Health Ministry Directs Clalit to Increase Stake in Herzliya Medical Center

Clalit Health Services is set to acquire an additional 10% of Herzliya Medical Center, bringing its total ownership to 50% in the private hospital. The transaction values the hospital at over 1 billion shekels. This move concludes a process where both a group led by Yitzhak Tshuva and a group led by Assaf Rappaport sought to gain control by purchasing shares from Yair Landau, who currently holds 50% of the hospital.

The Ministry of Health favored Clalit holding a majority stake and vetoed private acquisition attempts, leading to the current outcome. Clalit will now own 50%, Landau 40%, and Clal Insurance 10%. While other parties can still purchase shares from Landau or Clal Insurance, they cannot gain controlling interest. Clalit retains the right of first refusal on such transactions if directed by the Ministry of Health.

The Ministry of Health is increasingly hesitant about profit-driven private entities having significant influence over hospitals, even those classified as private. In recent years, private hospitals have increasingly provided services to the public healthcare system, with most of their operations funded by health funds. Approximately 25% of their activity remains private, which helps sustain their business model. This trend has led to significant health fund involvement in major private hospitals, such as Assuta (100% owned by Maccabi) and Mediclinic (55% owned by Leumit and Meuhedet).

When Tshuva's group initially proposed acquiring the hospital, the Ministry of Health stated that the evolving model would become a regulatory requirement, mandating Clalit's stake to exceed 50% in any ownership change at Herzliya Medical Center. The Ministry and the Treasury believe that expanding healthcare services quickly leads to increased demand and strain on the health budget, and new facilities could draw staff from the already understaffed public system.

Consequently, Herzliya Medical Center may represent a less attractive growth opportunity for private investors than initially anticipated. However, this regulation also makes it one of the last opportunities to enter the private hospital ownership market in Israel, as establishing new private hospitals is now heavily restricted. Herzliya Medical Center, founded in 1982, performs around 26,000 surgeries annually and holds broad surgical licenses. Clal Insurance acquired a 10% stake in 2016 for 700 million shekels.