A push to extend health coverage to more Peruvians has seen Peru make significant strides towards achieving universal coverage in the past decade. However, rising demand for health care is increasing the burden on already strained public facilities, following decades of underinvestment. The reforms initiated under President Ollanta Humala are expected to have a significant impact on the sector in the medium term, increasing efficiency and improving service delivery in public facilities. In the meantime, a dynamic private sector is set to benefit from growing demand for private services as insurance penetration rates continue to rise and the market offers new opportunities for public-private partnerships (PPPs).
Towards Universal Coverage
The passage of the Universal Health Insurance Law in 2009 represented a significant step forward in Peru’s push to reach universal coverage. Among other things, the new law established the right to health care and made participation in a health insurance scheme mandatory. As a result, coverage under the Ministry of Health’s (Ministerio de Salud, MINSA) Integral Health Insurance (Seguro Integral de Salud, SIS) programme was extended to expectant mothers and children under the age of five. Starting in 2015, newborns whose parents are uninsured are automatically registered with SIS. MINSA’s efforts to cover more Peruvians in vulnerable conditions has also seen the establishment of plans such as SIS Entrepreneur, which seeks to cover independent or freelance workers, and the School Health Plan, which registers children in preschools and primary schools.
The ministry’s efforts are having a visible effect. As of December 2015, the total number of individuals with some form of health insurance exceeded 25.1m, or 80% of the population, a significant increase from 21m in 2010 (63.5%), according to the National Superintendence of Health Insurance. MINSA expects the country to reach universal health coverage by 2021.
Health Indicators
The increase in coverage over the past decade has had a decisively positive impact on key health indicators, although it remains limited in rural areas. According to MINSA, the percentage of births that occurred in health centres or hospitals reached 89.2% in 2014, up from 81.3% in 2009. Moreover, the percentage of children under five with chronic malnutrition decreased from 23.8% in 2009 to 14.6% in 2014, according to the WHO. As is the case in a number of other Latin American countries, Peru’s epidemiological transition over the past decade points to rising health care costs and the need to move to a preventive health care model. According to MINSA, average life expectancy in Peru increased from 71.6 years at the beginning of 2000 to 74.1 in 2015, a trend that has seen a rise in the prevalence of chronic and life-style related conditions, including heart disease, cancer and diabetes.
Fragmented & Decentralised
The fragmented and decentralised nature of the country’s health care system has posed a challenge to increasing efficiency. Health services are provided by five main entities, each one with its own separate network of facilities. Administered by MINSA, SIS covers the most vulnerable segments of the population, in particular the poor, unemployed and workers in the informal economy. As of December 2015, those insured by SIS totalled some 16.1m people, covering more than half (51.9%) of the population of 31m. Under the purview of the Ministry of Labour, Social Health Insurance (Seguro Social de Salud, EsSalud) is the second-largest health provider, covering employees in the formal economy through a contributory scheme. With nearly 8.3m people registered as of December 2015, EsSalud covers 26.7% of the population and up to 11m Peruvians, including dependents.
The country’s armed forces are also covered under a third government-administered health insurance scheme, Sanidades de las Fuerzas Armadas (FFAA), under the purview of the Ministry of Defence, while the police force is covered under a similar scheme, Sanidad de la Policía Nacional Peruana (PNP), which is overseen by the Ministry of Internal Affairs. Together the two government health programmes covered nearly 470,987 people as of December 2015.
Finally, a growing minority of the population has private insurance, giving them access to Peru’s private health care providers, known locally as health service providers (entidades prestadoras de salud, EPS). In the second quarter of 2015, the EPS system covered more than 2m people, including dependents, up from 1.9m for the same period in 2014. Pacífico Seguros was the market leader, with 781,802 customers, followed by Rímac (750,196), La Positiva Sanitas (250,767) and Mapfre Perú (314,403).
With separate networks, cost and quality of care differ significantly among the country’s providers, and the fragmented and decentralised nature of the system has prevented the articulation of national policies, integration of public services and effective cost-saving measures such as joint purchases of medicine and medical consumables in the public sector.
Limited Resources
The increase in demand for services, particularly in recent years, has also put added pressure on the already strained public health care sector. With a significant infrastructure gap following years of underinvestment, the Peruvian public health care system is characterised by overburdened facilities and a lack of human resources. Though sector expenditure has increased substantially in recent years, at 3% of GDP, according to 2015 World Bank figures, public health spending in Peru remains low by regional standards, behind Colombia (5.18%), Panama (5.2%), Uruguay (6.08%) and Costa Rica (7.55%).
Indicative of the government’s commitment to sector reform, the country’s health care budget reached a historic peak in 2015, surpassing PEN13.7bn ($4.4bn), more than double the amount of PEN6.4bn ($2bn) allocated only five years earlier. In 2016 budgetary pressures from an economic slowdown saw the sector’s budget decrease to just under PEN13.5bn ($4.3bn), though it remained among the highest-priority sectors for the year.
Capacity Constraints
Even so, with an infrastructure gap estimated to reach 40% according to KPMG Peru, the financial effort needed to close that gap is tremendous. The deficit is particularly acute for specialty hospitals. Of the 15,150 health care facilities in the country in 2013, the vast majority (14,574) were primary care centres, with hospitals totalling 576. The limited number of existing specialty hospitals are also concentrated in the country’s largest urban centres, making access to specialty services difficult for rural populations. Moreover, the country’s hospital bed deficit is estimated at 5000 beds, with the public sector accounting for 4700 of those. According to MINSA figures, in 2013 the country’s number of beds totalled 46,574, that is 15.3 beds per 10,000 inhabitants, down slightly from 15.5 a decade earlier. In 2015 capacity constraints led MINSA to introduce a temporary measure extending hospital hours in Lima, in an effort to reduce the backlog of services.
In addition to the significant infrastructure gap and capacity constraints, the sector has also faced shortages of medical staff. In 2014 the deficit of doctors at MINSA-run institutions exceeded 16,000, up from 6398 in 2008, with family doctors, gynaecologists, paediatricians and general surgeons among the most needed professionals. Meanwhile, as of May 2015 EsSalud had some 10,675 doctors for its client base of roughly 11m. Besides long waiting times for medical procedures, the lack of human resources has also meant difficult working conditions for staff. Several factors are responsible for the sector’s limited human resources, including the increase in insurance coverage, the education system’s lack of emphasis on medical training and current labour market conditions that making the medical professions less attractive. Vidal Huamán, general manager of Clínicas Maison de Sante, told OBG, “There has been an increase in demand for health care services from the country’s growing middle class. This, combined with the scarcity of specialist doctors, may lead to a lack of supply from private hospitals in the future.”
Reform
A reform package introduced in December 2013 by the government of President Humala is beginning to address many of the challenges facing the sector. Among other things, the reforms strengthened health care regulations with the restructuring of MINSA and the creation of the Management Institute of Health Services to improve management and planning for the sector. To expand access to primary services, the reform established integrated networks that enable SIS customers to receive care at facilities administered by EsSalud, the FFAA or the PNP. It also enlarged the pool of pharmacies that serve SIS beneficiaries, better integrating public service providers.
In order to address the sector’s human resources challenge, a new compensation policy was also introduced, along with economic incentives for public sector health workers practising in difficult conditions in remote or high-priority areas. The reform also opened the door for greater private sector participation in the provision of health care services through service delivery exchanges.
Closing The Gap
An important component of the reform was the launch of a PEN8.4bn ($2.7bn) investment programme to address the sizeable infrastructure gap. Announced in late 2014, the programme aims to modernise existing medical infrastructure, as well as build new additions, and is expected to add some 7000 new hospital beds to the country’s inventory over the next four to five years. The programme includes 206 projects for the rehabilitation, construction and equipment of primary care centres at the national and regional levels. Some $1.8bn is also being allocated for the construction of 170 provincial hospitals, while $801m will be spent on the construction of 23 regional hospitals and $370m will go towards the construction of 13 national hospitals.
“Adequate infrastructure is no longer one of the main challenges in the health care sector, as many projects have been developed in recent years.” Daniel Querub, general manager at IBT, told OBG. “The challenges arise with respect to the maintenance, service, and overall shortage of medical human resources that are required to operate these new hospitals.”
As part of the expansion plans, ProInversión, the national agency responsible for promoting investment, is in the process of conducting feasibility studies for seven MINSA projects, including two hospitals in Lima and five in the regions of Arequipa, Trujillo, Piura and Apurímac.
Expansion Plans
ProInversión is also conducting feasibility studies for three new infrastructure projects for EsSalud: two specialty hospitals in Piura and Chimbote, and the National Institute for Children and Adolescents in Lima. Combined the projects will represent an investment of some PEN1.1bn ($351.1m), with the concessions expected to take place in the fourth quarter of 2016. The new projects will not be the first instances of PPPs for EsSalud. Its Hospital III in Villa María del Triunfo, inaugurated in 2014, and Hospital Alberto Leopoldo Bartin Thompson in Callao were both built as PPPs. The projects are part of EsSalud’s ambitious expansion plans. EsSalud also announced in May 2015 that it would be investing PEN3bn ($957.6m) in 25 projects to expand its service delivery capacity across the country.
Joining Forces
With demand for public services outstripping capacity for the foreseeable future, service delivery exchanges between the public and private sectors are likely to become more common as MINSA and EsSalud work to reduce waiting times at facilities. EsSalud has already begun sub-contracting services to the private sector, under Plan Confianza, a programme the institution launched to reduce the backlog of surgical procedures. EsSalud said in May 2015 that it had been able to attend to some 500,000 patients by contracting services to 10 private polyclinics. Though service delivery exchanges are still in the beginning phases – the legal framework for it having been introduced only in 2013 – the private sector should begin to see more opportunities.
Privately Growing
In stark contrast to the public system, the private health care sector has been particularly dynamic, having experienced significant growth in the past five years and buoyed by rising insurance penetration rates. Mario Otoya Puga, general manager of Alerta Medica, told OBG, “Demand for private health care services has been growing steadily in recent years, especially as the middle class continues to expand. This fact is evidenced by the entrance of foreign operators into the Peruvian market.” He added, “Corporate demand has been an important component in the growth of private health care services in Peru, as many employers are obliged to offer medical benefits to their workers.” The burgeoning market is also offering a number of new opportunities for health care services, including specialised segments like plastic surgery or senior care.
In this context, the market has attracted significant domestic and international investment in recent years. Private investment in the sector peaked in 2014, reaching $400m and adding some 1100 hospital beds. A number of investors have opted to buy existing clinics and expand operations. As a result, the market has seen a significant degree of consolidation and vertical integration, and the largest players are also the main insurance providers.
Market Dynamics
A significant amount of the investment has come from Credicorp, Peru’s largest holding company and owner of Pacifico Seguros. News site Ojo Público reported in December 2015 that Credicorp has invested more than $200m to establish its SANNA network of clinics, which includes Clínica San Borja and Clínica El Golf in Lima, another three clinics in the interior of the country, and five medical centres in La Molina, Talara, Cajamarca and Negritos. The firm also owns three laboratory chains.
Another important player is Grupo Breca, owner of Rímac Seguros. The group is known for its Clínica Internacional network, which includes four clinics and eight medical centres, known as medicentros. In 2014 the group expanded its reach outside the capital, with two new clinics in Trujillo and Arequipa, both of which are located in shopping malls as part of the group’s strategy to offer accessible services under a “retail” concept. Also among the most important players is Grupo Salud del Perú, with three clinics, a chain of primary care locations known as servimé
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