Editor’s note: Pinheiro Neto’s Théra van Swaay De Marchi has consolidated a leading practice in healthcare, being recognised by peers and clients for her expertise in the sector. De Marchi works closely with regulator ANS and has experience with litigation, regulatory and transactional work. Both De Marchi and Pinheiro Neto feature in Band 1 in the inaugurating Chambers Brazil’s ‘Healthcare: Regulatory' rankings. In the article below, De Marchi explains the trends in the world’s second largest private healthcare market.
Healthcare in Brazil
The release of this first issue of Chambers Legal featuring healthcare in Brazil, as distinct from other prominent industries, attests well to how this publication, renowned nationally and internationally, values and recognises the importance of this sector. This is indeed a great achievement for lawyers and other legal practitioners in the healthcare sector, which plays an independent and specialised role in the legal world, with an excellent potential for growth and opportunities for public and private investments alike.
When it comes to healthcare, everybody knows that there are diverse views and conflicting interests, and that the range of subjects embraced by this area is quite broad. Bearing in mind that not all these subjects can be addressed here, I propose to offer a broad perspective on the sector, in order to provide a brief insight into the path already trodden and the opportunities, challenges and trends ahead.
Brazil is the second largest private healthcare market in the world. That market operates together with the national public healthcare system, namely the Integrated Health System known as SUS. Health spending in Brazil totalled BRL120 billion in 2019, accounting for 8% of the country’s GDP; 55% of this spending came from the private sector, which delivers healthcare to around 25% of the Brazilian population, whereas the remaining 45% relates to the public sector, which serves approximately 75% of the population. These figures by themselves already reflect the size and complexity of the sector.
Since its creation in 2000, the National Private Health Agency (ANS), whose mission is “to promote the protection of the public interest in private healthcare, to regulate sector-specific operators – also concerning their relations with providers and consumers – and to contribute towards the development of healthcare actions in Brazil,” has contributed to the sustainability, efficiency and stability of the sector. ANS has also facilitated access to healthcare and the delivery of high-quality services, and has provided an institutional interface with other governmental bodies. More recently, ANS has also prioritised the improvement of the sector’s regulatory landscape as a means of attracting and establishing closer liaison with market players and society at large.
A secure and predictable regulatory environment is essential for the smooth functioning and growth of any regulated sector. This is no different in the healthcare sector. However, judicialisation has been a source of instability. Sometimes, the regulation covering the sector is disregarded by judges, who consider other pieces of legislation more relevant than the rules established by ANS. There are recent examples of court decisions setting aside an ANS rule on financial support mechanisms (deductible and co-payment). The courts also deemed unlawful the rules setting out conditions for healthcare and payment for exclusive healthcare plans of inactive employees that are maintained in effect after the termination of employment.
Very soon, the market will also know the stance of the Superior Court of Justice (STJ) on another sensitive issue for the sector’s economic and financial stability, concerning the validity of a contractual clause providing for price adjustments by age bracket in group plans.
Despite the uncertainties brought on by judicialisation, when compared with other industries the healthcare sector continues to attract significant investments, with an increase in M&A transactions – subject to review by ANS and, if applicable, by Brazil’s competition watchdog, CADE, which monitors concentration in the healthcare plan sector to protect competition in the marketplace – in addition to IPOs of healthcare operators and service providers.
Even amid the pandemic, the performance of the healthcare sector, which is strongly pegged to economic performance given the prevalence of group healthcare plan contracts, has shown a surprisingly upward trend. Based on debates over the impact of the pandemic upon the private healthcare market, there is a consensus over some key points: the sector has become stronger, though the private healthcare market has seen a relatively small growth; there must be greater integration between the private and public healthcare sectors; the relationship between healthcare operators and service providers must be improved; and primary healthcare and wellness along with health promotion and disease prevention programmes are particularly important.
Similarly, telemedicine authorised by ANS and by the Federal Medicine Council during the pandemic, as an alternative, emergency and provisional method for healthcare delivery, has evolved significantly. In addition, perhaps telemedicine may translate into an important means of demystifying the use of other technological advances in healthcare, such as artificial intelligence and healthtechs, which also foster access, efficiency and agility in the delivery of healthcare and wellness. This technological breakthrough is undoubtedly an irreversible gain for the sector, but this does not mean that we can dispense with the necessary evaluation in terms of cost benefit, quality of healthcare delivered, patient security and data protection.
Moreover, after the failed attempt to create so-called affordable (or popular) healthcare plans, and amid the emergence of new “deregulated” products and the search for new business models, we can say that the market strongly urges the review of obsolete and/or controversial rules. See, for instance, the relaxation of healthcare plan segments where coverage is currently restricted to a reference plan, outpatient plan, hospital plan (with or without obstetrics) and dental plan based on the ANS List of Healthcare Procedures and Events; authorisation for price adjustments in individual and family plans as a mechanism for resuming the offer of this plan type in the market, whose legal protections (price adjustment and termination) have led healthcare operators to prioritise the sale of group plans; and the rules applicable to the relationship between healthcare plan operators and service providers, including effective remuneration and healthcare models. Improvement of this regulation would promote at the same time greater competition between the regulated and “deregulated” markets and access to the private healthcare system, at least to primary care (non-complex medical examinations and appointments), while also relieving the burden placed on the public system.
These and other issues show the importance of continuing to debate the new legal framework for healthcare plans. This debate has been postponed by the Brazilian Congress over recent years, in particular due to disagreements between stakeholders and due to other structural overhauls deemed a priority for Brazil. There are hundreds of bills under consideration over a range of healthcare, economic-financial, administrative and budgetary topics and other provisions of the Healthcare Plan Law.
In addition to participation in working groups and public consultations promoted by ANS, it is crucial that society at large, including representatives of associations and entities of the various market players, has a proactive and constructive engagement in debates over the new legal framework – for which a Special Committee has been recently created by the House of Representatives. This is an opportunity to tackle the sector bottlenecks and redefine the path and role of the private healthcare system, whose functions supplement those of the public healthcare system, which in turn ensures universal and full access to healthcare.
Finally, I congratulate all healthcare lawyers and sincerely wish that recognition of their work acts as a stimulus for continual improvement within the healthcare industry. The healthcare sector has already overcome challenges and will face many others yet to come, which will continue to call for legal and regulatory support, establishing and developing a technical, balanced and transparent dialogue with the involvement of all in the private healthcare chain under the direction and oversight of ANS.