GHG at a Glance

Industry and market overview

Georgia’s healthcare services market (including hospitals, polyclinics and pharma) was estimated to be worth GEL 3.8 billion in 2018. The market 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 more than doubled from GEL 338 million in 2014 to GEL 704 million in 2018, accounting for 65% of all state healthcare expenditure. For 2019, the UHC budget is projected at GEL 754 million. Elective inpatient services and emergency services constitute the major part of the UHC budget, while outpatient services have a limited coverage.

  • The total hospital market was estimated at GEL 1.4 billion in 2018, while the addressable market was estimated at GEL 1.3 billion. The total hospital market is forecast to grow at a compound annual growth rate of 7% between 2018 and 2021.
  • The polyclinic market (outpatient market, excluding the revenue from dental and aesthetic services) was estimated at GEL 0.7 billion in 2018 and is forecast to grow at a compound annual growth rate of 10% between 2018 and 2021.
  • The total pharma market was estimated at GEL 1.6 billion in 2018 and is expected to grow at a compound annual growth rate of 9% between 2018 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 exceeds public financing and private insurance. The share of out-of-pocket expenditure in total healthcare expenditure in Georgia was 61% in 2016, the share of Government expenditure was 37% and the remaining 2% came from other sources.

Healthcare service market competition

Both state and private healthcare providers (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 3%. Therefore, it is likely that there will be further consolidation and emergence of a large participant in the market via mergers and acquisitions.

Pharmacy and distribution market competition

The pharmaceutical market in Georgia is highly concentrated, three major players holding approximately 75% of the market share. 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 these markets as the competitors have not managed so far to establish scalable businesses in all respective sectors.

Medical insurance market competition

As of 30 September 2018, c.554,000 voluntary medical insurance packages have been reported to the Insurance State Supervision Service of Georgia. The Georgian insurance market is represented by 17 companies, 12 of which operate in the health insurance segment. The market is highly concentrated, with top three companies holding a c.75% market share by Gross Premium Revenues (“GPR”). After winning the recent tenders and increasing its client base starting from 2019, our medical insurance business gained more than one-third market share by revenue and became the Country’s largest medical insurer.

Healthcare service gaps

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 are two PET/CT scanners in Georgia, while at least four are required to comply with the WHO recommendations. 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 pH meter units, Intraoperative Neurophysiology and navigation system in Neurosurgery. Private investment in high-technology equipment should strengthen local capabilities, increase the number of procedures and improve the quality of care.

Universal healthcare programme

A Government-funded healthcare programme that provides basic healthcare coverage to the entire population was introduced in March 2013 and eventually replaced the existing two State Insurance Programmes (“SIPs”). UHC is 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 the patients have to fund treatment on an out-of-pocket basis or rely on a private medical insurance coverage.

  • 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 Georgian healthcare market has shown double-digit growth in recent years, estimated at GEL 3.8 billion in 2018 and forecast to reach GEL 4.8 billion by 2021. The hospital segment accounted for 37% of all revenues generated in the 2018 healthcare market, outpatient clinics 20% and pharma 43%. According to forecasts by Frost & Sullivan, the total healthcare market is expected to grow at a compound annual growth rate of 8% from 2018 to 2021. The outpatient clinic segment is forecast to outpace the total market and grow at a compound annual growth rate of 10% in the same period. 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 5.1% in 2019-2023 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.
  • Filling the service gaps – 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 are two PET/CT scanners in Georgia, while at least four are required to comply with the WHO recommendations. 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 pH meter units, Intraoperative Neurophysiology and navigation system in Neurosurgery. Private investment in 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 in 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 market consolidation, 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 made basic healthcare available to the entire population and is expected to maintain increase in demand for medical care, particularly hospital services. The Government budget on healthcare is expected to grow in line with the country’s nominal GDP growth rate. For 2019, UHC budget is up 7% and total healthcare budget up to 6% y-o-y.
  • 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. However, 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 granting a limited UHC coverage to 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.
  • 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, should also lead to higher spending on pharma and healthcare services, particularly considering the potential increase of corporate medical insurance plans for employees.
  • 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 (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 medium to long term. Improving facilities and standards have the potential to develop health tourism by attracting the citizens of the 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 tourists in Georgia reached a record high of 4.8 million in 2018, up 16.9% y-o-y. Some potentially attractive segments for medical tourism may be IVF, plastic surgery, ophthalmology, transplantology, orthopedics and oncology.