Ramsay Sime Darby expects 12% revenue from medical tourism

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KUALA LUMPUR: Ramsay Sime Darby Healthcare (Malaysia) Sdn Bhd, a 50:50 joint-venture between Sime Darby Bhd and Ramsay Health Care Ltd, expects to see its medical tourism sector contribute up to 12% revenue to the group in the next three years, by continuing its focus on developed and developing countries.

In an interview with The Edge Financial Daily, chief executive officer Elaine PY Cheong said medical tourism presently contributes about 6% to 8% to the healthcare group and that Indonesian patients make up the largest segment in this sector.

“We will continue to focus on developing countries as well as developed countries like Japan, South Korea, Australia and Canada. We market to developed countries because our cost of healthcare is lower and it becomes [a] more value-added service [to them],” she said, adding that the group’s medical tourism has been expanding by word of mouth to other countries.

Ramsay Sime Darby Healthcare owns five assets in Malaysia — Sime Darby Medical Centre (SDMC), Ara Damansara Medical Centre (ADMC), ParkCity Medical Centre (PMC), Ramsay Sime Darby Healthcare College and the upcoming seven-storey wellness centre, Mediplex.

If all three of its hospitals are in full operation, there will be about 1,000 beds altogether; 400 in SDMC, 200 in ADMC and 300 in PMC.

“If the demand is there, we will definitely up the number of beds,” said Cheong.

The group plans to launch Mediplex, in which it will have invested up to RM90 million, by January. Built above its existing four-storey car park site within the SDMC compound, it is connected to the main hospital via two new link bridges.

Cheong said the group is always on the lookout for good assets to expand its brand, and “if the opportunity is right, we will definitely move out [from the Klang Valley].”

“We are looking at [the] states, which are not so saturated in terms of bed-to-population ratio,” she said, admitting that the hospital industry in the Klang Valley is quite saturated.

“We believe more in brownfield. [The construction of] greenfield sites like these two hospitals (PMC and ADMC) takes longer and the gestation period is definitely much longer, which is about three to four years,” Cheong noted, adding that the group is not in talks with any parties on any brownfield acquisition yet.

The group has spent about half a billion ringgit to build the PMC and ADMC and plans to spend another RM100 million to RM200 million in the next three years on SDMC, ADMC and PMC to upgrade their hospital beds and medical equipment.

Cheong also observed that healthcare cost has gone up about 10% per year in the past three to four years and will continue to increase, especially in view of the impending implementation of the goods and services tax (GST) come April next year.

(Left) Filepic of Ramsay Sime Darby Hospital Ara Damansara Photo by Kenny Yap. (Right) Cheong: We will continue to focus on developing countries as well as developed countries like Japan, South Korea, Australia and Canada. Photo by Kenny Yap

This is because, as chief financial officer Norzifiah Abdul Aziz said, hospital services are under exempt services, which means they would be unable to pass the cost on to the patients.

“On the other hand, we are being charged GST on drugs, intercompany transactions and medical equipment at standard rate. All in all, the input tax will increase our [operating] cost by about 4% to 5% and we can’t pass it on,” said Norzifiah, adding that its margin, which is at 10% currently, will be squeezed.

 

This article first appeared in The Edge Financial Daily, on October 7, 2014.