Direct Investments for the People

Participation of RDIF and its partners in Russia's healthcare companies is a vivid example of global capital improve the whole national healthcare system. Investments into MDMG chain, Moscow region's PET centers positively impact country's quality of life and well-being of its citizens.

Olga Vorobieva

In spring 2018, a new "Mother and Child" clinic opened in Samara. Before that, clinics of this standard were only available in Moscow or abroad. The clinic has state-of-the-art equipment and can assist in the delivery of up to 2,500 babies per year. It created 700 new jobs in the city.

The clinic was built as part of a public-private partnership (PPP), whereby a private company entered an agreement with the government, which granted subsides to attract investors to implement the project. As a result, the clinic will render some services free of charge under the mandatory health insurance (MHI) program.

Not all Samara's residents know that a significant part of 3.5 bln rubles invested in the new clinic's construction came from foreign direct investments funds, which work with the Russian direct investment fund (RDIF)

The representatives of these foreign funds have never been in Samara but they trust their partner, the RDIF. Since the Fund's first investment in "Mother and Child", the company has expanded its presence from 3 to 19 regions, opened 27 new clinics and become the largest private clinic in the country.

Before construction commenced on the Samara clinic, an international investment team had to do a lot of work evaluating risks, calculating the profitability rate for ten years of operations, assessing the investment climate in the country and region, and considering the terms of the state's participation in the project.

This part of an investment project is not usually visible to ordinary people. However, modern private clinics will only be able to continue performing high precision operations if the investors obtain a sufficient profitability rate and the terms of operation (e.g. concession agreement terms) remain the same.

Today, the Russian healthcare system is undergoing the greatest changes in its history. 

Successful cancer treatment, online health monitoring, digital medical records, remote services, and surgeon robots, these achievements of modern medical science are no longer a fantasy, but exist in many clinics. 

According to the aims set forth in the Address to the Federal Assembly, from 2019 to 2024 the federal budget for healthcare should double to 4-5% of gross domestic product. According to the current forecasts, by 2019 this amount should exceed 5 trillion rubles. 

This huge sum has to be spent efficiently and result in an actual increase in the quality of medical services. This may be achieved through the attraction of private investments of a similar size into the industry. However, to achieve that, healthcare projects must generate profits. 

Based on the Healthcare Ministry data, private investments in healthcare in 2017 amounted to 50 bln rubles--and this is only the beginning. 

The optimal mechanism for attracting private capital to healthcare is a public-private partnership based on a concession guaranteeing investors an acceptable level of long-term profitability. 

This mechanism is based on the fact that the investment return is guaranteed by future payments for medical services made mostly from the Mandatory Health Insurance Fund, whose revenues in 2018 are expected to be 1.9 trillion rubles.  

All over the world, private investors are showing interest in the healthcare industry. Data from the international consulting firm Bain & Company shows that, in 2017, direct investment funds and private investors spent USD 42.6 bln buying healthcare companies--the largest spent for the last 10 years.

RDIF's experience shows that correctly structured healthcare projects attract not only Russian private investors but also large international funds with strict requirements on the level of risk. For instance, RDIF brought in its Middle Eastern partners for the implementation of one of Russia's largest public-private partnership healthcare projects--the construction of a nationwide chain of cancer centres. The first two centres will open in the Moscow area this year.

Construction of this chain is part of the game-changing national anti-cancer program, about which the President spoke in his address. The new centres will have the best modern equipment including linear accelerators for radiation therapy and positron emission tomographs, which track changes in a body using emitting tracers. 

Today, Russia has only 190 linear accelerators for radiation therapy, out of which about 70 are outdated or do not work at all. According to Healthcare Ministry estimations, the industry needs 300-350 new accelerators for the entire country.  

Rosstat data shows that today only 25 positron emission tomographs are operational in the country--the World Health Organization (WHO) recommends having at least one such tomograph per 1 mln people. It should be noted that cancer is the second most frequent cause of death in Russia. The Healthcare Ministry estimates that cancer represents 15.6% of medical cases in the country. 

Cancer centres will render 85% of their services to people living in the Moscow area and in possession of general health insurance certificates, with only 15% going to private clients. However, even for private clients, the Russian centres' services will be much cheaper that those of similar centres abroad. 

The rapid spread of broadband internet opens new possibilities for the medical industry, allowing a doctor and patient to communicate through video calls. The new law on telemedicine, which became effective this year, places online and traditional consulting on an equal footing. 

RDIF and its partners from Japan, who boast one of the most efficient healthcare systems in the world, have announced investments in Doctis, atelemedicine platform, which has become a leader in this sector and plans to reach 10 mln active users by 2023. 

For many of RDIF's partners, healthcare investments are already a common and profitable practice. For example, the share of healthcare projects in the portfolio of Mubadala, a UAE sovereign fund, exceeds 3%--the equivalent of USD 2.3 bln. 

Mubadala, the largest Arab sovereign fund, manages a project portfolio that includes a telemedicine centre, the largest medical analysis laboratory, and a number of modern clinics in the UAE, which have serviced millions of patients in the last few years. 

As life expectancy increases, death rates fall and quality of life improves, citizens of our country are starting to demand an international standard of medical services. Over the last 6 years, the scale of high-tech medical care in our country doubled, and experts believe that this growth rate will remain the same in the coming years.   

Healthcare, as well as infrastructure and technology, is now one of the most promising and attractive industries in the Russian economy. Everyone will benefit from private investments in this sector: Russian citizens will have access to modern medical services, investors will have sustainable income, and the state will have an efficient healthcare system.