GHG at a Glance

Industry and market overview

Georgia’s healthcare services market (including hospitals, polyclinics/outpatient clinics and pharma) was estimated to be worth GEL 3.5 billion in 2017. The market has maintained a strong compound growth momentum of 14% between 2011 and 2017, and is expected to continue growing at 8% between 2018 and 2021. Since the introduction of the UHC, its budget nearly doubled from GEL 338 million in 2014 to GEL 660 million in 2017 and now accounts for 68% of all state healthcare expenditure. Elective inpatient services and emergency services constitute the major part of the UHC budget, while outpatient services have limited coverage.

  • The total hospital market was GEL 1.3 billion in 2017, while the addressable market (total market adjusted to exclude the revenue from specialty beds) was estimated at GEL 1.2 million. The total hospital market is forecasted to grow at a compound annual growth rate of 7% between 2017 and 2021.
  • The polyclinic market (outpatient market, excluding the revenue from dental and aesthetic services) was GEL 0.7 billion in 2017 and is forecasted to grow at a compound annual growth rate of 10% between 2017 and 2021.
  • The total pharma market was GEL 1.5 billion in 2017 and is expected to grow at a compound annual growth rate of 9% between 2017 and 2021.

Healthcare service providers (both state and private) generate revenue from out-of-pocket payments (including fee-for-service and the UHC co-payments), transfers from state healthcare programmes and payments from private medical insurance companies. Pharma companies’ revenue generation is primarily driven by out-of-pocket retail revenue of the pharmacies, together with wholesale revenues from hospitals, insurance companies and the state. Medical insurance companies depend on revenues from medical insurance policies purchased by employers for their employees and by individuals for their own use. Out-of-pocket expenditure on healthcare in Georgia still prevails over public financing and private insurance. According to the Frost & Sullivan analysis, the share of out-of-pocket expenditure in total healthcare expenditure in Georgia was 57% in 2016, the share of Government expenditure 36%, the share of private medical insurance 5%, and the remaining 2% came from other sources. While the Georgian Government is the main source of hospital service financing in the country, the total Government expenditure on health is low at c.3% of GDP, compared to the 5% benchmark set by peer countries, which leaves significant room for growth.
Healthcare service market competition
Both state and private healthcare providers (polyclinics/outpatient clinics and hospitals) compete in the Georgian market with private providers accounting for the vast majority of the country’s total supply. The market is relatively fragmented, with the six largest competitors (all of which are private) accounting for only 40% of the total number of beds in the country. This may indicate further growth potential for both new and incumbent market participants through mergers and acquisitions. The outpatient clinics market is even more fragmented and no competitor controls more than a 1% market share, with the Group’s own market share at c. 3% as of 31 December 2018. Therefore, it is likely that there will be further consolidation and the emergence of a large participant in the market via mergers and acquisitions.
Pharmacy and distribution market competition

The pharmaceutical market in Georgia was highly concentrated, with three major players holding approximately 74% of the market share. After the acquisition of the third and fourth largest pharma companies, GHG became the largest player on the pharma market and is now present in the whole Georgian healthcare ecosystem, maintaining the leading position. Two main competitors in the pharma market are also present in the hospital and medical insurance markets, with much smaller market shares than GHG. GHG therefore remains the only large player across all of these markets as the competitors have not managed so far to establish scalable businesses in the respective sectors.

Medical insurance market competition

As of 30 September 2017, c.550,000 voluntary medical insurance packages have been reported to the Insurance State Supervision Service of Georgia. The Georgian insurance market is represented by 14 companies, 11 of which operate in the health insurance segment. The market is highly concentrated, with top three companies holding a c.74% market share by Gross Premium Revenues (“GPR”).

In 2018 our insurance business won two large tenders, retaining the country’s largest insurance client - the Ministry of Internal Affairs (“MIA”) acquiring a significant new corporate client – the Ministry of Defense (“MOD”), as a result the number of GHG’s insured individuals reached c,230,000 in 2019.

Healthcare service gaps
Despite significant reforms to the Georgian healthcare system, a number of healthcare service gaps remain, particularly in relation to the medical equipment available and the laboratory/diagnostics services provided in Georgia. There are limited numbers of items of medical equipment such as gamma knife units (none in Georgia) and positron emission tomography computers (only one unit in Georgia). There are also shortages in Georgia of the following equipment: laparoscopic instruments, equipment for interventional endoscopy including endoscopic retrograde cholangiopancreatography, microwave tissue ablation systems, arthroscopes, choledocoscopes, muscle reinnervation systems, intraoperative ultrasound probes, vacuum machines, Flowtron mechanical compression units and pH meter units. In addition, the Georgian healthcare system suffers from limited provision of some laboratory services: there are no dedicated pathology laboratories for certain tests (samples are often sent abroad for testing); there are limited paediatric oncology services, limited rehabilitation services, limited suitable In Vitro Fertilisation (“IVF”) facilities, no bone marrow transplant facilities other than GHG’s and no suitable genetic or molecular laboratories.
Universal healthcare programme

In March 2013, the UHC was introduced to address high private healthcare costs in Georgia. The UHC also supplemented and eventually replaced the existing two State Insurance Programmes (“SIPs”), making state-sponsored health coverage available on a significantly larger scale. The UHC is a Government-funded healthcare programme that provides basic healthcare coverage to the entire population, including more than two million people who had never held medical insurance and purchased healthcare services only on an out-of-pocket basis. Unlike the preceding SIPs, the UHC is not an insurance product but an undertaking by the Government to reimburse healthcare providers directly for the delivery of treatment to patients. The programme is subject to certain limits and service and coverage exclusions, beyond which patients have to fund treatment on an out-of-pocket basis or rely on private medical insurance coverage. The key principles of the UHC are as follows:

  • The UHC covers basic outpatient elective services, most emergency care services, and elective inpatient services, subject to certain limits.
  • The UHC is fully financed by the Government from tax revenues and administered by the Social Service Agency (“SSA”) – a body under the Georgian Ministry of Labour, Health and Social Affairs (“MOH”). In most cases, beneficiaries have an annual limit of GEL 15,000 for planned procedures. For emergency admissions, the limit is GEL 15,000 per incident for all individuals, except those from certain socially vulnerable groups, pensioners and children under six. For planned procedures, patients are required to obtain approval from the SSA prior to treatment. These thresholds limit the services that a patient can access and result in the need for co-payments by patients for elective services and certain emergency services. There is a maximum two-month waiting time to obtain approval for elective inpatient services.
  • The UHC beneficiaries are entitled to select any healthcare provider of their choice, provided it is enrolled in the programme as a provider of the requested service.
  • Any provider, whether private or state, is eligible to participate in the programme.

Pricing, reimbursement and settlement of services under the UHC programme: The actual prices that are charged to patients by healthcare providers are not regulated by the state. However, the reimbursement paid by the SSA to the healthcare providers under the UHC differs depending on the type of service provided and the location of the facility (in some cases reimbursement rates are higher in Tbilisi than in the regions).

Outlook and main growth drivers
The main growth drivers are the following:

  • Population income growth and rising health awareness. Economic growth in Georgia is expected to outperform most of the developed and CIS countries – the IMF forecasts annual average real GDP growth in Georgia at 4.9% in 2018-2022 and per capita GDP is expected to surpass US$6,000 in 2022, the highest in the Caucasus region. Rising population incomes and awareness supported by Government efforts to develop preventive medicine will create growth opportunities for the polyclinic segment.
  • Growth of private investment in technology and equipment. While Georgia has achieved significant success in certain fields of healthcare, some areas remain underdeveloped and there are a number of service gaps in the country. Many laboratory tests are still performed abroad. There is only one PET/CT scanner in Georgia, while at least four are required to comply with the WHO recommendations. Private investment into high-technology equipment should strengthen local capabilities, increase the number of procedures and improve the quality of care.
  • Growth in the number of outpatient visits. Georgia lags behind most of the developed countries in terms of the number of outpatient visits per capita. This is partially explained by cultural differences (practices of self-treatment, distrust of outpatient service providers). However, with growing private investment into this segment, expected market consolidation and Government support, the market will see growth in outpatient visits, which will positively impact the polyclinics’ revenues.
  • Growth of hospitalisation rates. There is at least 15% growth potential in hospitalisation rate, which is likely to depend on the pace of introduction of new technologies and development of local skills.
  • Supportive Government healthcare policies. Since its introduction in March 2013, the UHC has provided the entire population with access to basic healthcare and is expected to maintain increase in demand for medical care, particularly hospital services. From 2017, the Government budget on healthcare is expected to become stable, and is estimated to grow in line with the country’s nominal GDP growth rate. Though the new Government initiative introduced in 2017 – excluding individuals with annual income of over GEL 40,000 (c.32,000 people) from the UHC coverage and presenting a limited UHC coverage for middle-income citizens, i.e. those with an income of over GEL 1,000 per month but under GEL 40,000 per year (c.400,000 people) – is intended to make the UHC spending more efficient and may potentially expand the private medical insurance market.
  • Growing awareness of the benefits of medical insurance among the population in Georgia. This may lead to a greater demand for private medical insurance from employers and self-paying customers who seek better quality services, quicker treatment or more advanced procedures than are covered within the UHC framework.
  • Strong growth in healthcare expenditure. On a per capita basis, healthcare spending remains low compared to certain emerging market peers (such as Malaysia and the UAE) pointing to further growth potential. At the same time, economic growth and rising disposable incomes of Georgian citizens, including those living outside the capital city, will also lead to higher spending on pharma and healthcare services, particularly in consideration of the potential increase of corporate medical insurance plans for employees.
  • Favourable demographics. The country has an ageing population, with an increasing proportion of its citizens aged over 60 (as per the latest UN Population Division data, the share of people aged 60+ in Georgia will increase to 24% by 2025 from 20% in 2015), who will require more frequent, better and prolonged treatments. Increasing incidence of certain lifestyle-related diseases (in particular, hypertension, ischemic heart diseases, cerebrovascular diseases and diabetes) will also boost demand for medical care and medicines. In addition, healthy fertility rates will drive demand for obstetric and childcare services.
  • Development of medical tourism in the longer term. Improving facilities and standards have the potential to develop health tourism by attracting citizens of neighbouring countries and, conversely, retaining the Georgians currently seeking treatment overseas in the long run. The country is also highly price competitive compared to other medical tourism destination countries and possesses unique natural resources (climate, mineral waters). The number of international arrivals in Georgia reached a record high of 7.2 million in 2018, up 11.1% y-o-y. Some potentially attractive segments for medical tourism may be IVF, plastic surgery, ophthalmology, transplantology, orthopaedics and oncology.