Since the beginning of the Turgut Özal administration in the 1980s, the Turkish economy has undergone major liberalisation unseen since the earliest years of the republic. The government has been working to privatise enterprises, telecommunications, roads and rapid transit. Within the scope of these changes, Turkey’s private health care providers have also taken on a greater role in the sector. A combination of economic growth, population expansion and legal changes has led to mushrooming demand for private health care. As a result, many of the industry’s major players have been seeking capital from abroad to support expansion efforts and facilities upgrades.

GROWTH FUNDAMENTALS: The combination of growing GDP per capita and a rising population has contributed to the environment of expansion in the health care sector. “Health care is a continuing growth story in emerging markets,” according to Arif Naqvi, the founder and CEO of Abraaj, which sold its 50% stake in Acıbadem to Malaysia’s sovereign wealth fund in late 2011. With disposable income levels and the size of the population itself both on the up, it seems natural that demand for health care should also be rising.

LEGAL CHANGES: In the midst of these demographic and economic changes, government policy, namely the 2003-13 Health Transformation Plan (HTP), has also been instrumental in bringing about structural changes in the sector. A key tenet of the plan has been an effort to broaden the pool of the population that qualifies for state coverage. All employees and dependents of employees receive coverage, with monthly rates adjusted depending on the level of income. Pensioners enjoy benefits as well, and certain impoverished citizens can qualify for free coverage. Even foreigners who reside in Turkey for over a year can opt to join the state social security scheme, a new policy that was announced in January 2012.

The portion of the population under government coverage has increased accordingly. In 2004, just as the HTP was in its infancy, 84% of the population qualified for the state’s various types of social security, including state pensions, social insurance and the green card scheme for low-income families. This ratio increased to 96% of the population by 2011, according to statistics from the Social Security Institution. In addition to broadening the pool of insurance holders, new regulations also allow Turkish citizens to use their state insurance at private hospitals, provided that the private hospital chooses to accept state coverage.

RISING PRIVATE SECTOR: The results of these changes have been massive. Between 2002 and 2009, the number of private hospital visits grew at a compound annual growth rate of 35%. Overall private hospital visits increased from 5% to 16%, according to statistics from the Ministry of Health. Although private visits still make up a minority of overall care, the rate of growth has caught the eye of Turkey’s private sector and foreign investors. Private hospitals have been undertaking expansion and upgrade projects, and foreign capital has been a key source of funding for this growth spurt.

In the last three to four years, a number of major private players have attracted investments from abroad.

On August 28, 2010, Qatar First Investment Bank and London-based ARGUS Capital announced that they had acquired a 40% stake in Memorial Health Group, one of Turkey’s largest private care providers. Universal Hospital Group, a major private player with locations across the country, announced on May 4, 2011 that a set of investors, International Finance Corporation, ADM Capital and Dutch-based PGGM, would be injecting a combined equity investment of $140m into the firm. Khazanah Nasional, the sovereign wealth fund of Malaysia, on December 23, 2011, acquired a 75% share of Acıbadem Healthcare Group and affiliated companies from Dubai-based Abraaj, the largest private equity firm in the region, and the Aydınlar family.

Indeed, with several of the country’s leading medical groups already utilising foreign investment to help fund expansion projects, opportunities to join existing ventures or start new companies seem set to grow.