Affidea CEO, Giuseppe Recchi, and Prof Rowland Illing, Chief Medical Officer, spoke about Affidea's strategy for future growth, for Healthcare Business International, the largest publisher to track private healthcare services across Europe.
HBI Interview: Giuseppe Recchi, CEO and Rowland Illing, CMO, Affidea
In a wide-ranging interview, we look at Affidea’s strategy and view of the market covering everything from partnerships with AI outfits, elite hospitals and payors through to the growth of private pay and the opportunities to manage entire health systems. How will the imaging services and radiotherapy group with HBI estimated sales of around €370m in 2017 grow and build over the next five years?
"Imaging isn’t sexy," an investment banker recently told Healthcare Europa. "Capital costs are high and you are dependent on state payors who want to cut tariffs." Recchi, the new CEO of Affidea and former executive chairman of Telecom Italia and chairman of ENI, the Italian state oil company and 12 years senior GE veteran, would beg to differ.
For Recchi and chief medical officer Illing, Affidea is unique and growing, adding 77 new centres to its network in the last year and two big acquisitions in the first four months since Recchi came. "No other company can offer standardised high-quality imaging diagnostics across 16 countries through 245 centres."
Recchi sees opportunities everywhere. In particular, the company is keen to partner with big data groups. He points out that Affidea is the only European operator to sit on the Imaging Advisory Board of both IBM Watson Health and Microsoft Cloud. That reflects the richness of its data – last year it took 12 million images of seven million patients. Illing says that Affidea can also work with small AI startups. "Typically they will have built an algorithm on small data sets of maybe 500. They need to then validate these on much larger sets." Illing says that Affidea can sell access to the data but prefers a profit share models.
He acknowledges that GDPR will have an impact on the sector but says that Affidea "has been planning for two years. The key is to get patient consent for the data to be used more widely and we can achieve that."
Elsewhere, Recchi wants to build the centres into more general outpatient services offering primary and specialist care expanding the value chain around patient’s services. He says that over a quarter of the centres have already added some of these functions. Meanwhile, Affidea has launched the first of a chain of greenfield outpatient centres in Ireland and has bought Fonix, an occupational healthcare chain in Hungary. "Healthcare industry is a local game that needs a global mindset and proximity is a key to success."
He is also excited about teleradiology and thinks Affidea has all the capabilities to become the Amazon of radiology. Several of Affidea’s country operations across West and East Europe already do teleradiology and the opportunity is to build a unique international platform with huge potential of third party services.
"Countries are opening up to telemedicine, look at the way Germany has recently relaxed its rules. This solution helps the national health systems to solve the shortage of radiologists." Teleradiology also makes it easier to flow images to sub-specialists with deep expertise in particular conditions leading to much better readings. He says that Affidea’s standardisation and independence allows it to become a partner of choice for any NHS willing to increase productivity and lower costs: "In Turkey, for example, it has been developed a unique model allowing 24/7 services, which is benchmarked by other states."
Recchi in particular believes Affidea is the perfect outsourcing provider of choice. Generally, the last decade has not seen a dramatic increase in the willingness of public hospitals to outsource medical services to the private sector. But Recchi thinks this needs to change and will be driven by the growth of elite centres of excellence and NHS budget pressure. "In many countries, we are now seeing public or private hospitals building national brands that are widely recognised in particular specialities. They get patients flocking to them from across the country as well as internationally."
Such institutions typically do not want to share their expertise and brand with other public sector hospitals but they face huge problems dealing with the new capacity. He says Affidea brings strong value by providing a national network of centres where images and tests can be carried out before the citizen goes to the elite institution counting on standardised protocols. "This is something we see in many countries."
At the same time, the rise in co-pay means that many patients are willing to pay a bit more to go private, creating a fast-growing, high margin revenue stream which will not be affected by state payor tariffs. That is particularly true in countries where there are severe queues. Illing says that in Poland it takes 77 days from a troubling symptom to diagnosis, which makes patients more willing to pay. Private pay rose to almost 40% of revenue at the group in 2017.
Meanwhile Recchi says that insurers are increasingly keen to partner. In Greece Affidea works with the big private insurer looking after a group of 110,000 patients determining their pathways and managing them on per capita basis. Illing says this has delivered clear savings for the insurer. Recchi says: "Generally insurers are suspicious of private sector hospital groups as partners because they know they have a strong incentive to get their clients into inpatient hospital facilities. Affidea is independent of hospitals and is not willing to enter into its customers business."
So how will Affidea change? Recchi doesn’t rule out growth beyond Europe and the Middle East but entering new markets depends upon margins and regulations and should be based on integration capacity and synergies. That suggests to us that it is unlikely to enter the India, Latam or Chinese market anytime soon. But Recchi boasts that it is quite likely to be involved in interesting projects in the Middle East: "Many want to partner with us on big outsource contracts because of our expertise in running big outpatient imaging networks" he claims.
Of course, imaging is only one diagnostic modality. Could Affidea go back into the lab business where it used to be a major player in countries like the Czech Rep and Greece? Recchi says no. "We have significant influence in the laboratory diagnostics business without having to own laboratories. Our centres act as sample collection points, so we manage the relationship with the patient and get to choose which processing partner we work with. I see the lab sector as a commodity business where scale is everything."
Large diagnostic lab groups generally claim that point of care tests (which effectively do away with the need to send the test to a physical lab) won’t expand into primary care. Typically they claim that POCT has been around for 30 years and never impacted their businesses despite the many claims made for it. Illing is less sure. He sees POCT developing fast and thinks it could well cover the ten or so tests which make up 80pc or so of total test volumes. Affidea could administer these tests in its centres.
Recchi sees an interesting contrast between healthcare services and telecoms. "In telecoms, we have seen a consolidation to 3-4 operators per country at large size. Healthcare is still and it will remain extraordinarily fragmented but consolidation is starting at smaller scale. The opportunity is to be a consolidator and we are very well positioned having the expertise across the organisation and a proven track record." With the heft of owner Waypoint Capital behind it, that sounds like a credible claim.