The commodification of the health sector has been an ongoing process for several decades; both at the level of international institutions (WHO but also IMF, World Bank and World Trade Organization [1]. and of European or national institutions, public policies - whose mantras are liberalisation, privatisation and deregulation - have largely favoured the development of a for-profit health sector. Whereas the pharmaceutical sector and its multinationals pocketing gigantic profits is fairly well documented, this is not the case for the private hospital sector or the sector of private institutions for the elderly. This is why we decided to collect the data available on private for-profit companies active in these two sectors in Europe and to create an interactive map.
We have identified 32 companies (14 in the elderly care sector and 18 in the hospital sector) that are, considering their total revenues, the largest players in their respective sectors. Some of these companies are true giants weighing tens of billions of euros. Others are smaller but growing fast. Still others belong to powerful and sprawling international groups.
The map also provides an overview, country by country, of the degree of commercialisation of hospital and nursing home beds. It shows that the share of private for-profit beds varies considerably from country to country. But what almost all countries have in commin is that this share of the for-profit sector is constantly growing ! This trend can be observed in both sectors; we are thus witnessing major company mergers (mergers/acquisitions), an accelerated internationalisation of some of them, and an increasing financialisation of their structures and activities.
Overall, what our sample shows is the predominant weight of French, German and, to a lesser extent, British companies in the European market. They are the best placed to gain a share in a rapidly expanding market.
In France, particularly in the field of nursing homes, the growth and internationalisation of national champions has been very rapid. Germany, Europe’s largest market, has powerful groups that are mainly active at the national level, with one notable exception, Fresenius, which is the largest European company in both sectors combined and is worth over €35 billion. The United Kingdom, where the liberalisation and privatisation of the sector took place earlier, has a more mature market which is shared between large British and Anglo-Saxon players. The financialisation of the sector (acquisition of holdings and management by investment funds) is very advanced there, but this is a trend that is increasingly found also on the continent.
Southern Western Europe, which is undergoing a marked ageing process, has become a very attractive market for the large French, German and, to a lesser extent, British groups, which are rapidly developing their activities there. In Spain, the major national players are tending to become subsidiaries of foreign groups (such as Quirónsalud, acquired by Fresenius in 2016). In Italy, apart from the national groups KOS and Gruppo San Donato, German and French players dominate the market. In Portugal, French and, to a lesser extent, German multinationals dominate the market for elderly care facilities. Portugal has two national champions in the hospital sector.
In Central and Eastern Europe, the degree of private sector involvement in the care market remains variable. Moreover, although hospital capacity is relatively well developed, this is not the case for for-profit nursing homes, which still have very little capacity in these countries; although a company such as Orpea is developing rapidly, the markets are still not very attractive given their small size, with the exception of Poland, which has more than 75,000 beds in establishments for the elderly (a far cry from the 950,000 beds in Germany).
The elderly care sector has experienced strong growth over the last 5 years. The figures for the selected companies show an average annual growth rate in turnover close to 10%, although this varies from just over 3% for the British HC-ONE to over 20% for the French DomusVi. This seems to indicate both a regular endogenous growth linked to the expansion of the market and an asset acquisition dynamic (concentration/consolidation). Apart from Bupa, the companies with the highest growth are the four French leaders, all of which have grown by more than 10% per year (22.2% for DomusVi and even a fourfold increase in size in four years for the Colisée Group).
The for-profit private hospital market is also growing: on average 7.5% per year for the companies in the sample. Here too there are major disparities, from the lowest averages of around 3% to growth of over 10% for others (15.2% for Helios, the market leader, or 13.2% for Ramsay, another heavyweight). In this sector too, the largest players are also recording the highest growth rates.
Regarding profitability, as measured by the operating margin (i.e. the profit made on each product/service sold), for the companies in the nursing home sector for which we have data (5 companies out of 14), it varies between 4.6% and 13.1%. In the hospital sector, where we have more data (12 companies out of 18), the rates vary from just under 1% to 11.4% for Helios-Fresenius, the market leader. It should be noted that 2020 represented a significant drop in profitability or revenue for some (but not all!) of the companies included in the sample.
The economic importance of the hospital and nursing home sectors makes it a massive source of profit; indeed, almost half of all healthcare expenditure in Europe [2] is devoted to these two sectors.
The ageing of the population and the accompanying increase in chronic diseases suggest a steady growth in the need for care and therefore in the demand for care services. Moreover, these are two areas that are largely subsidised by public institutions, allowing commercial actors to rely on regular and reliable revenues.
The evolution of these profitable markets is driven in particular by the growth and dynamics of the largest corporate groups; this is in line with the European Commission’s desire to create European champions capable of competing with the world’s largest companies. It is therefore no coincidence that European institutions, such as the European Central Bank and the European Investment Bank, have offered financing facilities to Korian and Fresenius in particular.
This strong public support, however, comes against the backdrop of ever-increasing controversies, exacerbated since the beginning of the pandemic, about the situation and practices in commercial care facilities: institutional abuse, lack of equipment, exorbitant prices, priorisation of profit, etc. This raises the following question: should we let private companies, whose objective is financial profit, take care of our health and look after us in our old age? The answer is probably already in the question...
Sebastian Franco
Map : Sebastian Franco, Elsa Delmas
