Ignacio Garcia-Tellez
Director of Health Sector
KPMG in Mexico
Miguel Angel Temblador Partner, Corporate & Business Tax Services, Head of Global Compliance Management Services (GCMS), KPMG in Mexico
Miguel Angel Temblador
Partner, Corporate & Business Tax Services, Head of Global Compliance Management Services (GCMS)
KPMG in Mexico
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What Should the Healthcare Industry Expect After COVID-19?

By Miriam Bello | Thu, 07/16/2020 - 11:17

Q: What challenges have clients faced from the government’s changes to the sector and how is KPMG helping them?

IG: There have been challenges with the centralized purchasing scheme regarding planning. Both the providers and the government have faced information biases that have caused supply disruptions. Any new supply chain scheme needs time and evaluation processes for improving. Manufacturing companies in the country have the capacity to comply with the government’s requests, but to do so they need to plan ahead, in some cases, almost three years ahead of their production. KPMG is advising companies on these areas on commercial strategy and supply chain operations.

MT: This year, taxes have been a concern for companies in Mexico. Even before COVID-19, the tax authorities have been asking all industries to verify their prices when working with related parties to understand how much profit is being generated in the country so that taxation is calculated correctly, which has led to heavy surveillance from the tax authorities. The government has been using electronic tools to analyze information and understand how companies are working and how much taxes they should be paying. Companies must understand what is on their digital tax receipt (CFDI) and on their tax returns to explain and provide the proper information to the tax authorities so they can ensure they are paying the right taxes in the country.

Q: What have been KPMG’s strongest recommendations to clients in the healthcare sector?

IG: The most common recommendation is to align the business strategy with robust operational excellence criteria, focusing on clients’ needs within a compliance framework and digitalize their practices when suitable to be more agile and exploit their business intelligence. It is important to collaborate with others to build a steady telehealth tool that provides wider and effective access to health for people facing limitations regarding hospital visits and enables better patient experiences that improve brand loyalty. We have also recommended the strengthening of manufacturing clusters; for example, in the pharmaceutical sector, Guadalajara and the metropolitan area of Mexico City; in medical devices, where Mexico is USA first provider, strong hubs are in Tijuana and Ciudad Juarez.

MT: There is a great opportunity for companies to understand the support coming from the Mexican Income Tax Law regarding research and development (R&D). This law offers a monetary benefit for organizations that demonstrate they are generating new technology or innovation in Mexico. The incentive can be up to MX$50 million (US$2.2 million) if a business can demonstrate that they have a strong R&D area that will benefit the country´s research potential. Many companies are working on the development of a vaccine for COVID-19 and are testing existing drugs for treatment. If Mexico develops a new technology, that organization can ask for the benefits that the Income Tax Law allows.

Q: How will the COVID-19 outbreak change the scenario for medical tourism in Mexico?

IG: This sector will see a momentary pause. On the one hand, hospitals have had to reschedule most of their non-urgent surgeries, meaning that around 70% have been postponed due to the pandemic. After COVID-19, hospitals will need to prioritize nationals to provide those services and treatments as we do not know what the new regulations for travel will be. We are working closely with hospitals to understand how to adapt and work with the new regulations.

There can be exceptions, however. Border cities have more opportunities to keep medical tourism active, unlike other important hubs like Cancun or Puerto Vallarta, which will face much lower demand.

MT: Hospitals need to be ready to implement the new requirements coming from the Ministry of Health, whether they treat local or international patients. KPMG is working on being an ally to hospitals as they reconfigure and strengthen safe spaces in their buildings.

Q: What have been the major challenges related to COVID-19 and how are you assisting clients?

IG: Perspectives are quite diverse, some products like mechanic ventilators have increased their demand at a global level, causing supply chain disruptions among other relevant technologies like pharmaceutical treatments (oncological, for example). Additionally, many raw materials for medicine manufacturing come from Asia, where the outbreak first occurred. This made countries protect their global supply first while also dealing with the logistics limitations in transportation. We are supporting the industry through remote working sessions for assessing their challenges and concluding together best practices to strengthen supply of medical inputs.

MT: Many legal challenges will arise from the COVID-19 pandemic. We are putting together advisory teams that will support our clients in all industries and guide them through this process. One of our main goals is to help our clients safely return to their workplace. With the government’s requirements as a baseline, KPMG has started a series of guidelines for companies so they can provide guidance to their employees.

Q: Can Mexico strengthen its position in the manufacturing market after COVID-19?

IG: Yes, there will be a wider opportunity for the country in the medical field. First of all, with the disruption in global supply chains, many companies that had exclusive providers in Asia might start looking to other markets, which is a good opportunity for countries like Brazil and Argentina in regards to the pharmaceutical production, and for Mexico regarding medical devices production. Moreover, the United States-Mexico-Canada Agreement (USMCA) will strengthen our position as a key player in North America, so there are very high expectations for the manufacturing sector to grow.

Additionally, Mexico has a strong chemical industry, which can be configured to provide active pharmaceutical ingredients (APIs). Following the pandemic, there could be an opportunity for the country´s professional talent and to encourage education to create technology and innovation in the country.

Q: What are the near-term goals for KPMG Health in Mexico?

IG: The industry is focusing on two main subjects. The first is control and promotion of healthcare. For this, technology and digital tools are being highly encouraged, from online tips and advice to wearables that count steps and heartbeats.

The second is increasing the number of health professionals in the country. Mexico has a deficit of around 300,000 health professionals and, unfortunately, after COVID-19, that number is expected to grow as some medical staff succumbed to the virus. This could be an opportunity to educate students on technology and digital healthcare options, such as electronic clinical records. This could push both the public and private sectors to increase health coverage in Mexico, allowing people to reach specialized care more easily. In the near term our goal is to support companies to grow into the new reality.

MT: On the legal side of the industry, we are expecting many opportunities stemming from international agreements, especially for insurers. Moreover, challenges regarding risk control, cybersecurity and tax and legal issues are expected. At KPMG, we are focused on creating strategies to help our clients overcome challenges.

 

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services in 147 countries. It has more than 219,000 people working in member firms around the world and is one of the Big 4 global consulting firms

Miriam Bello Miriam Bello Journalist and Industry Analyst