KUCHING: An increase in public-private sector partnership is expected within the healthcare industry during the medium terms due to increasing demand from for primary healthcare services from private sector.
Currently, the Ministry of Health (MoH) is concentrating on equipping public hospitals with departments and equipment that would enable to undertake more complex patient cases and increase accessibility to admission and treatment in oncology.
This, coupled with the current average nationwide bed occupancy ratio (BOR) of 68.2 per cent in government hospitals, has indirectly led to a shift in the responsibility of providing primary healthcare services from the public to private sector.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) explained that this is to reduce pressure on the public sector and that “This is also so that the public sector can concentrate more on providing services to the lower income patients and those with more complex health issues”.
This shift would contribute to an increasing demand in the private health sector. However, it should be noted that favourable demographics such as increase in aging population, lifestyle diseases, awareness of health diseases, standard of living and urbanisation are still the main drivers in the private healthcare sector.
“In particular, our aging population is expected to be the key driver in demand for private healthcare services.
“This is due to the aging population segment growing faster than other age segments as a result of both longer life expectancy and declining fertility rates,” explained the research arm.
As such, the care of our elderly population will be a huge demand for the private healthcare sector.
Additionally, urbanisation and increasing standard of living are also expected to be a key driver for increasing demand of private healthcare as majority of private healthcare providers are based in urban areas which would make them an attractive and viable options for the increasing number of population moving to the city.
The research arm also noted an encouraging trend on the medical tourism front where the number of medical travellers and revenue contributed by medical tourism has shown an increasing trend since 2007.
“Number of medical travellers and revenue from medical tourism are expected to grow at a compound annual growth rate (CAGR) of 14 per cent and 22 per cent respectively by the end of 2016,” opined the research arm.
In attempts to capitalise on this, private hospital operators have been observed to be already ramping up their capacity in targeted areas such as Penang, Malacca and Johor Bharu which are more susceptible to accept medical tourist.
“Aside from leveraging on high quality core medical services such as: oncology, orthopedics, cardiology, and infertility, the Malaysian health Travel Council (MHTC) acknowledges the growing demand in wellness coming from countries with high spending capacity.
These travelers seeks more on prevention methods such as: detoxification and traditional complimentary medicines which MHTC feels that Malaysia can further tap into,” reported the research arm.
With a clear trend of increasing demand for private healthcare, the sector should expect more participation from smaller players as companies with non-core private healthcare businesses are ramping up on their respective healthcare divisions.
The research arm opined that the reasoning for this is largely to cushion the impact of slow economic activities on their top and bottomlines by capitalising on the growing demand for private healthcare services.
Said players observed taking action are TDM Bhd (TDM) and Oriental Holdings Bhd (Orient) who have recently announced expansions and ventures into the healthcare business. Despite this increase competition, the research arm opines that they “do not think that this will affect IHH Healthcare Bhd (IHH) and KPJ Healthcare Bhd (KPJ) as we believe that demand is still greater than available supply currently.”
As such, the research arm have decided to maintain their ‘Neutral’ calls on both IHH and KPJ with a target price (TP) of RM6.95 and RM4.05 respectively.
“Further to this, we are maintaining our ‘positive’ stance on the sector given the bright prospect of the sector going forward,” concluded the research arm.