Growth potential

The Russian private healthcare market’s growth potential is not fully unlocked, and we see significant opportunities for its further development. Our dynamic expansion reflects the Group’s commitment to being at the forefront of this highly promising sector.

Today, residents in a number of regions have limited access to high-quality medical services, and are forced to travel to other cities in order to receive treatment. By opening new high-tech medical centres in the regions, we make it possible for people to receive high-quality medical services near home.

Working alongside the public sector, private healthcare is a key element in the development of healthcare solutions in Russia.

Private healthcare system overview

Before 1990, public healthcare was the only legal system that existed in Russia. Private healthcare practitioners were not legally allowed to provide services and their numbers were relatively small. Legal private medicine began in the early nineties with the creation of private branches of government health facilities. It developed very slowly and was dominated by dental surgeries and pharmacies. The sector for private healthcare in Russia experienced its first boom in the early noughties when separate multi-disciplinary clinics and network projects were created.

Fee-for-service medical aid can be provided by private as well as public healthcare institutions and is paid for either by individuals (out-of-pocket), insurance companies or commercial enterprises.

The market is characterised by high barriers to entry, namely: high capital investment requirements, a limited supply of a skilled workforce – both managerial and medical, the importance of brand awareness, and reputation in the market – both of the establishment and the doctor’s personal reputation. No new major players are expected to emerge in the near-to-medium term however an increase in activity from strategic and financial investors supporting existing projects is increasing.

The Russian government is taking steps to support the development of the private healthcare sector in the country in order to relieve the strain of the public system. A number of support measures were introduced at the regulatory level:

• abolition of income tax for private organisations involved in the provision of healthcare services, including all licensed medical care services.
• extension of mandatory healthcare insurance to all of the private medical care providers. This means that Russian citizens free to choose whether to go to a public or private clinic/hospital with the latter reimbursed for services provided by the state.
• tax deduction – Russian citizens are entitled to a tax deduction from their and their family’s healthcare expenditure up to expenditure of RUB 120,000.

Healthcare market drivers

• Growing health awareness among the Russian population and healthier lifestyles
• Development of healthcare services aimed at treating an ageing population
• Strong governmental support, as healthcare becomes a matter of national security doctrine:
  • Increase in government healthcare expenditure
  • National healthcare programmes aimed at reversal of overall population decline (National Health Priority Project, maternitycapital etc
  • Stimulation of private healthcare market development by way of supportive regulatory measures such as zero income tax and OMI extension.
• Specifically, private healthcare will continue emerging as a viable alternative to the public healthcare system, addressing unsatisfied demand for quality healthcare among the Russian population.
• Under-penetration of quality healthcare in the regions of Russia.
• Further expansion of VHI.
• Inflow of investments from strategic financial investors into the market given its high growth potential and attractive returns.
• Gradual eradication of the grey market for healthcare services and re-direction of cash flow into legitimate channels (private and public).