To view the original Dinero article in Spanish please click here. The below text has been translated using Google Translate.
Despite the millionaire NPLs with hospitals and clinics, more investment comes to this sector, which thrives on monthly rotations of government. Growing involvement of private equity funds.
On July 28 will open at Santander the first stage of which until now considered the nation, which was invested largest medical complex $200 million financed by banks and the IFC, which is the unit of the World Bank that lends him the private sector. This is the? International Hospital of Colombia, in addition to health services will include a hotel and convention center.
A substantial bet that starts amid alarms ignited by hospitals and clinics for growing problem of nonperforming loans more than 60 days owed them the different entities that sell them their health services, including EPS and local authorities and that at the end of last year, it could be between $ 13 billion and $ 14 billion. This calculation is the Association of Hospitals and Clinics, which unionizes to 146 institutions. “At the end of 2015, our members, with 20% of the beds in the country, owed $ 6.1 billion; if that figure is extrapolated to the entire sector portfolio can add $ 14 billion ” , says Juan Carlos Giraldo, president of the guild.
Although the Ministry of Health launched an emergency plan that seeks to reduce this portfolio and facilitate the movement of money in all links of the chain, hospitals and clinics warn that late payment continues to rise and some have portfolio up to 200 days.
The picture does not look very encouraging for calls Institutions Providing Health Services (IPS) and yet, the investment in the new? International Hospital Colombia is no exception, nor an isolated case, but more and more announcements are made institutions expansion and construction of new hospitals and specialists.
Moreover, the business of health and care not only doctors and professionals in the sector, but also private equity funds, which are bringing their resources to IPS millionaires.
One of them is the Ashmore London, which in 2013 invested in Specialized Cardiological Diagnostics (Diacorsas), a company that operates hospitals in Manizales, Ibague and Santa Marta .
Camilo Villaveces, president of Ashmore Colombia, explained that invest in IPS because they see it is a business with potential and says the undeniable problem of NPLs is faced with financial capacity, which is what they provide as investors. “We have a portfolio average of 200 days and that becomes complicated operation, but with capitalization we did, Diacorsas can resist and continue to grow,” she says and adds that in Ciudad Verde, a macro housing of Amarilo construction in Soacha, already have a plot to build a high complexity hospital 250 beds, where they will be owners and operators.
Having thick skin
So far Ashmore has spent between US $ 30 and US $ 40 million to the health sector in the country and plan to invest another US $ 60 million more. Villaveces says that interest hospitals and clinics highly complex, but not EPS because the business model is different and has other peculiarities. “Of course, financial theme of hospitals is complicated, but touches have thick skin to endure,” he says.
Another fund that will enter the business of the IPS is Tribeca, whose president, Luc Gerard, is also a shareholder in National Clinics, an operator of hospitals was born in 2014 and already operates 400 beds at its headquartersCentenario (in downtown Bogota) and the San Rafael Clinic (south of Bogotá). There has a long-term alliance with the owners of the institution: the Hospital Order of St. John of God.
Carlos Florez, vice president of National Financial Clinics, adding that the San Rafael were presented with another business, which was to buy the facilities of the clinic owners concentrate only in the operation and not in the real estate management. “As we are not interested in the real estate, but the operation of hospitals, then find another partner: the bottom Rizk Ventures” he says.
This fund was created three years ago, derived from a company that provided services to hospitals in the United States. “Our focus is real estate, and as we know the health sector, we decided to focus on that niche , ” says Geoffrey Rizk, one of Rizk Ventures partners.
They began their internationalization in Colombia through a joint venture with Goldman Sachs. What they do is buy the property of hospitals and arrendárselos to their former owners so that they engage only the operative part.
In addition to the San Rafael Clinic, Rizk Ventures also bought the property at the Heart Institute of Floridablanca, who belonged to the Cardiovascular Foundation of Colombia and along with National Clinics operate Clinic Los Nevados in Pereira, where he previously worked the Cardiovascular Clinic of the Child (former Social Security).
Another fund industry is stuck in MAS Equity Partner, which in 2013 invested $ 25,000 million in the Americas Clinic Medellin. He also is a partner of Smile Dental Clinics. However, Hector Cateriano, CEO of MAS Equity Partner, explains that although both are investments in health are different businesses, because one is private (Smile) and the other is mainly draws on the resources of the social security system.
The attractive to private equity funds are precisely those resources that the Government rotates monthly to pay the health of almost the entire population (since coverage is almost universal). It is estimated that each year are about $30 billion and thus money delay in moving from EPS to hospitals and clinics, is silver sooner or later.
“Colombia has the health system number 22 in the world, Germany 25 and USA 37. The cost per patient is perhaps one of the most efficient in the world are US $2,500 a year compared to between US $5,000 and US $6,000 in United States, that makes here the hospitals are more profitable than in other countries”, argue the partners Rizk Ventures to justify its commitment to Colombia and is the same investment thesis of all other funds they see there an opportunity to profit.
Others in the industry believe that, although the system is attractive for universal coverage and turns of the Government, its financing is not sustainable. “Social security is an achievement for the country, but doubts arise when this is increasingly being privatized more. It may be a setback in terms of equity “reviewers.”
Good or bad business, the fact is that while some IPS are on their way to bankruptcy, others are struggling to survive and some are expanding and looking for investors. The important thing is that ultimately serve to heal the ill health of Colombians.