Pavel Gagarin Diagnoses the Medical Market in Russia as looking very Healthy for Investors

In late September 2012, Pavel Gagarin, Chairman of the Board of Gradient Alpha Investments Group, explained to the participants of the third all-Russia medical forum in Moscow the ways of attracting investments into medical establishments.

Moscow, Russia (October 5, 2012) -- In late September 2012, Pavel Gagarin, Chairman of the Board of Gradient Alpha Investments Group, explained to the participants of the third all-Russia medical forum in Moscow the ways of attracting investments into medical establishments.

The need for quality health care in Russia is huge, with most people believing that they can only get it for money. According to a survey carried out by Romir Holding this summer, 67% of Russians have used paid medical services in the last year. More than half of the respondents paid their own account and 15% used those services as part of their corporate or private health insurance schemes.

Russian commercial medicine is one of the fastest growing industries in the country. From 2007 to 2011 the market volume has grown from 367 to 535 billion roubles (from £7.3 bn to £10.7 bn). The annual growth, even during the crisis, has remained at a level of 16%. Outpatient services comprise half of this market, laboratory-diagnostic services take one-quarter, a 16% share of the market is taken by in-patient treatment and 8% by rehabilitation services.

67% of Russians, when using paid medical services, turn to private health care institutions; 46% of patients go to state clinics and hospitals (13% use both). Among the five most popular services customers prefer to pay for are: dentistry, gynaecology, therapy (GP), ophthalmology and medical anaesthetics. Only 23% of those who do not use paid medicine believe that they cannot afford it; the others either claim to be completely healthy or are happy with the free medicine provided by the state.

The second factor that makes the market for private medical services in Russia promising and attractive to private capital is of the state policies for the privatization of medical institutions. In accordance with the Federal Law of 08.05.2010, No.83-FZ "On Amendments to Certain Legislative Acts of the Russian Federation in connection with the improvement of the legal status of state (municipal) institutions", many hospitals that have received autonomous status will be incorporated and transferred to the management of private parties. Tax incentives, such as corporation tax will also contribute to the growth of investment. Thus, within the framework of the Russian health reform, the state is gradually but purposefully substituting its operational functions by controlling functions.

Gradient Alpha's experience in supporting investment projects in the health area and auditing health facilities shows that competent management can increase the revenues of a medical institution by 30% to 50%. This fact is not a secret to the authorities who are willing to pass health care facilities to private owners in exchange for shares in the business of these companies.

A vivid example of such a transaction is the April 2012 deal between the Moscow government and the Medsi group of companies. Under this project, the city authorities passed two state-owned sanatoriums, three hospitals and five out-patient clinics in Moscow, as well as one resort in the Crimea to Russia's largest private network of health care institutions in exchange for a 25% share of the new company. Using these medical institutions, Medsi is launching new, specialized centres providing high-tech services. Thanks to the administrative resources that it has acquired through this transaction, the network of clinics is expecting to acquire the state quota for such services. The well-known American fund Apax Partners and the Russian Direct Investment Fund have signed an agreement to invest about $200 million in the development of this project.

Therefore, Russian health care is an attractive area for investors. Despite long investment horizons and difficulties in obtaining permits, the vast growth potential of the market provides for very good opportunities in terms of future income.

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For more information, please visit the company web site http://www.gradient-alpha.biz or use the following contacts:

PR department
Gradient Alpha Investments Group
Tel: +7 (495) 740 1264

PR representative in Europe
Eva Smit
Tel: +44 (0) 7538 978986

Gradient Alpha Investments Group has more than 15 years of experience in facilitating investment deals in Russia. Acting as a strategic growth consultant for many Russian companies, the group has conducted hundreds of investment projects, both private and public, in various sectors of the economy. The total amount of investment capital procured through Gradient Alpha has averaged around three billion US dollars per year during the last five years.

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