Development of Private Healthcare in Mexico

Mexico’s private healthcare infrastructure consists of more than 3,000 private hospitals and clinics containing 35,000 beds according to INEGI statistics. In 2014, the Ministry of Economy stated private hospitals have played a significant role in improving medical infrastructure in Mexico since 2007, with a foreign direct investment (FDI) of US$234 million in the last fourteen years. The market is dominated by major hospitals, such as Hospital ABC and conglomerates including Grupo Ángeles Servicios de Salud, Grupo Star Médica, Christus Muguerza, among others, which are paving their way for economic prosperity and growth. Three major trends characterize today’s private healthcare environment, namely consolidation and growth of hospital groups through expansions and certifications, development of highly specialized clinics and insurance services, and greater collaboration between the private and public sector. Achieving universal coverage is perhaps the major driver as well as a growing middle class demanding high quality accessible services.

Private hospitals are diffusing competition to areas outside the three big cities. Grupo Ángeles Servicios de Salud acquired CIMA México’s hospitals in the Northern area of the country and announced plans to build three more hospitals and three medical towers in June 2015, while Grupo Star Médica revealed its determination to expand to Veracruz, Chihuahua, Tijuana, and Leon. Moreover, Grupo Christus Muguerza aims at duplicating its sales between 2014 and 2017 through strategic alliances and operating existing hospitals in the Western and central areas of the country with an FDI of US$100 million from its American partner Christus Health. Along with expansion plans, private hospitals are aspiring to obtain certifications. At present, more than 100 private hospitals have been certified by the General Health Council (GHC) – the national elective recognition for hospitals complying with high-quality requirements for medical attention and patient security – and eight are accredited by the gold standards of the Joint Commission International (JCI). GHC’s requirements are aligned with those of JCI and improve hospitals’ image while guaranteeing the best medical practice, earning patients’ trust and preference.

COLLABORATION BETWEEN PRIVATE AND PUBLIC SECTORS ON THE RISE

At a time when Mexico is striving to achieve universal coverage, the importance of collaboration between the public and private sector has become greater than ever before. Mexico has the largest out of pocket spending among OECD countries – 45% of the total healthcare expenditure and 91.5% of private spending in 2013. According to the OECD, out of pocket expenditure can create barriers to healthcare access as households are more likely to delay or forgo necessary medical attention when having trouble affording medical bills, resulting in financial crisis when the accumulated costs become so high that patients can no longer afford basic necessities such as food or clothing. The WHO recommends that countries keep out of pocket spending below 15% of the total health spending. In an effort to decrease out of pocket spending, private hospitals are willing to collaborate with public institutions by providing them with highly specialized medical services. In the last five years, IMSS has increased its expenditure on private services such as hemodialysis and radiotherapy from US$1 billion in 2009 to US$1.7 billion in 2014. Moreover, according to Xavier Valdez, Director General at IMS Health, IMSS recently announced a public tender to subrogate medical care for 16,000 diabetic patients to private institutions. All of this represents attractive business opportunities for private hospitals and an example of cooperation between both sectors in improving access to medical care. Besides  subrogating services, public institutions could be further aided by insurance companies, which could manage budgets and mitigate the administrative burden of the hospitals. The Mexican Association of Insurance Institutions (AMIS) is pushing forward a proposal which would enable insurance companies to administer payments, manage risk funds, structure medical attention networks, and offer complementary coverage and integral programs for patients with chronic diseases, helping Seguro Popular to improve transparency, efficacy, cost savings, and productivity.

INSURANCE COMPANIES STILL HAVE LOW MARKET PENETRATION

Insurance companies also face the challenge of increasing their market penetration in Mexico, as well as offering insurance policies for chronic and degenerative diseases like diabetes and cancer. Today, 8.9 million people have medical insurance – constituting 7.3% of the total population – with only A, B, and C+ socioeconomic sectors having access to it. According to PwC, the reasons for this low market penetration include a lack of insurance culture

in Mexico as well as the high cost of private insurance coverage. The same consulting firm explains insurance policies are expensive for the average Mexican due to low integration between public and private healthcare, while in other countries private insurance is a complement for public coverage. In addition to increasing their market penetration, insurance companies are aware that chronic diseases are the leading cause of death in Mexico, as well as of their economic impact. For instance, Seguros Monterrey New York Life has an insurance policy, called Afronta, which covers cancer, heart attack, multiple sclerosis, stroke, Parkinson’s disease, and organ transplantation. AXA Seguros offers Vida DBTS, an exclusive life insurance for people with diabetes, while Seguros Multiva is focusing on developing programs for preventing diabetes. 2014 and 2015 have been characterized by strategies implemented by hospitals and insurance companies to expand their coverage while simultaneously providing the population with quality medical services. More changes are expected such as acquisitions, innovations, and greater collaboration between private and public institutions.