Healthcare industry

2.2.1 Finnish private healthcare and the SME framework

In Finnish literature, the more precise term social and healthcare company is used when referring to health business companies. The social and health care business is mainly a service provided by Finnish municipalities and almost half of municipal sector expenditure is incurred in these tasks (Finnish Ministry of Employment and the Economy 2018). In the international literature, however, the terms both social enterprise and social entrepreneurship differ from this meaning. A social enterprise is seen as a company that seeks to make a positive impact on its social community or environment, often through charity. The social entrepreneur, on the other hand, seeks to make a positive contribution to social and environmental problems by developing new innovative solutions. Further, as international research in this area commonly employs the concept of healthcare companies, that term is adopted here in this dissertation to locate the present study in an international context, even though the case companies are Finnish.

The healthcare industry is a labour-intensive and, generally speaking, female-oriented business. Private healthcare companies have traditionally been small enterprises although over the last few decades many big national and international companies have become involved in healthcare (Finnish Ministry of Employment and the Economy 2018, p. 24). In Finland, private healthcare companies typically have just a few big customers, such as municipal organisations. Due to these features, the healthcare industry has faced a number of challenges when it comes to increasing growth and profitability (Rissanen and Sinkkonen 2004). Another major feature of the healthcare industry is the value-added tax (VAT) exemption, which means that private healthcare companies do not have a statutory obligation to formulate financial statements on a monthly basis.

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Collaboration between public and private organisations is typical in the healthcare industry and is believed to create social value and increase cost-effectiveness (Caldwell, Roehrich and George 2017). However, maximising the profitability of private actors and the return requirement of owners has also been questioned in the Finnish context in a previous study because the private healthcare sector receives funding from tax money (Peda and Vinnari 2019). The interface between public and private activities has been studied using the public–private producer model (Barr 2007; Caldwell, Roehrich and George 2017; Peda and Vinnari 2019).

The Finnish version of the public–private partnership (PPP) is known as the provider–purchaser model, whereby a private party participates in public projects as a service provider (Tynkkynen, Lehto and Keskimäki 2012). This kind of partial privatisation, which was implemented in the 2000s, was believed to foster cost-consciousness and cost-effectiveness in the municipal sector, and, further, it was intended to develop the holistic persistence and practices of organisations (Barr 2007; Piekkola 2003; Robinson 1998). This model has been widely applied in Finnish municipalities in recent decades (Majamaa et al. 2008; Barr 2007). Nowadays, the provider–purchaser model appears to be very much an experiment from an earlier era that remains one step ahead in the fight to limit the cost of healthcare and to achieve better customer experiences. However, the disadvantages of the model have been highlighted in international reports, including the complications associated with competition systems, the limited competence of the subscriber, the need for wider national decision making and the need to integrate social and healthcare organisations. Due to these issues, the objectives of the provider–

purchaser model have not been fully achieved, and it has proven to be overly complicated and bureaucratic in practice (Jonsson et al. 2016).

The combined social and healthcare sector will soon face further major reform. In the near future, increased efforts will be needed to reduce institutional care, to increase the opportunities for private care companies and to increase the numbers of trained nurses and doctors (Finnish Ministry of Employment and the Economy 2018, p. 35). The most significant recent change in the field has been the planned healthcare reform, which should

represent a great leap forward in the desired direction although the reform process is still taking place. The decline in institutional care has opened up new opportunities to develop a profitable business involving home services for elderly people. At the same, the desire for more rehabilitative health and social care services and technologies has increased. New cross-border industry services are being created for use in rural areas. The aim is for elderly people to require less institutional care and to receive an increasing amount of non-institutional services, such as home care and support for informal care (Finnish Ministry of Employment and the Economy 2018, p. 54).

The total output of the social and healthcare sector in 2017 was approximately €7.3 billion, of which private service providers accounted for 27%. In Finland, there were 18,500 social and healthcare sector companies in 2017, amounting to 5.2% of all Finnish companies. Usually, these companies are privately owned Finnish companies (some 18,232 of them) although the number of foreign-owned companies had increased to 177 in 2016. While only 0.96% of all social and healthcare enterprises were foreign owned in 2016, their number has been growing rapidly, increasing by 97% between 2014 and 2016. In 2016, there were 14 municipally owned companies in the social and health services sector. As of 2016, social and healthcare employed 387,212 people (386,000 in 2014), of whom 285,000 worked in the public sector and 98,000 (71,000 in 2014) in the private sector (Finnish Institute for Health and Welfare 2014; Finnish Ministry of Employment and the Economy 2018, pp.

18–19). Some 5% of social and healthcare companies were SMEs in 2017, while 95% (17,532) were micro-enterprises employing fewer than 10 people.

In certain sectors, the market centralisation is significant. For example, in the case of dentistry, laboratory and emergency firms, a few of the biggest companies offer 30% of all services (Finnish Ministry of Employment and the Economy 2018, pp. 18–19).

Actions intended to enhance the environmental stability and predictability are essential to the industry’s development. Municipality restructuring as well as social and health service reform are ongoing, which is currently bringing uncertainty to the environment. It is now particularly important to ensure that an unfair competitive situation does not arise between public and private service providers. The public sector, businesses and associations should

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collectively be seen as a resource. All their efforts will be required to cope with future challenges (Finnish Ministry of Employment and the Economy 2018, p. 45).

The most important external environmental factors currently affecting the industry are the ageing population, rising education levels and increasing employee retirement. Additionally, medical and healthcare technology development and, at the same time, cost pressure on the municipal sector are affecting the industry (Finnish Ministry of Employment and the Economy 2018, p. 2).

2.2.2 The healthcare sector: The service industry

One way to classify businesses is to divide them into production technology firms and service firms. Sometimes it can prove problematic to follow this breakdown as many businesses have also adopted the service dimension, and many products have a service aspect. The social and healthcare sector is a typical service industry regarding to offering mostly intangible things (creation), having inputs that cannot be stored and having customers as part of the product. All this renders the industry a labour-intensive business, which causes the labour costs to account for roughly one-third of all costs in the sector.

The service industry is constantly expanding. New healthcare services are always being invented and introduced. Additionally, older products are often reintroduced with new service elements. For these reasons, the service sector is considered to be quite fresh and prosperous. At the same time, research has shown that the service sector does not always systematically apply technology and systems (Bhatnagar 2017; Biggiero 2006; Denner, Püschel and Röglinger 2018; Hussain, Gunassekaran and Laitinen 1998; Nazneen 2017;

Parviainen et al. 2017). Yet, it would now be easier and cheaper than ever to effectively utilize new technology. As the competition has hardened, and performance has remained the main measurement of a company’s success, modern information systems should be able to address the critical success issues. Eventually, both the customers and the business environment gain benefits from cost savings (Berger et al. 1993). In order to take full advantage of a company’s information systems, the systems should be easy and fast to

use. In addition to money, the problem of data confidentiality in the field and new restrictions on data collection make it even more difficult to maintain a comprehensive and effective patient record.