The transformation of Ukraine’s healthcare sector creates a range of potential investment opportunities for the business community.
For almost quarter of a century following the fall of Soviet Communism, successive Ukrainian governments largely ignored the growing weakness of the country’s healthcare system. Throughout this period, there was an unwillingness to let go of the Soviet legacy in a definitive manner, and a refusal to acknowledge the post-independence failure to provide unlimited and supposedly free healthcare services to all Ukrainian citizens. In reality, free healthcare in post-Soviet Ukraine was like dark humor – not everybody got it.
In 2016, the total value of the Ukrainian healthcare market was estimated at EUR 4.3 billion. Of this amount, almost half came out of patients’ pockets, despite Ukraine’s constitutional commitment to provide free medical services. While half of medical treatments involved payment in one form or another, 85% of healthcare sector activity remained nominally in the public sector, with treatment still overwhelmingly taking place in state hospitals suffering from outdated infrastructure and limited access to modern technologies.
Following the summer 2016 appointment of Ulana Suprun as Ukraine’s Acting Health Minister, the Ukrainian parliament adopted legislation in 2017 that cleared the way for the transformation of the Ukrainian healthcare sector. Suprun’s time at the Ministry of Health ended in summer 2019 as the new government under President Zelenskyy sought to appoint its own ministerial team, creating a degree of uncertainty over the future of healthcare reform. Nevertheless, the key principles and objectives of the reform process remain in place.
The envisioned transformation of the Ukrainian healthcare system is far-reaching and aims to introduce a business-like environment and fair competition to the sector, creating incentives for high-quality medical services. This involves a range of different elements, including the launch of a new financing model through the recently created National Health Service of Ukraine, the introduction of health benefits packages, a drive to make hospitals more autonomous, and much more.
Due to a number of factors including deep-seated distrust among both the public and the professional medical community, healthcare reform has proven one of the biggest political challenges taken on by Ukraine since the 2014 Revolution of Dignity. However, these difficulties have not prevented rapid implementation of reform initiatives. Two years since the launch of the first reforms, the achievements are obvious and there are mounting expectations regarding further developments. While the focus will necessarily remain on patients and healthcare providers as the principle beneficiaries of this healthcare transformation, the reform drive also creates significant opportunities for private investment and business development.
Public-Private Sector Cooperation
Following the successful first stage of healthcare reform at the primary care level, the process is set to expand to the secondary and tertiary care sectors starting from mid-2020. Public hospitals in those sectors will gain greater autonomy. They will enjoy far more flexibility in areas ranging from managing their own finances and leasing or purchasing equipment, to contracting services from private providers. Overall, the process should finally unlock the huge investment potential of Public-Private Partnerships (PPPs) in the Ukrainian healthcare sector.
Ukraine’s e-health initiative is an essential component part of the country’s broader healthcare transformation. In essence, it aims to transfer all medical records gradually to the digital sphere. This includes e-registers of patients, healthcare professionals and healthcare institutions, e-prescriptions, personal e-medical histories, and so forth. An e-health platform is already in place to manage primary care contracts and prescriptions for medicines subject to reimbursement. This digitalization trend is now set to develop rapidly in line with the “government in a smartphone” concept promoted by Ukraine’s new President Volodymyr Zelenskyy. E-health uses open source solutions and creates diverse business opportunities in the fields of software development, MedTech, health data analysis and data protection.
Healthcare Management and Training
As public hospitals gain more business freedom and independence, Ukraine is facing significant levels of unmet demand for professional healthcare managers. This, in turn, could open the door for healthcare management outsourcing. It could also create a market for service providers who are able to train or recruit healthcare administrators.
Constructing and Renovating Ukraine’s Healthcare Infrastructure
A significant portion of Ukraine’s current healthcare facilities is in desperate need of renovation and modern equipment. We therefore expect to see an increase in the number medical infrastructure projects and project financing opportunities over the coming years. This is likely to cover renovation of existing infrastructure as well as constructing and equipping new facilities.
Growing Private Healthcare Sector
The private segment of the Ukrainian healthcare industry is continuously expanding. Private healthcare providers are now offering a wider range of services and can access increasingly sophisticated technologies. Ukrainian healthcare reform should contribute further to this growth trend, as the National Health Service of Ukraine is able to cooperate with private and public healthcare institutions on equal terms. This opens the way for private sector healthcare service providers to access transparent and predictable funding from the Ukrainian state.