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Turkey

HEALTHCARE OVERVIEW

Q1 2014

2 | Colliers Internationall | Accelerating Success | www.colliers.com/en-gb/unitedarabemirates/services/healthcare

OVERVIEW REPORT | TURKEY | HEALTHCARE | FIRST QUARTER | 2014

For further information please contact:

Mansoor Ahmed MAS, MSc

Director | Development Solutions

Healthcare | Education | PPP

[email protected]

P.O. Box 71591 | Dubai | UAE

Main: +971 4 453 7400

Mobile (UAE): +971 55 899 6091

Kerim Cin

Managing Partner | Turkey

[email protected]

Main: +90 2122 88 6262

Fax: +90 212 34 707 94

Introduction COLLIERS INTERNATIONAL

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• $2.0 billion in revenue

• More than 13,500 employees

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78,000 sale and lease transactions

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SERVICES OFFERED BY COLLIERS INTERNATIONAL

• Strategic & Business Planning

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• Market & Competitive Studies

• Highest & Best Use (HBU) Studies

• Market & Financial Feasibility Studies

• Financial Modelling

• Mergers & Acquisitions Assistance

• Buy side Advisory/Sell side Advisory

• ‘Sale and Leaseback’ Advisory

• Public Private Partnership (PPP) & Privatisation

• Operator Search & Selection and Contract Negotiation

• Land, Property and Business Valuation

• Asset & Performance Management

• Site Selection & Land / Property Acquisition

• Performance Management and Industry Benchmark

Surveys

The healthcare system in Turkey is being developed under the 2003 –

2013 Health Transformation Program. The purpose of this program is

to increase the quality and efficiency of the healthcare system and

enhance access to healthcare facilities with the introduction of a

number of reforms.

With an estimated population of 76 million residents and an annual

growth rate of 1.8%, the Turkish healthcare sector caters to a rapidly

growing population, and the concurrent increasing demand on the

healthcare sector.

According to the Turkstat data, 49.3% of the Turkish population is

below the age of 30.

The largest quintile age group within the Turkish population lies

between the ages of 30 to 34 years, accounting for 8.5% of the total

population.

Males represent a higher share across the younger age groups, yet

females dominate the older age groups, starting from the 55 - 59 year

age group, which evidently indicates a higher life expectancy.

Approximately 44% of the population in Turkey is centralised in 8

provinces. The most populated province is Istanbul with 18.3% of the

population.

The Healthcare sector in Turkey is primarily managed by the

Government through the Ministry of Health (MoH), universities and

other semi-public organisations.

Nevertheless, the government has been encouraging the private sector

to invest in the healthcare sector and gain a wider role, which

consequently resulted in the number of private hospitals reaching 503

in 2011, compared to 271 private hospitals in 2002.

The number of beds per 1,000 population has been consistently

increasing over the past decade, reaching 2.54 in 2011.

Between the period of 2000 – 2011, the number of doctors (including

dentists) has reached 147,128 achieving a CAGR of 3.5%.

During the same period the number of nurses has reached 124,982,

achieving a CAGR of 5.5%.

The overall supply of healthcare facilities struggles to keep pace with

the burgeoning population, a situation recognised by the Government

who have recently introduced initiatives to encourage the private sector

to match the shortfall and benefit from this potentially lucrative sector.

The Turkish health insurance industry sector underwent a consolidation

process during the 2006 – 2008 period, in order to merge the existing

providers under one centralised umbrella, Sosyal Sigortalar Kurumu

(“SSK” or Social Insurance Organisation), and provide efficient

coverage for all citizens.

Total expenditure on healthcare (public and private) in Turkey remained

slightly under 6% of GDP between 2004 and 2007. In 2010, the ratio

has increased slightly to 6.3% according to the Ministry of Health.

Colliers International Healthcare Overview provides a brief snapshot

of the key factors impacting the Turkish Healthcare sector and its

future outlook.



1.1 ECONOMIC PERFORMANCE

The Turkish economy has demonstrated strong fundamentals over the past decade, achieving positive indicators, compared to its neighbouring markets.

The Turkish government increased its efforts following the global financial crisis to attract private investors into the services and infrastructure sectors through establishing initiatives and incentive programmes that support their PPP policies.

Accordingly, the government provided various tax and non-tax incentives to foreign investors, in line with those provided to domestic companies. These include customs and VAT exemptions on various imported or locally delivered goods, including machinery and equipment, as well as priority regions offering incentives such as free land and energy support. Investors are also able to benefit from R&D support and market research with the aim of encouraging exports and increasing the competitiveness of Turkish firms in international markets.

Following the global financial crisis, the Turkish economy recovered from a – 4.8% contraction in 2009 to achieve positive growth in subsequent years due to the aforementioned stimulating policies and procedures.

The Turkish economy achieved GDP growth of 2.2% in 2012, surpassing developed economies such as Japan, Brazil, UK and even the EU average.

As of the second quarter of 2013, the Turkish economy achieved actual growth of 4.5%, surpassing the IMF initial estimates which were set at 3.1%.

The general government budget deficit was realized at 2.0% in 2012, satisfying the Maastricht criteria of 3.0% and outperforming 18 EU economies in the process.

Since 2002 the GDP per capita in Turkey has tripled from USD3,492 to USD10,504 in 2012.

The inflation rate was 7.4% in 2013, According to the Ministry of Economy in Turkey, declining from 10.6% at the end of 2011.

The debt-to-GDP ratio in Turkey is one of the healthiest in the world, currently standing at a sustainable 36.1%, compared to higher ratios exhibited by several developed economies such as Germany, England and France.

The unemployment rate dropped to 8.8% in 2013, compared to 10.1% at the end of 2012, in accordance with positive economic performance.

According to the World Bank, Turkey has the fifth largest qualified labour force amongst the EU countries, after Russia, Germany, England and France.

In recent years, the Turkish banking sector has taken an increasingly large role in brokering major project finance deals, benefiting in many cases from its increasingly liquid balance sheets.

Nevertheless, in spite of the declining interest rates to record low levels, the Turkish central bank interest rate is still high in comparison to most European countries as the Central Bank holds off matching monetary-policy tightening, prevalent in other developing countries.

In conclusion, following a temporary economic slowdown in 2009, the Turkish economy started recovering from 2010, and is expected to grow by a CAGR of 7.9% (real GDP) during the 2013 – 2015 period.

Impact on Healthcare: The overall positive performance of the Turkish economy ultimately fares positively on its healthcare industry. Anticipated increase in GDP growth rates supported by the government’s efforts to establish a transparent market, will assist in strengthening the market fundamentals and encourage private sector investment from both; the local market and increased FDI in the coming years.

Source: World Bank, Ministry of Economy, Colliers International

2013

Exhibit 1: Turkey Real GDP Growth (%)

Exhibit 2: Turkey vs. World Real GDP

Growth Rate, 2012

Source: IMF, Ministry of Economy, Colliers International 2013

Source: Economist Intelligence Unit (EIU) 2012, Colliers

International 2013

Exhibit 3: Turkey vs. Europe - Debt to

GDP ratio (%)

1. Economic Overview of Turkey

7.8

%

4.0

%

3.9

%

3.4

%

3.1

%

2.2

%

2.2

%

2.0

%

0.9

%

0.2

%

-0.2

%

-1.4

%

-2.4

%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Ch

ina

India

Me

xic

o

Ru

ssia

Germ

any

Turk

ey

US

A

Japa

n

Bra

zil

UK

EU

Spain

Ita

ly

Gro

wth

(%

)

0.7%

-4.8%

9.2% 8.8%

2.2%

3.1%

4.0%

5.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2008

2009

2010

2011

2012

2013 e

2014 (

f)

2015 (

f)

Gro

wth

%

156.9%

127.0%

123.6%

117.6%

90.2%

90.0%

85.3%

84.2%

81.9%

73.4%

71.2%

55.6%

54.1%

36.1%

0% 50% 100% 150% 200%

Greece

Italy

Portugal

Ireland

France

England

EU

Spain

Germany

Austria

Netherlands

Poland

Slovenia

Turkey

Ratio (%)



2.1 DEMOGRAPHIC ANALYSIS

Turkey is one of the highest growing populations in Europe. According to Turkstat, the Turkish population will stand at 76.6 million by the end of 2013, achieving an overall growth of 1.4%.

Turkey’s population growth rate currently ranks third across Europe, following Ireland and Cyprus, as opposed to various developed countries that are shrinking such as Germany, Russia and an EU average of 0.16%.

Males in Turkey constitute 50.2% of the total population, the majority of which belong to the 30 – 34 year age group, a category between Generation X (1965 – 1980) and Generation Y (1981 – 2000). The population below the age of 34 years accounts for 58.9% of the total population in Turkey (Refer to Exhibit 6).

Turkey is currently witnessing massive urbanisation, accompanied by the current demographic breakdown and the imminent generational shift over the upcoming decades is set to further increase the presence of lifestyle diseases within the Turkish society.

The rapidly growing young population is one of the key factors driving demand for the real estate and healthcare sectors along with the dynamics of the average household size.

2. Demographic Overview of Turkey

Source: Turkstat, Colliers International 2013

Exhibit 5: Population Breakdown by Province

Exhibit 6: Age - Gender Distribution of Turkey’s Population

Consequently, as the profile of the Turkish population shifts from “baby boomers” towards a dominant younger demographic, the need for healthcare services both in terms of disease patterns and type of healthcare services, is expected to radically transform (Refer to Exhibit 7).

Source: Turkstat; Colliers International 2013

Exhibit 7: Demographic Structure of Turkey

The Rise of Generation X, Y & Z and the resultant Impact on Healthcare Demand

•Lifestyle diseases (also sometimes called diseases

of longevity or diseases of civilization

interchangeably) are diseases that appear to

increase in frequency as countries become more

industrialised and people live longer. They can

include Alzheimer's disease, atherosclerosis,

asthma, some kinds of cancer, chronic liver disease

or cirrhosis, Chronic Obstructive Pulmonary Disease,

Type 2 diabetes, heart disease, metabolic syndrome,

chronic renal failure, osteoporosis, stroke,

depression and obesity.

•Some analysts maintain a distinction between

diseases of longevity and diseases of civilization.

Certain diseases, such as diabetes, dental care, and

asthma appear at greater rates in young populations

living in accordance with the “Western Lifestyle”; as

their increased exposure is not related to age, so the

terms cannot accurately be used interchangeably for

all diseases.

Source: Turkstat 2013; Colliers International 2013

Exhibit 4: Projected Population in Turkey

70.5

9

71.5

2

72.5

6

73.7

2

74.7

2

75.6

3

76.6

8

77.7

4

78.8

2

79.9

2

81.0

3

82.1

5

64

66

68

70

72

74

76

78

80

82

84

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Po

pu

lati

on

/ M

illi

on

s

4,000 3,000 2,000 1,000 0 1,000 2,000 3,000 4,000

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80 - 85

Thousands

Ag

e

Male Female

Source: Turkstat 2013; Colliers International 2013

Istanbul currently accommodates the

highest population across Turkey, with an

18.3% share from the total population.

56.2%

2.8%

6.6% 2.8%

3.6% 2.1% 2.4%

18.3%

5.3% Rest of Turkey

Adana

Ankara

Antalya

Bursa

Diyarbakir

Gaziantep

Istanbul

Izmir



3. Healthcare Sector Overview Exhibit 8: Breakdown of Hospitals in Turkey

by Sector 3.1 KEY PLAYERS

• Ministry of Health (“MoH”): Approximately 57.8% of all hospitals in Turkey are owned and operated by the MoH (Refer to Exhibit 8). These hospitals provide basic healthcare services, as well as specialised facility centres.

• Other Governmental Organisations: Health treatment in other government and quasi organisations is effectively free for (government) employees, typical organisations would include The National Guard, Ministries of Defence and Aviation and the Royal Commission.

• Private Sector: Private hospitals account for the second largest share in the Turkish Healthcare market, with 503 hospitals in 2013 experiencing consistent growth since 2002, with governmental support.

• Other: This sector includes hospitals owned by the Ministry of Defence, municipalities and other public institutions. Total number of hospitals within this category has been experiencing a drop since 2002, with 45 hospitals in 2013 compared to 61 hospitals in 2002.

A family practitioner service has been in place since early 2005 aiming at the avoidance of unnecessary hospital visits and the improvement of primary care, especially in rural areas. Under the scheme, a family general practitioner (GP) will function as a gatekeeper to the healthcare system. However, due to lack of sufficient trained GP’s, the full implementation of the system is expected to take longer.

3.2 BUDGET ALLOCATION

Total expenditure on healthcare remained slightly under 6% of GDP between the period of 2001 and 2006. The ratio increased slightly starting from 2007 reaching 6%, above some other developing countries at the time such as China (4.7%), India (5%) and Russia (5.3%).

In 2009, following the global economic crisis, the allocated budget decreased as a nominal sum yet the government resorted to increasing the healthcare share out of its GDP to 6.7%.

The healthcare expenditure as a share of GDP remained constant throughout the subsequent years, whilst the economy was swiftly recovering, which resulted in an allocated budget of USD 52 billion in 2011, compared to USD31.4 billion in 2006.

The GDP share for healthcare currently remains steady at 6.7%, supported by increasing governmental revenues.

Turkey’s healthcare spending as a percentage of the GDP of 6.7% is one of the lowest when compared to some of the developed neighbouring countries, yet the budget share significantly exceeds GCC allocations.

Source: Ministry of Health 2011, Colliers International 2013

Exhibit 9: Healthcare Budget in Turkey (USD

Millions)


Exhibit 10: Healthcare Spending as % of GDP (Turkey vs. EMEA)

Source: UNDP 2012, Colliers International 2013

21,5

63

26,9

56

31,4

19

38,9

16

44,6

02

41,1

84

48,9

88

51,9

12

34%

25%

17%

24%

15%

-8%

19%

6%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

-

10,000

20,000

30,000

40,000

50,000

60,000

Perc

en

tag

e

US

D (

Mil

lio

n)

Healthcare Budget Allocation (US Million)

% of Total Budget

Budget Growth %

17.7

%

11.9

%

11.6

%

11.3

%

9.5

%

9.4

%

9.0

%

6.7

%

1.9

%

2.3

%

2.7

%

3.3

%

3.7

%

3.8

%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

US

A

Holla

nd

Fra

nce

Canada

Sw

eden

UK

Fin

lan

d

Tu

rkey

Qata

r

Om

an

Ku

wait

UA

E

KS

A

Ba

hra

in

% o

f G

DP

Developed Nations

GCC

57.8%

4.5%

34.6%

3.1%

Ministry of Health University Private Other



3.3 KEY HEALTHCARE INDICATORS

Comparing the healthcare indicators of Turkey to other developed countries such as the US, UK and Germany, demonstrates there is a shortage of doctors, nurses and beds in Turkey. (Refer to Exhibit 11).

Despite increasing numbers of physicians in recent years, Turkey currently holds the second lowest number of physicians per capita among all OECD countries.

Respectively, there is also a significant shortage of nurses in Turkey, with 1.7 nurses per 1,000 population, significantly below the average across neighbouring countries.

In order to address the shortage in hospital beds, the government has increased its effort to attract private investors.

The number of beds per 1,000 population currently stands at 2.5 beds, which lags behind various European markets; such as France (6.6 beds) and Germany (8.3 beds).

Exhibit 11 Key Healthcare Indicators (per 1,000 people)

Source: World Bank, Ministry of Health Statistics Yearbook 2012, Colliers International 2013

3.4 HOSPITALS & BED CAPACITY

There are currently over 1,453 hospitals, both within the public, university, private and other sectors providing various healthcare facilities and treatment throughout Turkey (Refer to Exhibit 12) with a total capacity of 194,504 beds.

The MoH has almost 58% of the total existing hospitals in Turkey and approximately 62.4% of the overall beds in the market, with an average of 144 beds per hospital.

However, the university hospitals account for only 4.5% hospitals, yet have 17.9% of the overall beds in the market, with an average of 228 beds per hospital.

The private sector hospitals account for 34.6% of total hospitals, whilst possessing only 16.3% beds of the overall beds in the market, with an average of 63 beds per hospital.

Overall, the average beds per hospital, for all types of hospitals across the Turkish healthcare market, currently stands at 134 beds per hospital (Refer to

Exhibit 13).

Exhibit 12: Key Healthcare Indicators –

Hospitals & Bed Capacity


Exhibit 13: Average Beds Capacity Per

Hospital Type

3.0

4.7

6

.6

2.5

3.2

8.3

3.0

9.8

13.4

9.3

1.7

9.9

11.4

9.5

2.4

2.9

3.4

1.7

2.1

3.7

2.8

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

USA Netherlands France Turkey Canada Germany UK

Beds Nurses Physicians

Type

Hospitals Beds

Number % Number %

MoH 840 57.8% 121,297 62.4%

University 65 4.5% 34,802 17.9%

Private 503 34.6% 31,648 16.3%

Other 45 3.1% 6,757 3.5%

Total 1,453 100% 194,504 100%

144

228

63

150

134

-

50

100

150

200

250

Nu

mb

er

of

Bed

s




-65.0%

-55.0%

-45.0%

-35.0%

-25.0%

-15.0%

-5.0%

5.0%

15.0%

25.0%

-

50,000

100,000

150,000

200,000

250,000

2005 2006 2007 2008 2009 2010 2011

Gro

wth

%

Ho

sp

ital B

ed

s

MoH University Private

Other MoH Growth % University Growth %

Private Growth % Other Growth %


3.5 PATIENTS VOLUME

The number of outpatients is considerably higher than inpatients. This is in line with the nature of outpatient treatments which are less than a day long with a high percentage of cases consisting only of consultations.

According to the latest data available, out of the total 337.8 million patients, almost 96.6% were outpatients compared with only 3.4% accounted for as inpatients (Refer to Exhibit 16).

In 2011, the average annual rate of visits per capita to MoH hospitals was 3.4 visits, whilst the overall average annual rate of visits per capita across all healthcare sectors (MoH, University and Private) was at 4.5 visits.

The average length of stay across all healthcare sectors (MoH, University and Private) in 2011 was 3.9 days, which is significantly lower than neighbouring markets and developed nations around the world such as Japan (18.2 days), Germany (9.5 days), UK (7.7 days) and France (5.7 days).

The average bed occupancy rate across all healthcare sectors (MoH, University and Private) in Turkey was at 65.5% in 2011, rising from 59.4% in 2002.


Exhibit 15: Growth of Hospital Beds in Turkey (2005 - 2011)

Exhibit 14: Breakdown of Hospitals in

Turkey by Specialty


Exhibit 16: Inpatients / Outpatients Analysis

89.7%

3.4%

1.7%

1.2%

1.0%

3.0%

10.3%

General Hospital Obstetric & Child Care

Opthalmology Pulmonalogy

Physical Treatment & Rehab Other

Patients MoH University Private Overall

Total (inpatients / outpatients) 2011 – Millions

Outpatients 247.6 22.8 56.0 326.4

Inpatients 6.8 1.6 3.1 11.4

Total

254.3

24.4

59.1

337.8

% Distribution (inpatients / outpatients) 2011

Outpatients 97% 93% 95% 97%

Inpatients 3% 7% 5% 3%

Total 3% 7% 5% 3%

% Distribution (Sector Breakdown)

Outpatients 76% 7% 17% 100%

Inpatients 59% 14% 27% 100%

Total 75% 7% 17% 100%

3.4 HOSPITALS & BED CAPACITY (CONTINUED)

An analysis of the bed capacity at hospitals in Turkey reveals that the total number of beds at MoH hospitals increased from 107,394 in 2002 to 121,297 in 2011.

While university hospitals and the private sector hospitals bed capacity increased from 26,341 and 12,387 to 34,802 and 31,642 respectively during the same period.

Other Hospitals run by the Ministry of Defence and municipalities have experienced a considerable decrease, during the same period, dropping from 18,349 beds in 2002 to 6,757 beds in 2011.

As presented below, the total number of hospital beds in Turkey increased from 164,471 in 2002 to 194,504 beds in 2011, with a CAGR of 1.9% over a period of ten years, whilst the total number of hospitals increased from 1,156 in 2002 to 1,453 in 2011, a CAGR of 2.6% during the same period.

As of 2011, the bed capacity at MoH hospitals is by far the largest across the healthcare market in Turkey, accounting for 62.4% of cumulative hospital bed supply in Turkey.



4. Overview of Health Insurance in Turkey

Exhibit 18: Private Insurance Policies;

4.1 MARKET OVERVIEW

In 2007, legal measures mandated that all citizens of Turkey would have access to free primary care, even if they are not covered under the social security system.

With the legislative changes unifying the three different social security and health insurance schemes (SSK, Bag-Kur and Emekli-Sandigi) into one unified social security institute, the Social Security Institute of Turkey (SSI) was established in 2006.

The SSI was accompanied by a law and the establishment of the Universal Health Insurance Fund (UHI Fund).

Concurrently, a claims and utilization management system called MEDULA has been established to process claims for all the health insurance funds including the Green Card system.

Source: Ministry of Health Statistics Yearbook; Colliers International

Research 2013

Social Security Institution (SGK)

• In 2006, the three main social security systems, namely SSK, BagKur and Emekli Sandigi, were combined under one single entity, the Social Security Institution.

• The population insured under the Green Card health scheme is also covered by the new social security institution, ensuring all citizens are supported.

• The Universal Health Fund was also established to create a central payments agency, efficient and effective in its operation.

• This new system is a part of Turkey’s ongoing healthcare reforms and aims to resolve the various outstanding hindrances that have plagued the Turkish healthcare system over the past decades.

2003 - 2005;

The Government announced the “Transformation Programme for Healthcare System”; MoH was restructured to assume the role of a “Regulator” rather than a service provider.

•Members of the Government Employee Pension Fund (GEPF) were allowed get service from both private hospitals and clinics

•The law on pilot implementation for family practitioner system was enacted

2005 - 2007;

•Patients covered by Social Security Organization (SSK) were allowed to get healthcare services from private hospitals and clinics.

•Ownership of SSK hospitals were transferred over to MoH.

•BagKur members have started to benefit from the services of private hospitals without direct referrals.

2008-2009;

•Three public insurance systems (GEPF, BagKur and SSK) were consolidated under one umbrella “SSI”.

•In June 2008, the government decided to put a 30% limit on the surcharge by private institutions.

•Private hospital license approvals were frozen.

•SSI introduced a co-payment scheme in order to eliminate artificial demand frauds.

2010-2012;

•Therapeutic area based contracts with private hospitals were allowed by SSI.

•The government has allowed semi top-up insurance through some changes in the regulations enabling private hospitals to apply a higher maximum surcharge ratio of 90%.

•SSI amends the service agreements signed with the healthcare providers, with new clauses invoke tighter regulation in order to prevent breaching the maximum limits of surcharge.

Exhibit 17: Key Milestones in Turkey's Health Insurance Sector

4.2 PRIVATE HEALTH INSURANCE GROWTH

Recent regulatory amendments in 2010 facilitated the rapid expansion of the private health insurance system in Turkey, with the introduction of the semi top-up insurance which allowed private hospitals to apply a higher surcharge ratio.

During the 2005 – 2011 period, the private health insurance market experienced rapid growth with a CAGR 14.1%, reaching 2.2 million private insurance policies in 2011.

Group policies represented 60% of the total issued policies in 2002, as opposed to 36.3% in 2011. The change in market composition is attributable to the exponential development of the individual policies market, which grew at a CAGR of 14.1%, reaching 1.4 million private insurance policies and controlling 63.7% of the private healthcare demand in 2011.

It is expected that the industry will continue to grow over the upcoming period with market fundamentals already set in place, along with the governments initiative to further improve healthcare coverage for the Turkish population.

0.4

0.4

0.5

0.5

0.6

0.8

1.4

0.6

0.7

0.7

0.8

0.8

0.9

0.8

9.1%

8.3%

7.7% 7.1%

17.6%

22.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0

0.5

1.0

1.5

2.0

2.5

2005 2006 2007 2008 2009 2010 2011

Gro

wth

(%

)

Ins

ura

nc

e P

oli

cie

s (

Mil

lio

ns)

Individual Group Growth (%)



Exhibit 21: Healthcare Transaction Value in

Turkey vs. Central and Eastern Europe

Source: Mergermarket; Colliers International Research 2013

5.1 MAJOR HEALTHCARE TRANSACTIONS (2007 – 2011)

During the 2007 – 2011 period there has been a total of 82 concluded transactions across the Central and Eastern European Region with a total value of approximately USD 5.6 billion.

Turkey ranked second, following Poland, in terms of transaction share with 28%, yet ranked first in transaction value with 46.9% of the total transactions value across the Central and Eastern European Region.

Out of the aforementioned 23 transactions that were concluded during the 2007 – 2011 period, 19 transactions have been made public whilst 4 transactions managed to retain confidentiality in regards to the affiliated parties.

The Turkish healthcare sector has managed to successfully attract major international Private Equity funds such as; the Carlyle Group and Abraaj Capital.

Exhibit 19: Healthcare Transactions in Turkey

vs. Central and Eastern Europe


5.2 RISK ANALYSIS – TURKISH HEALTHCARE PPP PROGRAMME

The Healthcare PPP in Turkey has gained pace in the recent past but is still relatively unproved over the long term. The following risks have been identified in completed transactions:

i. Programme coverage seems to be one of the issues facing the sector, with bidders doubtful of progress of PPP transactions outside the main cities of Ankara and Istanbul.

ii. Despite concessions being set at 25 years, yet refinancing in Turkey currently poses as a risk with the current maximum loan tenor at 12 years.

iii. Failing to match the size, complexities and compatibility of PPP transactions with bidders for tendered projects, increases the risk of completion and consequently the approvals of project financing.

iv. The Turkish Lira represents significant currency risk with the majority of the infrastructure debts set in USD in a high inflation region; even local bankers have expressed some concern, bringing into the spotlight the long term risk of active PPP projects.

5. Healthcare Investment Environment in

Turkey

Exhibit 20: Major Healthcare Transactions in Turkey (2007 - 2011)


24

23

14

9

8

4

0 5 10 15 20 25

Poland

Turkey

Czech Republic

Romania

Russia

Hungary

Number of Transactions

2,649

1,857

607

334

149

57

- 1,000 2,000 3,000

Turkey

Hungary

Poland

Russia

Romania

Czech Republic

USD (Million)

Year Transaction Investor Investor Origin Share (%)

Transaction Value

(USD Million)

2011 Acibadem Healthcare Group Khazanah Malaysia 75% 1,230

2011 Goztepe/JFK Hospital Acibadem Turkey 100% 40

2011 Alanya Can Hospital Antalya Anadolu Hospitals Turkey 100% N/A

2011 An-Deva Hospital Memorial Healthcare Group Turkey 63% N/A

2011 Arkaz Healthcare Group Turkven PE Fund Turkey 51% 40

2010 Memorial Healthcare Group Argus Capital, QFIB UK/Qatar 40% 120

2010 Mesa Hospital TOBB ETU Turkey 100% N/A

2010 Dunya Goz Hospital NBK Qatar 30% N/A

2010 Ozel Konur Hospital Acibadem Turkey 50% N/A

2010 Medical Park The Carlyle Group USA 40% 110

2009 Isvicre Hospital Bayindur Turkey 100% N/A

2008 International Hospital Acibadem Turkey 40% 33

2008 Safak Group Hygeia Greece 50% 48

2008 Ozel Gaziosmanpasa Hospital Bahat Group Turkey 50% N/A

2008 Acibadem Healthcare Group Almond Holding (Abraaj Capital) UAE 32% 444

2007 Acibadem Healthcare Group Almond Holding (Abraaj Capital) UAE 22% 163

2007 Italyan Hospital Universal Hospitals Group Turkey 100% 35

2007 Nuru Medical Centre Acibadem Healthcare Group Turkey 100% 8

2007 Memleket Medical Surgery Acibadem Healthcare Group Turkey 51% 8



The Turkish healthcare market remains sternly fragmented, yet it is foreseeable that the consolidation of the market is set to become the way forward during the upcoming period with the larger chains seeking to further benefit from the economies of scale and enhanced efficiency that occurs as a result of a wider geographical coverage and increased brand value.

• Healthcare Providers:

o The Ministry of Health is currently the main healthcare provider in Turkey with

57.8% of the hospitals under their management.

o Private sector hospitals have been consistently growing over the past decade,

becoming the second largest market shareholder, with the support of the growth

in private medical insurance and increasing FDI into Healthcare.

o In the last 20 years the region has experienced gradual decrease in mortality and

an increase in the fertility rates which are expected to gradually change the

demographic structure of the region over the next 20 years.

• Population Growth:

o Turkey is one of the highest growing populations in Europe; according to Turkstat,

the Turkish population will stand at 76.6 million by the end of 2013, achieving an

overall growth of 1.4%, ranking third after only Ireland and Cyprus.

o In the next two decades, as the current young population of Turkey ages, there is

likely to be a sharp rise in healthcare demand as almost 80% of a person’s

healthcare requirements typically occurs after the age of 40 – 50 years.

• Lifestyle Related Diseases:

o There is a considerable increase in lifestyle related diseases, such as diabetes,

hypertension, obesity, heart (cardiovascular) and kidney (dialysis).

o Presently, the private sector plays an important role in providing care for these

diseases, however, the government needs to take an active role in prevention

through educating people and offering preventive services.

• Healthcare Expenditure:

o Turkey’s healthcare spending as a percentage of the GDP of 6.7% is one of the

lowest in the region when compared to some of the developed neighbouring

countries.

o In addition, Turkey has one of the lowest rates healthcare spending per capita,

lagging behind neighbouring healthcare markets, which is one of the challenges

that need to be addressed.

• Shortage of Hospital Beds:

o The number of beds per 1,000 population currently stands at 2.5 beds, which lags

behind various EU countries; such as France (6.6 beds) and Germany (8.3 beds).

o Overall, the supply of healthcare facilities struggles to keep pace with the

burgeoning population, a situation recognised by the government who have

recently introduced initiatives to encourage the private sector to match the

shortfall and benefit from this potentially lucrative sector.

o The present shortage of beds which is growing with time, can be overcome by

funding from the private sector to establish new hospitals both in the Public and

private sectors, as well as, improving and expanding existing facilities through

PPP initiatives, subject to mitigating the existing risks.

• Quality of Service:

o A rising number of private hospitals are actively seeking accreditation from

international organizations such as JCI, to increase their competitive value.

Colliers International Healthcare Insights (CIHI)

KEY STATISTICS

Population 76

million in 2013

1.4% annual

population growth

rate

60% of the total

population under

34 years age

group

US$ 1,160 per

capita healthcare

expenditure in 2011

US$ 51 billion,

total healthcare

expenditure in 2011

6.7%

healthcare

expenditure as a %

of GDP



• Other Shortages in the Healthcare Sector:

o The most significant cost for healthcare providers is qualified medical staff.

o Despite the consistent growth in numbers of physicians, nurses and beds over the

past decade, the Turkish healthcare market remains significantly lagging when

compared to neighboring healthcare markets.

o Additionally, the proposed bill to limit physicians to working in only one single

sector is destined to increase the load on the existing situation.

o It is noteworthy that the annual Number of Medical School Graduate in Turkey is

around 4,500 compared to an EU average of 14,000 graduates.

• Regulatory Environment:

o Recent regulatory amendments facilitated the rapid expansion of the private

health insurance system in Turkey. It is expected that the industry will continue to

grow over the upcoming period with market fundamentals already set in place,

along with the governmental will to further improve healthcare coverage for the

Turkish population.

• What Next:

o The healthcare sector in Turkey is going through a swift change and most of the

governments in the region are encouraging private sector investment in this

sector, either direct investment or through Public Private Partnership (PPP).

o There has been a significant number of healthcare transactions over the past five

years, proving the increased appetite from local and regional PE funds to invest in

such resilient sectors.

o All these factors provides an opportunity for private healthcare operators and

service providers to enter into a market which offers unlimited potential for growth.

o In order to fund growth, healthcare operators are likely to evaluate untrapping

wealth from existing assets such as its real estate component and its fast

depreciating healthcare equipment.

o The sale and leaseback vehicle is a relatively straightforward transaction that

requires appropriate valuations for both developer and operator to succeed. High

expectations and unsustainable valuations remain the key deal breakers.

o The need for healthcare operators to focus on distinguishing and unique selling

points is apparent within a highly competitive and sensitive market. Careful

planning is required to ensure appropriate strategies are employed for successful

entrance into the highly complex healthcare market in Turkey.

Positive population CAGR of 1.4% which exceeds the majority of EU nations, yet lags behind GCC economies.

Introduction of centralised health insurance, ensuring wider and efficient coverage

Low numbers of existing beds per 1,000 compared to neighbouring markets, presenting an opportunity for further growth

The presence of a Privatisation & Public Private Partnership (PPP) program

Government’s commitment to healthcare industry improvements

P

osi

tive

Fac

tors

N

ega

tive

Fac

tors

Budget constraints on Healthcare spending

Low per capita spending on healthcare, compared to several neighbouring economies.

Limited presence of trained and qualified physicians and nurses.

Exhibit 22: Challenges and Opportunities in the Turkish Healthcare Sector

Source: Colliers International Analysis 2013

KEY STATISTICS

2.5 beds per

1,000 people

1.7 doctors and

nurses per 1,000

people

326 million

outpatients

&11.4 million

inpatients in 2011

1,443

Hospitals &

194,500

beds in 2011

83% inpatients &

73% outpatients

in MoH & University

hospitals

17% inpatients &

27% outpatients

in private hospitals



COLLIERS HEALTHCARE SERVICES - SNAPSHOT

Key Projects:

300 bed Hospital in Riyadh

200 bed Hospital in Abu Dhabi

80 bed Hospital in Abu Dhabi

100 bed Hospital in Dubai

200 bed Hospital in Sharjah

100 bed Hospital in Fujairah

100 bed Hospital in Amman

2 Healthcare Parks in Jeddah

1 Healthcare Park in Riyadh

1 Healthcare Park in Cairo

Conducted Studies for the

Following Specialities (2010-2014)

• General Hospital (20+ Hospitals)

• Maternity & Childcare (10+ Hospitals)

• Polyclinics (5+ Centres)

• Day-care Centre (5+ Centres)

• Trauma & Rehabilitation (5+

Hospitals)

• Wellness / Beauty Centres / Resorts

(3+ Centres / Resorts)

• Cardiac (2 Hospitals)

• Paediatric (2 Hospitals)

• Oncology / Cancer (1 Hospital)

• Orthopaedic (1 Hospital)

• Medical College (1 Institution)

• Nursing College (1 Institution)

Feasibility Studies; Due Diligence; Investment Memorandums (IM)

- Conducted over 50 Feasibility Studies, Investment

Memorandums & Due Diligence for ; new projects,

Financing & Refinancing, &Merger & Acquisitions:

- Countries: UAE, KSA, Qatar, Egypt, and Ecuador

- Total Number of Beds (2010-2012): 5,000 plus

- Mixed Use Healthcare Parks (2010-2012): 5 with a total

BUA of 5+ million sqft

- Total BUA of All Healthcare Projects (2010-2012):10+

million sqft

Land; Property; Business Valuation

- Conducted over 20 Hospital Valuations for ; end of year

Audit, Financing & Refinancing, Merger & Acquisition:

- Countries: UAE, KSA, Qatar, Egypt, and Oman

- Total Number of Beds Valued(2010-2012): 1,200 plus

beds

- Mixed Use Healthcare Parks (2010-2012): 5 with a total

BUA of 5+ million sqft

- Total BUA of All Healthcare Projects Valued (2010-

2012): 10+ million sqft

Operator Search & Selection and Contract Negotiation

- Countries: UAE, KSA, Qatar and Egypt

- Total Number of Beds (2010-2012): 1,000 plus

- Total BUA of All Healthcare Projects (2010-2012): 5+ million sqft



482 offices in

62 countries on

6 continents

United States: 140

Canada: 42

Latin America: 20

Asia Pacific: 195

EMEA: 85

• $2.0 billion in revenue

• More than 13,500 employees

• 5,100 brokers

• $71 billion in transaction volume

across more than 78,000 sale and

lease transactions

• 1.1 billion square feet under

management

SERVICES OFFERED BY COLLIERS

INTERNATIONAL

• Strategic & Business Planning

• Economic Impact Studies

• Market & Competitive Studies

• Highest & Best Use (HBU) Studies

• Market & Financial Feasibility Studies

• Financial Modelling

• Mergers & Acquisitions Assistance

• Buy side Advisory/Sell side Advisory

• ‘Sale and Leaseback’ Advisory

• Public Private Partnership (PPP) &

Privatisation

• Operator Search & Selection and

Contract Negotiation

• Land, Property and Business Valuation

• Asset & Performance Management

• Site Selection & Land / Property

Acquisition

• Performance Management and

Industry Benchmark Surveys

For further information please contact:

Mansoor Ahmed MAS, MSc

Director | Development Solutions

Healthcare | Education | PPP

[email protected]

P.O. Box 71591 | Dubai | UAE

Main: +971 4 453 7400

Mobile (UAE): +971 55 899 6091

Kerim Cin

Managing Partner | Turkey

[email protected]

Main: +90 2122 88 6262

Fax: +90 212 34 707 94

COLLIERS INTERNATIONAL

Colliers International is a leading global real estate services organisation defined by our spirit of

enterprise. Our 13,500 professionals in over 482 offices worldwide are dedicated to creating

strategic partnerships with our clients, providing customised services that transform real estate

into a competitive advantage.

COLLIERS INTERNATIONAL MIDDLE EAST

Colliers International has been providing leading advisory services in the Middle East and North

Africa region since 1996 and in Saudi Arabia since 2004. Regarded as the largest and most

experienced firm in the region, Colliers International’s expertise covers Hospitality, Residential,

Commercial, Retail, Healthcare, Education and PPP sectors together with master planning

solutions, serviced from the five regional offices, i.e., Abu Dhabi, Dubai, Riyadh, Jeddah & Cairo.

Colliers Research Services Group is recognized as a knowledge leader in the industry, providing

clients with valuable market intelligence to support business decisions. Colliers research analysts

provide multi-level support across all property and business types, ranging from data collection to

comprehensive market and competition analysis.

OUR SPECIALISATIONS

The information contained in this document (the “Report”) has been obtained from sources deemed reliable. While every reasonable effort

has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged

to consult their professional advisors prior to acting on any of the material contained in this report.

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whether direct or indirect, or responsibility for the accuracy, completeness, or usefulness of any information that contain in the Report. It is

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HEALTHCARE OVERVIEW - Colliers International...7.9% (real GDP) during the 2013 – 2015 period....

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