Specialist clinics, which dramatically speed up surgery and deliver demonstrably better results, together with 17-23% EBIT. Dream or reality?
We interview Per Batelson, CEO of Global Health Partner, and former chief executive of hospital group Capio, about his unique business model, based on building integrated practice units. These are clinics focused on specific conditions, delivering the best possible solution and becoming regional centres of excellence.
The company recently moved its stockmarket listing from the London AIM market to the Stockholm NASDAQ.
HE: Tell me how it works
PB: Each clinic is dedicated to dealing with a specific medical area. We have four service lines – bariatrics (obesity), spinal, dental and orthopaedics. We head hunt the best specialists, and build teams of 3 or 4 clinicians, who then own roughly 30% of the equity in the individual clinic.
The aim is to provide holistic care at the highest level. So, for example, the spinal clinic also offers physiotherapy and psychotherapy. There is a lot of concentration on post treatment care and rehabilitation, and we want to build up a clear record on QALYs etc.
We want to follow 5 and 10 year success rates. What makes us special is a real focus on the best possible treatment.
For instance, we are pioneering a new treatment for people with tachycardia (excessively fast heartbeat) using 3D magnets, rather than cutting nerves, which means you can triple the number of procedures with better results.
In bariatrics, we have moved away from using gastric bands towards a new system which has had documented better outcomes in Sweden for many years.
Because the clinics have several clinicians who specialise in one treatment, we have the volume to enable us to be real experts and to rapidly build statistically significant outcomes.
HE: Why do these surgeons want to come to you? Couldn’t they set up on their own?
PB: They could, yes. But we provide them with a basic salary which matches what they were on before, plus dividends, which should double their income if they achieve targets, and some equity. We also provide the marketing, and invest a lot in best practice.
They really like all this. It's not just about money; these guys want the best treatment records, to beat their peers. They are competitive, sometimes prima donnas. We also let them run the clinic; the chief executive is always a clinician.
HE: So how far have you got to date?
PB: We have two spinal clinics in Gothenburg and Stockholm, and have just opened a third in Bergen in Norway. We have three bariatric clinics in Sweden, and are just opening three more - in Birmingham (UK), Bergen (Norway) and Cairo (Egypt).
We have four dental implant clinics in Sweden and one in Leeds, plus two orthopaedic clinics in Sweden.
Group sales grew 45% to SEK400m, with a loss after tax of SEK11.6m (excluding one-offs). Next year, our fourth, I want to get to a positive cashflow.
HE: So is the model profitable?
PB: Yes, we think so. EBIT margins at mature clinics run between 17-23% before our central overheads. We spend quite a lot on product development.
HE: So are other companies pioneering similar approaches? I hear there are 10 or 20 specialist spinal surgeries in Germany. Surely the big hospital groups, like Rhoen Klinikum, are setting up such centres.
PB: Well, yes and no. A lot of specialist clinics are based around one specialist, and we avoid single specialist clinics like the plague - both because of the risk and because of the lack of control. There are quite a few spinal clinics we would never dream of acquiring, because their medical track record is not brilliant.
I think there is a lot of institutional resistance to setting up clinics like this. For instance, when I was chief executive of Capio and we set up specialist eye surgeries in seven hospitals, it was not easy; other doctors and hospital managers felt that we were setting up A and B teams.
I think you would find similar pressures in other European hospital chains. In the USA, hospitals have also fought hard against such clinics, because they are scared that they will take their business. I’ve heard ugly stories of hospitals leaning on health councils to block referrals.
HE: You aren’t coming up against that resistance?
PB: On the contrary, insurers, particularly in Denmark and also in Sweden, love what we are doing, because it cuts costs and complication rates. The Swedish state is also broadly supportive. Some 60%-65% of our work is paid for by social insurance, with the rest mainly paid by private insurers.
HE: You are actually working closely with the state?
PB: Yes. Hospital managers like it, so do the politicians. The arrhythmia/tachycardia clinic is based inside a public sector hospital. We pay rent, buy acute care for our patients and make the technology investment of around SEK35m.
This is unique for Sweden. But we are coming across some resistance from the university hospital, which feels that it should be pioneering the treatment.
Elsewhere in Sweden, we are buying acute care when we need it from the public sector. But it is not just Sweden - the spinal clinics are now getting referrals from the Middle East, and we are in talks with the Kuwaiti Ministry of Health.
