospitals and 17 healthcare clinics in the São Paulo, Rio de Janeiro and Brasilia. Acquisition of AMESP in process - will double the vertically integrated owned delivery network

11 Strong growth and consistent operating performance Membership Healthcare plan premiums R$ million %

12 Significant cost advantages supported by owned delivery network Medial owns and operates 5 hospitals and 17 healthcare clinics in São Paulo, Rio de Janeiro and Brasília. Hospital Alvorada Moema Hospital Alvorada Santo Amaro Hospital Taguatinga Brasília Healthcare Clinic The owned delivery network allows Medial to provide high-quality healthcare services and closely manage medical costs in the third-party network

13 Focus on managing medical costs Pre-approval of medical procedures based on evidence-based medicine Medical auditing Nearly 90% of hospitalizations audited in 2006 Medical materials department audits the needs for the utilization and often supplies required medical materials Preventive Medicine and disease and case management Home care is a cost-efficient alternative for chronic and other long-term patients Real-time electronic medical records and PACS to be implemented in 2007 Medical Loss Ratio Medial Brazilian Average 81.5% 81.7% 81.3% 81.6% 71.8% 70.8% 70.9% 71.2% 73.3% M05 9M US Average (1) Source: Medial, ANS Caderno de Informação da Saúde Suplementar Dec 06 (1) Comparability of MLR may be affected by the different accounting standards used in Brazil and the U.S. High quality care while maintaining an efficient delivery network and containing costs

14 Medial s strategy is to sustain high growth while preserving margins Increase plan members while maintaining pricing discipline Pursue strategic acquisitions selectively Focused geographic expansion into attractive markets Continue to invest in information technology Expand product offerings range Expand and intensify the vertical integration process

15 Conditions for a successfull IPO Consistent track-record Solid Reputation among Clients and Doctors Established Corporate Governance Management team with a diversified range of skills and experience Alignment of interests with management via a stock option plan

16 Broadening the private health care system PUBLIC COMPANIES: STRONGER AND MORE RELIABLE HIGHER TRANSPARENCY IN THE SYSTEM A MORE COMPETITIVE ENVIRONMENT ECONOMIES OF SCALE LEADING TO MORE AFFORDABLE PRODUCTS MORE INVESTMENTS IN OWNED DELIVERY NETWORK TECHNOLOGY EVIDENCE BASED MEDICINE PREVENTIVE MEDICINE AND DISEASE AND CASE MANAGEMENT BETTER MANAGEMENT