Terveystalo - For a healthier life

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Terveystalo, which has improved its profitability for the seventh consecutive quarter, has started to reap the benefits of improved operational efficiency. However, there was some softness in portfolio businesses at the end of the year due to a weaker demand environment. Terveystalo’s CEO Ville Iho comments in an interview with analyst Roni Peuranheimo.

Topics:
00:00 Start
00:11 Successes and areas for development in 2024
01:27 Drivers behind the year-end result development
02:16 Satisfaction of self-employed professionals
03:36 Softness in portfolio businesses at the end of the year
04:46 Challenging demand situation in Sweden
05:42 Outlook and guidance

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I came across a claim in this thread via Google and wanted to share a different perspective. Why it relates to the investment thread: the question is how private healthcare could offer doctors a competitive alternative to public hospital work. Money is a metric, not an end in itself.

Topic: doctor’s earnings and private practice in a university hospital area.

Doctors’ earnings are salary income. On-costs must be paid from salary income, usually 25% and a bit more on top of the gross. In addition, overtime, especially on weekends and public holidays, must be paid significantly more.

As a result, when a doctor’s working hours start to fill up on an annual basis, they are practically forced to take leave. There’s no budget to pay for overtime. Doctors run private practices because they enjoy their work.

The problem with the private sector, for example in the field of Terveystalo, is that in their pursuit of maximizing revenue per doctor’s working hour, they choose not to offer services where revenues are lower. This is a problem because, from a doctor’s perspective, a low-income patient with a complex or difficult-to-diagnose disease is more interesting and rewarding to treat than a 35-year-old avid athlete who frequents blood labs multiple times a year, monitoring their testosterone levels, for example.

This somewhat exaggerated example above is what the investment scene would call lifestyle services or wellness activities.

The private sector could very well do much more interesting things, especially modern technologies would enable the construction of much smaller and more cost-effective hospitals. Instead of concrete mausoleums, smaller units performing demanding surgery – there is global demand for this worth billions. For example, removing bullets from brains is a demanding task for which there is little expertise in the world – among others, in Finland, so-called stereotactic surgery is mastered at a completely different level.

I am disappointed with Finnish companies in the field because it seems they are not interested in creating and developing new things. In other words, Finnish technology companies in the field thus have no customers in Finland to sell to, and therefore no springboard to conquer America with better imaging, robotics, and so on.

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Roni has updated the report; targets and recommendations remain unchanged (11.50 & Add).

Terveystalo’s Q4 report showed that the profitability turnaround seen in recent years was not a one-off adjustment, but rather the company continues on a path of continuous improvement in terms of profitability. Although expectations had risen sharply before the results due to the strong increase in the share price, we consider the strong negative share price reaction (-10%) on the results day to be unduly large. The moderate valuation supports us in continuing to hold the stock. Terveystalo’s adjusted P/E ratios for 2025-2026 are 13.5x-12x, and the corresponding IFRS16 adjusted EV/EBIT ratios are 11x-10x.

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OP Financial Group raises its recommendation to ‘add’, target price €11.50->€12.00

OP forecasts moderate years of earnings growth. In summary of its comments, the company is in good condition and the market offers growth opportunities both in the short and long term.

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A somewhat larger trade. 17.3 million shares, 194 million euros.

Varma and Rettig would have such a large stake to sell separately.

But also Pohjola Vakuutus 10.5 million shares + OP-henkivakuutus 7.1 million shares together would gather the amount.

Waiting for flagging notifications… Incl. buyer

Giant block trade with Terveystalo shares – Total value over 194 million euros Terveystalon osakkeilla jättimäinen blokkikauppa – Kokonaisarvo yli 194 miljoonaa euroa | Kauppalehti

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Nordea published its updated Terveystalo analysis after the Q4 results. The recommendation (BUY) and target price (€13.00) remain unchanged. :point_down:

Screenshot_20250218_211548_Chrome

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So, yesterday’s giant deal was just about combining two pots into a new address within the house…

Terveystalo Oyj: Notification in accordance with Chapter 9, Section 10 of the Securities Markets Act: OP Osuuskunta Terveystalo Oyj: Arvopaperimarkkinalain 9 luvun pykälän 10 mukainen ilmoitus: OP Osuuskunta | Kauppalehti

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We went through the situation of Terveystalo and Pihlajalinna. Both have found the right remedies for earnings growth, and profit records are breaking.

Topics:
00:00 Introduction
00:18 Remedies for earnings improvements
03:38 Slowdown in acquisitions
06:08 Dividends are growing
07:20 Role of the private sector in social and healthcare (sote)
10:15 New cooperation models sought
11:40 Pihlajalinna “buy”, Terveystalo “add”

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What do you think about the news regarding cooperation with Instrumentarium: Terveystalo aloittaa yhteistyön Instrumentariumin kanssa - Inderes

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Roni has written about Mehiläinen and its strong performance.

Mehiläinen, a competitor to Terveystalo and Pihlajalinna, continued its double-digit growth in 2024. At the same time, the company’s operational profitability improved significantly, similar to its competitors, and is already at a record level, at least considering recent history. In light of the numbers, the company’s performance last year can again be considered very strong. The guidance also indicates continued growth in revenue and profit in 2025. Compared to Terveystalo and Pihlajalinna, the company is clearly more ambitious regarding international growth, where there is naturally more room for larger acquisitions than in Finland.

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"One reason for establishing the new medical center was the increased price level of doctor’s visits. He believes that the new medical center can compete with prices that also reach self-paying customers.

– We don’t have to produce anything for the stock market. In addition, we have a very small administration, and the owners themselves work here, says Janhunen."

As has been mentioned in the thread, as large organizations improve their margins, at least some doctors start voting with their feet. It makes me wonder what kind of profitability a healthcare provider can maintain without losing its grip on professional staff.

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In the same vein, Helsingin Sanomat has been dropping these news stories lately. Without insurance, those sums are quite significant for a so-called small operation. The biggest problem highlighted there is perhaps that pricing isn’t very transparent when going for treatment. You only find out the final price at the checkout.

A more sensational news story about a 700e bill was, however, on Sunday and included labs and other tests. It doesn’t create a positive image for private clinics, but that’s where the profit is made.

A short phone call with a doctor cost almost 200 euros | HS.fi

A flu visit to a private doctor turned out expensive, a bill of over 700 euros was given at the checkout | HS.fi

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Overbilling revealed at Terveystalo – doctors charged for visits longer than they actually were
Cases have emerged at Terveystalo where a doctor has repeatedly overcharged clients. Terveystalo admits the issue. According to them, these are isolated cases.

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I am becoming concerned about Terveystalo’s public image, both as an owner and a customer.

Previously, there was disapproval when a defibrillator was not lent out in an emergency. Also, customers’ recent comments in newspapers about overpriced calls and other procedure fees. Not good at all.

Reputation can be lost in an instant, and customers will turn to Mehiläinen or other competitors.

I truly hope someone with a backbone can be found within the company to put things in order.

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This doesn’t surprise me at all, having been an occupational health client for a couple of big companies. There’s nothing a doctor doesn’t want a call time for to review results (2 minutes, I wonder how much they charge?)

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Seems to be quite lacking in backbone.

“Have you reported the incidents to the police?” Answer: Evasion and the answer NO.
“Have you compensated customers for overcharges?” Answer: Evasion, stuttering about some technological capability to investigate the matter (which is complete bullshit), if there are individual cases, that information could certainly be dug out even manually. So the answer to this is NO.

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Media is slow today but might post updates from Mehiläinen here:

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Roni’s comments on Mehiläinen’s acquisitions:

Highlight:

“Mehiläinen’s valuation in connection with the financing round was not disclosed, but media estimates have circulated around an enterprise value of approximately six billion euros. Mehiläinen’s adjusted EBITA in 2024 was EUR 289 million, against which the valuation appears quite high. Forward-looking figures are not available, as there are no forecasts for Mehiläinen, and the earnings contribution from the acquisitions is unknown. In any case, Mehiläinen is valued at significantly higher multiples than its smaller peers Terveystalo and Pihlajalinna.”

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I’ll get back to Monday’s MOT broadcast. In the program, Terveystalo cited, among other things, its significant investments as a basis for its price increases, which were higher than inflation. This is precisely where the company’s problem from the owner’s perspective lies: the investments are economically poor, as evidenced by the weak return on invested capital.

For example, acquiring a new MRI device makes no economic sense if it has to be financed by raising the price of all other services.

The company’s management is destroying shareholder value with its investments. Fortunately for Terveystalo, it has pricing power in an oligopolistic market.

I know I’m repeating myself with my argumentation, but now was a natural moment to criticize the company.

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Hello,
The MOT program has understandably sparked discussion, and at this point, I want to present the facts from the company’s perspective:

  • Our work is based on trust, and our professionals perform their duties carefully and responsibly. Suspicions of overbilling are rare, and we have clear mechanisms to prevent and detect them. We have over 4,000 practitioners, and only a few suspected overbilling cases have emerged.

  • Terveystalo has zero tolerance for improper billing. Improper billing leads to the termination of the practitioner’s contract. In addition, we take any other necessary official measures.

  • We monitor billing carefully and have clear processes for identifying and preventing potential deviations. If we can determine during an investigation that there is an error in billing, the billing found to be incorrect will be credited.

  • We do not reward referrals. Terveystalo’s professionals make referrals for imaging, laboratory, or other services based on medical discretion, supported by care pathways based on Current Care Guidelines. The goal is always to ensure safe, high-quality, and effective care for patients.

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