HBI Interview: Giuseppe Recchi, CEO Affidea

Source: Healthcare Business International

Europe’s largest imaging company Affidea wants to become a one-stop shop for all outpatient services. HBI talks to CEO Giuseppe Recchi about changing a brand’s reputation, a record year of M&A and how the pandemic impacted the business. 

“You cannot provide value-based services by only running the equipment,” he says. “This is a natural growth line for Affidea. You should picture our centres as a hub for specialist doctors to offer at the highest possible quality services that patients cannot find in traditional hospital environments.” 

To achieve that, Recchi is predicting 6% organic growth for the next few years by expanding its 308 clinics in 15 markets while M&A adds more presence for patients locally, as well as economies of scale. Affidea has made a record six acquisitions in seven months, most notably acquiring Centro Diagnostic Cernaia (CDC) with €75m sales in 2020. It has also added outpatient clinics in Croatia and Northern Ireland, nuclear medicine in Spain, and an orthopaedics and sports medicine clinic in the UK. 

To help fund that expansion, Affidea has just completed a new €150m credit line. Moody’s reckons the group will spend around €265m on M&A this year. The credit rating agency recently updated its outlook from negative to stable and says it expects gross leverage to return to 6x by 2022 from 8.4x at the end of last year. Affidea confirms that net leverage is forecast to go from actual 4.8x to below 4x by 2023 (the difference is cash). “This puts Affidea amongst the best in class.” 

Affidea is expecting a 45% revenue jump vs 2019 to make, by HBI’s estimates, around €650m. Sales did drop 4% in 2020 to €431m, according to Moody’s. Recchi says there was an activity dip of 15% but that recovery was V-shaped as lockdowns ended. 

The move to outpatient will also increase the private pay split, which stands at around 45/55 private/public. Patients aren’t yet paying for capitated subscriptions for all outpatient services but this is a growing trend. Instead, Affidea says it has expertise in capitation model with private health insurers or B2B with private companies. 

Recchi says that an outpatient brand with “clinical excellence” and the ability to buy the latest technologies is attractive to workforce and patients. “In this way, we can really build out the skills for further specialisation and even create verticals attracting doctors with the strongest reputation. For example, CDC is strong in occupational health and we now have an extra 8,000 corporate clients.” 

He does warn, however, that Affidea is not prepared to pay over the odds for its inorganic expansion at a time when multiples are sky-high. “We’ve been doing this for more than 15 years with strong financial discipline, we buy according to integration opportunity so if the price goes too high we drop it.” 

A big challenge to create a large viable outpatient business is workforce and retention. Affidea pays its radiologists a variable compensation scheme, which Recchi claims pays more than the standard, and tackles scarcity with services like teleradiology and tools like AI. 

“We’re a natural point of interest for AI companies because we have more than 10m patients, one of the largest in our space. We’re bigger than any single hospital.” 

Two of its three AI imaging pilots with icometrix (dementia) and Subtle Medical (PET-CT)  are now in full operation with the third, Aidence (lungs), still in the pilot stage. 

Recchi says that its Subtle Medical partnership is the most interesting as it helps both quality and productivity. “It’s a tool that allows the radiologist to maintain a high quality of the PET/CT images while reducing dose, scan time or both at the same time. We’re already achieving a 33% reduction in the FDG dose, without compromising image quality which is better for patient safety and more cost-efficient for us.”

As for international expansion, France and Germany are two notable gaps in the portfolio. “We’re not excluding entry. Both are interesting markets and we’re opportunistic on it. The key is to create economies of scale in existing markets and then as the company grows I think we’re set to expand even outside of Europe.”