Operating environment

Target markets

Demand for healthcare services in Finland continued to be strong during the second quarter of 2024.  The supply and booking rates were at a good level. Demand from corporate and insurance customers remained strong. The overall employment remains decent. However, significant changes could affect the demand for occupational health services in Finland. In particular, demand for out-of-pocket dental care services and massage services was dampened by weaker consumer confidence and purchasing power, although a slight pick-up in demand was seen during the quarter. Only smaller tenders for digital services were seen in the publicly funded market.

In Sweden, the demand for occupational health services was at a satisfactory level, while demand for organisation and leadership consultation and harmful use rehabilitation services continued to be weak. The termination of public sector contracts at the beginning of the year reduced revenue. 2024 is expected to remain challenging.

Terveystalo continued to invest in the recruitment of professionals and was successful in steadily increasing supply. To strengthen supply, development efforts have been increasingly shifted towards solutions that enhance the work and productivity of professionals.

The long-term growth prospects for Terveystalo’s addressable markets in Finland and Sweden are solid; the underlying demand is strong, and megatrends, such as the ageing population, digitalisation of healthcare, and lengthening queues in public healthcare, support growth in the future. As the most preferred employer, Terveystalo is well-positioned to drive growth going forward, supported by its strong market position.

The impacts of inflation

Inflation has levelled off compared to the comparison period. Terveystalo has actively negotiated with its suppliers to limit the impact of inflation on costs. Electricity prices levelled off from the comparison period. One of the key areas of the profit improvement program has been to mitigate the impacts of inflation and reduce costs in selected product and service categories.

During the spring, a new two-year collective agreement was negotiated for the private healthcare sector for the period 1 May 2024 - 30 April 2026, covering the largest group of employees at Terveystalo, nurses. In 2024, salaries will be increased by 2.4 percent with a general and scale increase on 1 September 2024, plus a one-off payment of 500 euros in December 2024 and a local instalment of 0.4 percent. In 2025, from 1 May 2025 to 30 April 2026 (12 months), salaries will be increased by a general and scaled increase, the amount and timing of which will be determined by the salary increase in certain benchmark sectors.

In other professions, wage inflation is also present. Most of the physicians who work in Terveystalo are private practitioners (approximately 96 percent), who are not in employment with the company. At the beginning of 2024, Terveystalo introduced a new remuneration model for private practitioners in occupational health, which enables more effective inflation management.

In addition, Terveystalo has implemented commercial initiatives to mitigate the effect of inflation as a part of the profit improvement program.

From 1 September 2024, the general VAT rate in Finland will go up from 24 percent to 25.5 percent. The increase in the VAT rate is estimated to increase Terveystalo's costs by approximately EUR 2 million annually.

The treatment queues and regulatory environment in Finland

The contraction of non-urgent care during COVID-19 restrictions resulted in a significant treatment gap for other illnesses. Treatment queues for specialised care in Finland’s well-being services counties are still long, although they improved in the right direction during the first half of the year. According to Finnish Institute for Health and Welfare (THL), at the end of April 2024, more than 162 000 patients were waiting for non-urgent specialist care in the well-being services counties, which was 10 000 less than in December 2023. In April, almost 17 percent, or more than 27 000 patients, had been waiting more than six months for access to treatment. The number fell by almost 2 000 patients during the spring 2024.

The responsibility for the organisation of social and healthcare services was transferred to the 21 wellbeing services counties and the City of Helsinki at the beginning of 2023. The wellbeing services county councils decide on the service strategies, principles of the service network, service level of emergency services, budget and financial planning of the well-being services county, and appointment of members to governing bodies. The wellbeing services counties have launched smaller tenders for example digital service solutions, but no decisions on larger tenders from the private sector have so far been made.

The government program published in the summer of 2023 aims to increase cooperation between private and public healthcare and to improve the effectiveness and cost-efficiency of the healthcare system. As a first concrete measure, higher Kela reimbursements came into effect on 1 January 2024 (https://www.kela.fi/medical-expenses). In total, Kela compensations will be increased by 500 million between 2024 and 2027, of which the state's financial contribution is 335 million. The aim of increasing the reimbursements is to shorten the treatment queues in primary care. The measures of the government program are estimated to support the growth of demand for private service production and will bring new opportunities for the implementation of publicly funded and privately provided services.

Impact of the global political situation and conflicts

The direct impacts of political tensions and conflicts, such as the war in Ukraine, have been minimal to Terveystalo. The company does not have business operations in or with Ukraine, Israel, or countries that are subject to sanctions. The indirect financial impact arises from inflation and potential disruptions in the supply chain and financial markets. The indirect economic impacts are visible in weakened consumer confidence and purchasing power. The impacts may also have a delayed economic impact through declining employment, which could negatively impact the demand for Terveystalo’s services.