Wednesday 17 Apr 2024
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This article first appeared in The Edge Malaysia Weekly on August 7, 2023 - August 13, 2023

THE strong recovery in the nation’s medical tourism sector has prompted the Malaysia Healthcare Travel Council (MHTC) to revise its targets upwards as it eyes RM7 billion in hospital receipts, with spillover economic impact valued at almost RM30 billion, for the period of 2022 to 2025.

The council has revised its revenue or hospital receipt target for this year to RM1.7 billion from RM1.5 billion previously, after revenue in 2022 surpassed its initial target of RM800 million to reach RM1.3 billion. The country saw an influx of healthcare traveller arrivals last year stemming from pent-up demand during the pandemic.

MHTC acting CEO Farizal Jaafar tells The Edge that along with indirect and induced expenditure such as investments as well as job and business opportunities, healthcare travel is expected to provide a fourfold spillover effect. This means that for every RM1 that a healthcare traveller spends on medical treatment, another RM4 would flow into related industries, including tourism, transport, accommodation and food and beverage.

“For the first half of 2023, Malaysia’s healthcare travel industry recorded revenue of over RM900 million. It is projected to make a full recovery to its 2019 pre-pandemic performance level of RM1.7 billion, potentially setting a new record for the industry,” says Farizal.

He adds that the positive performance has put MHTC on a new course of continuous and sustainable growth, in line with its target over the next five years as guided by its blueprint.

During this “rebuilding” phase, Farizal says the industry will focus on enhancing its service quality, increasing brand cohesiveness across key touchpoints, amplifying Malaysia’s brand equity in core markets and growing beyond the country’s primary markets.

Where strategic collaborations in key markets are concerned, MHTC has established ties in Indonesia, Australia, Bangladesh, Cambodia, China and Myanmar.

“We will explore more niche markets to strengthen our presence,” says Farizal, explaining that the medical healthcare segment’s new phase will also see a focus on both curative and preventive treatments as well as several niche branding initiatives such as those of cardiology, oncology, fertility and dental treatments as well as premium and scientific wellness offerings. In addition, MHTC intends to collaborate with key industry players to develop a comprehensive elderly wellness programme, he adds.

Capturing other markets besides Indonesia

Norhaizam Mohammad, who is the officer in charge of KPJ Healthcare Bhd, attests to the surge in revenue in the sector, having witnessed a 108% uptick in health traveller patients, which resulted in a 176% increase in the group’s health tourism revenue in 2022.

KPJ Group, which sees Indonesia as the primary revenue contributor (78%) to its healthcare tourism segment, says regions such as the Riau Islands, Jakarta, Surabaya, Medan, Aceh, Pekanbaru and Kalimantan have accounted for the majority of its foreign patients.

Similarly, Sunway Healthcare Group points to the double-digit year-on-year growth in its international patient revenue following two years of border closures.

“In 2022, we witnessed a phenomenal growth of 35% in international patient volume and 69% in revenue growth in Sunway Medical Centre (SMC) in Sunway City alone, as compared to the year before,” its president Datuk Lau Beng Long tells The Edge.

Several factors provide Sunway Healthcare Group with some advantages in tapping the medical tourism boom, such as SMC’s position as the country’s largest private quaternary hospital with 724 licensed beds as well as its accessibility to amenities in the integrated township, which has been a draw for foreign tourists, Lau explains.

As part of SMC’s strategy to grow its number of international patients by 30% y-o-y in the next three years, the group will capitalise on its full suite of medical and surgical services as well as cutting-edge technology in cancer therapy, and promote other major medical specialties such as orthopaedic surgery, digestive health and neurological services.

SMC also aims to develop relationships and partnerships with insurance companies and various corporations abroad, to enable their employees or clients to seek treatment at the hospital.

It is common knowledge that Indonesian patients contribute significantly to Malaysia’s medical tourism industry. Industry reports suggest that up to 70% of inbound patients who visit Malaysia are from Indonesia — with an estimated 40% to 70% of them hailing from the Sumatra and central regions — followed by countries in the Middle East as well as India, China, Japan, Australia, New Zealand and the UK.

KPJ Group plans to strengthen its reach in the Indonesian market by positioning its KPJ Penang Specialist Hospital — which currently serves the Seberang Perai, Penang as well as Kedah and northern Perak markets — to tap patients in Aceh and northern Sumatra, Norhaizam shares.

“To meet this goal, KPJ Penang is expanding its capacity, including increasing the number of beds to 345, by 2024. The hospital is also making enhancements to critical departments such as accident and emergency, intensive care unit and the Central Sterile Services Department. Additionally, plans are underway to incorporate more dialysis chairs to address the growing demand for dialysis services,” she explains.

Beyond fortifying its presence in the Indonesian market, the group aims to establish secondary markets in Indochina, South Asia and the Middle East and North Africa region, says Norhaizam. She anticipates a y-o-y growth rate of 20% to 30% in the group’s medical tourism segment.

Indonesia’s efforts to reclaim patients ‘not a threat’

It is worth noting that Penang has been a significant contributor to Malaysia’s foreign patient market, with the state’s total revenue from medical tourism increasing exponentially from RM66 million in 2021 to RM285 million in 2022 following the reopening of the country’s borders.

Data from Penang Global Tourism (PGT), the state’s tourism bureau, reveals the arrival of 178,132 foreign patients to the state in 2022, a 54% increase from 115,636 in 2020, which more than doubled the revenue from this segment to RM352.7 million from RM149.8 million previously.

“The comprehensive goal would be to grow the revenue per patient, rather than patient numbers per se. There are capacity constraints to the number of medical tourists we can accommodate, especially given the manpower shortage in terms of nursing and other professional staff. Thus, the more conducive strategy would be to grow the revenue, as we are still very affordable compared to other countries like Singapore in terms of treatment costs,” PGT CEO Ooi Chok Yan tells The Edge, noting that the northern state bureau’s statistics are based on earlier data from 12 members of its Penang Centre of Medical Tourism (PMED), a grouping of hospitals and associates promoting medical tourism. 

As of July, PMED’s membership has increased to 16 hospitals and 19 associates (players without hospital beds but in healthcare and related fields). The members include Island Hospital, Loh Guan Lye Specialists Centre, Penang Adventist Hospital, KPJ Penang Specialist Hospital, SMC Penang and Genesis IVF & Women’s Specialist Centre.

In January, Tourism and Creative Economy Committee chairman Yeoh Soon Hin reportedly said that Penang has been the top contributor in terms of revenue generated for medical tourism in Malaysia, earning more than 50% of the country’s pre-pandemic income. He added that in the first 11 months of 2022, Penang welcomed almost 144,975 international medical arrivals, of which Indonesia contributed 54% and followed closely by Bangladesh and India.

Data from Hospital Management Asia, a Singapore-based trade platform for hospital operators, suggests that Indonesia’s medical patients collectively spend about US$11 billion (RM50 billion) annually on medical services abroad, with Malaysia, Thailand and Singapore being the top destinations. It points out that the number of Indonesians going overseas for medical treatments nearly doubled to 600,000 in 2015 from 350,000 in 2006, and grew to around one million in 2020.

Consequently, there has been news of Indonesia’s Ministry of Health setting healthcare quality improvement as a key priority now and in the next few years to attract foreign tourists to visit the country for medical treatment and locals to seek healthcare domestically.

As part of its 2024 Digital Health Transformation Strategy (blueprint), Indonesia is preparing to invest in more healthcare facilities and equipment and to drive more widespread use of digital tools that can improve efficiency and outcomes.

Nevertheless, Malaysian healthcare authorities and players opine that “building up the medical and healthcare infrastructure, in terms of both hardware and software, takes time”.

“It would take some time before [Indonesia] develops the trust of its patients to an optimal level. Until then, Penang and Malaysia [as a whole] will continue to be recipients of Indonesian patients who obtain good outcomes when they come to our shores,” says PGT’s Ooi, adding that PMED works closely with numerous parties such as MHTC, travel agency Astindo, Tourism Malaysia as well as airlines and banks to cement Penang’s strong position as a destination for medical tourism.

“The only constraints we face are the direct air links between Penang and other cities in Indonesia,” he says, pointing out that an increase in direct connectivity to Penang would lead to more patients for the state’s medical tourism industry. In order to maintain its position as a preferred healthcare destination, the state’s private hospitals have been actively visiting Indonesian towns and cities on a monthly basis for sales calls and follow-ups, he explains.

Ooi adds that the longer-term plans are to diversify the geographical origin of patients to other countries in Southeast Asia as well as South Asia, the Middle East and China.

Sunway’s Lau says, “As Indonesia continues to develop its healthcare infrastructure, I believe Malaysia’s healthcare industry will have to adapt and deliver more value-added and unique offerings. Our main aim is to complement what is lacking, and fill the gaps in the healthcare services in Indonesia.” 

 

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