The Norwegian healthcare system and political risk

In Norway, healthcare services are a public responsibility. On the other hand, both private players and non-profits are critical to the healthcare infrastructure due to lack of capacity on the supply side, combined with a growing demand for healthcare services.

The private players face political risk, as there are different political opinions around what level private suppliers should be able deliver healthcare services to the public. We see this risk both on a national, as well as a municipal level.

For a private supplier, barriers to entry can be quite high. For companies that have proof of concept as a quality supplier to the municipalities, or the specialized healthcare system, business tends to be rather sticky if complexity is high. Switching costs can also be significant due to reluctance to change e.g. a well-functioning IT system. Within the care segment, we believe there are substantial differences between individual companies' abilities to manage the political risk. Reputational risk is material, and choosing the right counterparty to cooperate with is essential. Moreover, when a private supplier performs a high-complexity service well, the private supplier is difficult to exclude, as the municipality will prefer to avoid reputational risk and negative media attention. This will somewhat limit practical political risk for a high-performing supplier. Shortage of time and personnel, also contributes to higher switching costs, and switching costs are probably significantly higher in the specialized healthcare system.

Among the General Practitioners (GPs), there is a lack of time and capacity in general. GPs are the main entry point into the specialized healthcare system, but we observe that private healthcare insurances are becoming an increasingly important way into the system. This is partly because the pressure on the GPs is making them a bottleneck into specialized care. We have also seen that GPs have low barriers for adopting new technology in order to save time and relieve the administrative burden. As the GPs are busy, it seems that once they have chosen a new technology that works, the business sticks. This implies an advantage for suppliers already delivering digital solutions to GPs or other smaller clinics. Norway’s GPs are private, and typically operate in small clinics. Most of them have implemented electronic systems enabling them to focus on their patients. These systems are typically removing some of the administrative tasks like payment and bookings, in addition to various specialized electronic patient journal systems. During the Covid pandemic, GPs quickly adapted to enabling video consultations with patients. These changes seem to have a long-term effect on the way we work, contributing to higher adoption of new technology. Going forward, we will probably see combinations of physical and digital meetings in most parts of the healthcare system.

Contribution by
Vibeke Vier Simensen
Head of Healthcare, Corporate Banking, Danske Bank Norway