Operating environment

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.

Target markets

In 2023, demand for healthcare services in Finland continued to be strong. Seasonal variations in demand and booking rates normalised compared to the exceptional comparison period. Demand for basic laboratory services largely normalised to pre-pandemic levels. As the pandemic receded, customer visits were focused on brick-and-mortar as the demand for COVID-19 testing, digital services, and remote appointments declined materially year-on-year.

Demand from corporate and insurance customers remained strong. In the public-pay market, staffing services saw continued strong demand. In the second half of the year, demand for out-of-pocket dental care services and massage services was dampened by weaker consumer confidence and purchasing power. The public-pay private-provision market is yet to see a broader increase in demand and new, smaller tenders have been limited to digital services.

In Sweden, increased economic uncertainty during the second half of the year affected the demand for organisation and leadership consultation and harmful use rehabilitation services, which are more sensitive to macroeconomic changes.

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

A tight labour market and inflation created increasing pressure on operating costs, including wages, throughout 2023. The overall employment remains decent. However, significant changes could affect the demand for occupational health services in Finland.

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

Despite the stabilised inflation, some procurement categories had continued cost pressure. 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 is to fight inflation and reduce costs in selected product and service categories.

A tight labour market, and continued inflation put upward pressure on wages in healthcare services. In the private healthcare sector, a two-year collective agreement is binding for the duration of 1 May 2022 - 30 April 2024, which applies to Terveystalo's largest group of employees, nurses. In 2022, salary increases were 2.0 percent from 1 October 2022 onwards, and for 2023, the increases were in total 2.95 percent and came into effect on 1 November 2023. In addition, the agreed, one-time instalment of 450 euros was paid in June 2023. In other professions, wage inflation is also present. The large majority of the physicians who work in Terveystalo are private practitioners (approximately 96 percent), who are not in employment with the company.

Terveystalo implements commercial initiatives to mitigate the effect of inflation as a part of the profit improvement program. The successful pricing actions impact both 2023 and 2024 financials.

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 have continued to grow. In August 2023, close to 178,000 patients were waiting for access to public provision of non-urgent specialised medical care according to Finnish Institute for Health and Welfare (THL). Of those patients, more than 30,500 (17.2 percent) had been waiting for more than half a year to get treatment. In August 2023, the number of patients who had been waiting for more than half a year for treatment had grown by 9,400 from April 2023.

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, the government decided to raise Kela reimbursements. The new 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 high 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.