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Private healthcare sector sees healthy growth

by Ronnie Teo, bizhive@theborneopost.com. Posted on May 12, 2013, Sunday

The Malaysian healthcare industry is experiencing steady growth so far in 2013, rapidly expanding to meet the needs of society. In 2012, the domestic healthcare market was valued at US$2.25 billion and is estimated to grow to US$3.65 billion within six years’ time. Certain subsectors in particular have been highlighted such as medical tourism, specialist hospitals and private medical insurance. BizHive Weekly speaks to several specialists in the field to gauge the outlook of the industry.

Catching up on private healthcare provision

Rhenu Bhuller, Frost & Sullivan Asia Pacific vice president for healthcare

As a rapidly urbanising country, Malaysia is fast catching up in various sectors that play a crucial role in society.

One such segment is the healthcare sector, whereby its services are required at all stages of life. Birth, life, disease and even death require the aid of medical practitioners and equipment at some point in time.

In Malaysia, the sector is rapidly expanding to meet the needs of an ever-expanding society. In 2012, the Malaysian healthcare market was pegged to be worth US$2.25 billion and will grow to US$3.65 billion by 2018, representing a cumulative annual growth rate (CAGR) of 8.4 per cent within those six years.

According to Frost & Sullivan Asia Pacific vice president for healthcare, Rhenu Bhuller in an email to BizHive Weekly, Malaysia’s growth was parallel with the Asia Pacific healthcare market which was worth US$369.9 billion in 2012 and was expected to reach US$752 billion in 2018, growing at a CAGR of 12.8 per cent.

This contrasted starkly with global growth rates continuing at less than an estimated six per cent during the same period.

“Frost & Sullivan finds that healthcare expenditure in Asia Pacific will almost double in the next six years with the largest share coming from China, Japan and India,” she said.

“Healthcare expenditure continues to experience growth as rising patient demands for better healthcare will result in healthcare reforms in Asia Pacific,” said Bhuller.

“The increasing life expectancy in the region will also result in more elderly requiring long-term care.

“The Economic Transformation Programme is expected to generate 181,000 healthcare jobs in Malaysia by 2020 through EPP projects in the pharmaceutical, biotech and medical devices industry.”

The Malaysian healthcare industry has progressed tremendously over the past decade with strong economic growth aiding the construction of a comprehensive network of hospitals and clinics nationwide.

The government will also be intensifying public sector expenditure in the healthcare industry to further develop its infrastructure. This move incorporates initiatives to enhance collaboration between public and private healthcare providers.

Incentives include tax exemptions equivalent to 100 per cent of qualifying capital expenditure incurred for a period of five years for the construction of new hospitals or for expansion, modernisation or refurbishment of existing hospitals from 2010 to 2014.

Private medical centres in Malaysia are approved and licenced by the Ministry of Health. Most private medical centres have achieved certification for internationally recognised quality standards such as MS ISO 9002 or accreditation by the Malaysian Society for Quality of Health (MSQH).

“The private hospital market size is forecast to grow to close to US$5 million in 2016 at a CAGR of 18 per cent during the period 2011 to 2016 due to the fact that new hospitals are expected to be completed within five years and investments that are being made in new areas like Iskandar Malaysia,” highlighted Bhuller.

To note, in 2012, there were 225 private hospitals in Malaysia and the number is expected to increase to 239 by 2018.

Changing consumer profiles, awareness

Asia Pacific will consist of over 2.3 billion people above 65 years of age and the average percentage of people above 65 will rise from 9.8 per cent in 2013 to 11 per cent in 2018 across the region. 68.5 per cent of people will be in the working age of 15 to 64 years.

The urbanisation rate is expected to increase at a CAGR of 1.2 per cent between 2013 and 2018 in Asia Pacific. About 2.6 million people are expected to move from rural to urban areas in Malaysia between the same period.

“Increasing urbanisation is accompanied with growing consumer awareness and an expanding middle class, progressively skewing population density. This all translates to an increased demand for improved healthcare services,” said Bhuller.

The increase of ageing population and middle class population contributes strong continual revenue growth of private hospitals due increased awareness on healthier lifestyles (such as leads to growth in health check ups).

This segment of the population may be turning too private healthcare due to the high load in public hospitals.

The growing middle class is also more aware of the value and need for private insurance (whereas before the focus was only on life insurance), and this allows for more access in private hospitals.

On top of that, there is an increasing diagnosis of complex illnesses among the Malaysian population (due to more screening and health check ups) which leads to growth in treatments and procedures.

In 2011, there were 221 private hospitals in Malaysia attributed to 13,568 beds in total. Most of the hospitals are part of a wider network of hospitals operated by several key service
providers.

Other than private hospitals, there is an increase trend on the establishment of other private health care service facilities which further enhance the private healthcare sector namely maternity homes, nursing homes, ambulatory care centres, blood banks, haemodialysis
centres, and combinatorial facilities.

Bhuller further believed that there was an access gap between the East Malaysia and West Malaysia, adding how important for the government to look at the differences and possibly work with the private sector in public-private partnerships to develop the infrastructure.

“It is not only hospital infrastructure that would need to be developed, but also the ability to access that infrastructure (namely road/rail networks) so that patients can get to healthcare facilities.”

Growth opportunities in Top 5 sectors

Specialty Hospitals

Bhuller noted that due to increasing lifestyle diseases, such as diabetes and chronic heart disease, Asia would be a big market place for specialty hospitals.

“With the ageing population, there will be specific diseases and areas we will need to tackle like geriatric diseases, cardiac areas, oncology.

“Hospitals that have specialisation in this area would be attractive as they will provide expertise in diseases that will be of high load.”

Medical Tourism

Driven by rising affluence and increasing demand of quality healthcare, medical tourism will be one of the top growth sectors in Asia Pacific in the short to medium term, highlighted Frost & Sullivan’s Bhuller.

“Internationally, the medical travel market growth in Malaysia is on an upward trend where in 2011, Malaysia generated RM509.8 million (US$167 million) in revenues for medical travel and is expected triple the amount to RM 1.57 billion in 2016, registering a CAGR of 25.2 per cent during the period,” she stated.

“The upcoming and potential medical travel hub in Malaysia include the Medini Health Hub in the Iskandar Development Region will attract more Singaporeans and expatriates where more hospitals are setting off to acknowledge Singapore national insurance fund (Medisave) for high quality yet cost effective healthcare services.

“The flows of medical tourists are expected to inflate when the planned high-speed rail link between Johor and Singapore completed by 2020.”

Private Medical Insurance

Increasing cost of healthcare coupled with existing low penetration rates of public insurance will create a big market for private insurance companies.

Currently in Malaysia, there are a variety of insurance players with tie-ups with major private healthcare providers to capitalise on this, offering different types of packages to suit the many needs of domestic patients.

Some even have plans to aid foreign medical travellers seeking treatment in Malaysia.

Healthcare IT

“In order to remain competitive by increasing operational efficiency, clinical outcomes and financial profitability, private and public hospitals will invest extensively in installing, maintaining and upgrading Healthcare information technology (IT),” Bhuller
noted.

“Currently the hospital sector is moving towards high technology implementation – private hospital networks have electronic medical record systems that can link patients in their branches.

“The growth for this will be more in the mid to longer term post 2015 as this is a high investment area, but will ultimately enable providers to increase efficiency.”

Day Care Surgery / Healthcare Centre

Day Care Centre is a medical service entity which performs medical and surgical procedures on patients within a day. Day Care Centre is a lucrative business option which requires lesser investment and offers better profitability.

“As healthcare costs rises and technologies advance, people are also time poor, the industry is moving towards minimally invasice procedures that don’t require hospital stays. This also leads to less requirements for infrastructure like hospital beds and fast recovery periods,” Bhuller underscored.

Tapping into the medical tourism segment

SEAMLESS EXPERIENCE: Photos show the recently launched Tourism Concierge and Lounge at the Kuala Lumpur International Hall. This venture is hoped to enable seamless healthcare travel experience for both medical tourists and patients alike.

Another major segment in the domestic healthcare industry rapidly gaining traction is medical tourism.

“Medical travellers” are a growing, lucrative segment to tap into.

As private health care costs escalate in countries overseas amid long waits for treatment at public hospitals, more people are pursuing cross-border options for a range of procedures.

Most are drawn to nearby countries that can offer equivalent treatment at a fraction of the cost.

Under the tutelage of the Malaysian Healthcare Travel Council (MHTC), Malaysia has made much progress in this segment bearing in mind how relatively new it is here (about five years) compared with peers such as Thailand who has been promoting medical tourism for some 30 years.

“Malaysia received 392,000 healthcare travellers in 2010 and the number grew to 671,000 in 2012, a remarkable accumulated growth rate of 63 per cent in the last three years,” revealed Dr Mary Wong Lai Lin, MHTC chief executive officer.

“There is growing demand in healthcare tourism in this region due to its value-for-money, high quality care and competitive pricing. In terms of total revenue generated, it grew from RM379 million in 2010 to RM594 million in 2012, with an accumulated growth rate of 51 per cent for the same period.”

Graph shows the number of healthcare travellers from 2007 to 2012 (SOURCE: MHTC)

Wong further highlighted the top ten countries from which most of the medical travellers come from were Indonesia, India, Japan, China, Bangladesh, United Kingdom, Nepal, Australia, US and the Middle East.

Moreover, she noted that “Hospitals involved in medical tourism can get 100 per cent tax allowance for capital expenditure on medical equipment. So the cost of advanced equipment won’t be transferred to customers.

“Seventy-two out of 253 private hospitals in Malaysia are open to medical travellers. Popular travel packages include exams such as colonoscopy and coronary angiogram.”

The MHTC has ensured that we were not left far behind in this context, exemplified by unique efforts such as the recently-launched Tourism Concierge and Lounge at the Kuala Lumpur International Arrival Hall on April 29 this year.

The first of its kind MHTC Concierge and Lounge 2013 is set-up at the Kuala Lumpur International Arrival Hall for a “seamless healthcare travel experience for both the medical tourists and patients alike.”

This one-stop-centre will add a further boost to the developing medical tourism industry in this region; providing medical tourist a seamless healthcare travel experience.

OFFICIALLY OPENED: Chief Secretary to the Government Datuk Seri Dr Ali Hamsa signs a plaque to officiate the opening of the MHTC Tourism Concierge and Lounge here on April 29. Also present were Malaysia Airport Holdings Bhd senior general manager of Operation Services Datuk Azmi Murad (left) and Wong (right). — Bernama photo

“Supported by Malaysia’s Ministry of Health, the MHTC Concierge and Lounge is certainly a milestone achievement for us as it is the first point of contact for medical tourists upon their arrival to our country,” Wong highlighted.

“Thus, giving much assurance to the medical travellers’ and providing easy access to all their medical tourism enquiries for a comfortable and fruitful stay in Malaysia.”

The MHTC Concierge and Lounge began operation on April 1, 2013 and the main purpose is to disseminate and facilitate healthcare services information as well as questions pertaining to transportation, accommodation and travel within Malaysia.

A team of dedicated medical personnel will assist and facilitate all medical travel inquiries from providing information pertaining to treatment centres to certified doctors, treatment available and even up to assisting with the appointment requests with participating hospitals.

In 2009, under the patronage of MHTC, there were only 35 hospitals that were registered to promote medical tourism. This figure has grown to 72 today which mean more healthcare facilities in Malaysia are becoming ready to cater to international patients, according to statistics provided by the MHTC.

BP Healthcare striving for market dominance

Chevy Beh, BP Healthcare Group executive director

With humble beginnings as a clinical laboratory in Ipoh in 1982, BP Healthcare Group of Companies (BP Healthcare) has grown into a fully-fledged heavyweight as Southeast Asia’s largest medical diagnostic chain with more than 100 outlets so far spanning every state in Malaysia.

BP Healthcare Group executive director Chevy Beh in a telephone interview with BizHive Weekly gave an in-depth update on the group’s various strategies to aggressively grow itself on the back of an ever-expanding healthcare market.

“Malaysia’s healthcare in general is on the rise with more spending seen in both private and public healthcare facilities,” he said to BizHive Weekly. “In the past five years, the industry has seen a cumulative annual growth rate (CAGR) of 10.5 per cent.

“BP Healthcare is catering to this growth by expanding not only its current services but also into other new sectors as well.”

The group started the year strong with a takeover of the Sime Darby Specialist Centre Megah daycare facility in Petaling Jaya as its first ever maiden acquisition.

Beh noted this was in line with BP Healthcare’s plans to own a chain of hospitals.

Currently, the group has over 20 companies in its forte, involving several key sub-sectors such as dental, clinical services, pharmacy business, laboratory services, medical and specialist divisions, IT solutions, medical equipment and so forth.

“This year, we have plans to significantly add over 30 new outlets each under diagnostic centres, Lovy Pharmacy, hearing centres and food testing facilities,” Beh outlined.

“We also have plans to increase the number of existing five specialist centres, another three specialist dental clinics and a second Garvy’s health and wellness restaurant.”

The group has also expanded into several segments such as diagnostic and imaging, pharmacy, hearing solutions, specialist centres and dental solutions. These subsectors within the healthcare industry have seen exponential growth within the healthcare industry itself with high demand seen to date.

Perhaps this also served to be the main advantage of BP Healthcare, allowing for affordable and competitive pricing also made able by its sourcing and range of patient services.

“We are looking to extend our growth in Sabah and Sarawak. We are looking at more outlets in Kota Kinabalu and Kuching,” Beh noted, adding that he was looking to provide third tier medical facilities there.

BP Healthcare’s efforts has been far reaching. For example, its BP Diagnostic Centre has even been appointed by the Ministry of Health to promote medical tourism.

“BP Healthcare has actually been appointed by the government to help growth this industry, with various incentives such as tax breaks and such to help patients,” Beh said. “This all boils down to BP Healthcare’s pricing which is comparatively lower than other local private healthcare players.

“For example, to go for health screening here (at BP Healthcare) is easily 40 to 50 per cent lower than other domestic hospitals. This, including the fact that Malaysia is cheaper than other developing countries by about 30 to 40 per cent, would give tourists a cost savings of up to 70 to 80 per cent,” he gave as an example.

“Some might have red flags raised when they see our competitively low prices – thinking it might mean a lack in quality. But this is not the case. We are always striving to reduce the cost for patients.”

Such notions are also dispelled by BP Healthcare’s various accolades, such as the Joint Commission International accreditation for its laboratories, the Frost & Sullivan Malaysia Health Screening Company of the Year 2013, the Europe Business Assembly 2012, the 7th Asia Pacific Super Excellent Brand 2011, the Brand Laureate Best Brand in Wellness-Primary Healthcare and Screening category and many more.

Speaking on increasing competition, Beh was confident that his group’s unique aforesaid qualities were its key advantages which made itself outstanding not only in one specific niche but in all sectors that it was expanding into.

“We are unique in that we started off as labs and then grew into other healthcare subsegments like clinics, pharmacies and so on. So, our advantage will be that we strive to cover all healthcare segments and become and integrated yet coordinated healthcare service provider in Malaysia,” he explained.

“Looking ahead, we predict to see significant good growth as the government hopes to decentralise certain services.”

To note, currently the market share for healthcare services is about 80 per cent undertaken by public hospitals with the remaining 20 per cent done by private practitioners, revealed Beh.

“If there will be a government shift, say from 80 per cent to 75 per cent, then the five per cent entering to private healthcare is a significant number,” he said, adding that other factors also came to play such as an ageing society, increase in population growth and diseases.

On its ambition to expand overseas, Beh noted  its plans to ‘conquer’ all countries within the Southeast Asian region.

The group has already entered into joint ventures with the Ciputra Group in Indonesia and with Red Bull International in Thailand to open up branches in those two countries. The group has plans to open up to 100 outlets in Indonesia and 50 in Thailand within the next two or three years.

“We are looking at the other Asean countries, such as Singapore, Myanmar, all of them,” he said. “We are still in the planning stages.”

The BP Healthcare executive director affirmed that the group will strive to continue affirming its brand with better quality and deliverance, at the same time maintaining low costs.

“It is a value game, and everything has a market price,” he underscored.

“For example, there was already a dental market before we entered the industry. There was already a hearing solutions market. But when BP came in, we were able to provide quality services and still undercut other players in terms of pricing.”

In a way, Beh said BP healthcare was fulfilling its social obligations without compromising quality.

“We hope that anything healthcare in the future, people will first think of BP Healthcare.”

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