Capio expands its successful system for health care into one of Europe's key markets
9/25/2002 10:00 AM EST
Acquisition of France's second largest private healthcare provider
Capio expands its successful system for health care into one of Europe's
key markets
European healthcare company, Capio, today entered into an agreement to
acquire France's second largest private health care provider, the
Clininvest Group. Clininvest runs 16 hospitals in several regions and
had a turnover last year of 120 million Euros. The buy is a positive
step taken by Capio in line with the ambition to become a pan-European
provider of private healthcare, driven by high quality and cost
efficiency.
"The fit between the Capio Group and Clininvest is perfect", said Per
Båtelson, Capio's CEO and President. "Clininvest is focusing on private
acute care in regions outside Paris and the group puts emphasis on the
same clinical areas as Capio. I'm convinced we will benefit from scale,
technical and integration synergies between the two groups once the take-
over process has been completed."
Scandinavian medical care is highly regarded in international circles.
From this base, Capio has already developed its own competence in
providing cost-effective, high-quality care to mainly public-sector
purchasers. At the same time, the French healthcare standard is regarded
as one of the highest in the world. Into this sophisticated but
fragmented market Capio brings expertise to the management process in
order to boost revenue and output through improvement in efficiency,
quality and local execution skills.
In the summer of 2001 Capio acquired Community Hospitals Group, renamed
to Capio Healthcare UK, in England. The experiences gained in this
integration process, will be of major value when integrating Clininvest
into the Capio Group.
Through the acquisition of Clininvest, Capio will become an important
player in the French market. The private sector in France is fully
integrated in the healthcare system and the French government has for
several years pushed for a consolidation process to take place in the
fragmented market.
"We more than welcome the Capio offer," says Jean-Michel Texier, CEO of
the Clininvest Group. "It is our strong belief that with the support
given to a member in the Capio Group, we can now take advantage of our
market position as the second largest private healthcare provider in
France and increase margins and the quality of our services even further
in the future."
"Clininvest will provide a platform for Capio's further expansion within
southern Europe", said Paul Hökfelt, Head of Business Area Capio
Healthcare France. "With a recognised need for high quality care
Clininvest also adds immediate medical value to the Capio Group as a
whole."
Göteborg, Sweden September 25, 2002
Capio AB (publ)
For further information, please contact:
Per Båtelson, CEO and President, Capio +46 31 732 4001
Paul Hökfelt, Head of BA Capio Healthcare France +41 22 772 11 27,
+41 76 50 73 333
Ulrika Stenson, Vice President, Corp. +46 705 90 07 23,
Communications Capio +46 31 732 40 04
Jean-Michel Texier, CEO Clininvest +33 1 46 99 40 53,
+33 6 18 43 00 73
This press release is available in French and in Swedish on our website;
www.capio.se.
Press photos are also available on the website.
Key Figures
September 2002
Capio acquires the Clininvest Group
The French Healthcare Sector
· The French healthcare sector has a total value of Euro 141
billion.
· The private acute healthcare sector has a total value of Euro
7.5 billion.
Clininvest Group
· Clininvest has a two per cent market share of the private
healthcare sector, which makes Clininvest the second largest private
healthcare provider.
· Number of hospitals: 16
· Number of employees: 1 840, of which 715 are nurses. In
addition approximately 600 doctors use the facilities.
· Number of patients per year: 150 000
· Annual turnover: ?130 M (2001 ?121m)
The transaction in figures
· Clininvest enterprise value approx. ?80m
· Possible earn out after one year up to ?15m
· Clininvest net bank debt June 30, 2002 approx: ?55m
· Property book value June 30, 2002 approx: ?77m
(Will adjust to fair value at close)
· On a proforma basis consolidated Group EBITDA 2001 was ?12m
Background
The Clininvest Group
September 2002
The Clininvest Group was founded in 1987 as an investment fund with the
initial objective to acquire, operate and develop private hospitals in
France. In 1994 Suez Group became the major shareholder with the
ambition to create a network of top-ranked hospitals. Clininvest is
today 85.7 per cent owned by SI Finance, a division of Suez Industries.
Clininvest today ranks as the second largest health care provider in
France, only surpassed by Générale de Santé. The fact that the total
market share of the two top players among private health care providers
accounts for only 10 percent and 2 percent respectively sheds light on
the fragmentation in the French market.
Clininvest has restructured its operations by creating regional hubs and
operating the hospitals as a group rather than as stand alone units. As
a result of scalability in both size and units, Clininvest offers high-
quality health care and in modern facilities.
Due to the need to improve performance, a program was launched year
2000. One of the cornerstones in this action was heavy investment made
in buildings and equipment. The result of this program is that
Clininvest today has a trimmed organisation for private health care in
various regions around the country, and is well positioned to meet
competition in a market under consolidation.
Clininvest manages 16 hospitals across France, which receives 150 000
patients annually. The group provides 1 823 beds and has excess in
surgery capacity.
Other specialities are psychiatry, medicine, rehabilitation centres,
chemotherapy and dialysis. During the last years Clininvest has invested
heavily in its properties and in the latest hi tech medical equipment.
Clininvest is headquartered in Paris and has a total of 1 840 full-time
employees of which 715 are nurses. In addition more than 600 consultants
are working for Clininvest, but due to the French legal system
Clininvest does not employ them.
Background
Capio
September 2002
Capio is one of the leading private healthcare providers in Europe.
Capio's operations are conducted on behalf of public-sector purchasers,
such as county councils and trusts, and on behalf of insurance companies
and organisations. The company has built up a unique competence in the
supply of cost-efficient, high-quality healthcare and medical care
services.
Capio operates in Sweden, Norway, Denmark, Finland, Poland, the United
Kingdom and Switzerland. Among other facilities, Capio operates St.
Göran's Hospital in Stockholm and more than 20 acute hospitals in UK and
provides care services within most medical specialities. Capio has
created a unified approach in all markets.
There is a competitive price situation in the Swedish market and figures
show that St:Görans hospital in Stockholm, has a lower production cost
than its public competitors.
In total, the Capio Group has more than 150 operating units with
approximately 11 800 employees, of which 2 000 are doctors. Capio is a
knowledge-based company, in which major emphasis is placed on the
competence and job satisfaction of its personnel.
The Capio Group has grown rapidly the last three years, mainly through
acquisitions. At the end of May 2001, Capio acquired Community Hospitals
Group PLC, (renamed to Capio Healthcare UK) the fourth largest private
healthcare company in the United Kingdom. The acquisition contributed
more than SEK 2 000 M in annual sales to the Capio Group, which thus
established itself as one of the largest private players in the UK
healthcare market.
Capio has an annual turnover of about SEK 7 500 M and today more than
half of Capios operations are conducted outside of Sweden.
Capio's operations are divided into three business sectors:
· Healthcare Services is the dominant area and services range
from general medicine and psychiatry to complex surgery. This business
area also includes occupational healthcare services. Capio is the
leading private healthcare provider in Sweden and Norway, and in the UK
among the largest.
· Diagnostic Services comprise laboratory medicine and radiology
for outpatient and inpatient care. Capio is the Scandinavian market
leader within this field.
· Elderly Care Service is an area that has grown rapidly through
acquisitions and extension projects, resulting in doubled net sales year
2001. Capio focuses on care-demanding services for the elderly and has
operations in Sweden and Norway.
Capio's ambition is to be the most efficient provider of medical care
services in Europe and to be the leader in the development of complete
care chains for selected areas of therapy. Capio's strategy is to be a
full-service provider of health and medical care services, with
specialist expertise within diagnostics, radiology, psychiatry and
inpatient and outpatient medical care. Capio has the expertise to
operate across borders and fields of medical specialities.
Background
Healthcare Markets in France, UK and the Nordic Area
September 2002
France
The French healthcare sector is the second largest in Europe with a
total public spending of about 9.5 per cent of Gross Domestic Product
(GDP). The private sector is integrated in the healthcare system and it
is the largest and most mature private healthcare market in Europe.
However, the private market is fragmented with few large providers,
dominated instead by smaller, regionally strong players.
The healthcare system is characterised by each individual's right to
choose the medical treatment best suited to them, whether from the
private or from the public sector.
A majority of the healthcare financing comes from the state, while a
smaller part comes from mutual and private insurance companies.
The French private hospital sector generates 30 percent of the total
hospital activity. But it only corresponds to 16 per cent of the
expenditures, due to more effective cost management. In spite of this,
the quality of private healthcare is considered very high. A recent
report from the magazine Le Figaro, shows that 26 out of the 50 highest
ranked hospitals are privately owned.
Current health care providers face on going state regulation and are
therefore required to invest in their facilities. As a consequence, many
of the smaller independent private hospitals will become part of the
consolidation process.
The maturity and the wish of the French population and practitioners to
maintain the private healthcare system make it a market for Capio to
gain stable profitability.
United Kingdom (UK)
The UK healthcare market is the third biggest in Europe with a total
spending of about 7 per cent of GDP
The healthcare system is based on the publicly financed National Health
Service system (NHS). Apart from public finances, the healthcare system
is funded by insurance companies and by the patients themselves.
The public system is administered by Strategic Health Authorities. The
NHS funds these authorities and the amounts they receive are based upon
the size of the population and their health profiles.
In July 2000, the UK government published the "Concordat", a plan for
the NHS to work in partnership with the private sector. The Concordat
extends to patient care, diagnostic services and organisational co-
operation. Increased funding of 6.3 per cent over each of the next five
years is intended to reduce patient waiting lists, build more hospitals,
provide better information to the patients, improve care for the elderly
and set tougher standards for NHS organisations and better rewards for
the best performers.
The increased number of patients choosing to pay for their own treatment
in combination with an insurance system supporting private care and the
declaration of the Concordat makes UK a market highly suitable for a
private healthcare provider such as Capio
The Nordic Area
The public total spending on healthcare in Sweden is about 8.5 percent
of GDP. Public-sector providers are responding to the private challenge
by focusing on improved quality. At the same time, the tendering for and
outsourcing of healthcare services trend is continuing. The ongoing
implementation during 2002 of a "Care-warranty" that guarantees all
citizens adequate healthcare will stimulate the market.
The public total spending on healthcare in Norway is around 9 per cent
of GDP. The same care requirements exist as in Sweden and a major
reorganisation of the medical sector in the beginning of this year will
open the market to new initiatives.
The public total spending on healthcare in Denmark is approximately 8.5
per cent of GDP. It is still too early to see what actions the new
government will take to improve the conditions in the healthcare sector.
The most urgent issue is to solve the problem of long patient waiting
lists.
There has been a tendency towards an increasingly open-minded attitude
towards private alternatives at a national as well as at a regional
level. However, due to the recent elections in Sweden and Denmark it is
still to early to anticipate in what direction the markets will develop.
Conclusion
The healthcare markets in France, the UK and Scandinavia are heading in
the same direction. Private healthcare is considered a relevant
alternative to the public and there is a focus on allowing the
individual decide his/her own medical treatment. Transparency in pricing
also increases the possibility for the State to procure private
healthcare with public funding.
Pricing models
DRG (Diagnosis Related Groups) is used in Scandinavia. A similar but
less comprehensive tariff system OQN (Objectif Quantitatif National) is
at work in France. In the UK the pricing models are more diverse but the
Government have undertaken a wish to move to HRG's (Health Related
Groups) a concept similar to DRGs.
The DRG model is an assessment of the overall healthcare process, based
on all diagnosis being assigned a specific "weight". A fixed price is
set for a certain weight unit, an index. To calculate the price for a
service, the price per unit is multiplied by the specific weight for
that service. If the care process is more efficient than what has been
stated by the index, there is revenue for the hospital. If not, the
hospital has to carry the cost.
The OQN model is based on the DRG methodology. The main difference is
that the OQN model only validates the medical process and not the
overall healthcare process. Regional hospital authorities called ARH
fund the hospitals.