This article first appeared in The Edge Malaysia Weekly on January 18, 2021 - January 24, 2021

AFTER 40 years of being in what it describes as the “build” mode, KPJ Healthcare Bhd, the healthcare arm of Johor state-owned conglomerate Johor Corp, is now looking to focus more on consolidating its assets and services, with a keen interest to work alongside the government to strengthen the country’s healthcare system.

This is a priority for the group’s new president and managing director Ahmad Shahizam Mohd Shariff, who took the reins from Datuk Amiruddin Abdul Satar in July last year.

Ahmad Shahizam has been an independent director at Malaysia Healthcare Travel Council since May 2019. He previously served as CEO of Pantai Holdings Bhd from July 2014 to June 2017 and later as chief corporate officer at IHH Healthcare Bhd from July 2017 to December 2017.

Although Ahmad Shahizam is not new to the healthcare industry, the 49-year-old acknowledges that joining KPJ in the midst of the Covid-19 outbreak has brought unprecedented challenges for the country’s largest listed private healthcare group by capacity.

“For me, it was interesting because in my previous roles, I ran country systems such as Malaysia and I was doing a lot of strategic work at IHH. I was part of the original team from Khazanah Nasional Bhd that worked on the listing of IHH. I did acquisition and merger integrations with Singapore. But I’ve never seen what you would call healthcare services under duress,” he tells The Edge in an interview.

“The reality is because of the nature of the industry, you wouldn’t expect a situation where suddenly there are no patients coming to the hospital. This was unprecedented. Suddenly, patients can’t come to the hospital or they are worried about coming. Hypothetical scenarios of low occupancy levels became a reality.”

KPJ’s net profit for the nine months ended Sept 30, 2020 (9MFY2020) came in 33.1% lower at RM85.16 million compared with RM127.37 million in the previous corresponding period as a result of the impact of the Movement Control Order last year.

The group was hit in 2QFY2020 ended June 30, when net profit came in at RM12.66 million compared with RM41.83 million in the previous year. By 3QFY2020, however, the easing of the lockdown had improved economic conditions, translating to a pickup in healthcare services, which saw its net profit more than double to RM33.97 million.

On the back of a tough year, the silver lining is that the need for private healthcare remains clear, says Ahmad Shahizam. Noting that public hospitals have become overwhelmed due to rising Covid-19 cases, he says KPJ has always been ready to step in and help them manage other non-Covid-19 cases, which could have been sidelined in the process.

“The government continues to have to deal with a high volume of patients. We’re an ageing population, so the demand [for healthcare] is continuously rising. The way we are currently managing this situation on the public side is unsustainable,” he notes.

Ahmad Shahizam points out that private hospitals have spare capacity where patients can get almost on-demand services. “Yet, the availability of these medical facilities are not being channelled to the demand on the public hospital side when in reality, it could.”

He blames this on the existing “dichotomy” between the cost structure of the public and private healthcare systems, adding that it would result in a net loss to the country in the long term. He hopes that with public-private partnerships, it would help shift some of the long-standing assumptions that people have about the inaccessibility of private healthcare in the country. On its part, KPJ has been in talks with the Ministry of Health (MoH) on this matter.

“We are part of the same system … yet there’s a dichotomy. It’s actually one of the opportunities that the pandemic has shown us. We need to start looking at our healthcare as one system, not two,” says Ahmad Shahizam.

“By right, private hospitals can do a lot more and I want KPJ to do a lot more. That’s why we are looking to establish proper arrangements with the government.”

KPJ hospitals have been offering both walk-in and drive-through services for Covid-19 tests.

On the rollout of the Covid-19 vaccine, Ahmad Shahizam says that although KPJ is waiting for direction from the MoH, it has been training its staff to prepare should the group get involved in the process.

“We will take our cue from the government. But we believe there will be a need for private healthcare providers to step up in this massive undertaking because countries that can have a clear exit from this pandemic earlier than others will have an advantage economically,” he says.

“The reality is that outside the MoH, KPJ is the biggest organisation with about 15,000 employees. In terms of the number of nurses and trained staff, we are the largest. Like it or not, we have to start preparing ourselves for this.”

With 28 hospitals nationwide and one more currently being built, KPJ’s portfolio makes it the largest private healthcare system provider in the country.

The 29th hospital for the group — KPJ Damansara 2 — is expected to be ready by early 2022. It would be the last new hospital in the pipeline for the time being as the group shifts towards consolidation, says Ahmad Shahizam.

“When we consolidate, it does not mean we cannot grow. With the pandemic, our occupancy is still quite low. A hospital typically is about full at 70% to 80% capacity. On average, we are at 50%,” he says.

“Even in 2021, depending on how the pandemic is, we don’t think it will return to normal levels yet. So, we still have the opportunity to focus on filling up those hospitals first and getting back the patients. More importantly, with our current system of over 3,000 beds, we can still add about 1,000 more beds because we already have expansion plans at existing hospitals.”

Looking ahead, KPJ’s strategy is to locate healthcare services closer to the patient with the establishment of ambulatory care centres (ACCs) in selected community areas, says Ahmad Shahizam.

These ACCs, which blend into the lifestyle of the community, are not purpose-built like hospitals, which means they can be operated even in a commercial centre that offers other services. KPJ is currently building its first ACC in Kinrara, Selangor, which will be ready in the middle of this year.

“Hospitals are generally provider-centric and not patient-centric. The patient needs to move around a lot to get medical services. Many a time, the reasons people go to the hospital may not require them to get it done there. So, an ACC will allow patients to fulfil their needs without having to travel far. For example, seeing the paediatrician at a time that is convenient for them and not according to fixed hours or going for rehabilitation or getting a scan,” says Ahmad Shahizam.

In addition to improving its cost structure and getting its services closer to patients, KPJ continues to work on managing its service delivery by increasing its use of technology.

“We have taken the opportunity of 2020 to revamp some of the things we are doing. So, we are confident about coming out of this in a much stronger way,” he says.

“It’s also appropriate cycle-wise because we have done a lot of investments. Now, it’s about getting utilisation up and improving our cost, management and delivering services extensively.

“There is still room to do incremental investment, but it’s not a key priority at the moment. One thing KPJ has not done in a big way — and perhaps because it has relied on organic growth to grow its healthcare business — is to look at acquisitions. We are now looking into that.”

The last major healthcare transaction the industry saw was in September 2019, when Hong Leong Group and alternative asset firm TPG acquired 17 Columbia Asia Hospitals and one clinic in Malaysia, Indonesia and Vietnam in a US$1.2 billion deal, marking the group’s foray into healthcare.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.