Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on October 10, 2022 - October 16, 2022

SIX months after reopening its borders, Malaysia is seeing a return of foreign patients seeking medical care, say healthcare providers.

“[Since April 1,] we have seen an increasing trend of health tourists coming to seek treatment at Sunway Medical Centre. In August, we saw more than five times the growth of health tourist numbers in our hospital compared with April, with over 31,000 international patient visits recorded from January to July,” Sunway Healthcare Group managing director Datuk Lau Beng Long tells The Edge.

“The top treatments sought by foreign tourists are mainly cancer, blood disease, obstetrics and gynaecology, hepatology, orthopaedics, and ear, nose and throat, to name a few. We are also looking to develop new clinical services and niche products,” he says.

Ramsay Sime Darby Health Care (RSDH) has also observed a 10% pickup in its international healthcare patients from pre-pandemic levels in 2019. RSDH, which is equally owned by Sime Darby Bhd and Australia’s Ramsay Health Care Ltd, operates four hospitals in Malaysia and three in Indonesia.

IHH Healthcare Bhd says its foreign patient numbers have recovered from the Covid-19 pandemic, with some of the markets in which the group operates in such as Turkey and Europe “having rebounded when borders reopened in 2021 and grown beyond pre-pandemic levels”.

“Foreign patients tend to visit IHH hospitals for high acuity treatments, which may not be available in their home countries. Such specialities include clinical and radiotherapy oncology, neurology, cardiology and orthopaedic surgery,” the group says in an email reply to The Edge. It adds that the hospital brands under the group such as Pantai, Gleneagles and Prince Court continue to underpin the recovery, demand and eventual growth of its foreign patient numbers.

However, the three healthcare providers declined to reveal their market share in the local medical tourism market.

“Currently, data with regard to international patient contribution for 2022 is scarce. However, we know from our earnings calls with management that international patients contributed 7% and 15% to KPJ Healthcare Bhd and IHH’s revenue respectively in 2019,” says an analyst with a bank-backed research house. “Many players are [also] hesitant to commit to revenue targets from the medical tourism segment for now, but that market is certainly set to look more upbeat as we go into 2023 and beyond.”

In a Sept 21 note, MIDF Research says it likes IHH for its “resilient financial performance on the strength of increasing inpatient volume and returning medical tourists post-pandemic, strong balance sheet and efficient local, regional and international collaborations”. It is maintaining a “buy” call on the stock with an unchanged target price (TP) of RM7.96.

The research house also has a “buy” call on KPJ Healthcare, with a revised TP of RM1.18 from RM1.14 previously. It points to KPJ Healthcare’s “favourable outlook in view of higher demand for hospital care and treatments, improving medical tourism, rising demand for elective medical procedures, demographic shift to a growing ageing population, and continuous utilisation of digital healthcare for its day-to-day operations”.

RHB Research analyst Jim Lim Khai Xhiang says while RSDH is a non-core business for Sime Darby, he believes Sime Darby and Ramsay are not in a rush to divest RSDH as it is a profitable business, usually contributing between 2% and 4% to Sime Darby’s operating profit.

“We think Sime Darby will continue to explore all options for RSDH, potentially including an IPO (initial public offering),” he writes in a Sept 12 report. Lim maintains a “buy” call on Sime Darby but with a lower TP of RM2.55 from RM2.75 previously after the group’s discussions with IHH to sell RSDH fell through last month.

Analysts covering Sunway Bhd are upbeat on its healthcare division Sunway Healthcare Group’s expansion, which includes pivoting to elderly living and post-natal confinement centres, a move seen as maximising revenue generation, as well as its targeted listing by 2029. Sunway Healthcare Group is 84% owned by Sunway and 16% by Singapore’s sovereign wealth fund GIC Pte Ltd.

Kenanga Research analyst Lum Joe Shen points to Sunway Healthcare Group’s RM75 million net profit recorded in the first half ended June 30, 2022 (1HFY2022), noting that this is record-high profit as patient count has recovered nicely and is now above pre-pandemic levels.

“While we anticipate the healthcare segment to register all-time-high profits in FY2022, FY2023 and FY2024 will see slight negative earnings growth before showing growth again in FY2025, given the gestational losses expected from the three new incoming hospitals. That said, the new hospitals are expected to break even faster than the industry norm as established doctors with existing patients are coming on board,” he says in an Oct 5 note. He is maintaining an “outperform” call on Sunway, with a TP of RM2.05, while Loong ascribes a “buy” call on the counter with a TP of RM2.06.

According to Malaysia Healthcare Travel Council (MHTC) CEO Mohd Daud Mohd Arif, medical tourism in Malaysia is on course for a continuous and sustainable industry growth, which has been strategically proposed for rollout over the next four to five years, guided by the Malaysia Healthcare Travel Industry Blueprint 2021-2025 released in January.

He says Malaysia’s healthcare travel industry, branded Malaysia Healthcare, is considered a key economic growth driver, with a potential to contribute up to RM2 billion to the economy by 2025 with estimated spillover effects on air travel to accommodation, food and beverage, and leisure activities.

“For every ringgit spent on healthcare, an estimated three ringgit is spent on such ancillary services based on the pre-pandemic economic impact,” Mohd Daud tells The Edge. He adds that 1.2 million healthcare travellers from Indonesia, China, Bangladesh, India, the Philippines, Singapore, Australia, Japan, the UK and the US in 2019 represent the top international arrivals seen also over the last decade, with orthopaedics, cardiology, fertility, neurology, oncology and health screenings recorded as the top fields sought for treatment.

The council’s data shows that Malaysia earned RM1.7 billion in medical travel revenue in 2019, with an estimated RM6 billion from other non-related healthcare expenditures such as air travel, transport, food and drink, accommodation and tourism activities.

MHTC says the Malaysian government is targeting hospital revenues (medical receipts only) from medical tourism to hit RM1 billion this year, increasing to RM1.3 billion in 2023, RM1.7 billion in 2024 and RM2 billion in 2025.

“While there is no specific data detailing the exact total count of medical tourists in Malaysia now, the tourist arrival figures published by the Malaysia Tourism Promotion Board (Tourism Malaysia) include international medical patients and their expenditure,” Malaysian Association of Hotels (MAH) president Christina Toh says.

Tourism Malaysia’s website shows that Malaysia registered 26.1 million arrivals and RM86.1 billion in tourism receipts in 2019. Arrivals plunged to 4.33 million in 2020 and just 130,000 in 2021, with tourism receipts falling to RM12.7 billion and RM240 million in the respective periods.

For 2022, Tourism, Arts and Culture Minister Datuk Seri Nancy Shukri has revised and set a new target of tourist arrivals at 9.2 million with tourism receipts of RM26.8 billion, after the country reportedly nearly surpassed its original 2022 target of 4.5 million tourist arrivals with RM11.1 billion in tourism receipts within the first seven months of the year. A total of 3.21 million tourist arrivals and RM9.35 billion of tourism revenue were recorded during the January-July period.

In MHTC’s blueprint, the council slated 2021 to 2023 to be a recovery phase, with 2024 and 2025 the period to rebuild the Malaysian healthcare industry.

Accelerating growth amid challenges

Over the next few years, healthcare groups in the country are planning to advance their offerings in services and products such as oncology, cardiology, neurology and neurosurgery, orthopaedics, gastrointestinal, paediatrics and robotic services to tap foreign demand.

Sunway Medical Group, for instance, intends to also strengthen its quaternary services such as kidney transplant, paediatric heart surgery and bone marrow transplant, says Lau.

KPJ Healthcare will be targetting more surgical referrals from neighbouring countries, especially Asean and Asia-Pacific, says  its chief corporate officer Ariesza Noor.

However, healthcare players will face economic headwinds as high inflation remains, impinging on healthcare spending; there is a shortage of talent, especially nurses, with many being lured abroad by better remuneration packages in “bigger currencies”, as well as increasing competition; and rising healthcare costs are eating into profit margins.

In terms of healthcare players creating an ecosystem to address the international patient’s needs, Sunway City is an example, with its infrastructure as an integrated hub providing healthcare, travel, accommodation and leisure services within close proximity. “At the hospital side, we have invested in modernising our façade, enlarging physical spaces of clinical areas, putting up signage in different languages and, most importantly, developing a one-stop International Patient Centre that is equipped with medical officers, nurses and interpreters,” says Lau.

As for venturing into new areas of treatment to tap international demand for medical services, he says Sunway Medical Group sees “some potential in wellness, preventive medicine and niche offerings using advanced technologies in treating cancer and other diseases”.

“As inpatient days are getting shorter and cost of healthcare is rising, there are predictions that healthcare could eventually shift to the home. More investments and initiatives will be driven around establishing our cancer services, in particular, the areas of hemato-oncology and interventional radiology,” RSDH group CEO Peter Hong says.

MAH’s Toh says hospitals are currently working with hotels to host domestic and international patients who come to Malaysia for health screenings with accompanying persons such as family members. Its promotion is only in its infancy, but this will be increased in time to come. The price for these packages complete with the medical screening and a short stay comes in at RM1,000 to RM2,000.

Complementing regional treatments

Last December, Indonesian President Joko Widodo announced the construction of the Bali International Hospital in Sanur — the country’s first health-focused special economic zone — to recoup IDR97 trillion (RM29 billion) in annual losses from wealthy Indonesians travelling to receive treatment in neighbouring nations. Jokowi reportedly said two million Indonesian patients were lost to overseas healthcare systems every year, and that the new hospital in Bali is expected to be completed and operational by mid-2023.

When asked if the new hospital would mean less medical visitors coming from Indonesia, MHTC’s Mohd Daud says there is an existing and mutually beneficial relationship between Malaysia and Indonesia in the healthcare sector for expert consultancy services, patient referrals and the facilitation of a seamless end-to-end journey for healthcare travellers. “For instance, we saw more than 670,000 healthcare travellers from Indonesia (coming to Malaysia) in 2019.”

MAH’s Toh concurs. “Indonesia is aggressively promoting its new Bali hospital and we may anticipate a slight loss of Indonesian patients, but as the population in Indonesia is very large, incoming patients from the nation should continue to grow.”

This article has been amended as Ramsay Sime Darby Health Care says it no longer owns the day surgery centre in Hong Kong. The error is regretted.

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