The announcement that UnitedHealth is buying Amil Participações (October 8) goes someway to fulfilling predictions of a wave of M&A in the fragmented and fast-growing sector. Head of Bradesco Asset Management and former secretary for the Treasury, Joaquim Levy, expects to see more such deals.
Brazil does have a national public healthcare system, SUS, but a key aspiration of the growing middle class is to leave this very imperfect system and move over to private healthcare providers. With nearly full employment and companies struggling to hire and retain talent, a key plank of hard pressed HR departments is to offer healthcare to a growing slice of employees, boosting numbers enlisted in plans significantly. Tough national legislation means that health plans have to be pretty comprehensive in the treatments they offer and fast in referring patients so companies can’t skimp on costs.
The diagnostic companies are seen as particularly likely to consolidate. Foreigners are restricted from owning hospitals which crimps their ability to take over health care providers (they often own hospitals). Diagnostic centres are both popular in Brazil and the legislation surrounding their take-overs less restrictive.
Outside the United States, Brazil is the largest and fastest growing private health care market in the Americas. As Stephen Hemsley, president and CEO of UnitedHealth, pointed out that it was access to a large and growing market that made the deal so enticing. Expect others to follow.