Laboratory and imaging diagnostics in Romania

August 2011

IOANA FILIPESCU - Managing Director RAIFFEISEN INVESTMENT ROMANIA S.R.L.

 

Introduction - Romanian healthcare market snapshot

The Romanian healthcare market is currently facing a harsh time due to the economic downturn and the lack of a coherent strategy of the Ministry of Health. Total health spending per capita remains one of the lowest in Europe (i.e., some EUR 355 per capita (1), with a direct impact on the maintenance of the existing infrastructure, investments in new equipment and access to services, especially for lowincome groups.

As in most of the ECE (2) countries, public financing is the main source of health financing, being funded by a combination of employer and employee contributions to the National Health Insurance Fund (NHIF) and of direct allocations from the state budget. It accounts for more than 85% of all health expenditure (3). In 2010, public spending on healthcare accounted for only 4% of a declining GDP, considerably lower than ECE average of around 7%. For 2011, there are some positive signals as the public health budget was set at 5% of GDP, 11% higher in value than in 2010.

Given the difficulties to reform the failing public healthcare system, the private investments have increased significantly during recent years. The private medical services emerged as a viable alternative to the poor condition of the public health system, long queues and the artificially created bottlenecks that were addressed through  out-ofpocket payments. With investments worth tens of millions of Euros and a growth path of 20-30% per year, the private medical services have been one of the most dynamic sectors in time of economic slump.

The private medical services sector is estimated to have reached EUR 420 mn in 2010, representing around 5-6% of the Romanian health services market. In the years to come, the fragmented, but fast-growing, private sector is expected to increase its share in the total healthcare market to 30%. The private sector will consolidate, especially backed by the private equity funds which have already invested in leading market players.

In order to address the deterioration of the public health system, we expect the government to increase cooperation with the private sector in various fields through public private partnerships (PPP) and management contracts. The introduction of co-payment obligation starting mid year 2011, under which citizens will have to pay from their own pockets RON 600 (EUR 150) of their annual healthcare charges, should further stimulate the growth of the private healthcare market.

Romania is not the only country facing difficulties in sustaining the healthcare system. The financing ofthe healthcare system is a major issue for all the European countries, as the pressure of the rising expenses for treating an ageing population and the high budgetary deficits, force the healthcare regulators to come up with innovative measures inorder to encourage competition and the development of the private environment.

 

Laboratory medicine market in Romania

Market characteristics

The Romanian laboratory market is very fragmented, with some 2800 laboratories functioning across the country in 2009. Out of these, more than 30% are private (i.e., 954 units). Many of these units are small scaled with either minimum investment in laboratory equipment or obsolete medical equipment (i.e., in regional stateowned hospitals) thus, with limited capabilities regarding the complexity of tests to be performed and often with a low degree of accuracy regarding the results.

According to market players, tests carried out in intra-hospital laboratories were weighting about 60-70% of the total market, with the difference being serviced in ambulatory areas, mostly by private players. The hospital laboratories are generally state owned, although a number of the large hospitals have outsourced their facilities to the private sector through public tenders. The technological upgrade required to perform more complex tests and to improve the quality of results have led many public hospitals to rely upon outsourced diagnostic laboratories. More than 20 state-owned hospitals out of the 431 existing in 2009, have already signed services agreements with private medical services operators. Such cooperation is expected to further develop in the next period, due to the scarcity of public resources and the need to improve productivity while cutting a large part of the public spending for inpatient care. An attempt to increase efficiency and cut costs in the public sector is the recent announced governmental measure to close down or merge 182 state-owned hospitals. Precisely, 71 hospitals are to be transformed into rehab or asylum units, while 111 will merge with other hospitals in the same region. Some say that the measure is not sufficiently documented and that the inpatient sector would rather suffer than benefit from it as the large profitable hospitals would have to absorb the loss making institutions.

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