OUE Lippo Healthcare JV to manage three hospitals in China

A JOINT venture company of Catalist-listed OUE Lippo Healthcare (OUELH) has inked contracts to manage three hospitals in Shanghai, Chongqing, and Nanjing.

Shanghai Changhang Hospital, Chongqing Changhang Hospital and Nanjing Youyun Hospital are currently operated by member companies of China Merchants Group (CMG), the China state-owned conglomerate based in Hong Kong.

Under the new management agreements, China Merchants Lippo Hospital Management (Shenzhen) or CMLHM, which is owned 50:50 by OUELH and CMG, will manage the hospitals for one year commencing on Feb 1, 2019.

The management agreements are extendable for a further one year on substantially the same terms and conditions at the option of the joint venture company, OUELH said on Sunday.

CMLHM will be paid a management fee equivalent to 5 per cent of the annual revenue of each hospital for each fiscal year. OUELH said that it is unable to disclose the revenue figures of the three hospitals at this point of time.

CMLHM also has a right to acquire an interest in the business of each hospital, after the completion of a "regulatory restructuring" of each hospital within the management period.

OUELH explained: "Subject to the relevant regulations in China, the restructuring includes setting up a new hospital operating company, with its own hospital licence. The JV will then take a stake in the newly formed operating company."

Shanghai Changhang Hospital is a Grade II hospital located in Pudong New District, Shanghai with 204 registered beds. It occupies a land area of about 11,000 square metres (sqm).

Chongqing Changhang Hospital is a Grade II hospital located in Yuzhong District, Chongqing with 219 registered beds. It occupies a land area of about 13,750 sqm.

Nanjing Youyun Hospital is a Grade I hospital located in Gulou District, Nanjing and occupies a gross floor area of about 2,015 sqm. This is a clinic and outpatient facility, so the number of beds is not applicable, OUELH said.

Stephen Riady, executive chairman of parent firm OUE and board director of OUELH, said the group was expanding its healthcare network "on the back of strong growing demand for quality healthcare in China".

He said: "In addition to our presence in Dujiangyan, Chengdu, and the recently announced new hospital project in Shenzhen, we now have expanded into another three high-growth cities viz Shanghai, Chongqing, and Nanjing."

The group added: "China's healthcare market has continued to develop at double-digit rates and is the fastest-growing healthcare market of all large emerging economies. Since the Chinese government's announcement of healthcare reforms in 2009, China's healthcare market has had a compounded annual growth rate of approximately 17 per cent over a five year period."

Healthcare facilities developer OUELH was formerly known as International Healthway Corp (IHC). Real estate group OUE acquired control of IHC in 2017, and announced the acquisition of Brainy World Holdings, which indirectly owns CMLHM, later that year.

OUELH shares last traded at 6.3 Singapore cents last Friday, up 0.2 Singapore cent.