Lemann-Backed Startup Looks to Tackle Brazil's Health-Care Woes

(Bloomberg) -- A potential solution to the ailments of modern-day health care may be burgeoning from inside one of Brazil’s biggest slums.

Startup firm Dr. Consulta is betting it can capitalize on demand for affordable, a la carte services for the increasing number of Brazilians who don’t have private health insurance. It’s proven to be an attractive proposition, luring investors including the billionaire co-founder of 3G Capital Inc., Jorge Paulo Lemann, and venture capital firms like Kaszek Ventures and Madrone Capital Partners.

“Unfortunately, Brazil’s public system is broken,” Dr. Consulta Chief Executive Officer Thomaz Srougi said in an interview. “We believe our model can be applied in any place in Latin America and North America to solve the health crisis, which has just been increasing as people age.”

The company’s service offerings include a blood test for 16 reais ($4) and a full abdominal ultrasound for 160 reais. According to Dr. Consulta’s website, the most searched medical appointments are with a gynecologist (115 reais), psychiatrist (160 reais) and dermatologist (120 reais). Patients can book a consultation with a cardiologist for 140 reais.

With unemployment increasing over the past three years, the number of people with access to private health-care plans is dropping. Only about 25 percent of the country is covered privately. As of last December, 47.3 million people had insurance, down from 50.4 million in December 2014, according to data from Brazil’s national health agency.

“The number of people losing their private health-care plan in Brazil is significant and the country is getting older, which increases the need for treatment,” said Luciano Campos, a former health-care analyst at Bradesco BBI, in a phone interview. “Dr. Consulta isn’t regulated, it isn’t a health-care plan. It simply fixes people’s problems. It has found a market gap.”

Not a Newbie

Dr. Consulta opened its first unit in 2011 in Sao Paulo’s Heliopolis, the 10th most populous slum in Brazil. It stuck to a single location for the first three years. “We knew that if we were successful in Heliopolis, we would be successful in Sao Paulo,” Srougi said. “We had to learn to be problem-solvers, spending less.”

Around 30 percent of appointments are scheduled through Dr. Consulta’s app, which allows the company to reduce its call center staff, Srougi said. Moreover, the startup has developed its own software to compile patient information. Doctors are given a list of procedures for each treatment, and their pay is deducted if they recommend unnecessary exams.

“This helps to improve the patient’s experience and to reduce cost,” Srougi said. “The more we use technology at the operation, the cheaper it gets to patients.”

One Million Patients

Today, Dr. Consulta has more than 1 million patients. Two thousand doctors in 60 locations attend to 200,000 people every month. After Sao Paulo, the firm started its first unit in Rio de Janeiro and also expanded to Belo Horizonte. Before this year, Dr. Consulta had raised $100 million from foreign funds, as well as Brazilian and American doctors, and the company is halfway to its goal of raising another $100 million.

“We have been seeing a huge level of interest from Americans,” Srougi said. He declined to provide further details about the company’s long-term plans in the U.S.

Expanding abroad is also on the minds of investors. “At the end of the day, each country across the world wants higher quality and affordable health care” said Hernan Kazah, co-founder and managing partner of investor Kaszek Ventures.

To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Catherine Larkin, Steven Fromm

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