“On the one hand, there are operators (clinics i.e.) that are losing subscribers, on the other there are companies that are growing and have not offered subscriptions (to their employees i.e.) so far,” Chreih told ZF in an interview.
Regina Maria had 195,000 subscribers last year, according to the available data.
The 32-year old executive estimates that sales of medical subscriptions (occupational medicine not included) stand at 650,000 a year in Romania. At an average monthly fee of EUR5, the segment amounts to EUR40 million a year, according to ZF’s calculations.
It is usually companies that buy subscriptions for their employees as part of the salary package, but individual patients buy subscriptions, too.
Regina Maria gets 36% of its yearly revenue from such subscriptions, which could reach EUR55 million in 2014. The contract with the National Health Insurance House generates another 5% to 8%, while the rest of the revenue comes from cash payments by patients.
This revenue structure has remained unchanged since the end of 2012, Fady Chreih says, who does not expect any changes until 2015.
Regina Maria operates a network of 21 clinics, four hospitals, two maternity hospitals, as well as medical campuses, imaging centers, labs and a stem cell bank and posted growth of 17% in revenue in the first seven months of the year.
Fady Chreih says the last part of the year is usually better, so he thinks Regina Maria is on course for attaining the 20% growth target.
Like other large medical service providers, Regina Maria’s growth relied on the investments made in 2011-2012, considering such investments take time to reach maturity.
Regina Maria opened a clinic in the Sun Plaza mall in Bucharest and other clinics in Floreasca and Lujerului areas of the city in 2011, and in 2012 it completed an investment in an ob-gyn and pediatrics hospital.
“There are positive signals in the rest of the country, but the important thing is to position yourself properly. We opened in Craiova because we had a lot of corporate subscribers there and demand was on the rise. We are talking a 300 square meter and several hundred thousand euro project in Craiova,” Regina Maria’s CEO said.
“There aren’t that many markets that can absorb a EUR2 million to EUR3 million investment other than Bucharest. Purchasing power is very important.”
A recent ZF analysis shows the private medical service market is concentrated in Bucharest, with revenue in the city reaching more than EUR350 million, almost double the rest of the country.
Regina Maria, controlled by private equity fund Advent International, budgeted almost EUR5 million investment and has opened two new clinics (inside the Titu Maiorescu University in Bucharest and in Craiova) and four lab collection points so far this year. It will open a new clinic in the next few months.
“Medical service market will grow this year, but not as much as it did in 2013, when I estimated a 10% increase. Medium-sized players are in distress and the system cleanup induced by the harsher rules of the [National Health Insurance] House will keep the market from growing by more than 7% in 2014,” Fady Chreih said.
The private medical service market is going through changes and the first signals thereof came with the decline of the investment volume. After 2011 and 2012, when they invested more than EUR200 million, operators took a break. The first insolvencies then happened and now more and more clinics small and medium-sized alike are trying to find buyers.
“We’re getting offers to buy even medium-sized companies with several million euro revenue in Bucharest and in the country. Things have become much tougher. We are just looking now but haven’t found anything worth buying, anything to give us added value,” Chreih said.
(English version by Loredana Fratila-Cristescu)