Partnerships with the private sector are on the rise as the government prepares to address infrastructure gaps

After decades of underinvestment, the Peruvian government is now prioritising the health care sector. A reform package passed in 2013 and the allocation of $8.4bn to address the sizeable infrastructure gap in the public system are indicative of the government’s commitment to raising sector standards. A new emphasis on public-private partnerships (PPPs) to boost public infrastructure is expected to generate opportunities for an already dynamic and fast-growing private sector.


The Peruvian health care system is decentralised and fragmented. Services are provided by five main entities, which differ considerably in cost and quality of care. Through its Integral Health Insurance (Seguro Integral de Salud, SIS), the Ministry of Health (Ministerio de Salud, MINSA) subsidises services in its network of hospitals and clinics for the most vulnerable segments of the population, in particular the poor, unemployed and the vast numbers of workers in the informal economy. As of July 2014 SIS covered 14.8m people, nearly 50% of the population.

Employees in the formal economy are covered under the Social Health Insurance (Seguro Social de Salud, EsSalud), a contributory scheme for permanent employees under the purview of the Ministry of Labour. As of July 2014, 10.3m people were covered under this scheme, making it the second largest after SIS. Like MINSA, EsSalud also has its own network of facilities.

A third government-administered health insurance scheme – the Sanidades de las Fuerzas Armadas (FFAA) – covers the armed forces and falls under the purview of the Ministry of Defence. The police force is covered under Sanidad de la Policía Nacional Peruana (PNP), overseen by the Ministry of Internal Affairs.

The private system, composed of private insurance companies known as health service providers ( entidades prestadoras de salud, EPSs) and civil society organisations, accounts for some 6% of the population.

Expanding Coverage

While Peru has traditionally suffered from limited access to health care, in the past few years significant steps have been made towards reaching universal coverage. The passage of the Universal Health Insurance Law in 2009 represented a milestone for the sector. Among other things, the law established the right to health care and made participation in a health insurance scheme mandatory. According to MINSA, in early 2014 health coverage reached 73% of the population, a rise from 63.5% in 2010. Starting in 2015 every newborn child whose parents are not insured through public or private insurance will automatically become affiliated with SIS. MINSA expects Peru to achieve universal coverage by 2021.

Mandatory participation and recent increases in the number of formalised workers have also contributed to the significant expansion of EsSalud. Coverage under this scheme has grown more than 20% since 2010.

Meanwhile, the increase in purchasing power has seen insurance penetration rates rise. In first-half 2014 alone the number of EPSs affiliates grew by 10%, according to the National Superintendence of Health Insurance (Superintendencia Nacional de Aseguramiento en Salud, SUSALUD). As of July 2014 the EPS system had over 1.9m affiliates: Pacífico Seguros led the pack with 40.62% market share (782,239 affiliates), followed by Rímac with 37.25% (706,916), Mapfre Peru with 13.78% (271,389) and La Positiva Sanitas with 8.35% (164,571).

“Given the comparatively limited uptake of private health insurance, there is significant potential for growth,” Edgardo Malpartida, CEO of Clinicas Limatambo, a network of private clinics in Lima, told OBG. “In order to increase penetration, insurance providers need to offer a greater range of products,” he added.

Infrastructure Gap

The public system is characterised by a significant infrastructure gap and has overburdened and underdeveloped facilities. According to KPMG Peru, the infrastructure gap in the sector reaches 40%. MINSA figures show that in 2012 there were 15.2 beds per 10,000 inhabitants, down from 15.5 in 2003. With the largest share of affiliates MINSA accounted for 57% of beds, while EsSalud, FFAA, PNP and the private system accounted for the remaining 43%. At 5.1% of GDP, overall health expenditure in Peru is low even by regional standards. On a per capita basis, Peru is among the countries with the lowest spending in Latin America – $337, compared to $530 in Colombia, $618 in Mexico, $723 in Panama and $1103 in Chile, according to the World Bank. The public sector is responsible for 58.9% of total expenditure, while the private sector accounts for the remaining 41.1%, of which 86.9% is out-of-pocket, according to World Health Organisation (WHO) figures for 2012.


The infrastructure gap is made worse by the shortages in medical staff, which cut across MINSA and EsSalud. According to WHO, in 2012 there were 1.1 physicians per 1000 inhabitants. SUSALUD figures show MINSA has 15,000 doctors for its 14.8m affiliates, while EsSalud has just over 8000 doctors for its more than 10m affiliates. Shortages are felt primarily in medical specialities such as anaesthesiologists, cardiologists and ophthalmologists. These capacity shortages have meant not only long waiting lists but also low standards of care and difficult working conditions for staff. Rural areas are most affected by infrastructure and capacity shortages. Doctors and medical facilities are concentrated in Lima, while rural areas are underserved. The discrepancies in standards of care between urban and rural centres are readily visible in indicators such as infant mortality rates, which in 2012 stood at 14 per 1000 live births in urban areas, compared to 22 in rural areas, according to the National Institute of Statistics.


Since 2012 challenging working conditions and a lack of incentives have led to a series of strikes by MINSA and EsSalud staff, demanding salary increases and better working conditions. In the summer of 2013, a strike by MINSA staff which lasted 30 days caused interruptions in the delivery of services and the cancellation of an estimated 900,000 appointments. The strike ended when MINSA agreed to salary increases and bonuses for doctors practising in remote areas. Strikes have continued in 2014, with some claiming MINSA had not fulfilled promises made in 2013.


The wave of strikes intensified the push for comprehensive reform of the sector, one of President Ollanta Humala’s promises on assuming office in 2011. A reform package was passed in December 2013, aimed at increasing the quality and efficiency of the health care system through better integration of public services. Among other things, the reform restructured MINSA and expanded coverage under SIS to expectant mothers and children up to five years of age. In addition, to improve access to services the reform created an integrated network for primary health care, enabling SIS affiliates to access services at facilities administered by EsSalud, the FFAA or the PNP. The concept was also extended to the pharmaceutical sector with the establishment of “inclusive pharmacies”, which give SIS affiliates being treated for chronic diseases access to essential medicine. The set of reforms also approved the implementation and development of regulations for service delivery exchanges between the public and private systems, which should help address shortages.

Private Sector

The private sector has experienced significant expansion in the past few years, fuelled mainly by the steady increase in insurance penetration. With only 9.8% of total private expenditure coming from private insurance, there is plenty of room for expansion. The recent growth has propelled large-scale investments and, according to local consultancy Apoyo Consultoría, the sector will receive $880m in private investment in clinics and medical centres in 2014-17.

Leading Players

A substantial portion of the investment has come from two business conglomerates, which already owned two of the most important insurers: Grupo Breca, owner of Rímac Seguros, and Grupo Romero, owner of Pacífico Seguros.

Grupo Breca, known for its Clínica Internacional network, has invested nearly $200m since 2010 in expansion plans. The group expanded outside Lima in 2014, with two new clinics in Trujillo and Arequipa and an investment of $12m. Both new facilities are located in shopping malls as part of the group’s strategy to offer accessible services under a “retail” concept. With the new additions the group now has four clinics and seven medical centres. The company’s plans include expanding its existing facilities in San Borja and its headquarters in Cercado de Lima with 300 and 200 beds, respectively, in the medium term.

By 2015 Grupo Romero will have invested $232.3m in its SANNA chain of clinics. SANNA has recently expanded outside Lima and now has a total of 11 locations in Lima, Arequipa, Cajamarca, Piura and Trujillo. Another player experiencing rapid expansion is AUNA, owned by investment group Enfoca, which has three clinics and two medical centres. Its most emblematic project is the $140m Clínica Delgado, which opened its doors to the public in November 2014. Of the foreign players Chilean group Banmédica has the largest presence with its Clínica San Felipe and Roe Laboratorio Clínico.


Competing for a limited market of a little over 1.9m EPS affiliates, the private sector is set to see further consolidation and vertical integration in coming years. In late September 2014, Pacífico (with its SANNA network) and Banmédica announced the two companies would be joining forces to become the biggest private health group in the country. A decision on the details was scheduled for the 90 days following the announcement, although the preliminary agreement foresees an investment of around $82m from Banmédica to reach 50:50 participation in the venture with Pacífico, to be used to fund joint operations.

Investment & PPPS

In a speech to the nation in July 2014, President Humala announced that his government would be allocating PEN8.4bn ($3bn) over the next three years to improve infrastructure and equipment in hospitals. With this amount, government investment in health care would reach PEN11.8bn ($4.2bn) by 2016, nearly three times the accumulated investment over the past 10 years. To help boost public infrastructure, the government is enlisting the help of the private sector. “2015 is expected to be a decisive year for PPPs in the sector,” Mario Hernández, the chief of health and education projects at ProInversión, the agency in charge of promoting private investment, told OBG. “The goal is to allocate PEN2.3bn ($821.1m) of the PEN8.4bn ($3bn) by 2016,” Hernández added.

The private sector has been invited to participate under what is known as a bata gris (“grey coat”) model, in which the private entity participates in the construction, provision of equipment and maintenance of infrastructure – i.e. all non-medical services – while medical services remain the responsibility of the public sector. Under the alternative bata blanca (“white coat”) model, the administration of the public hospital, including the medical staff, is privately run.

ProInversión is in charge of the pre-investment studies and is now working on seven projects: two hospitals in Lima and five in the regions of Arequipa, Trujillo, Piura (2) and Apurimac. The first contract, for the Instituto Nacional del Niño in San Borja, was awarded in July 2014. Since the hospital was already built, the process involved the award of a single management contract for all non-medical services. The contract was awarded to Spanish consortium Gestora Peruana de Hospitales for PEN31.8m ($11.4bn) for 10 years. The contracts for the other two hospitals in the capital, Arzobispo Loayza and 2 de Mayo, were both expected to be awarded in the first half of 2014, but have faced delays given their landmark status.

ProInversión is currently conducting pre-investment studies for the five hospitals. Concessions will include design and construction, equipment, operation, and maintenance of infrastructure and all non-medical services. With the support of ProInversión, EsSalud is initiating procedures for three hospitals, in Lima, Piura and Chimbote. According to Hernández, the concessions for these projects are expected to take place in February or March 2016. The projects are part of EsSalud’s ambitious plans in the next few years, which include the expansion of existing infrastructure in San Juan de Lurigancho, Chorrillos, Surco and Callao. These will not be the first instances of PPPs for EsSalud. Its Hospital III in Villa Maria del Triunfo, inaugurated in May 2014, and its Hospital Alberto Leopoldo Barton Thompson in Callao were both built as PPPs. Given the complexities of labour laws and recent difficulties with medical staff in the public system, MINSA and EsSalud are likely to remain focused primarily on bata gris contracts.

Private Initiatives

A second category of PPPs is available, in which MINSA accepts private proposals to be evaluated by ProInversión, an option which has attracted significant interest. In fact, the large influx of private initiatives in the first half of 2014 prompted the government to redesign the parameters for the submission of proposals. Starting in January 2015, private entities will have a 45-day window to submit proposals needing co-financing. The change is expected to give ProInversión the chance to evaluate all proposals at the same time and decide which should be prioritised.

Service Delivery Exchanges

Another type of PPP in the sector which could gain traction in the next few years is service delivery exchanges. Through its Plan Confianza, EsSalud aims to alleviate its backlog of surgical procedures (much of which was caused by recent strikes) by contracting with private entities. In August 2014 EsSalud reported the number of operations delayed by strikes was in excess of 20,000. The initiative is expected to benefit not only patients but also medium-sized clinics like Clínica Javier Prado in Lima, which offers prices 10-15% below their lowest prices for these service delivery agreements. Miguel Villanueva, general manager of Clínica Javier Prado, told OBG, “We should be pursuing more of these types of service delivery agreements. Every month an additional 5000 EsSalud affiliates have been waiting for operations for more than 30 days in Lima alone. The private sector has the installed capacity and could be operating on these patients, helping to alleviate the backlog.”


Though Peru’s per capita spending on pharmaceuticals ranks among the lowest in the region – $30.40 in early 2013, according to the National Association of Pharmaceutical Laboratories – its pharmaceuticals industry displays considerable potential for growth. Sales grew 6.3% in 2013, surpassing $1.6bn, from a little over $1.5bn in 2012.

The retail market, which accounted for 68% of sales, is dominated by three large groups. Together they represent 81.8% of sales and had a total of 1816 sales points at the end of 2013. Intercorp’s Inkafarma ended the third quarter of 2013 with 636 sales points (56 more than the previous year) and has announced plans for an additional 100 in 2014. With 800 sales points, through the purchase of rivals, Quicorp now manages three chains: Mifarma, BLT and Fasa. Arcángel is the third biggest player, with 380 sales points, having recently expanded its business model to include 110 medical centres and five polyclinics. With local production and sales of generics being actively encouraged by the government, a number of chains have begun to sell generics produced under their own brand, a practice which is becoming common throughout Latin America.

New regulations passed in 2013 that allow MINSA to buy generic medicine directly from foreign companies to cut costs seem to be hurting domestic production. According to local consultancy Maximixe, in the first half of 2014 production fell by 23.8% as a result of a drop in demand from the institutional market, which in 2013 represented around 25% of overall sales. The decline is likely to see annual production volumes fall by 5.1%, although overall retail sales are projected to reach $1.17bn by end-2014, up 3% year-on-year.


Though competition is set to intensify, the private sector should remain dynamic, benefitting from rising EPS affiliation rates, which are expected to grow by around 9% annually up to 2016, according to local consultancy Apoyo. Private sector revenues are forecast to grow at a similar rate of 10%. Further opportunities for the private sector are set to accelerate as the government seeks to address the infrastructure gap in the public system through PPPs. While the current injection of public funds should begin to address the infrastructure gap, significant additional investments by EsSalud and MINSA will be needed to raise health care standards and make universal coverage a reality.

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The Report: Peru 2015

Education & Health chapter from The Report: Peru 2015

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