The San Donato hospital empire: a financial analysis
HBI’s analysis of Italy’s largest for-profit hospital operator San Donato Group’s accounts answers many questions about the group’s financial health before COVID. Like: which hospital accounts for 40% of revenues yet drags down profits by 20%? How concentrated is the business in its Milan stronghold and does this differ for profitability? Which subsidiaries are growing and which aren’t?
Gruppo San Donato’s (GSD) hospitals are grouped under eight holding companies with 2-5 hospitals each. Three of these holding companies are formed around its Institute for Research, Hospitalization and Health Care (IRCCS) university hospitals, including Policlinico San Donato Spa. That is where the revenues of its flagship IRCCS San Donato Policlinico are booked and is also the holding company for another seven holding companies. See the company structure below (click top right to full-screen).
HBI’s analysis of company accounts – vetted and confirmed by the GSD team – show that profitability and growth vary wildly. Some 95% of revenues are in Lombardy region and around 65% in its capital Milan.
IRCCS San Donato Policlinico, which it has run since the late 60s, is by far the most profitable with a profit of €33.7m off €169.7m sales in 2019 (+4%): a 20% margin.
It is also the direct parent company for four hospitals not in other structures – Casa di Cura La Madonnina, Institito Clinico Villa Aprica in Milan, Villa Erbosa, Casa di Cura Villa Chiara in Bologna – whose combined revenue amounted to €131m in 2019 (also growing 4%), but a much lower profit margin at 1.7%. The latter two are its only substantial facilities outside the Lombardy region and account for around 5% of the top line.
The largest operating company is, by far, IRCCS Ospedale San Raffaele, which encompasses the large research hospital, three smaller ones, all in Milan. Some 40% of San Donato’s top-line of around €1.7bn in 2019 is made there, but it made a €14m loss on €673m (flat) of revenue last year, dragging down the group’s consolidated profit to €70m.
The financial position of its other research hospital, IRCCS Instituto Ortopedico Galeazzi and its two adjoining hospitals, also in Milan, comes somewhere in between the other two: a 5.7% profit margin on revenue of €205m (+2.5%).
The infographic below shows how profitability is more skewed to its hospitals outside of Milan. Toggle between the two tabs to compare: operating companies for hospitals outside Milan account for exactly one-third of revenues (33.3%), but a pinch under half of the profits (45.2%). And that is just accounting for those companies in profit, ignoring the negative figures of IRCCS San Rafaelle. If that was break-even, the amount of its profits from outside Milan (then €88m) falls to 39%.
Istituti Ospedalieri Bergamaschi Srl encompasses two hospitals and a diagnostics centre in Bergamo and had a 13.4% margin on €175m (flat) 2019 revenue. Istituti Ospedalieri Bresciani Spa, three hospitals in Brescia, had a 6.7% margin on revenue of €190m (+1.5%).
Its other main operating company outside Milan, Istituti Clinici Zucchi Monza which runs three hospitals in Monza, had a 5.8% margin on €67m of revenue (flat). Meanwhile, its dental subsidiary, Smart Dental Clinic Srl, grew revenue well in 2019 at 5% to €15m and made small profit of €100k.
Our Analysis: On the one hand, it’s impressive that San Donato has managed to grow to such a size whilst barely leaving its stronghold of Milan (Monza is a suburb while Bergamo, Brescia and Pavia are just an hour’s drive) and if it manages to replicate that in just one other major city – let alone country – that is a substantial growth pipeline. But its a very high level of exposure to one city and region which is reflected in a very slow recovery from the COVID-19 pandemic. To successfully IPO at a good price it will probably need to expand outside Milan, and if that isn’t possible, outside of Italy.
We would welcome your thoughts on this story. Email your views to Cameron Murray or call 0207 183 3779.
