Singapore

RISING cost of treatment and growing competition from regional rivals are hitting the once-bullish medical hospitality sector in Singapore, which is already experiencing a decline in the number of medical tourists coming here.

While the numbers vary according to the different players, industry observers speaking to The Business Times said they have generally seen a drop in the number of medical tourists for some time now, particularly from traditional markets such as Indonesia, Malaysia and Brunei. While new markets such as Myanmar and Bangladesh are developing, it isn't enough to make up for the loss of medical tourists from the traditional markets.

Rising cost is seen as a key factor deterring foreign patients from seeking treatment in the Republic. This is exacerbated by the relatively stronger Singapore dollar, in relation to other regional currencies.

In a report earlier this year, BMI Research pointed out that it will be increasingly difficult for Singapore to maintain its position as the leading medical tourism hub in South-east Asia, given cost issues. A heart bypass in Singapore costs 41 per cent more than in Thailand and 106 per cent more than in Malaysia, it noted.

Jeremy Lim, partner and head of the Asia Pacific health and life sciences practice at Oliver Wyman, said that variability in pricing has heightened concerns of unanticipated costs resulting from complications and overlooked charges. Coupled with high transport and accommodation costs here, medical tourists have been put off.

Based on the 2013 annual tourism statistics by the Singapore Tourism Board, medical receipts grew from S$777 million in 2009 to peak at S$1.11 billion in 2012, before dropping 25 per cent year-on-year to S$832 million in 2013.

Regional countries are also narrowing the gap with Singapore.

Countries like Malaysia and Indonesia, which used to be plagued by the lack of medical capabilities and patient confidence, are moving up the ladder with improved healthcare infrastructure and services. As a consequence, the impetus for seeking treatment in Singapore has diminished, said Dr Yong Chern Chet, healthcare sector leader at Deloitte Southeast Asia.

This shift in the regional medical tourism landscape is also observed by David McKeering, Singapore healthcare leader of PwC Southeast Asia consulting, who said Singapore's key competitors in the region include Thailand and Malaysia.

Malaysia's 2020 medical tourism target is 1.9 million foreign patients, up from 770,000 patients in 2013, said Mr McKeering, who noted that in recent years, 18 hospitals in Thailand and eight hospitals in Malaysia have gained JCI (Joint Commission International) accreditation, which is regarded as the gold standard.

"Specialist services were previously a strong selling point for Singapore, but with more international providers branching into this area, this is no longer such a compelling competitive advantage," said Mr McKeering.

One way to respond to this is to "fix the unpredictability of pricing and provide bundled prices", he said, adding that Singapore now needs to move even higher up the value chain and focus on skills and infrastructure and differentiated medical procedures which are more price inelastic.

The less bullish outlook here has led healthcare players to look further afield for growth. Several have moved to capture overseas markets with bigger populations so as to generate more revenue. This has led to a flurry of joint ventures and mergers and acquisitions (M&As) in the region.

For example, Singapore and Malaysia-listed IHH Healthcare Berhad, the world's second largest healthcare operator by market capitalisation, has been particularly active.

In March, it bought a 51 per cent stake in India's Continental Hospitals. Five months later, it acquired a 73.4 per cent stake in India's Global Hospitals for 12.84 billion Indian rupees (S$0.27 billion). This year, IHH also announced two joint ventures - one with Shanghai Broad Ocean Investments in October and another with Shanghai Hongxin Medical Investment Holding in July.

"Going forward, we will continue to expand in markets with rapidly growing demand for quality private healthcare, especially China, India and Asean, while maintaining our leadership positions in our home markets of Malaysia, Singapore and Turkey," said Dr Tan See Leng, managing director and CEO of IHH.

However, he said the group remains upbeat about Singapore's long-term prospects as a medical hub given the well-regulated healthcare environment and availability of high quality medical staff and equipment.

Raffles Medical Group has also made clear its ambitions of expanding into places such as China and Vietnam as the company aims for its overseas operations to contribute more than half of total revenue as soon as possible.

Healthcare players have started to recognise the benefits of consolidation - for price negotiations with suppliers and staffing optimisation, for example, said Dr Lim, who cautioned that this is not necessarily beneficial to Singapore. "Singapore could be hurt in three ways - skills and expertise migrating outside Singapore, management attention turning to where the revenues and opportunities are, with less interest in Singapore, and finally the availability of good jobs in Singapore would diminish."

There is still upside for local players, but they need to be alert to shifts in demand.

"Knowing exactly where, when, why and how their patients come to them for healthcare services will enable healthcare groups to make strategic business decisions with subsequent operational tweaks to ensure that there is a steady state of demand for their services," said Dr Yong, who noted China's recent scrapping of the one-child policy could prove to be a boost for those in the field of reproductive medicine.