Industries: HEALTH CARE
STRONGER MEDICINE FOR ASIA
As the region prospers, demand for better health care is creating a new business boom
For three decades, Charles Lee has lived with a heart irregularity that he can do little to control. The 44-year-old Singapore businessman, a father of two who runs his own metals company, Primetals (Asia) Ltd., often endures frightening moments when his heart pounds furiously. Since Lee's palpitations come without notice and pass within minutes, his doctors can't witness the attacks firsthand--a factor that has hindered their ability to treat him.
Now that's changing. Last winter, Lee became a customer of Tele-Medical Services, a Singapore startup that provides sophisticated equipment to patients with heart, respiratory, and other conditions. When an attack hits, Lee can call a control center, hook up the phone to equipment that measures his heart rate, and have the results immediately read. Thus, doctors know what medicine to prescribe. The service isn't cheap: $700 to buy the equipment, and $90 a month for the monitoring service. No matter. When it comes to spending money for his health, "I would not really hesitate," says Lee.
HOT DEMAND. Health-care companies in Asia and the West are starting to see patients such as Charles Lee as the key to unlocking one of the most lucrative markets for private health care in the world. Across Asia, years of brisk economic growth have created consumers keen on imported cars, cellular phones, and designer clothes. That's not all they want. "With the increase in wealth, people want better health care--and are willing to pay for it," says T.C. Chu, principal at McKinsey & Co. in Hong Kong. Instead of settling for crowded public hospitals and clinics with out-of-date equipment, many of Asia's new rich are turning to new companies that offer more luxurious facilities and the latest in high-tech diagnostics and treatment.
That means hot demand for private care and new markets for health insurers and managed-care providers such as Kaiser Permanente and Aetna--and for local hospital companies and niche enterprises like Parkway Holdings and Tele-Medical. Excluding Japan, Asians spend $150 billion on health care, says Singapore's Economic Development Board. But that will soar by 70% in just the next three years, to $255 billion.
Already, more than 130 million people can afford private services, according to an estimate by Asia Care Inc., a subsidiary of care provider Integrated Health Services Inc. of Owings Mills, Md. "There's going to be a dramatic growth opportunity," says Mohan Chellappa, a surgeon who is CEO of Medi-Projects Ltd., a Singapore-based manager of hospitals and clinics in India and Indonesia. Mohan sees the private sector commanding 65% of the entire regional market in 5 to 10 years.
Of course, most Asians still must rely on state-subsidized care, which varies widely in quality from generally good in Singapore to poor or even dangerous in Indonesia. Until recently, in fact, government hospitals were the only option for most Asians, even middle-class ones. By taking such a large role, most governments left little room for the private sector, which catered to the wealthy.
But that system is under strain as Asians live longer. Diseases such as malaria and cholera are not the killers they once were, so the incidence of heart disease and cancer, afflictions of the developed West, are rising. Such illnesses last longer and cost more to treat. This "leads to a tremendous demand in health services," says R. Mark Brooks of the World Health Organization in Jakarta.
Well aware of the monumental health-care bills faced by governments in the U.S., Canada, and Western Europe, Asian policymakers fear a similar crisis if they don't act soon. In Hong Kong, for example, government health-care spending has doubled in the past five years, to about 14% of the territory's budget. Thailand spends 6.5% of its gross domestic product on health care, and that will rise to 8% by the end of the decade. These are "alarming signs," says Sanguan Nitayarumphong, assistant permanent secretary of public health in Bangkok. "We have to control this."
In many countries, though, rising expectations for health care are meeting limited government resources. With Thailand in a financial crisis, Malaysia and the Philippines feeling jitters, and Singapore and Hong Kong entering the ranks of mature economies, policymakers find they can't rely on dynamic growth to provide funding for health care. "The pie isn't getting any bigger," says Derek B. Gould, principal assistant health secretary in Hong Kong.
To lower their medical bills and raise quality, most governments are trying to shift more of the burden to companies and employees so that the state pays just for the poor and elderly. "We're leaving middle-class services to the private sector and concentrating on areas that no one else wants to touch," says a senior Indonesian health official. In Taiwan, some private companies are already making up for the shortfalls in the new public-health system. The market for premium health care is growing 35% a year, says Ted Chang, analyst at Andersen Consulting in Taipei. Hong Kong's Schmidt Scientific Inc., for one, is opening clinics to provide everything from pediatrics to dermatology. "People want their doctors to have more time to talk to them," says Dennis Wu, president of health care at Schmidt Taiwan.
"BLANK SLATE." Singapore, which has the best care in the region, is a model for how governments could tackle costs. There, the government forces employers and workers alike to contribute to medical savings accounts. The government has also introduced flexible pricing so that people who can afford it can pay for more comfortable rooms.
The government is also encouraging Singapore's private-sector health-care providers to build hospitals, manage primary-care clinics, form health maintenance organizations, and extend their operations to China, India, and the rest of Southeast Asia. "There's a blank slate to build the next generation of health care," says Donna A. Wright, managing director for Asia Pacific at Kaiser Permanente International, a division of the U.S. managed-care giant that has a joint venture in consulting with Singapore's Raffles Medical Group.
Even real estate developers, who have prospered building malls, office towers, and hotels in Asia's capitals, are getting into the act. Last year, developer Parkway Holdings took over Singapore's premier hospital, Mt. Elizabeth's, from American hospital operator Tenet Healthcare Corp. and so became the dominant private-sector health-care player in Singapore. Its first hospital, Glen-eagles, targets middle- and upper-class patients who are willing to pay as much as $2,000 a night to stay in a facility with such amenities as valet parking and concierge service.
BIG PLANS. Parkway gets half its $237 million in health-care revenue from rich patients from Indonesia, Malaysia, and elsewhere. It also runs managed-care networks for corporate employees and has six clinics in public housing estates, where Singapore's middle classes live. It is setting up hospitals and clinics with partners in China, India, Indonesia, and Malaysia. Its competition: Several former top Parkway administrators who last year defected to form Vista Health Care. Backed by Chase Venture Partners of the U.S., Vista plans to spend $300 million on facilities in the next three years.
Singaporean companies are not the only ones with big plans. Subang Jaya Medical Center in Kuala Lumpur, owned by local conglomerate Sime Darby, is likely to start work on a new cancer center. The Bumrungrad Medical Center, controlled by Bangkok Bank, opened a $110 million 554-bed facility in January, and almost a quarter of its patients are non-Thai. "Everybody is looking for a gold mine," says Vista's Chia.
The rush of new programs is leading groups to seek a competitive advantage by teaming up with big names from the U.S. Singapore property developer Pontiac Land and Health Corp. of Singapore have found an ally in Stanford University School of Medicine. The California university owns a 17.5% stake in a joint venture that is building an advanced medical imaging facility in the city-state. Stanford will train the staff, and it hopes patients who need more advanced treatment will go to Palo Alto, Calif. Stanford gets about 1,000 Asian patients a year, says James Bair, associate director of Stanford Health Services International Medical Services, and that number is growing by about 13% a year. "The future of medicine is in international cooperation," says Bair.
In addition, U.S. universities are helping pave the way for the private sector to enter China. Doctors from the University of Michigan have taken leading roles in a new joint venture in Shanghai that aims to run a managed-care network of six clinics by the end of next year. The company, Worldlink Medical Center, is targeting employees of multinationals as well as local middle-class Chinese. Its doctors teach at local medical schools, and Worldlink has won cooperation from officials by presenting its work as a form of technology transfer. "We're not coming in and setting up a parallel system that competes with the Chinese," says Joseph C. Kolars, medical director of Worldlink Medical Center.
Beijing, eager for alternatives to its costly "iron rice bowl" social-welfare system for state workers, is letting more foreign companies in, too. In May, InterHealth Canada, a Toronto company backed by the Canadian government, formed a venture with Singapore Technologies Industrial Corp. and two Chinese partners to build and operate a hospital in Beijing and clinics in other cities. A Maryland company, U.S.-China Industrial Exchange, opened the first private U.S. facility in Beijing this spring.
EXCESSES. New forms of care are coming to Hong Kong, too. First Pacific Davies, the real estate arm of Hong Kong's First Pacific Co. conglomerate, is acquiring private doctors' practices in the territory. Godfrey A. Blott, deputy managing director, says First Pacific wants to create a system of primary-care clinics for employees of its corporate clients and then expand across the region. Raffles Medical and others are buying practices, too.
In some cases, eagerness to build has gotten ahead of demand. Bangkok, left with 140 hospitals after a construction boom, has three times as many beds as it needs. "A lot don't have any patients," says Michael Heindel, executive director for operations at Bumrungrad. With so many extra beds, hospitals find that they must splurge on expensive new equipment if they want to keep up with the competition. "It has become an arms race for medical technology," marvels Brian Defrancesca, managing director of Asia Bio System, a Bangkok-based company that services medical equipment.
There are bound to be excesses as Asia reinvents its health-care system. But with more Asians entering the middle class every day, the opportunities will just keep growing for health-care companies. "When you are sick, you want the best," says Parkway's Tan. "You want to know more, and pay more. As long as there is a better alternative, people will come." Parkway and other firms are betting this trend will continue for years. If they are right, millions of Asians will be far healthier--and so too will the companies that care for them.By Bruce Einhorn in Hong Kong, with Keith H. Hammonds in New York, Jonathan Moore in Taipei, and Michael Shari in JakartaReturn to top