When Khazanah, Malaysia’s sovereign wealth fund, launched a bid for control of Singapore’s Parkway Holdings healthcare group earlier this year, it triggered a cross-border takeover battle involving companies in three Asian countries.
The tussle demonstrates the high value attached by the rival bidders to Parkway’s extensive hospital network, which the bidders hoped to use to create a leading Asian healthcare provider – and capitalise on the region’s fast-growing medical tourism industry.
Demand for private medical services has been growing in Asia as incomes rise, propelled by soaring economies.
India’s healthcare market alone was worth about $38bn in 2009, and is expected to increase by $62.9bn during the next four years, according to Fortis Healthcare.
The ageing population of the developed world – especially patients without health insurance or facing long queues at over-burdened national healthcare services – is also helping to boost demand for the stock-in-trade of many of Asia’s medical destinations.
These include heart bypasses, hip replacements, and dental work.
India, meanwhile, has emerged as a popular destination for western couples seeking fertility treatment – including surrogate mothers willing to bear their children.
But much of Asia’s medical tourism is still intra-regional, or from the Middle East and Africa, with a flow of patients from countries with less developed healthcare infrastructure towards those with better hospitals.
However, healthcare has not been immune to the global financial crisis. The economic situation has hit demand “because elective surgery is being delayed”, says Paul Keckley, executive director of the Deloitte Centre for Health Solutions.
At Bangkok’s Bumrungrad Hospital, one of the best established medical tourism destinations, profits improved in 2009, but are still 22 per cent down on the pre-crisis peak of 2007.
In the medium term, many providers in the region are looking to the US healthcare market for more growth. A heart bypass operation that might cost $130,000 in the US could cost less than $30,000 in Bangkok, for example.
But so far, such cost savings have mainly appealed to patients without health insurance, with many western insurers still reluctant to pay for what they perceive to be the risks of foreign treatment.
Singapore was an early mover in healthcare tourism, helped by its strategic location in south-east Asia and the rising demand for private hospitals that comes with per capita incomes that are approaching US levels.
Parkway, just one one of several private healthcare providers in the city-state, has also shown that middle class patients from developing countries such as Indonesia can be tempted to make the short flight to Singapore for a standard of healthcare that is difficult or impossible to obtain in their own countries.
For example, it is common to hear Bahasa Indonesia spoken in Parkway’s Mount Elizabeth facility, just off the Orchard Road shopping centre, which was the first hospital in Asia to perform cardiomyoplasty surgery for heart failure successfully with a laser.
Parkway runs three hospitals in Singapore, with a fourth under development, plus one in energy-rich Brunei, six in China and two in India. In addition, it runs 11 in Malaysia, including nine operated by the Pantai group, in which it has a 40 per cent stake, with Khazanah holding the remaining 60 per cent.
Enthused by Singapore’s example, Malaysia’s government has identified private healthcare as one of 11 key sectors for development, alongside more traditional strengths such as energy and tourism.
According to Malaysian health ministry figures, the nascent industry is already showing its value – revenues per patient grew by 12 per cent between the first half of 2008 and the comparable period of last year, reflecting a steady increase in the range and sophistication of treatments.
Najib Razak, the Malaysian prime minister, recently announced a series of initiatives to promote the industry, including tax breaks for new hospitals aimed at medical tourists, simplified visa requirements for patients and incentives for medical specialists to work in the country.
The sector’s prospects are attracting other new entrants, such as Taiwan, South Korea and India.
In Taipei, the Department of Health has set up a special unit to help develop and promote the industry, and the government has set aside and near the international airport to be developed into a medical tourism centre.
The Department of Health estimates that with government support, Taiwan’s nascent medical tourism industry will grow by T$11bn ($342m) and create 3,860 jobs within four years.
The Confederation of Indian Industry estimates foreign medical tourism could also be a $2.4bn business for the country within a few years.
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(Additional reporting by Robin Kwong in Taipei, ft.com)