Private healthcare in Central Europe expected to recover from crisis between 2011 and 2013 FREE ARTICLE.

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1 FREE ARTICLE Private healthcare in Central Europe expected to recover from crisis between 2011 and 2013 Source: report Private healthcare market in Central Europe Development forecasts for Author: Monika Stefańczyk July 2011

2 Monika Stefańczyk, Head Pharmaceutical Market Analyst Investment activity started to pick up again on the private healthcare market in Central Europe 1 in 2010 and Many companies returned to abandoned projects, and this resulted in new establishments being opened in 2011, particularly in Romania. However, public healthcare systems in the CE region continued to be underfunded and characterised by poor infrastructure and underpaid staff, which could constitute an additional stimulus for the private market. Private healthcare growing again The overall market in the six countries covered by this study increased by almost 25% between 2007 and 2010, from 4.7bn to 5.9bn. This happened despite the reduction in euro terms in 2009, which was caused by the global financial crisis and a reduction in patient purchasing power. In 2010, the market began to recover and is expected to improve year on year from 2012 onwards. Value ( m) and change in the private healthcare market in Central Europe, ,727 22% 5,758 5,515 5,894 6,331 7% 7% 6,931 9% 7,746 12% -4% 1 Poland, Hungary, the Czech Republic, Slovakia, Bulgaria, Romania f 2012f 2013f Market value Change f forecast Source: report "Private healthcare market in Central Europe Development forecasts for ", PMR Publications,

3 Romania and Bulgaria witness growth from a small base The most important markets in the region in terms of value are Poland and the Czech Republic, which account for approximately 70% between them. The lack of coherent policies in Hungary renders forecasting difficult. Given the developments and plans on the other markets, Hungary will be a declining market worth approximately 300m in The most substantial growth figures will be recorded in Romania (which is expected to develop even more rapidly than in previous years) and in Bulgaria, but those two countries are developing from a very small per capita spending base of around 20 in 2010, in contrast to almost 200 in the Czech Republic. Reduction in public spending on health The average amount spent on healthcare in the six countries covered by this report in 2010 was approximately 5% of GDP, with the lowest figure recorded in Romania and the highest in the Czech Republic, according to data amassed by PMR Publications. Significantly, the situation even deteriorated in 2010: in 2009 the average healthcare spending figure in the region analysed was more than 2 p.p. higher and estimated to be 7.2% of GDP. Over the past two years investors have been cautious about spending on new ventures in this industry because of the economic downturn. However, the crisis has affected public healthcare in equal measure, and budgets have shrunk. This has prompted an increasing number of patients to opt for services at private healthcare facilities. This is why companies have continued to invest, and in 2011 there has been a great deal of activity in this area. Poor healthcare infrastructure The dilapidated public healthcare infrastructure has continued to remain a serious problem across the entire region. With the exception of the Czech Republic, where healthcare infrastructure was revamped at an early stage of the healthcare reforms in the 1990s, the modernisation of healthcare facilities has been slow across the region. Over the past two years, public health budgets have been substantially reduced and public healthcare systems badly underfunded. In Slovakia, the debt of the healthcare industry came to 285m in 2010 and was growing at a rate of 7.7m per month, according to the Slovak Ministry of Health s calculations presented to the country s cabinet. According to Ministry of National Resources data, the overdue obligations of Hungarian hospitals in 2010 came to HUF 34.6bn ( 126m). This increased by HUF 11bn ( 40m) in Q but was reduced by HUF 12.9bn ( 47m) in Q after the receipt of HUF 27.5bn ( 100m) of financial aid.

4 In addition, the OECD states that two areas healthcare and pensions accounted for the largest part of the increase in public debt in the Czech Republic in In Poland, the legally enforceable debt of public healthcare entities stood at PLN 2.18bn ( 553m) at the end of December This represented a decline of 8.8% in comparison with three months earlier, and a year-on-year fall of 2.7%. The total debt of public healthcare entities (including long-term debt), which is about four times this, also declined on a quarterly basis during the three months to December, and was broadly flat in annual terms. The figure was PLN 9.64bn ( 2.45bn) at the end of the fourth quarter, a 1.4% reduction in comparison with the end of September and a 0.1% increase in comparison with a year earlier. Because of the debts of the public healthcare facilities, the substantial investments which public hospitals in the region desperately need have been delayed, in most cases without any specific schedule. At the same time, this creates an opportunity for private companies. This article is based on information contained in the PMR report Private healthcare market in Central Europe Development forecasts for , published by PMR Publications in July 2011.

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