Insurance Health companies of a southern region of Colombia: Company behavior and survival 2012-2016

Corresponding Author:

José D. Charry
Research Department
Fundación Universitaria Navarra-Uninavarra, Colombia
E-mail: danielcharry06@gmail.com

Abstract

This article describes the behavior of insurance health companies registered during 2012 to 2016, from the state of Huila - Colombia. A retrospective observational descriptive study was performed; the source of information was a national database “Registro Único Comercial y Social - RUES”; taking into account only registered health insurance companies, their economic activity, size and location. It was found an inverse association between company size and survival, and a direct association between size and number of companies that are registered under a specific economic activity. This information can be useful for future projects, strategies, interventions for new and established health insurance companies.

Keywords

business success, health companies, health sector, business behavior

Introduction

Social ministry of Colombia has changed the health system significantly and also the structure for health workers. Before the Law 100 of 1991, there were three subsystems: social security, public and private health [1].

The social security included the Social Security Institute (SSI), which provided its service throughout the network of public hospitals, and the private subsystem which covered groups that had prepaid or private medicine plans [1-2].

Law 100 of 1993 incorporated a new competition based schemes which regulated market and price mechanisms with the goal of increasing coverage, improving efficiency / quality of services, throughout the adoption of an obligated health insurance plans and a regulated competition scheme [3].

These changes in the health system allowed the creation of the Health Promoter Companies (HPC), the outsourcing of the health service to the Health Care Institutes (HCI), leading to formation of the Small and Medium companies. Although this reform has influenced the formation of many small and medium size companies [4], this puts a big uncertainty for survival in the market National.

Several studies, in different countries, show that 50% or more of those companies created can survive for at least five years [5-7]. In fact, in OECD countries, about 20-40% of new firms leave their operation within the first two years of life and only 40 to 50% survive beyond the seventh year [8,9]. There are various factors that determine the company survival: economic environment and capacity to innovate [10-15], growth rate, size and age of companies [16-20], level of concentration and reactibility to market changes [21,22] and making strategic decisions [23,24].

In Latin America there are a similar behavior, according to the national association of commerce of Latin America survival for companies is defined when 50% or more of those companies created can survive for at least five years. In Colombia only forty percent remain open [25] evidencing that a low company survival [7,26].

However, in Colombia the determinants for company survival are not clear. There have been made several studies about company survival in certain cities of Colombia [27-29], but most of them excludes health companies and have not reached to solid conclusions [30], and have very singular inclusion criteria [31]. Although these studies have established a baseline in Colombia, they cannot be considered current since economic conditions change rapidly over time.

Regarding the health sector, the dynamics of these companies are not yet established. Therefore, the objective of this study is to describe the survival factors of health companies that were included in the National Market Register between 2012 to 2016 in a southern state of Colombia.

Methods

A retrospective observational descriptive study was performed; the source of information was a national database “Registro Único Comercial y Social - RUES”; taking into account only registered health insurance companies between 2012 to 2016, their economic activity, size and location.

Data analysis was restricted to companies with a legal status and registered under human health care and social assistance as their main economic activity. The analysis was performed for the Uninavarra Research Center team using the statistical program IBM-SPSS^® 23 version.

Central tendency and dispersion measurements were used for the quantitative variables; in addition, bivariate analysis was performed to correlate economic activity, size and location. Various statistical confidence tests were applied, such as spearman Rho and Chi2 (x2).

Inclusion and exclusion criteria

Company creation date was determined with the registration database and company death whenever it disappear from database, that could be for cancellation of the registration or due to no new updates of its registration in the following years. Every missing data information of the companies was not considerate for de study.

Results

Between 2012 to 2016 a total of 51 114 companies were registered, 63.04% of those were subscribed for a natural or legal person. From these productive units 18.81% were legal entities, and the constitution average was 18.97%, with constitution means ranged between 17% to 20% (FIGURE 1).

Figure 1: Type of company registration by period.

For the period of 2016 a total of 72.61% of companies were found registered and with an updated commercial register. Between 2012 - 2015 period 64.19% (n =2 976) updated their commercial registry, conforming 67.62% of the total active companies for 2016 (TABLE 1).

Table 1. Updating of the merchant registry.

Data showed that during 2012-2016 the updating of the merchant registry was found to be inversely proportional with the time of creation. Updating for the first period companies was 41, 50% (n=586), for the second period 66,51% (n=687), for the third period was 73,97% (n=1137) and for the fourth was 81,78% (n=862) (TABLE 1).

During the study period, 67.94% of the companies registered were created in the northern región of the state, of which 71.78% were still active at the end of 2016, additionally presenting the lowest renovation rate compared to the other zones of the state, the other regions of the state presented different behavior (TABLE 2).

Table 2. Geographical distribution of companies registered during 2012 to 2016 periods among the state of Huila-Colombia.

At the end of 2016, 70, 32% of the companies registered had also another economic activity registered. The most common was other activities related to health care with 23.22%, wholesale trade in 14.7%, construction 11.27%, professional, scientific and technical activities 11-16% and agriculture, livestock, hunting, forestry and fishing 9.98%. The most common size of the companies related were the micro-companies, that corresponded to 92.84% (n=4,086) of the total (TABLE 3).

Table 3. Distribution of companies by size and economic sector.

About 45% of the companies from the health care and social assistance in the study period corresponded to a legal entity with an average of 45.61% of constitution per period. The lowest companies under this legal status (31%) were in the 2016 period, while the highest creation of companies of this type (57.50%) were the 2014 period (TABLE 4).

Table 4. Type of company registration by period.

During the study period 81.91% (n=154) of the registered companies renewed their registration title for the year 2016 with a mean of 78.43% between 2012 - 2015 periods (TABLE 5). The companies registered during the 2012 to 2015 periods also presented a similar average of renovation ranging between 82.58% and 84.78 (TABLE 6).

Table 5. Company Registration and updating by period.

Table 6. Company register Updating by period.

Of the companies incorporated in 2012, 72.2% (n=526) renewed their registration in all periods of the study, 5.5% (n=2) did not renew in any period and 22.2% (n=8). They renewed in one of the periods described. The information discriminated from the behavior of the renewals by enrollment period is found in TABLE 7. Additionally, it was evidenced that the behavior of non-renewal of the registry increased exponentially period after period where in the first year it was 23.54%, 32.87 % for the second, 42.99% for the third and 58.50% for the fourth.

Table 7. Company register Updating following creation.

Most of the companies from the 2012 group 72.2% (n=526) renewed their registration at all periods, 22.2% (n=8) updated their registration only for one period, and 5.5% (n=2) did not updated at any other period. Also, there was a relationship between time of registry and updating, where the oldest registries only renewed in 23.54%, 32.87 % for the second, 42.99% for the third and 58.50% for the fourth registry period (TABLE 7).

A total of 92.55% (n=174) companies were micro-companies in size. From those companies, 80.46% (n=140) remained in activities until the end of the 2016 period (TABLE 8).

Table 8. Company register Updating by period by size.

The state region with the bigger number of companies registered as new was the north region with 77.13% of the total, and maintaining its representation in the number of active companies in 2016 with 78.57% of the total. The average turnover of companies in the other sub regions was 78.92% (TABLE 9).

Table 9. Company registration and updating by state subregion.

The registration of new companies for nonhospitalization health care remained constant over all periods of the study, with an average enrollment of 43.98%, followed by other activities of human health care 19.21%, and 11.32% for dental practice (TABLE 10).

Table 10. Company registration by period and economic activity.

The most part of the companies were related to basic health centers 74.47%, and the rest corresponded to other activities of human health care and dental practice. The largest portion of size companies were micro companies 92.55% (n=174), and its distribution corresponds, in the same order, with the activities of most common participation (TABLE 11).

Table 11. Company registration by economic activity and size.

The 36.3% of the economic activities in the health care sector registered during all the periods were diagnostic support, therapeutic support, day care management of patients, and those related to the dental practice. As the periods are passing we found decreasing number of companies registered, for the 2012 period only 72% remained in activities in the 2016 period, and for the 2014 period around 80% remained in activities by the 2015 period (TABLE 12).

Table 12. Registered and updated companies for the 2016 period by economic activity.

For the 2016 period 73.37% of the companies were registered for medical practice without hospitalization, other activities of human health care and activities of dental practice (TABLE 13).

Table 13. Company registered and updated for the 2016 period by economic activity.

The 90.90% (n=140) of the companies were micro companies in size, we found also that this kind of companies presented the bigger proportion of closure (TABLE 14).

Table 14. Registered and updated companies for the 2016 period by economic activity and size

Conclusion

Creation and sustainability of companies are indicators of development and economic growth in a region. In our study we found that, from a global view, companies that did not update their commercial registration were most micro and small companies in size also were the companies that did not update their merchant registry. In addition, companies registered as medium and large maintained had more updates of their mercantile registry without reporting a cessation of activities. Therefore, the smaller the companies are more difficult it becomes to maintain activities over time. Similar behavior was explained for Martínez [30] and Hernández [31] who identified that the small companies have more probabilities of staying actives that other large ones.

We found a direct association between size of the company and economic activity. Activities related to the smaller companies were related to activities of medical practice without hospitalization, dental practice and other related with health care. Similar behavior was found for companies that updated their registries, where the activities that had the most renewal of companies were activities of medical practice without hospitalization, diagnostic support activities and activities of dental practice. In addition, there was a direct association between the type of registered economic activity and the number of companies registered for each of them. Economic activities with less creation of new companies did not present cessation of activities or intermittency in the update of their merchant registry; but for those with high number of new registers presented more closure/cessation of activities. In different way, in Colombia, the level of concession of companies in economic subsectors is related to the probability of survival demonstrating that the companies registered in the sub-sectors with high levels are at greater risk of leaving the market [21-31].

These results have different contributions: for practical of business administration, for economic and management literature and for regional politics decision. Also, this study shows the business landscape of the health sector in a region of southern Colombia, serving as a national and international benchmark and a baseline for future studies.

Our conclusions in this study could help others for carrying out projects, strategies and interventions that encourage the creation of companies and strengthen their sustainability and success in a similar economic environment.

Disclosure

The authors declare no conflict of interest, regarding the publication of this paper.

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