Georgia's Healthcare Sector Overview
Demand on healthcare services in Georgia is largely driven by rising prevalence of age-associated diseases and improved accessibility, supported by increased government spending.
Public health spending increased almost 3x times to GEL 2.0bn over 2014-22, reducing share of out-of-pocket payments from 66% to 51% of total health expenditure in Georgia. This ratio is still high compared to EU (16%) and peer EM countries in the region (36%). The government plans to reduce share of out-of-pocket health expenditures to 30% of total by 2030.
Hospital sector in Georgia shows low efficiency. Number of hospital beds stood at 5.6 per 1,000 people in 2021, above peers and many high income countries globally. With oversupply of hospital beds, occupancy rate was low even in the pandemic years (55% in 2021).
Utilization of primary healthcare is still low in Georgia, despite significant improvement in accessibility over the last decade. Outpatient contacts per person stood at 4.0 in 2021 in Georgia vs 7.0 in EU.
Georgia faces oversupply of physicians and undersupply of nurses, with only 1 nurse per physician in Georgia vs 2-5 nurses in European countries. As a result, Georgian doctors are 3 to 5 times less productive than peers in terms of patients treated annually.
The profitability of the healthcare sector has improved in 2021 (boosted by increased government spending on the covid-19 management) after continuously deteriorating for several years. EBITDA margin reached 17.1%, while average net profit margin hit 14.6% in 2021. With introduction of DRG, profitability margins are expected to stabilize on healthy levels in the medium term.
The government implemented a new funding model of UHC - Diagnostic Related Grouping (DRG). DRG model determines reimbursement based on patient’s diagnosis and various other factors (e.g. age, gender, health complications, etc.).
The DRG model is expected to enhance efficiency and sustainability of healthcare system, increase transparency, create healthy competition between hospitals, boost consolidation and reduce market fragmentation.
DRG model comes with its risks. If the incentives for cost reduction are too strong, without sufficient capacity of quality control, DRG can lead to reduced quality of care. Furthermore, it can slow down the adoption and use of technological innovations and create deficiency of certain medical services on the market.