CASE STUDY Outpatient in its DNA MedLife: Changing the Culture of Healthcare in Romania March 2017 ABOUT IFC IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on leveraging the power of the private sector to tackle the world’s most pressing development challenges. Working with private enterprises in more than 100 countries, IFC uses its capital, expertise and influence to help eliminate extreme poverty and promote shared prosperity. ABOUT THE CASE STUDY Expanding access to quality and affordable health care is a central element to eliminating extreme poverty and promoting shared prosperity. The World Bank Group has a goal to end preventable deaths and disability through Universal Health Coverage (UHC). In many developing countries, governments do not have the capacity to service the entire population and private health care providers often play a critical role in meeting societal needs. IFC’s health practice is developing case studies that demonstrate the ability of the private sector towards achieving global and national health care goals. Through a focus on efficiency and innovation, certain business models can provide better outcomes at a lower overall cost to society. WRITTEN BY This case study was authored by Ann M. Casanova with valuable inputs from IFC colleagues: Ioan Cleaton-Jones, Mona Hassan, Chris McCahan, Alexandre Oliveira, and Elena Sterlin.   ACKNOWLEDGEMENTS A special note of appreciation is extended to MedLife, especially to Mihai Marcu, Dr. Nicolae Marcu, Dorin Preda, and Alis Lupu for sharing their experience and data with us. The author is grateful for the many insights provided by IFC colleagues. Special thanks to Elizabeth Price and Irina Sarchenko for communications advice, and to Leticia Crentsil for copy-editing and for the creative design.  DISCLAIMER The findings, interpretations, views and conclusions expressed herein are those of the author and do not necessarily reflect the views of the Executive Directors of the International Finance Corporation (IFC) or of the World Bank or the governments they represent. While IFC believes that the information provided is accurate, the information is provided on a strictly “as-is” basis, without assurance or representation of any kind. IFC may not require all or any of the described practices in its own investments, and in its sole discretion may not agree to finance or assist companies or projects that adhere to those practices. Any such practices or proposed practices would be evaluated by IFC on a case- by-case basis with due regard for the particular circumstances of the project. RIGHTS AND PERMISSIONS © International Finance Corporation 2017. All rights reserved. The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. COVER PHOTO: MedLife Photo © MedLife Table of Contents Forever Thankful to the People at MedLife 1 From a Two-Bedroom Medical Practice to a Healthcare Network 5 A Diversified Business Model Anchored in Outpatient Care 7 Adopting a Day Surgery Model in Romania 11 Selected Features About the Business Model 15 The Role of IFC 19 Conclusion 21 Photo © MedLife “FOREVER THANKFUL TO THE PEOPLE AT MEDLIFE!” “All of a sudden, Aneliss rolled her eyes to one side, as if she didn’t know where she was, and began to vomit. She started to cry and then went into a strange state, she was just staring aimlessly,” explained her mother, Diana U. Her frail daughter, just barely 13 months old, went on to have a seizure. Her mother had suspected that something was not right with her daughter since she was born. Early on, she had bags under her eyes and when she was nine months old, small veins appeared above the bridge of her nose and her eyes had swollen significantly. Blood tests did not reveal any particular issue but her mother was worried that the veins might burst, so they were very careful when handling her. The parents had planned on taking Aneliss to be seen in Bucharest, where there is better quality care, but after this seizure they called 112 and took her to the emergency room in Constanta. A CT scan showed that there was a brain hemorrhage which could not be treated locally. The neurosurgeon referred them to a public hospital in Bucharest. At 4:00 Photo © MedLife a.m., they arrived and the doctor told them to “enjoy it while it lasts; we don’t know what could happen later.” Those words were very jarring to the parents, and the mother responded by saying, “Doctor, I have no intention to bury my child.” That doctor ultimately referred them to Dr. Stefanita Dima at MedLife. Twenty years ago, the In addition to the MRIs and CT scans that had been done, Dr. Dima brain surgery that saved ordered an angiogram, which provided a very clear view of what was happening. Dr. Dima told the parents that they were dealing with a very Aneliss’ life would not rare condition—pial para-galenic arteriovenous fistula—a type of venous have been possible in aneurysm, which compressed the nerves and reversed the blood flow. This Romania but MedLife caused the epileptic seizures and the eyes to bulge. This was the first case successfully cured the in Romania and there had only been six such cases in the world. little girl’s rare condition. Anelis needed brain surgery. The father cried for two days in a row fearing that they would lose their little girl, but the mother told him she did not accept that—whatever happened, she must live. It was an emotional roller coaster for them given the complicated nature of the surgery. The medical team inserted metallic spirals (coils) that corrected the aberrant communication of the vessels at the site of fistula and a resin consolidated the entire structure, allowing the blood to resume its normal flow. Outpatient in its DNA | 1 The surgery, which was done in September 2016, was a success. It was the first of its kind in Romania and Aneliss’ case was the seventh in the world to be treated with modern techniques since 2010. Aneliss woke up without any complications, was much livelier than prior to the surgery, and had a big appetite. Reflecting on the experience, Diana said, “We found a team of consummate professionals at MedLife, who helped my daughter become a normal child. She is laughing again and wants to get up and walk—she had started to walk right before her first seizure. I’m happy and can’t wait to take her home! We are forever thankful to the people at MedLife!” Twenty years ago, such a complex surgery would not have been possible in Romania. Mr. Mihai Marcu, Chairman of the MedLife Board, explains, “MedLife was able to successfully address this case because of the high level of quality of our medical team and the state-of-the-art technology in which we are always investing in. This positions us to manage an increasing number of high complexity interventions, which are comparable to the procedures performed in high-ranking hospitals abroad.” MedLife, S.A. is the leading private, for-profit healthcare provider in Romania, serving over 2 million patients annually with 3,300 employees, of which nearly 2,000 are doctors and 1,000 are nurses. MedLife has achieved such market penetration by offering “a one-stop shop” approach for patients through a network that integrates 37 outpatient clinics, 8 hospitals, 3-day care units, 26 laboratories with 143 sample collection points, 10 pharmacies, and 8 dental Photo © MedLife clinics. Its corporate subscriptions, pre-paid employer provided healthcare packages for employees, have reached over 500,000 individuals. Most of its patients are seen on an outpatient basis. Mihai Marcu In 20 years, MedLife dramatically elevated the availability of quality Chairman of the Board healthcare, bringing it out of a communist era mentality and infrastructure and putting its services on par with several of its European neighbors. It In 20 years, Medlife has demonstrated that the private sector can be trusted to provide effective dramatically elevated medical solutions. MedLife has become the leading healthcare provider the availability in Romania by offering innovative, effective, affordable, and good quality and the quality of healthcare. healthcare, bringing The company has established a geographic footprint in about half of Romania it out of a communist and it has reached 80 percent of inhabitants in the areas where MedLife has a era mentality and presence. Over a period of 20 years, it has provided medical services to over 5 million unique patients—this accounts for about 25 percent of the overall infrastructure and Romanian population. It is quite rare for a single private health service demonstrating that company to have treated such a large share of the country’s population. In the private sector addition, 70 percent of its patients are women. can. provide effective IFC played an important role in MedLife’s growth and expansion through medical solutions. different stages of its development. In 2005, IFC took an equity stake in the company with a $5 million investment and a EUR 5 million ($6.23 million) loan.1 This was later followed by two separate loans over the next decade totaling EUR 20 million ($24.3 million) from IFC’s own account. In addition, in 2011, IFC mobilized a EUR 40 million ($55.6 million) syndicated loan. In December 2016, IFC supported MedLife in going public. It was the first healthcare company to be successfully listed on the Bucharest Stock Exchange. In 13 years, the company’s revenues have skyrocketed. In 2003, the company’s revenues were $1.5 million and as of December 2016, they rose to an estimated EUR 116 million, ($128.3 million). 1 Foreign exchange rates were as follows: 2005 = US$1: EUR 1.246; 2010 = US$1: EUR 1.327; 2011 = US$1: EUR 1.392; 2016 = US$1: EUR 1.106. Source: Reuters. 2 | Outpatient in its DNA TOP 3 SUCCESS FACTORS Becoming the largest private healthcare provider in Romania was made possible in large measure because of its hyperclinics, its focus on the patient experience, and its pioneering attitude. HYPERCLINICS PATIENT PIONEERING EXPERIENCE ATTITUDE MedLife introduced the MedLife fosters a medical culture MedLife was convinced that they “hyperclinic” concept to the that is focused on the best care could do better than the status Romanian market. A hyperclinic experience for the patient. For quo in the post-communist era is a very large clinic that treats a many Romanians, this begins and they introduced a number of number of medical issues on an through employer-based corporate firsts in Romania. They were the outpatient basis. This concept subscriptions that provide access first to introduce the hyperclinic was revolutionary in Romania to MedLife doctors for annual concept, the first to offer a fully at that time. Romanians had exams and basic care. If issues are integrated solution for patients believed that the hospital was identified, care is escalated to the on site, the first to open a private the only place to get problems next tier, typically an outpatient hospital for Romanians, not just solved, because communist clinic. Across its network, it expatriates, the first to hire their medical systems were typically improved the patient experience by own doctors as employees, the first hospital-centric. standardizing care and covering a to offer transparency in pricing for large number of specialties—ten of patients, the first to introduce the The hyperclinic brings together which are specialized niches.2 day surgery model in Romania, a number of medical specialties and the first healthcare company under one roof and compliments It attracts qualified doctors and is to successfully publically list on the high medical quality with constantly increasing capabilities. Bucharest Stock Exchange. state-of-the-art diagnostic and It provides a clean medical treatment equipment, labs and environment and has a very low While some of these features may pharmacies. With its “one-stop infection rate. It eliminated the have already existed in other parts shop” model, MedLife helped “grey envelope,” a widespread of the world, MedLife was the first change the culture in Romania practice in public hospitals where to introduce them to the Romanian toward a greater acceptance of patients are expected to make market and did so successfully. medical solutions that can be informal payments to doctors These efforts helped to change done on an outpatient basis. prior to receiving treatment. It the culture of healthcare in the The hyperclinic is the gateway eliminated this practice by hiring country. It shattered stereotypes and referral coordination hub doctors directly and paying them and redefined patient expectations. for its other health services. well. Unlike at public institutions, It proved that the private sector everything the patient needs for has the power to safely resolve treatment is provided by MedLife medical problems from the simple on site, without the need for the to the complex—with quality care. patient to provide medications and medical consumables in order to be treated. It has gained patient trust in a country grappling with corruption and has built a strong brand based on its good reputation. 2 Aesthetic and reparatory surgery, thyroid surgery, assisted human reproduction, gastroenterology, maternal-fetal conditions, proctology, psychiatry, and psychotherapy. Outpatient in its DNA | 3 Photo © MedLife 4 | Outpatient in its DNA FROM A TWO-BEDROOM MEDICAL PRACTICE TO A HEALTHCARE NETWORK Seven years after the fall of communism in 1989, market reforms began to allow the establishment of private medical practices in Romania. At that time, Dr. Mihaela Marcu Cristescu, a well-known pediatrician was one of the first movers to establish a private sector practice. She opened a small clinic in a two-bedroom apartment in Bucharest where she offered pediatric and gynecological services, as well as general examinations. The clinic was called “MedLife.” Three years later, she expanded the practice to include additional specialties of ophthalmology, dermatology and ear, nose and throat (ENT). Over the next 10 years, Dr. Cristescu was joined by her two sons, Nicolae Marcu, a psychiatrist, and later by Mihail Marcu, a former banker, and together they went on to diversify and grow the family business. They thought big and sought to change the culture and become the leader in the Romanian private healthcare market. They introduced other segments including laboratories (2000), occupational health services (2002), and the “Hyperclinic” (2004). In the early days, hyperclinics brought together over 20 medical offices under one roof—a comprehensive mix of high-quality medical outpatient services. However, if the patient’s treatment needed to be escalated to the next tier, the patient would have to turn to public hospitals but the remnants of the communist system left a public healthcare infrastructure that was severely underfunded and crumbling. Public hospitals lacked basic equipment that was necessary to ensure patient safety and facilities were unclean, exposing patients to the risk of infection. Medical skills were out of date and there was no funding to upgrade them. Even in these conditions, patients experienced long waits to be seen. Although there was at the time—and there still is—universal health coverage, patients are expected to provide medical staff with informal payments to be seen. Furthermore, several basic products were not covered and patients would have to pay for these out of pocket. It was very common for patients to have to pay for hospital bed accommodation separately, buy their own medicines and other materials from a private pharmacy, and bring them to the public hospital for use in their treatment. MedLife decided that it could do better. The Romanian economy was growing at the time and the family set out to establish a private hospital in Romania. At that time, one private hospital, Euroclinic, was operating in the country, but it was targeted at the expatriate community, rather than Romanians. MedLife engaged IFC Advisory Services to provide expert guidance on the business of establishing the first private hospital for Romanians. They wanted a mass market product that was not geared toward the top tier of society and that was within reach for Romanians. As with MedLife’s other ventures, it embraced core values of price transparency—before treatment, high standards of medical quality, equipping its facilities with the latest technology and bringing in international expertise. It also ensured that facilities were clean, patients would be seen at their appointment time, and patients would not be asked for informal payments. Patient volumes suggest that the market has accepted MedLife’s model and that the company is bringing good value to Romania. Outpatient in its DNA | 5 Photo © MedLife 6 | Outpatient in its DNA A DIVERSIFIED BUSINESS MODEL ANCHORED IN OUTPATIENT CARE BUSINESS LINES Today, MedLife has six business lines that span all the key healthcare segments - ambulatory, inpatient, laboratory, diagnostic imaging, and pharmacies. Below is a brief summary of the top three business lines by revenues - corporate subscriptions, clinics, and hospitals. 1. CORPORATE SUBSCRIPTIONS MedLife introduced this business line in 2001. As of September 2016, it had the largest corporate subscriber base in Romania with more than 4,100 companies and half a million subscribers. Corporate subscriptions are an important aspect of the strategy as it provides a major gateway for patients to its network. MedLife sells to companies a variety of prepaid medical service packages that cover a range Photo © MedLife of preventative services, including annual check-ups, basic doctor consultations, and some lab tests. Surgeries are not normally included in the corporate subscription package, although in many cases the public health insurance can help to supplement the cost at a MedLife facilities. In addition, it also offers occupational health services that are mandatory under Romanian law. Hyperclinics are very large clinics that handle several 2. CLINICS treatments on an outpatient Hyperclinics are very large clinics—over 3,000m2 (approximately 32,300 ft2)—that handle several treatments on an outpatient basis basis without hospitalizing without hospitalizing the patient. Today, hyperclinics integrate about the patient. Today, MedLife’s 50 medical specialties, including 10 centers of excellence, diagnostic hyperclinics integrate about imaging, and laboratories under one roof.3 MedLife invests heavily in 50 medical specialties. the latest medical equipment and devices to ensure accurate diagnosis and treatment. Large cap-ex equipment such as MRI’s and CT scans have been installed in hyperclinics to facilitate access for patients. This is a differentiating factor from the competition. All these features have contributed to patient convenience, to building a culture of trust, and building the MedLife brand. 3 MedLife’s 50 medical specialities are Allergology and clinic immunology, infectious diseases, cardiology, pediatric cardiology, dentoalveolar surgery, aesthetic and reparatory surgery, general surgery, pediatric surgery, thyroid surgery, assisted human reproduction, dermatovenerology, diabetes, nutrition and metabolic diseases, endocrinology, gastroenterology, physio kinetotherapy and medical recovery, genetics, geriatrics and gerontology, gynecology, hematology, homeopathy, speech-language pathology, labor medicine, family medicine, general medicine, internal medicine, sports medicine, maternal-fetal conditions, nephrology, neurosurgery, neurology, pediatric neurology, ophthalmology, oncology, ear nose and throat (ENT), orthodontry, orthopaedics, pediatrics, pneumology, proctology, psychiatry, psychology, psychotherapy, radiology and medical imaging, rheumatology, stomatology, and urology. The specialties highlighted in bold are considered centers of excellence. Outpatient in its DNA | 7 Photo © MedLife By providing effective healthcare solutions, MedLife helped to cultivate greater acceptance of outpatient care. It is worth noting that MedLife was providing outpatient care long before the public health authorities started to make it a priority. The clinics, particularly the hyperclinics, are the main engine that generates business for the other five business lines. 3. HOSPITALS MedLife believes that an integrated solution is necessary to provide patients with the best possible medical experience. By providing a complete ecosystem, it can complete the cycle of care within its network, thereby enhancing its credibility as a medical provider. This element is also important to attract and retain good doctors throughout its network. MedLife has pursued a mix of organic growth and acquisitions that has resulted in eight hospitals in its portfolio. In addition to general hospitals, it has added hospitals that specialize in maternity, pediatric, orthopedic, neurosurgery and plastic surgery. It has the largest chain of private hospitals with a total of 530 beds and 20 operating theaters. MedLife follows European standards of safety protocols, and delivers integrated treatment solutions for patients. It has worked hard to upgrade the Romanian system to place it on levels that compare with other European countries. It has obtained CONAS accreditation, the most prestigious certification offered to hospitals in Romania. 8 | Outpatient in its DNA MedLife helped to cultivate greater acceptance of outpatient care long before public health authorities started to make it Photo © MedLife a priority. Photo © MedLife Outpatient in its DNA | 9 Photo © MedLife 10 | Outpatient in its DNA ADOPTING A DAY SURGERY MODEL IN ROMANIA A number of technological advances have enabled medicine to evolve toward minimally invasive techniques, which expose patients to lower risks, while advances in anesthetic drugs are enabling faster recovery times. These advances are allowing patients to be discharged from hospitals faster. In developed countries, it has been the normal practice for several years to operate on patients and send them home the same day without spending the night at the hospital. In the United States, over 75 percent of surgical procedures are performed this way; however, in Romania, this is a relatively recent concept. The World Bank conducted a study and concluded that the Romanian system had too many hospitals that were old and inefficient. Further, according to Eurostat, in 2014, the average length of in-patient hospital stay was just over eight days.4 Believing that these indicators can be improved, the World Bank advised the Government of Romania to Photo © MedLife consolidate and transform hospitals toward a model that was focused on more acute and long-term care, while shifting less complex services to outpatient care and daily hospitalization. In order to further incentivize daily hospitalization, the National Health Insurance House (NHIH) began reimbursing out-patient surgeries at a higher rate than those same surgeries that are conducted on an in-patient basis. Dr. Nicolae Marcu, CEO In 2005, MedLife was the first to introduce limited day surgery to the Day surgery has many Romanian market. In the early days, MedLife found that Romanians benefits. For patients were not yet ready to adopt this concept. Dr. Marcu explains, “in our there is minimal disruption part of the European Union, if you go home in five hours something is wrong.” While Dr. Marcu found that it was very difficult to change the and faster recovery. mindset toward this type of surgical approach, it has gradually been For providers, it allows gaining acceptance. When MedLife introduced the concept, it would do higher patient volumes an average of 30 day surgeries a month—today, it does about 30 a day. and spreads fixed costs MedLife has created space within two of its hospitals and one hyperclinic over a greater number of where it dedicated 100 beds to day surgery. It offers a total of 110 patients. Patients, public procedures on a day-surgery basis or a one-day admission basis, where insurance payers, and the patient remains in the hospital for a maximum of 12 hours. Some examples of procedures are tonsillectomy, laparoscopic appendectomy, hospitals all benefit from node biopsy, cervical polyp excision, and knee arthroscopy. In addition, reduced costs. MedLife offers some treatments such as chemotherapy, which is done on a one or two-day basis. 4 Hospital discharges and length of stay statistics. Eurostat. http://ec.europa.eu/eurostat/statistics-explained/index.php/Hospital_discharges_and_length_of_ stay_statistics Last visited on February 24, 2017. Outpatient in its DNA | 11 Photo © MedLife While many patients are eligible for day surgery, not all are. MedLife takes the patient’s medical history into account to determine if the patient is the right candidate. A pre-admission testing program includes guidelines and algorithms based on high, medium and low risk procedures as well as patient comorbidities, the simultaneous presence of two chronic diseases or conditions in a patient. Day surgeries are performed by skilled surgeons, anesthesiologists, and other medical staff. Once the patient is in recovery, MedLife ensures that certain criteria are met before the patient is discharged. This includes patient orientation, stable vital signs, controlled pain, understanding the course of medication, ability to dress and walk, and ensuring that there is a responsible adult to take the patient home and care for them over the next 24 hours. While this is still not a core part of the business, MedLife has found many benefits of day surgery. For patients, there is minimal disruption, reduced risk of cross-infection, as well as faster and better recovery in the comfort of their own home. The benefits for the hospital are higher volumes of patients, greater efficiencies, greater flexibility in scheduling operations, as well as lower overall procedural costs. Patients, public insurance payers, and hospitals benefit from reduced costs. Further, hospitals can serve a greater number of patients while optimizing fixed costs, making it financially attractive. By reducing inefficient and long lengths of stay, hospitals can free up beds for more complex conditions. 12 | Outpatient in its DNA Medical advances are allowing patients to be discharged faster, reducing inefficient and long lengths of Photo © MedLife hospitals stay. Photo © MedLife Photo © MedLife 14 | Outpatient in its DNA SELECTED FEATURES ABOUT THE BUSINESS MODEL GROWTH OF THE NETWORK MedLife currently has a presence in about half of Romania and in time, it intends to fully cover all of Romania. It seeks to open hyperclinics in cities of over 250,000 inhabitants and clinics in cities with populations over 150,000. It does not plan to enter markets with populations of less than 150,000. In the early days, its growth was largely organic, but a fragmented market has offered opportunities to mix organic growth with mergers and acquisitions. As of January 2017, it had acquired a total of 23 companies. It seeks companies that are performing well and are managed by people with entrepreneurial drive, and who are open to innovation. It targets companies where it can add value by complementing the existing services by adding specialties, doctors, labs, and upgrading equipment. MedLife prefers to take a majority stake in the company and it keeps the founders as managers. This is a very important element of success and is also a reason why many target companies prefer to be acquired by MedLife rather than by its competitors. FIGURE 1: FOOTPRINT OF MEDLIFE’S SERVICES - 2017 Source: MedLife BRANDING MedLife enjoys a strong brand reputation, but since it acquires well performing companies whose brands also bring value, it co-brands for a period of time. Depending on the company, this can be anywhere from 6 months to 2 years to complete the branding integration. Outpatient in its DNA | 15 Photo © MedLife MANAGEMENT STRATEGY MedLife was lucky to be a family-run business that brought both medical and business expertise to the company. While Dr. Cristescu no longer has day-to-day responsibilities in the company, the brothers have divided their responsibilities according to their area of specialization. Dr. Nicolae Marcu, CEO, oversees all the medical aspects of the business while Mihai Marcu, Chairman of the Board, focuses on business strategy and financials. In terms of management of acquired companies, it has a very flat organizational structure, with about 40 managers. MedLife gives deference to the expertise of the acquired company and those managers have a great deal of latitude to make decisions so long as it is within the negotiated budget guidelines. The managers and teams of the newly acquired companies are provided training in areas including financial management and business process improvement to assist them in achieving optimal outcomes. They are held accountable through key performance indicators. MEDICAL QUALITY AND STAFFING From around 2005 to 2007, it was difficult to recruit doctors to private practice because doctors feared that the private sector could not provide a secure future. Competitors were able to attract doctors from public hospitals for a few hours a day, but this model was not satisfactory to MedLife. MedLife wanted doctors to provide continuity of care to patients. Dr. Nicolae Marcu explains, “It is difficult to train and maintain a doctor if that person is only on our premises for three hours a day.” So the starting point for MedLife was to hire doctors as employees for their hospitals and clinics. Due to low investment in the healthcare sector- in 2016, Romania spent about 5 percent of GPD on healthcare— doctors at public hospitals have long been underpaid. Medical staff routinely demanded informal payments from patients to make up the shortfall. MedLife wanted to bring dignity back to the medical profession and eliminate the corruption. It achieves this by paying its doctors and staff appropriately. It prohibits staff from taking informal payments and immediately fires those that do. It has only had two cases in 20 years. 16 | Outpatient in its DNA MedLife succeeded in attracting doctors with a policy that provides a salary, a schedule, opportunities to manage personal career interests without state intervention, opportunities to be up to date with the latest medical developments, having clean facilities to treat patients, and having the latest technology. It was also able to stop the hemorrhaging of doctors and nurses who were leaving to work in other EU countries. MedLife created jobs for 2,000 doctors and nurses that would have otherwise emigrated. In addition, it has successfully attracted the Romanian diaspora pursuing careers in the medical profession abroad to return to Romania. REVENUE STREAMS As of December 31, 2015, corporate subscriptions were responsible for the largest share of revenues. This was followed by clinics, which includes all of its outpatient care. Hospitals, which largely include day surgery, were the third-largest driver of revenues. REVENUE SOURCE BREAKDOWN Most of MedLife’s revenues are received directly from patients on an out-of-pocket basis and are paid for at the time of service. In 2014, 88 percent of revenues were cash payments made by patients, while 12 percent was from the National Health Insurance House (NHIH). Further breakdown shows that its clinics represent 95 percent of cash transactions while hospitals brought in 28 percent of revenues from NHIH. Corporate subscriptions are paid 100 percent in advance of services, representing an important cash flow. Private health insurance is negligible and very few Romanians rely on it. FINANCIAL SUSTAINABILITY Its overall EBITDA5 margins are in line with industry standards for integrated providers. Its compounded annual growth rate has been on a growth trajectory and was 13 percent in 2012. This was driven by organic growth and acquisitions. Its diversified business model is heavily reliant on cash transactions, corporate subscriptions, and outpatient clinics which has positioned the company to be financially sustainable. FIGURE 2: REVENUES AS OF DECEMBER 2015 (US$) Stomatology Pharmacy 494,563 4,905,551 Other Revenues 139,436 Laboratories Corporate 19,094,733 Subscriptions 27,867,361 Hospitals 20,171,235 Clinics 25,316,819 5 EBITDA is an acronym for Earnings before Interest, Taxes, Depreciation and Amortization. It is a measure of a company’s cash flow and allows investors to see how much money a company is making before its deductions. Outpatient in its DNA | 17 Photo © MedLife 18 | Outpatient in its DNA THE ROLE OF IFC The relationship between IFC and MedLife began in 2006 when MedLife approached IFC for advisory support to privatize a public hospital. That effort was ultimately opposed by the parliament and MedLife decided to build its own hospital organically with IFC’s Advisory Group support. At that time, MedLife had one large clinic, one lab and 44,000 corporate subscriptions. In 2006, IFC took a 20 percent stake for a $5 million investment and provided a EUR 5 million ($6.4 million) loan to complete the building of Life Memorial Hospital. MedLife and IFC went on to partner on two more investments totaling EUR 20 million ($24.4 million) to increase the national coverage of its services by expanding into second and third tier cities and by broadening its service offerings through organic growth and acquisitions. MedLife was interested in doing business with IFC because it brought long-term debt financing to support the building of hospitals that was not readily available in the local market. It was also very attractive to have IFC, a member of the World Bank, as a shareholder because it brought goodwill to the company. IFC also brought valuable expertise to MedLife, more so than a conventional bank. For instance, IFC helped the family business to consider corporate governance issues that would position the company as it grew. Mihai reflected, “Rarely in banking do you see such sophisticated persons.” At that time, IFC did not formally appoint a board member to MedLife, but Alexandre Oliveira, then the investment officer, served as a sounding board with which the family could explore opportunities in a confidential environment. IFC’s support included a number of key people “which gave comfort to the family.” IFC was interested in doing business with MedLife because the investments complimented the World Bank’s country strategy to support a major health sector reform project that was aimed at providing better quality health services. It was also well aligned with IFC’s global health strategy, which is aimed at increasing access to healthcare by scaling up operations across regions, moving down market, and creating centers of excellence in emerging markets. In addition, it would provide employment opportunities to retain skilled professionals, many of whom were leaving the country. Over the last decade, IFC and MedLife have had a mutually beneficial relationship that has resulted in better healthcare offerings for Romanians. MedLife concluded its IPO in December 2016 and IFC partially exited for a second time. IFC has already recovered the value of its initial equity investment and continued to retain a partial stake in the company.   Outpatient in its DNA | 19 Photo © MedLife 20 | Outpatient in its DNA CONCLUSION MedLife pioneered the creation of an integrated healthcare network and proved that the private sector was capable of providing good healthcare solutions for all Romanians. It has shown that private hospitals in Romania are safe and are capable of handling complex procedures, like the brain surgery that Aneliss—the little girl with the fistula underwent—with successful health outcomes. Through its corporate subscriptions, it has expanded preventative medicine and it demonstrated that a large number of services can be done on an outpatient basis, thereby improving outcomes for the patient while reducing costs. It plans to continue to expand its day surgery model and other services. By promoting dignity in the medical profession, it has enabled doctors to pursue their professional dreams in an environment that has raised the standards of professional quality and ethics. MedLife thrives on transparent practices and it hopes to provide a demonstration effect that will become the norm in the sector. MedLife created a culture of trust with patients that has enabled it to build a strong reputation and brand. This trust has resulted in a large number of patients choosing MedLife for the overall quality of its services.     Photo © MedLife Outpatient in its DNA | 21 STAY CONNECTED WEB: www.ifc.org/health LINKEDIN: www.linkedin.com/company/ifc-health TWITTER: #ifchealth For more information about IFC’s investments in health please contact: Elena Sterlin Chris McCahan Global Manager, Health and Education Global Lead, Health Care Email: Esterlin@ifc.org E-mail: cmccahan@ifc.org Washington, D.C., USA Washington, D.C., USA www.ifc.org/education www.ifc.org/health www.ifc.org/health 2121 Pennsylvania Ave. NW Washington, DC 20433 Tel. 1-202-473-1000