This is an overview of LatAm Mergermarket proprietary intelligence in the healthcare space in June, featuring existing 

opportunities in the market. 

Brazil is undergoing a wave of vertical integrations in the healthcare space, particularly between health insurance companies on the one side and hospitals and clinics on the other, according to Brazil-based antitrust lawyers.

The trend towards vertical integration and consolidation of the healthcare sector is undeniable, considering the large number of transactions filed with competition authority CADE, said Luiz Felipe Rosa Ramos, a partner at São Paulo based law firm AJDC.

Brazilian medical group Dasa [B3:DASA3] and health insurer Amil Participações’s hospital joint venture, announced on 14 June, is part of this broader trend, said José Inácio Franceschini, a partner at São Paulo-based law firm Franceschini & Miranda.

Franceschini’s law firm submitted to CADE a compilation of 54 healthcare deals that were submitted to – and unconditionally approved by – CADE between 2020 and 2023, as proof of a movement towards vertical integration and partnerships involving Brazil’s main health insurance operators. The list was submitted amid CADE’s review of a deal in which a subsidiary of Brazilian bank Bradesco [B3:BBDC], which owns health insurer Bradesco Seguros, partnered with hospital operator Rede D’Or São Luiz [B3:RDOR3] to develop a new hospital network.

CADE unconditionally approved the deal. Franceschini represented nephrology clinic Nefrostar in the merger review, whose third-party petition was rejected by CADE.

Vertical integrations such as the acquisition of health insurer SulAmérica (SASA) [B3:SULA11] by hospital operator Rede D’Or often create the incentives for competitors to follow suit, said Marcel Medon, a partner at São Paulo-based law firm Tozzini & Freire.

Ramos said something similar: When one player becomes vertically integrated, other players likewise enter vertical transactions “as an attempt to reorganize themselves to continue to survive, to be able to compete in this new market structure.”

Under the Amil/Dasa deal, Dasa’s existing hospital and oncology company Ímpar will become a JV to manage the companies’ hospitals and oncology-related assets, with Amil contributing 11 hospitals, according to Dasa’s material fact. Ímpar will contribute 14 hospitals and will have BRL 3.85bn (USD 702m) in net debt upon the closing of the transaction. Amil will not contribute any net debt.

The Ímpar JV would be Brazil’s second largest hospital network – after market leader Rede D’Or – with 4,400 beds, Folha de S.Paulo reported.

Amil/Dasa entails both a horizontal overlap between the parties’ hospitals and a vertical integration between Dasa’s hospital network and Amil’s health insurance operations, Medon said.

Other large deals in the sector include the USD 1.7bn SASA/Rede D’Or deal, which was approved in November 2022, and US-based UnitedHealth Group’s [NYSE:UNH] sale of health insurer Amil to José Seripieri Filho for USD 411m in February, said Vitor Asseituno, CEO of Sami Saúde, a Brazilian venture capital-backed healthcare insurance company. Amid these large deals, there is a trend of smaller M&A transactions, Asseituno said.

The lawyers all mentioned potential competition concerns associated with this vertical integration trend. One notable feature of Brazil’s healthcare market is that several of the country’s top hospitals are philanthropic entities, whose technological innovations are spread out throughout the country’s healthcare network, Ramos and Medon said.

There are limits set forth by law on philanthropic hospitals’ ability to vertically integrate themselves with other players, Ramos said. “When transactions create difficulties for non-vertically integrated players, such as these hospitals, CADE could look carefully at the impact” on these players, he said.

The impact of the ongoing vertical integration trend on philanthropic hospitals is yet to be determined, Medon said.

Ramos and Medon raised the issue of sensitive information exchange. “When a hospital becomes integrated into a health insurance company, there is a concern that the health insurer will have access to the business practices and patient profiles of rival operators, and vice versa,” Medon said.

Health insurers are increasingly aiming to have access to data to fuel artificial intelligence tools and develop new products, Medon said.

Sensitive information may flow between the different links of the healthcare chain, Ramos said. “Information on competitors needs to be analyzed and treated with great care,” he stated. The vertical integration creates an incentive for the health insurer to benefit the vertically integrated hospital, either by directing more profitable services or through other means, he said.

Amil/Dasa, just like previous deals involving health plan operators and hospitals, is not expected to face major hurdles at CADE, Franceschini said. Amil/Dasa draws a little more attention because it involves larger economic groups, but it is part of a broader inorganic growth trend spanning the last five years, he said.

Dasa and Amil declined comment, while Rede D’Or said it does not comment on market speculation. CADE and Bradesco did not respond to comment requests.

by Camila Pavanelli de Lorenzi in São Paulo, with additional reporting by Priscilla Murphy and Max Gonzales Proprietary Intelligence