As CEO of the growing Romania-based powerhouse Regina Maria, Fady Chreih is working to remake the country’s attitude about — and its access to — routine and preventive care.
Regina Maria is the leading network of private healthcare facilities in Romania. Under its auspices are a broad range of healthcare delivery facilities: Four hospitals, including Baneasa Hospital for maternal-fetal medicine, which is the only healthcare facility in the country with accreditation from the Joint Commission International, and also the triple-internationally accredited Ponderas Academic Hospital; 33 multi-specialty clinics; more than 180 partner multi-specialty clinics; and 11 imaging centers for diagnostic services. In 2016, the company had revenues of US$96 million (91 million euros), up 40 percent over 2015. It’s targeting 30 percent growth in 2017, in part because of another year of aggressive acquisitions and the opening of a new hospital in the Romanian city of Cluj.
Regina Maria was founded in 1995 as Centrul Medical Unirea, or CMU. It was renamed in 2011 after being acquired by Boston-based Advent International. In 2015, the company was acquired again by Mid Europa Partners, a London-based investment fund that focuses its services on Central and Eastern Europe and Turkey.
One big reason Regina Maria is so focused on expanding the number of its healthcare facilities nationally is that it also sells what it calls preventive care packages for Romania’s citizens. These packages can include both routine primary care and outpatient services. They are sold primarily as employee benefits, and at the end of 2016, Regina Maria had nearly 400,000 of these contracts. Customers use the plans for everything from obstetrics and gynecology to pediatric care and dermatology. CEO Chreih estimates that the Romanian market for these packages could grow to two million contracts by 2020 — which would mean preventive coverage for about one out of every ten Romanian citizens. He sees particular opportunity in targeting sales through the country’s small and medium-sized enterprises (SMEs).
Chreih is a native Romanian, and grew up in Bucharest. He came to the healthcare field after working in commercial banking, including stints at Banca Transilvania as the deputy head of its SME division, and then as the head of its healthcare division. He has been with Regina Maria since 2010, and its CEO since 2013.
Chreih sat down for a conversation with Global HealthCare Insights’ Leslie Brokaw during a January trip to Boston, where he was at the Harvard Business School participating in a leadership program with YPO, the international program for young executives.
Is Romania making high quality, affordable healthcare available to its citizens?
Ok, that’s a reach. Officially, everybody is fully covered through their healthcare state insurance program — everybody who is either an employee, a young person, a pensioner, or even in official unemployment. They are all officially covered for healthcare, from prevention to difficult surgeries, treatments and medication, with certain limitations.
But Romania has 19 million people, and there are a lot of challenges to the system, including the lack of infrastructure. It used to be worse in terms of healthcare spending and percent of GDP. If we look at the last 20 years, for instance, and if we benchmark ourselves with the other European countries on how much our government spends on healthcare, we have one of the lowest percentages. There were years when we were below five or six percent. We’re not benchmarking it with the U.S. or the U.K.; these are countries spending 10 or 12 percent. But there is, apparently, a sweet spot where we could be somewhat comfortable, at let’s say seven to eight percent — but that’s when you already have a good infrastructure. But Romania lacks that, so actually the spending should be higher in order to improve the standards.
And by infrastructure do you mean specifically the hospitals and facilities?
Yes, and also technical equipment. We do see pockets of excellence in the public state system, but they are mainly people-driven — heads of units and hospitals, or chiefs of sections and so on — who are heading this excellence. In Romania, it’s not a government-led process.
The private sector is not a substitute of public healthcare; it’s complementary. Private healthcare right now in Romania is on a very good trend: It has been growing in the market in the last three years at about nine to ten percent organically. That’s a very good market growth. We, as a company, have been growing in the last three years by 20 percent on average organically. We had a very good year in 2016, but we also had acquisitions which are complementary to our business model.
So on whether Romania is making high quality, affordable healthcare available to its citizens, it depends geographically and it depends on what types of healthcare. Generally, it’s not in great shape. It needs a lot of fixes, but healthcare is a big issue everywhere these days.
Are most people receiving their services from public hospitals, versus private hospitals?
There are about 560 hospitals, out of which under 200 are private ones. Public government funding is still about 80 percent of the overall healthcare spending in Romania, and about 20 percent is private. Government spending is still the biggest funder.
How do Regina Maria’s preventive health packages work?
Romania spends quite a lot on hospitals and very little on prevention. What we do as a company is try to convince people to go to the doctor when they are in better shape and to look at prevention treatments and plans — so they won’t reach hospital facilities. It’s kind of an inverse pyramid on the government side that needs to be reversed here in Romania.
The discussion nowadays is, how do you fund healthcare needs? Funding is a big issue in every country. Public health insurance in Romania, you like it or not, you have it, and you pay for it from your salary. One of the things our company created 20 years ago was a subscription model to treat outpatient needs, which we sell to companies. Our private health plans are completely privately paid either by companies for their employees or by individuals.
We are not officially an insurer, although it sounds like it. It’s very similar as a concept to the Kaiser Permanente model in the U.S. or the Bupa model in the U.K. We get a population from a company and we have to take care of them for a certain fixed amount that we get monthly from that company. That means we are very focused on making sure that those people are healthy, because otherwise the incurred costs are on us.
And they retain the option of going to one of your private hospitals or to a public hospital?
Yes, although while our plans cover outpatient services, hospital inpatient care is not included. So if you need surgery, you have to pay out of pocket, or to have an international insurance. We have diagnostic treatment included, which more people are accessing. We have imaging — MRIs, CT-scans — which are also included. We have had a shift from preventive care to preventive and treatment. But we don’t include surgeries.
What is the cost for the plans?
So we sell to individuals, SMEs [small or medium-sized enterprises], and corporations. And of course the difference is huge. Individual plans are the most expensive one: It’s roughly 20 euros per month for the cheapest, and 70 euros for the most expensive. Individual plans are a very small part of our business — out of 400,000 plans, about 10,000 are individual ones. For companies, you get certain discounts, depending on the number of people you get on board. And for corporations it’s completely tailor made, and the per-person cost is lower still.
We were the first company to look at the SME market, because everybody is focusing on the blue chip companies. We have quite a big market share on the blue chip companies, at least 44 percent, so for the next five years we’re focusing on SMEs. We did a pilot and we tested to see how it worked, and this year we’re launching the full spectrum of products.
Regina Maria has been extremely active in acquiring clinics and other facilities in Romania in recent years. In 2016 especially, it seemed there was some acquisition or another being announced every month.
Starting in 2010, the company began doing major investments in infrastructure, and began to expand from Bucharest to many other cities. Now in 2017, we are present in 12 cities in Romania. We have a very focused approach on capital expenditure and expansion, as well as on growing organically. It’s a chicken and egg situation — you can not sell health plans if you don’t have healthcare that looks good in that city because people won’t buy it. You need a health plan where people can utilize the services. So the delivery of the healthcare is extremely relevant.
Regina Maria was acquired by an investor company, Mid Europa, in 2015. How does that work in terms of future acquisitions? Are they doing add-on funding?
First of all, I’m very happy to have Mid Europa Partners as shareholders. They have previous experience in healthcare, so it was very relevant from that perspective. And secondly, yes, it’s a combination of self-funding — adding funds — and bank funding. We are focused on having good-quality acquisitions that are complementary to our business model and very focused on delivering sound growth. It’s been going very well for the past two years that we’ve been together.
Is it unusual for a hospital group to be bought by an investor company like this?
It’s not unusual, because Romania has full potential on healthcare. We have seen it in other countries, and also in established markets where consolidation is happening in healthcare. There are good stories to be written for healthcare.
Do you ever think about doing partnerships with organizations in the U.S.?
Not yet, because the U.S. is a little bit too far away for our business model and what’s happening in Romania. We are more focused on what’s happening in Europe.
What does Regina Maria have planned for the next year?
The plan is to continue to grow. We are an organization with 3,500 people, and we live in challenging times — as does everybody in healthcare. But, fortunately for us, we are an employer of choice, so we don’t have trouble finding good people to work for us right now. Of course, we have strategic plans on how to address the general world-wide shortage of personnel, from nurses up to physicians.
We are doing capital expenditure, and we are still building up the network — still investing in new equipment, creating new facilities and expanding into new cities in Romania. For instance, the biggest project that we have this year is developing a new hospital in the city of Cluj, which is second to Bucharest in terms of importance. We hope to open it by the end of the year.
There was a news item about an investment by the World Bank into a hospital in Cluj. Is that yours?
The Romanian government has a plan to build six new regional hospitals, with part of the funding coming from the World Bank. And one of the cities targeted is Cluj. But this discussion has been going on for about five years now and there is no feasible project. One of the questions the Cluj mayor asked me is, “Are you afraid we’re going to build a big hospital?” And I said, “No, because I am going to open it sooner than you guys.” And those things are complementary. On some parts we’re competing, but on the majority we are not competing.
— Leslie Brokaw
Leslie Brokaw is a contributing editor at GHCi.