Comprehensive growth: A rising economy is creating opportunities for expansion

With Law No. 3 passed on May 3, 1920, Turkey established its Ministry of Health (MoH). From that time onwards, the health care sector, under the direction of the government, expanded to offer comprehensive coverage for Turkish citizens. During the early years of the republic, the scope of services on offer and the number of personnel saw major gains, especially between 1950 and 1960, when the number of doctors, nurses and midwives more than doubled. By the 1960s, the government was moving forward with plans to socialise the sector. Throughout the 1970s and 1980s, the sector was in transition as the government underwent its own changes, and by the 1990s, the MoH was working with the State Planning Organisation on what was then called the “Master Plan Study on [the] Health Sector”. It is from this master plan that the current MoH has picked up with its own reforms, which have driven the direction of the sector for the last decade.

CHANGE IN THE AIR: The latest of these reform efforts has been the 2003-13 Health Transformation Plan (HTP) under the direction of the incumbent Justice and Development Party (AKP). The goal of the programme is to increase the quality and accessibility of health care provision. Major changes have included the unification of the three social security schemes – the Social Insurance Institution, Ba ğ-kur and Emekli Sandığı – under the Social Security Institution (Sosyal Güvenlik Kurumu, SGK), the centralisation of public hospital administration and the reduction of medication prices.

The ways that low-income citizens are covered is set to change as well. To increase accessibility, the government introduced a green card system in 1992. Green cards allowed holders to access state health care free of charge. Over 9m have benefitted from the programme, with infant and maternal mortality rates both falling, and measles and malaria being virtually eradicated. Still, as part of the state’s drive to consolidate the health care system, the government announced in 2011 that the green card scheme would be phased out and that members of the system would be integrated into a new general insurance system, in which the government assigns monthly premiums between TL33 and TL200 (€14.03 and €85), based on income. Those with a monthly income of less than TL279 (€118.58), or roughly one-third of the minimum wage, are set to continue receiving services free of charge. The government expects the scheme to generate up to TL4.4bn (€1.87bn) for the state health care budget.

STATE SPENDING: That extra income will likely be welcome at the MoH. Spending on health care in the country increased significantly in the 1990s and 2000s.

Between 1998 and 2008, health care spending per capita more than tripled, growing from $295 to $902, according to the OECD’s “Health Data 2011”. Likewise, total expenditures on health care rose from 3.6% to 6.1% of GDP within the same timeframe. Although these gains are significant, they are still short of the spending rates of most other OECD countries, which generally fall between 8% and 10%.

The Turkish population has been utilising health services at a higher rate, which has offered a substantial boost to the sector. Consultations with doctors per capita rose from 2.8% to 7.3% between 2003 and 2009.

Preventive measures like vaccinations have increased as well. From the announcement of the government’s HTP in 2003 through 2008, the latest statistics available, the rate of vaccinations against measles grew from 75% to 97% and child vaccinations against diphtheria, tetanus and pertussis rose to 98% from 68%.

INCREASING OPTIONS: One of the key growth drivers in the health care sector has been the growing role of private care providers. Changes made by the government have allowed citizens to use state social security to cover costs incurred at private hospitals. This measure has broadened the options available for social security holders, and public opinion towards the programme has improved over time.

These changing government policies, combined with population and economic growth, have given increasing opportunities for private health care providers. Overall, hospital visits have more than doubled in the past decade. The private sector’s share of business has also increased tremendously. Between 2002 and 2009, private hospital visits as a share of all hospital visits more than tripled, from 5% to 16%, according to statistics from the MoH compiled by the Pharmaceutical Manufacturers Association of Turkey (IEIS).

PRIVATE CARE: The private health sector is dynamic and includes major hospital groups, independent private hospitals and smaller practices. Smaller operators may be affected by new regulations governing doctors. In the past, it was common for doctors to work part-time at state or university hospitals while operating private practices or working in private clinics on the side. In January 2010, however, the government passed the Law on Full-Time Employment of University and Health Care Personnel, which stipulates that doctors cannot work at public or university hospitals part-time. According to the current administration, the law was enforced to improve the quality of medical training, allowing doctors at university and public institutions to focus more on their teaching responsibilities as full-time employees.

Larger private health groups, meanwhile, have seen significant growth in the last 20 years, in part thanks to social security changes. Nearly all of these hospital networks started in Istanbul and began expanding as the government carried out social security reforms. The prevailing mantra seems to be economies of scale, with health groups rapidly expanding their networks beyond larger cities like Istanbul and Ankara to the cities of the Black Sea and the central and south-eastern Anatolia regions. A number of these private operators have been successful in securing foreign capital to help fund growth (see analysis).

HEALTH CARE PROVIDERS: Acıbadem Healthcare Group, which has operated since 1991, has a 2000-bed capacity on 105,000 sq metres spread across 16 general hospitals, nine outpatient clinics, an ophthalmology centre and other facilities. The health care group held its initial public offering in 2000. Since then, Acı badem has been pushing to further expand and currently has seven new hospitals slated for completion in the near future. In addition to three new locations in the Be şiktaş, Maslak and Ataşehir districts of Istanbul, the health care provider has four new hospitals planned across the country in the cities of Bodrum, Eski şehir, Kayseri and Adana. In December 2011, Khazanah Nasional, the sovereign wealth fund of Malaysia, acquired a 75% stake in Acıbadem.

Medical Park opened its first hospital in 1995 in Istanbul’s Fatih district. In subsequent years, the company has expanded to include more far-flung areas of Turkey, such as Batman, in the country’s south-eastern Anatolia region, and Elazı ğ, in eastern Anatolia. Medical Park currently operates 13 hospitals, two hospital complexes and two medical centres across Turkey. In January 2012, the Carlyle Group, a private equity firm based in Washington, DC, bought a 40% stake in Medical Park’s operations. The capital raised is set to support the group’s hospital operations and expansion.

Tracing its history back to 1992, Medicana Health Group, up until 2011, had expanded only in Istanbul and Ankara, but from 2011-12, it opened two new hospitals outside of these areas. The $70m Medicana Samsun Hospital, in the Black Sea region, opened in August 2011 with a total bed capacity of 220. Medicana Konya in central Anatolia, meanwhile, is set to open in 2012. Moreover, the company demonstrates another trend that is beginning to take off in Turkey: investing in health sectors abroad. The firm plans to go international by opening a 200-bed hospital in Bucharest, Romania, which is currently under construction.

Memorial Health Group, meanwhile, began as an investment made in 1996 by the Memorial Health Investments Corporation. The group’s first hospital was completed at the end of 1999, admitting its first patient in February 2000. As the company grew, it constructed additional facilities, including two 450-sq-metre outpatient clinics in 2001 and another in the Suadiye neighbourhood on Istanbul’s Asian side in 2003. In addition to its Istanbul locations, Memorial also operates a hospital in Antalya, on the Mediterranean coast. Qatar First International Bank and ARGUS Capital acquired a 40% stake in Memorial in August 2010.

Another company that specialises in private health care is the Universal Hospital Group, which has a total of 1370 beds in facilities covering 170,000 sq metres in 12 general-purpose and branch hospitals. Having started in 1976 with a single hospital in Istanbul, the company now runs 12 general-purpose branches in seven cities across Turkey, including Izmir, Bursa, Bodrum, Diyarbakır, Konya, Manisa, Malatya and Karabük. A combined equity investment of $140m from the International Finance Corporation, ADM Capital and Dutch-based PGGM will support the company’s to continue expanding.

EYE SPECIALISTS: In addition to major hospital groups that provide a full spectrum of medical services, specialist groups are emerging as well. The ophthalmology sector in particular has been conducive to private sector growth. Two private eye hospital networks that have seen impressive growth in the past decade are Dünyagöz and Batıgöz. Dünyagöz, founded in 1996, has expanded with branches across Turkey, as well as in Berlin, Cologne, London and Amsterdam. Likewise, Batıgöz, founded in Izmir in 2004, operates hospitals at various locations in Turkey as well as branches in Bucharest and Erbil, in northern Iraq. Both firms specialise in eye treatments, such as laser eye surgery, cataract removal and glaucoma treatment, and are also highly active in the medical tourism industry, offering packages for foreigners to come and receive treatment and enjoy Turkey’s tourism offerings. In 2010 some 66% of Istanbul’s medical tourists came for eye treatment, according to data compiled by Dr Dursun Aydın, the MoH General Directorate of Primary Health Service’s health tourism coordinator.

MEDICAL TOURISM ON THE UP: Indeed, in addition to the boost in domestic demand, Turkey’s private health care sector has also been marketing its advantages to foreign patients. The MoH estimates that 500,000 foreigners were treated in Turkish hospitals in 2010, earning the country $850m in health tourism revenues.

Turkey has been competing on three fronts: quality, price and location. “The entire mechanism of medical tourism is built on the following: you offer better quality patient care along with better or equal medical service for a reasonably cheaper price,” Melis Abacıo Dünya Eye Hospital’s international business development regional manager for Europe and the Balkans, told OBG. “Patients are attracted to the combination of the three.” Attracting foreign patients provides an invaluable source of income, in addition to a prestige boost in what is growing into a highly competitive market.

COSTS: In terms of costs, Turkish health care providers are able to offer prices that are far lower than those in more expensive markets like Europe and North America. The US, with some of the world’s highest health care costs, is perhaps the most telling example. A heart bypass there, for example, could cost between $129,000 and $144,000, whereas the same procedure in Turkey costs between $11,375 and $15,000, a full 90% less. Even European countries with lower costs than the US are well above Turkish rates. A spinal fusion in Germany costs between $13,500 and $15,000, while the same ğlu, operation is about $7125 in Turkey, according to the Foreign Economic Relations Board (DE IK).

“The Ministry of Culture and Tourism is supporting the promotion of Turkey abroad with incentives for Turkish health firms to attend conferences, produce international commercials and purchase foreign hospitals that can be used as a bridge for Turkey into foreign markets,” Dr Ru şen Yıldırım, the CEO of Kent Hospital Izmir and chairman of the DEIK Health Tourism Business Council – a reference point for institutions, insurers and medical travellers – told OBG. “This also helps Turkey maintain a cost-competitive edge in the latest treatments and procedures.”

Undercutting European prices is important because the majority of medical tourists in the country come from Europe. In 2010 Germans made up roughly 36% of arrivals, by far the highest of any country, followed by the Netherlands and Austria, which accounted for 8% and 4%, respectively. Although Turkish hospitals can provide services at a lower cost, the income from them is still invaluable for hospitals. In 2008 the government started to limit Turkish citizens’ co-payments, which cut into health providers’ margins. The move encouraged an increase in hospitals to accept more patients from abroad. “[W]e realised the potential of international clients,” Dr Hasan Ku ş, president of health care business development for Anadolu Medical Centre, a private hospital in Istanbul, told New York-based news site Eurasianet.org.

UP TO SNUFF: Winning the trust of foreign patients, however, is no easy task. To assure customers that their quality standards measure up to that of their rivals abroad, Turkish hospital groups have been working to gain accreditation from a number of internationally recognised health commissions. International accreditation is a relatively new phenomenon, and as a result, there is not yet any overarching international accreditation standard. In the past, most nations had their own schemes for accrediting national health care providers. The international agencies that currently operate have generally based their systems on the national systems from which they arose. QHA Trent, for example, runs its standards according to those of Britain’s National Health Service. The Canadian Council on Health Services Accreditation and the Australian Council on Healthcare Standards, on the other hand, have grown out of the standards in their respective countries.

The Joint Commission International (JCI), meanwhile, is a US-based standards agency. JCI is the global arm of the Joint Commission on Accreditation of Healthcare Organisations, a non-profit health accreditation organisation also based in the US. JCI standards enable hospitals to maintain patient safety and keep the risk of infection in their facilities at minimum levels. JCI accreditation has become among the most important criteria for medical travellers, and the organisation now works with hospitals, clinics and health ministries in over 80 countries, including Turkey. There are currently over 40 hospitals in Turkey accredited with JCI – the largest number for any country globally. These include private and university hospitals located in major urban areas: Adana, Ankara, Antalya, Bursa, Kocaeli and Izmir.

Quality control standards for equipment are also important for attracting foreign patients. Technischer Überwachungsverein (TÜVs) are German organisations that offer equipment inspections to ensure quality management and work environment safety. These are also attractive for foreigners, especially for German medical tourists. A number of Turkey’s health care providers, including Universal Hospital Group, Dünyagöz and Batigöz, carry TÜV certification.

Applying for and maintaining these accreditations can be expensive, costing tens of thousands of dollars per accreditation, and it is typical to hold a handful of certificates to assure potential patients from a wider geographical area. For health care providers, however, the benefits of increasing international prestige and attracting customers from abroad seem to outweigh the costs.

The government has also shown interest in providing care for non-Turkish patients at public hospitals. Foreign patient coordination centres are to be established in seven provinces – Istanbul, Ankara, Izmir, Antalya, Mu ğla, Aydın and Gaziantep – according to a MoH directive dated June 13, 2011. Foreign language services are also planned, providing translation services in the languages that are most common among visitors: English, German, Arabic and Russian.

A strong public presence in the sector could keep state officials in closer contact with medical tourism operators. “The government will now come to us instead of us going to the government, [and] they will ask us, ‘What do you think we can do to drive up these numbers?’” Abacıo ğlu told OBG. “What the government is doing right now for foreign patients will open up the sector.” In recent years, the number of medical tourists treated in state hospitals has shown some growth. In 2008, public hospitals treated about 6% of Turkey’s medical tourists. That percentage went up to 8% in 2010, according to projections based on data for the first eight months of the year compiled by Dr Aydın.

TRAVEL INCENTIVES: Turkish Airlines, the country’s flagship carrier, which is 49% owned by the Prime Ministry Privatisation Administration, is also involved in the medical tourism sector. The national carrier offers a number of incentives to travellers coming to Turkey for medical purposes. Passengers and two companions can receive up to a 20% discount, or up to 25% for passengers from the US, on airfares. In addition, medical tourists receive an excess luggage allowance and exemption from rebooking penalties provided the rebooking is for medical reasons.

OUTLOOK: In the past decade, the sector has seen major changes, including a rise in coverage and growth of private hospitals. Still, there are several challenges the country will have to face in the coming years. Raising the standards of care in rural areas remains a major issue, one that the private sector is addressing through expansion programmes. Maintaining affordability of care is also a growing concern as privatisation occurs.

The government for its part has expressed continued determination to push the health care sector forward and keep addressing issues as they arise. With fundamentals like increasing domestic and foreign demand, as well as rising disposable incomes, there seems to be a myriad of opportunities for sector growth.