The Finnish healthcare market – structural growth with or without the social and healthcare reform

Recently, there has been a lot of discussion in Finland about healthcare and its future. We have heard a lot of colorful opinions but woefully few facts. This sector is new to the Helsinki Stock Exchange, and the private companies of the sector are often referred to as “giant multi-national social and healthcare companies”. The structure, strategy and operating model of the companies operating in Finland vary significantly, however. To see the big picture, let’s start with the markets.

Recently, there has been a lot of discussion in Finland about healthcare and its future. We have heard a lot of colorful opinions but woefully few facts. This sector is new to the Helsinki Stock Exchange, and the private companies of the sector are often referred to as “giant multi-national social and healthcare companies”. The structure, strategy and operating model of the companies operating in Finland vary significantly, however. To see the big picture, let’s start with the markets.

It is a fact that the healthcare costs per citizen in Finland have doubled since the beginning of the millennium, and this trend is not expected to change soon. The record-breaking speed of aging as well as high incidence of lifestyle diseases further accelerate the increase of costs. The taxpayers are right to be concerned, and Finland needs solutions to break this vicious cycle. The increasing need will increase the demand for healthcare also in the future.  

In 2016, the total healthcare costs in Finland amounted to approximately EUR 14 billion, out of which 77% was publicly produced and publicly financed, 19% privately produced and financed, and only 4% privately produced and publicly financed. Even without the social and healthcare reform, a 5% annual increase in private production is expected in the coming years. In the past, Terveystalo has grown approximately 1–3% faster than the market, and this is also our long-term objective for the revenue growth. Last year, 91% of our EUR 690 million revenue came from the private sector; corporate customers accounted for 54% of the revenue, private customers for 37% and public sector customers for 9%.

In the view of public health and total healthcare costs, Finland’s occupational healthcare system is unique within an international context, and wider dissemination of its practices should be achieved. When travelling abroad, the Finnish model always draws a lot of interest and many would like to copy its elements to their own system. According to studies, in companies that invested in systematic work ability management, one invested euro returned six euros in terms of reduced costs of sickness absences and lower pension costs.  

A lesser known fact: In Finland, there are 11 contribution categories for disability pension paid for by the employer. Employers in the lowest category pay only 0.1% of total wages and salaries in disability pension contributions when the amount of disability pensions and part-time disability pensions granted to the employees has been low in the last two calendar years. At its highest, the contribution can be 5.5%. If the total wages and salaries amount to EUR 60 million, for example, the total expense is EUR 60,000–3,300,000, and the employer can directly influence the amount. This creates a strong incentive for investments in preventive care and systematic work ability management that exceed the statutory minimum sum.

As buyers of health services, companies demand measurable quality and cost-effectiveness. The same elements are urgently needed in healthcare in general. We at Terveystalo want to be a part of the solution and show what can be achieved by systematic operation: management of illnesses at population level. Next time, I will be discussing Terveystalo’s strategy and business model and reveal what Terveystalo’s competitive advantage and strong market position are based on.

Kati Kaksonen
Director, Investor Relations and Financial Communications