Mikhail Yugay, CEO of the IMC Foundation that will manage the cluster, has spoken to TASS and explained why Russian medicine needs this special zone, what famous clinics may have their branches in Russia, which Russian companies are ready to invest in private health care and what laws will govern the responsibility of the cluster's participants towards patients.
Russian medicine is developing year by year, but treatment abroad is still popular among Russians. According to the Minister of Healthcare Veronika Skvortsova, in recent years the number of Russians who go abroad for treatment has decreased considerably. She emphasized that in 2016, a more than 80 thousand people went abroad for elective care. However, there are still people who want treatment in foreign clinics. But now they will not have to go abroad: foreign clinics will be brought to Russia.
To this end, a special zone will be created in Skolkovo where clinics from various countries will be opened: Hadassah (Israel), Bundang (South Korea), and UPMC (U.S.). Within this zone, hospitals will operate according to their own rules: they will have the right to employ foreign doctors and use medical equipment and drugs that have not been registered in Russia yet. The Government of Moscow expects the Moscow International Medical Cluster to greatly facilitate the development of health care in Moscow and the Moscow Region.
Mikhail Yugay, CEO of the Foundation that will manage the cluster, has spoken to TASS and explained why Russian medicine needs this special zone, what famous clinics may have their branches in Russia, which Russian companies are ready to invest in private health care and what laws will govern the responsibility of the cluster's participants towards patients.
— An International Medical Cluster that will host branches of leading international clinics, is being built in Skolkovo. What is special about it?
— There are two problems in medicine: how to cure a patient and how to ensure that treatment is cost-effective. There is a term 'hospital logistics" that deals with the quickest way to cure a patient. It includes several indicators: how quickly and effectively diagnostics is carried out, how quickly medical care is provided and how appropriate post-operative patient care is.
In Russia, hospital management is only just emerging, that is why we can wait until it evolves on its own or implement models, algorithms and standards of treatment which already exist. To ensure integration of the existing models, one should first operate in these conditions for a while. This is what the cluster was created for.
This means that Russian doctors will be working within hospital models developed in various countries such as South Korea, Israel or Germany. They will be learning from foreign practices in order to introduce them in Russia in the future having regard to Russian culture, mind-set and traditions.
— Which clinics intend to join the project?
— In February 2017 we launched a roadshow to attract investors and foreign clinics to the cluster. Israel and South Korea were the first countries to respond. Historically, our ties with Israel have been very close, but the interest shown by South Korea came across as something total unexpected.
Having analysed this phenomenon, we discovered that over the last 15 years the Koreans have revolutionized their health care system: from a very mediocre level it was transformed into high-tech medicine, and it is now part of the national export strategy.
The Koreans have made this system competitive. Bundang Hospital of the National University has become our first partner from South Korea.
In addition, we are virtually on the point of signing a contract with the Israel clinic Hadassah, and are discussing details of cooperation with another Israel medical centre Rambam. A hospital operated by UPMC which is among the top 20 American clinics has openly expressed interest in taking part in the project. IHPM, another American institute, is planning to create a centre for developing corporate health promotion and prevention programs in the cluster. Networks of private clinics also want to cooperate with us. They operate in a competitive environment, and a clinic should continuously extend its presence if it wants to keep its competitive edge.
— Overall, how many hospitals do you intend to set up in the cluster?
— Initially, we had plans to establish 15 clinics with 60 to 100 beds each, but this number may be revised upwards. We are already discussing a specific operating model and selecting investors for 11 clinics from Israel, U.S.A, Italy, Finland, France, Spain, Germany, Switzerland, South Korea and Japan. Besides, we have about 60 other clinics which may be interested in cooperation. Most of them are multi-profile hospitals.
— What criteria were used for selecting the clinics?
— We apply a whole range of criteria in choosing operators. An important consideration is the willingness of foreigners to provide training for Russian specialists. We expect that Russian doctors and nurses will account for about 80% of staff in the clinics of the cluster. And it is important for us that our foreign partners should be prepared to ensure that knowledge is passed on. I think that in a few years from now, when good clinics appear in Russia, there will be much more interest for services provided by Russian doctors.
Working with an investor pool is another aspect that is vital for launching the clinics. Very often operators cannot finance clinics on their own due to legal requirements that are binding for their organizations. For instance, there are non-profit organizations which cannot invest abroad. That is why we always consider creating links between operators and investors participating in the cluster.
At the moment interest comes primarily from Russian investors. In our opinion, this is even for the best because Russian investors know the market and understand how to work in it. A Russian investor and a foreign operator are a perfect combination.
— Who gives a final approval for projects of the clinics?
— We have our own procedure for selecting hospital operators. First of all, an Expert Board which includes eminent representatives of the Russian healthcare industry and foreign experts assess the clinic. They assess how promising the clinic is and how necessary it is for the city; they also consider whether it meets the cluster's criteria: the development of Russian medicine, medical staff and scientific research. The assessment of research potential, for instance, can be based on the investment in this area that a clinic is prepared to make.
After this, the Supervisory Board of the IMC Foundation which is headed by the Mayor of Moscow and also includes representatives of the Moscow Government, the Government of the Russian Federation, the Ministry of Healthcare and the Skolkovo Foundation, gives its opinion. The Supervisory Board assesses the general picture: the clinic, the investor, the social and economic importance of the project for Moscow, and then it makes a final decision.
— Will the clinics really be operated in accordance with a special law that will let them operate in compliance with the laws of their countries?
— Yes, and this law is what makes the cluster so special. Historically, Russia has been a rather conservative country. Many Russian industries including healthcare are subject to long established legal requirements that are difficult to change.
For instance, today, the first limiting factor in medicine is doctor mobility. In general, the development of global medicine is based on this factor. In European countries doctors travel around the world, share expertise and cooperate in providing treatment for patients.
There is no provision to such mobility arrangements for Russian doctors. Our doctors can certainly go abroad, but mostly to attend conferences or spend short periods of internship during which they cannot even get near to an operating table or a patient. Foreign doctors can't come to Russia freely either. To do this, they need to get their credentials approved and take an exam in Russian. The cluster will allow Russian doctors to treat patients side by side with foreign specialists and perform surgeries together with them in full compliance with the law.
Another limiting factor is registration of drugs which may take years. To put it into perspective, a drug is usually put on the Russian market five years later than in Europe. The same applies to medical equipment: its registration takes less time, but this is not sufficient, anyway.
It will take years to change the system across Russia. We will try to change the system within the cluster. Under the federal law there will be no regulatory barriers – this will allow the clinics to branch off by creating exactly the same clinics locally.
— So, the cluster clinics will be able to bring drugs and medical equipment not registered in Russia and use them here. This begs the question: which law will the clinics' liability?
— This is a fair question. This makes me think of the following situation. Imagine a transplantation process. When an organ is transplanted, blood vessels, ligaments and nerves must be sutured. As a matter of fact, we are also transplanting foreign medicine into the "body" of the Russian medicine. And we are connecting all these small blood vessels and nerves, i.e. we are gradually integrating the law into the Russian legal system.
Legal liability is an extremely important issue. Clinics are expected to operate in accordance with their own laws and protocols, but their liability will be subject to the Russian legislation. Harm and medical error can occur everywhere.
This is a framework law, so we will have to work hard on further elaboration of the legal framework. We are already discussing these issues with lawyers, and this work will take another few months. We are also cooperating on this issue with the Ministry of Healthcare, the Federal Service for Supervision in Healthcare (Roszdravnadzor), the customs, migration and tax service.
— Are there any exemptions for foreign clinics, why are they interested in the project? Will there be tax exemptions for residents?
— There has been no precise answer to these questions yet. However, I think there should be a loosening up of some tax requirements.
The cluster cannot be a closed system. It should be of interest for its environment. Moreover, it must complement the environment rather than destroy it.
Therefore, if the city shows a lot of interest in some models, I think that it will be able to provide specific support for some of the projects. Take rehabilitation, for instance. No high prices can be charged for this because rehabilitation takes a long time. If the project is not profitable enough, targeted assistance from the city may be considered.
— Will the cluster be run like a private healthcare model or will anyone with an OMI policy be able to use the services offered by the clinics?
— The cluster will be focused on the private services market. All over the world the share of the private healthcare sector is high. We expect Russia to develop this model too. As for the current position of the private sector on the Russian healthcare market, in Moscow it accounts for about 20%.
— What will the investment model of the cluster's clinics be like?
—Tashir has recently announced its participation in building and providing equipment for the South Korean Bundang Hospital. To this end a separate company Tashir Medica which is prepared to invest up to 15 billion rubles in the project has been set up.
Indeed, such projects are often managed by developers because they see this as a development area. When I discovered that medical networks in Russia are opened by developers rather than doctors and hospitals, it was quite a revelation for me. Tashir decided to get deeply involved in the medical sector because its development will be sustainable, unlike that of many other industries. Tashir is getting involved as an investor – they are trying to create a new market.
— Who will invest in the Israeli Hospital Hadassah?
— Another developer, AFI Development. They have also established a separate company specializing in medicine. We cannot disclose the details yet.
—Who else are you negotiating with?
— We are negotiating with leading Russian banks such as Sberbank, with multi-profile investment companies and private investors.
— Who initiated the establishment of the cluster?
— The Moscow Government. But in general, the project is partially federal. It is aimed primarily at the Moscow healthcare sector, but its overall task is global: gaining experience of transplanting foreign medicine on Russian soil. In my opinion, this is a systemic project, a search for a completely new format.
— Does the Moscow Government provide any investment?
— The Moscow Government is planning to invest about 9.7 billion rubbles, of which 3.5 billion have been allocated for the construction and equipment of the first building accommodating the clinical and diagnostics centre. Another 3.2 billion rubles will be used for the construction of the second building. It is planned to allocate the remaining funds for the construction of housing facilities for doctors and patients and the creation of the cluster infrastructure: roads, utilities, etc.
— When can the first patients be admitted to the clinics?
— The construction of the first building with the clinical and diagnostics centre will be completed before the end of this year, and the construction of the second one is being arranged. We expect the patients to admit to the clinical and diagnostics centre in the first quarter of 2018, while the second clinic will accept them by the beginning of 2020.
— Why Skolkovo?
— Today medicine depends greatly on information technology, science and education. In Skolkovo, the Skoltech University has already been established in collaboration with the Massachusetts Institute of Technology, and clusters of biomedical, nuclear, information and space technologies have been created. This is the right platform for integrating medicine because we will already have both educational and scientific platforms.
— What will be the size of the area covered by the clinics?
— In Skolkovo we have an area of 57 ha. This land is being leased by the Moscow Government. The area is divided into two zones: in the first one there are clinics, hotels for patients and staff; and in the second one there is an industrial park.
Attracting start-ups is an important factor in ensuring the cluster's effectiveness. It is expected that the industrial park will include both new and existing medical projects in Skolkovo, there will be joint scientific research which will evolve into experimental and small-scale production. It is planned to locate it in the industrial park.
— What start–ups are you interested in? Have you selected priority areas? May these be biotechnology or manufacture of medical equipment?
— We have focused on medicine and we have not embarked on technology yet. But now most companies that we are approached by propose organizing production.
— What pharmaceutical companies contact you — are these new or established companies?
— We are approached by companies with established production facilities that aim at further development. The clinics are expected to operate in accordance with their own protocols and laws, but their liability will be governed by the Russian legislation. They understand the need for innovative forms — they need science.
Companies are now moving away from the blockbuster model. Figuratively speaking, in the past everyone had been treated using the same dosage and pills. This is wrong because different people have different stages of disease and different metabolism which is genetically determined. And now the pharmaceutical industry is switching from standardized therapy over to tailored production. I can't tell you the names of the companies yet.
— What is your vision of the cluster's target audience?
— From a financial point of view, these are middle and upper middle classes. However, I also work at the Higher School of Economics where we have recently considered a profile of a Russian citizen who uses medical services. We have found out that income is not the only determining factor.
Services provided by private clinics are used by people in all walks of life. Undoubtedly there are more people on a high income that those whose earnings are average or low, but average and low earners also use private services.
Consumer behaviour in medicine is changing. Today there is a paradigm shift; there is a departure from a patronising attitude when the government states: "I own your health". Today health is a person's capital, and the number of people who go jogging in the morning proves this. I have recently met with an owner of a network clinic who was surprised to learn that over the last year he earned more from health promotion, i.e., prevention, rather than from treatment. When a person feels well, he or she sees the world in a different way.
So, in my opinion, our consumer is a person who wants to live a long and happy life, which does not always depend on income.
Interviewer: Anna Toporova