Medical tourism: A billion-ringgit industry for Penang

loading

Regional healthcare holds great potential, and Penang is well located to continue benefiting from it.

Medical tourism, or health tourism, is defined as the travel of people to a foreign country for medical treatment. In an estimation by Nikkei Asia, the worldwide medical tourism market will reach US$55bil, (RM206bil) in 2015, and will continue to enjoy an annual growth of 20%1.

Interestingly, Malaysia recognised very early that medical tourism is a very promising and lucrative part of the overall tourism industry. This inflow of people seeking treatment into the country is estimated to continue growing, and Penang is presently the destination for more than half of these healthcare travellers. The numbers of those coming to Malaysia reached 770,000 in 2013 – an increase of 15% from 2012 and 126% from 20072. Most come from Indonesia, Singapore and Japan. In 2014 alone, Penang received about 300,000 tourists seeking treatment for simple ailments such as cataract removal as well as complex bypass surgeries and cancer treatment. The range is wide.

Private hospitals in Penang continue to welcome them. These hospitals include Gleneagles Penang, Lam Wah Ee Hospital, Island Hospital, Loh Guan Lye Specialist Centre, Mount Miriam Cancer Hospital, Pantai Hospital and Penang Adventist Hospital.

Penang Monthly speaks to two of these for an insight into medical tourism in Penang.

Gleneagles Penang

Gleneagles Penang began as a modest three-storey building in 1973. It has since expanded to include a soaring 19-storey building that was completed in 2013. But despite the healthy number of medical tourists to Malaysia, there appears to be a hitch. When we met Gleneagles Penang’s chief executive officer, Ivan Loh Ee Hoe, at his office on the 18th floor of this new building, he worriedly asked us the question: “Have you heard about the Jaminan Kesehatan Nasional (JKN) programme in Indonesia?”

According to The Economist,

JKN was conceived to provide better health coverage for all Indonesians, by extending insurance to the entire population, including large swathes of the population previously not covered by any insurance schemes3.

Loh says that private hospitals in Penang will be the worst hit by this Indonesian initiative to provide better healthcare to their people. “The programme was started at the beginning of 2014, and following that we have seen a significant reduction in Indonesian patients.”

The situation is not unique to Gleneagles Penang. “Some budget airlines also reported a decline of 20%-30% from Indonesia”, he says. This phenomenon is likely correlated with the reduction pattern of Indonesian medical tourists. Loh calculates, taking just reduction of a quarter off the peak Indonesian visits in 2013, a drop of RM100mil in revenue for all Penang’s private hospitals.

Syerleena Abdul Rashid

Gleneagles Penang.

Indonesians make up the lion’s share of the total proportion of medical tourists, and according to Loh, “If all Indonesian patients stop coming to Penang, the amount of revenue loss is equivalent to the operating cost per year for two average-sized private hospitals. That would directly translate to the closure of two hospitals.”

Karen Lai

Ivan Loh.

There are solutions, of course, and one of them lies in exploring new markets. According to Loh, the local market for private hospital care is plateauing. The growth of local demand is usually tied to the growth of medical insurance purchased by the consumers. “As it stands, for most private hospitals in Penang, two-thirds of patients are subsidised or covered by health insurance, while one-third of local patients pay out of their own pockets,” says Loh. “At the same time, Penang’s population is growing slower over the years, so the local demand base is not really expanding. Therefore, to attract more patients, exploring new markets is constantly on the hospital’s agenda.”

However, it’s easier said than done. “Identifying the potential of a new market is one aspect, but it has to match with what the hospital and the destination can offer. Besides the touristic attractiveness of the destination, the (quality of) treatment and the cost of living, medical standards and the supporting services are also decisive factors for attracting the right type of patients.” On top of that, the importance of connectivity between potential clients and the service provider cannot be overstated. Usually, the establishment of direct flights to Penang is vital. Needless to say, the facilitation or arrangement for transportation and accommodation would increase the willingness of some patients to make the trip.

Loh admits that manpower, staff time and money have to be taken into consideration and hence resources must be wisely invested in the right places to generate the biggest return. He has market intelligence and analysis reports to assist his hospital in formulating the best marketing strategies, and thus make the best decisions.

On top of that, there are other factors to consider. Loh opines that strong government support for the sector would make a huge difference. Without direct government support, hospitals have to cover more groundwork for marketing and engaging consumers and businesses of the intended market from scratch. He feels thankful that now both the Penang state government and the Malaysia Healthcare Travel Council (MHTC) are taking initiatives to help develop medical tourism in Penang.

However, if there is one underlying factor that might make tourists hesitant to travel to Malaysia for treatment, it is the falling Ringgit. “It translates to price increase for goods and services,” says Loh. “Most drugs and devices we use are imported, so they become more expensive. The cost, if not absorbed by the hospital, will be passed back to the consumers. We have little choice.”

Penang Adventist Hospital

At the forefront of medical tourism in Malaysia is Penang Adventist Hospital (PAH); on top of its five-storey building that houses an array of medical facilities, the hospital added a new oncology building with radiation therapy in June this year, working closely with the National Cancer Centre of Singapore. The hospital’s main medical tourists are Indonesians, of course. According to Dr Jeremy Low Keng Hoong, PAH’s director of business development and marketing, the hospital receives the highest number of medical travellers in the country, and Indonesian patients amount to more than 92% of its medical tourists.

Karen Lai

That is staggering, considering that in 2014, PAH received 84,000 medical tourists who contributed RM110mil in revenue to the hospital. Of all patient encounters, 40% were foreigners.

And while Low thinks that the JKN programme in Indonesia might have had some impact, and might translate into a five per cent reduction, middle and higher income classes of patients are not expected to be affected. “It is an interesting observation for us. The JKN caused the geographical switch of patient group from Medan to Surabaya, for example. The reduction in visitor numbers from Medan was covered by the influx of Indonesians from other provinces. This shows that there are still untapped markets in other provinces in Indonesia.”

On top of that, there are other markets to explore, such as Myanmar, Bangladesh, Vietnam and southern China. From his research, Low found that a six-hour flight radius is the ideal range for any potential medical tourism market. He listed visa requirements, direct flights and language capabilities to serve foreign patients as the major obstacles for the hospitals tapping in any new market.

Syerleena Abdul Rashid

PAH is working closely together with MHTC, Penang Global Tourism and Penang Centre of Education Tourism for overseas promotion campaigns. “While PAH is no longer in the Penang Health Association, there is still strong cooperation among private hospitals in Penang in many aspects. We are happy that the state government has taken the initiative to work closely with private hospitals to create a platform for all to work together.

“Penang is a tourism centre and has always been attractive. Traffic is not too bad and the healthcare system is much simpler, with resident specialists working closely with private hospitals. Patient accessibility is simply making an appointment or even visiting the hospital. The patient’s needs are addressed effectively on that day itself.”

Karen Lai

Dr Jeremy Low.

However, Low acknowledges that Thailand and Singapore began medical tourism much earlier than Malaysia. Even so, affordability has become a major issue – especially in Singapore. “In Malaysia, we should target affordability, accessibility and patient experience as the main advantages. Our main disadvantage is more perception than reality – accountability or quality of healthcare in Malaysia as perceived by other countries to be much lower than in Thailand and Singapore.” 

And Low shares the same sentiment regarding the falling Ringgit as well: “Due to the inflation on the price of imported goods, the cost of hospital care will increase. As most economists would postulate, when prices increase, demand will decrease. We hope this currency situation will not last long; then, the impact will not be as acute.”

1 asia.nikkei.com/magazine/20150226-Medicinein- transit/On-the-Cover/Asia-leads-a-medicaltourism- industry-worth-billions.

2 www.mhtc.org.my/en/statistics.aspx.

3 Clearstate, “Universal healthcare coverage in Indonesia: One year on”, The Economist Intelligence Unit, January 2015, p. 6.

 

Doris Liew is currently reading Economics at Nanyang Technological University. She labels herself as a Penang girl and dreams of returning to Penang as an economist one day.

 

Lim Chee Han received his PhD in Infection Biology from Hannover Medical School, Germany. He is currently a senior analyst in the economics section at Penang Institute.



Related Articles

PENANG ECONOMIC INDICATOR
Jan 2016

Preparing for challenging times ahead

It is likely to be a difficult year for Malaysians in 2016, but at the same time, opportunities await those who are well prepared.

PENANG ECONOMIC INDICATOR
Jul 2017

Longing for A Penang Home

The state government takes active measures to house as many as possible who wish to live in Penang.

PENANG ECONOMIC INDICATOR
Jul 2016

Wanted: Employees!

As labour demand increases, labour supply struggles to catch up.

PENANG ECONOMIC INDICATOR
Jul 2017

Low Unemployment in Penang for Now

The recruitment market is expected to grow moderately in the second half of 2017.