Private healthcare operators in Malaysia are poised for a major step-up in revenues and profits if a government-backed national health insurance system becomes a reality here.
Analysts at the research arm of AmInvestment Bank Bhd (AmInvestment Bank) said there are concerns that the current public healthcare system in Malaysia is untenable over the long term.
“The funding needs for the sector are on a constant upward trajectory simply due to the growing population, aging population, a longer life expectancy and cost inflation.
“Already, overcrowding has become a common sight in public hospitals, while patients seeking specialist treatments will have to bear with a long waiting period.
“Under a national health insurance system, theoretically, citizens can choose between seeking treatments in a public or private hospital,” the research team said in a report.
It further pointed out that while a patient seeking treatment in a private hospital would still incur a higher cost compared a public hospital, the general price differential between the two hospitals should narrow.
This is in terms of a higher contribution for a premium national health insurance package, or out-of-pockets for extra services provided by the private hospital not covered by the health insurance.
“There is a possibility that private hospitals may even drop prices for certain services (for instance, an MRI scan) due to better utilisation of their equipment, with more patients switching to private hospitals from public hospitals,” it highlighted.
However, it said, the biggest hurdles for a national health insurance system remain who would be contributing, by how much and the legitimacy of free riders in the system.
Meanwhile, on the outlook of Malaysia’s healthcare sector, AmInvestment pegged a ‘neutral’ view on the private healthcare sector in 2018.
“The local private healthcare sector has an added catalyst, which are the medical tourism backed by its highly competitive medical charges and hospitalisation costs, a generally English-speaking population as well as various incentives provided by the government,” it said.
Over the short term, it said, private healthcare operators in Malaysia would also benefit from the strengthening ringgit against the dollar, as costs of key inputs such as drugs, medical supplies and medical equipment are denominated in US dollar.
On the other hand, it cautioned that as in the case of 2017, private healthcare operators in Malaysia would continue to face wage inflation in 2018, and some short-term pain for long-term gain, such as start-up losses from new hospitals.
“We may upgrade our ‘neutral’ call for the sector to ‘overweight’ should there be a surge in patients due to outbreaks of pandemic diseases, lower-than-expected start-up losses at new hospitals, value-accretive mergers and acquisitions (M&As), and a national health insurance system materialises in Malaysia.
“In contrast, we may downgrade to ‘underweight’ should there be a significant dropout of patients from private hospitals due to economic reasons, higher-than-expected, and prolonged start-up losses from new hospitals.”