Tuesday, July 26, 2016
Indonesia - Health Management International cashing in on regional demand for healthcare
Mainboard-listed Health Management International (HMI), which is expanding its two tertiary-care hospitals in Malaysia to boost capacity, is also eyeing a bigger footprint in the region to cater to the rising demand for healthcare.
Increasing affluence, an ageing population as well as a growing transition to private healthcare in the middle-income segment are underpinning demand for private healthcare in Malaysia.
More Singaporeans are also headed across the Causeway for elective treatments and health screenings at Medisave-accredited hospitals.
"There are a lot of opportunities for growth in private healthcare in the region - in Malaysia and other countries," says Chin Wei Jia, group chief executive officer of HMI, adding that the group is in a net cash position which gives it the flexibility to scale up.
HMI currently has a 49 per cent stake in the 270-bed Mahkota Medical Centre in Malacca as well as a 61 per cent stake in the 200-bed Regency Specialist Hospital in Johor Bahru. Together serving over 400,000 patients annually, both are operated by the group under management contracts. In addition, HMI runs the HMI Institute of Health Sciences (IHS) in Singapore.
Mahkota is being ramped up to 360 beds and will also introduce new services, such as nuclear medicine, which uses radioactive material to diagnose or treat diseases. This comes after it recently launched a new day surgery unit last September.
Over at Regency Specialist, the group plans to build a RM90 million (S$30.7 million) medical block, which will effectively double capacity by adding more beds, clinics as well as inpatient and outpatient facilities.
Construction of the 10-storey medical block at Regency Specialist is expected to begin this year-end and will be completed in 2018. The expansion will be funded through internal cash and loans.
Meanwhile, the group is on the prowl for new investment opportunities in the region, given the growing demand for private healthcare services. While Malaysia is a likely option, given its familiarity with the country, it hasn't ruled out other markets as well.
Ms Chin said: "Medical tourism is still expected to grow. The growth for Malaysian healthcare tourism has been in the high double-digits over the past five years, and we expect this number to increase. Malaysia attracted about 850,000 medical tourists in 2015. As a two-hospital group, we contributed about 10 per cent of that."
According to industry data, the Malaysian medical tourism market will roughly double from RM1.09 billion in 2014 to an estimated RM2.03 billion in 2017. The weaker ringgit also makes Malaysia a more attractive proposition to medical tourists.
"We expect to see continued growth in medical tourists," Ms Chin said, adding that the group is working on improving the way it reaches out to foreign patients. Indonesia, in particular, is an important market for the group, given the cultural similarities between Indonesia and Malaysia. Foreign patients currently account for about 20 per cent of the patient load across both hospitals.
Meanwhile, HMI will continue to tap HMI IHS here for internal training as well as use the institute's facilities to offer training to Singaporeans and others in the region. The institute is in the process of shifting to e-learning, which will allow it to broaden its base of users by reaching out to those who are working full-time and those in developing countries.
While a listed company, the group is in a sense the family business for Ms Chin. Founding member (and Ms Chin's mother) Gan See Khem, is the executive chairman while Ms Chin's brother, Chin Wei Yao, is an executive director as well as director of finance and corporate development. Meanwhile, Dr Gan's husband Chin Koy Nam (also a doctor) was an executive director until he retired in 2014.
Ms Chin joined HMI in 2002 as a management trainee just as it was undergoing a period of major restructuring. At that time, HMI had a small hospital in Balestier, with little room for expansion. In addition, the group was facing the double whammy of a falling volume of foreign patients and local hospitals in Singapore proving tough competition. This prompted the decision to turn the Balestier hospital into HMI IHS, a private provider of healthcare training and education.
At the time, HMI was also running Mahkota Medical Centre, in which it had acquired a 20 per cent stake during the height of the Asian financial crisis in 1998. By 2002, HMI managed to get the loss-making centre to break even.
Fresh out of school then, Ms Chin was involved in some very tough situations, such as having to let people go, in order to keep HMI going. The group tried to help some of its former employees by absorbing them into the HMI training institute or finding them positions elsewhere in the industry. The experience was one that left an indelible impression on Ms Chin. She highlighted that it made her realise that every decision has to be made with sustainability in mind.
"You just have to be very strategic and very hands-on," she said, of the lessons learnt during those years. "You can't manage a company just looking at the numbers. But numbers are extremely important; by doing well, you're able to reinvest in the business and the people. And everyone grows together."
Today, the group has grown to over 1,500 employees and more than 180 specialists.
Mahkota, once heavily loss-making, turned around after HMI changed the business model; instead of employing doctors, it made them partners by renting or selling space to them in the hospital.
"This model was quite new in Malaysia," Ms Chin said, adding that this attracted more doctors to the hospital. At the same time, the group focused more on medical tourism by setting up representative offices in Indonesia to drive traffic to the hospital. Today, HMI has some 14 such offices across Indonesia's major cities. The private healthcare provider also made a great effort to make the entire experience as hassle-free as possible for patients by establishing a concierge team, which helps out even with details such as hotel bookings.
Regency Specialist was added to its portfolio when the group acquired a 35 per cent stake in an empty hospital building in 2007. The hospital opened its doors in 2009. HMI raised its stake in Regency to 61 per cent in 2008, and the hospital was contributing to the bottom line within five years.
"New hospitals (aren't) easy," said Ms Chin, who stepped down as chief executive of Regency Specialist in February.
"You need to attract doctors - and doctors are trained to make good assessments of risk! It took us time to recruit doctors and to let the market know that there's a new hospital."
Since 2011, HMI's topline has roughly doubled from RM174 million to RM345 million in FY2015, while earnings before interest, taxes, depreciation and amortisation (Ebitda) have nearly quadrupled from RM19 million to RM75 million in the same time frame.
"For us, it was always looking at what a patient needs, and then building our services around it," Ms Chin said. "One thing we learnt from the Singapore experience is that you need to have a clear differentiating factor for patients to want to continue to support you. We decided that our approach was to build comprehensive hospitals where it can be as 'one-stop-shop' as possible. In all the disciplines we have, we want to build them up into centres of excellence."
Going forward, HMI plans to eke out growth by improving quality and raising its service standards.
"The economy is a bit up-and-down now," acknowledged Ms Chin, adding that the group is focused on building fully comprehensive tertiary hospitals to give it an edge over competitors. "For us, we just focus on our core competencies. We're also trying to innovate our service delivery mechanism through technology, processes, and by making it very personalised.
"That's what patients and their families are looking for: someone to support them along their healthcare journey."