Health Care In Asia

The Next 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., has 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--which hindered them in treating 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.

LUCRATIVE. 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, a principal at McKinsey & Co. in Hong Kong. Many of Asia's new rich aren't satisfied with inexpensive, no-frills services from their governments. Instead of settling for crowded public hospitals and clinics with out-of-date equipment, these customers are turning to new companies that offer more luxurious facilities and the latest in high-tech diagnostics.

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.

LOCAL VALUES. Of course, most Asians must rely on state-subsidized care. Yet more than 130 million 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.

Asia's leaders, faced with rising expectations and limited resources, are counting on the private sector to meet the demand for better care. With Thailand in a financial crisis, Malaysia and the Philippines feeling jitters, and Singapore and Hong Kong becoming mature economies, policymakers 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.

Moreover, despite smug talk by some political leaders about Asian values, families may not be up to the task of caring for the sick and elderly as they once were. Last year, Singapore started requiring people to support their aged parents. "Families are getting smaller. People are very busy. They don't have time for their parents," says Colin Theseira, a retired Singapore Air Force general who is CEO of Tele-Medical Services, which does a brisk business in home health care.

Until recently, government hospitals were the only option for most Asians, even middle-class ones. The quality of this system has varied widely--from generally good in Singapore to poor or even dangerous in Indonesia. By taking such a large role, most governments left little room for the private sector, which catered to the wealthy few. In some countries, including the Philippines and Hong Kong, employers provided some health-care benefits. In China, most city- dwellers went to clinics and hospitals run by their work units.

But that system is under strain as Asians live longer. Diseases such as malaria and cholera are not the leading killers they once were, while 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.

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."

Even successful programs face problems. Two years ago, Taiwan introduced universal health coverage. Premiums are low, and patients can choose their doctors. But costs are already rising some 15% a year. Officials now want to turn the health insurance bureau into a public foundation, a possible step toward a managed-care system.

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. 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.

Singapore, which has the best care in the region, is the model of what governments should do to tackle health-care 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. HMO giant. It has a joint venture in consulting with Singapore's Raffles Medical Group.

$2,000 A NIGHT. 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, Gleneagles, 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.

Kenneth Thean, a surgeon and director of Gleneagles, says the goal is simple: "We've tried to make it look not so much like a hospital." Parkway gets half of its $237 million in health-care revenue from affluent overseas patients from Indonesia, Malaysia, and elsewhere. Parkway also runs managed-care networks for employees of corporate clients and even has six clinics located 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. Managing Director Tony Tan Choon Keat says the system will provide routine procedures in local hospitals while transferring patients needing advanced treatment to Singapore. Parkway's income last year was $35 million.

Parkway, whose public shares have risen 60% in 12 months, has its rivals. In June, an arm of the Development Bank of Singapore, which runs several hospitals, announced plans to buy 19% of Parkway for $280 million, sparking rumors of a takeover battle. And some Parkway staff, suspicious of the firm's real estate origins, have decamped. "They tend to analyze health care from a property perspective," says Chia Chee Keong, CEO of rival Vista Health Care in Singapore. Last year, Chia and several other top administrators defected from Parkway's most important hospital to form Vista, which is backed by Chase Venture Partners of the U.S. In the next three years, Vista plans to spend $300 million to build facilities.

"GOLD MINE." 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 some groups to seek a competitive advantage by teaming up with big names from the U.S. Singapore property developer Pontiac Land and Health Corporation 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 its facilities in 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 in the city by the end of next year. The company, Worldlink Medical Center, is targeting employees of multinationals as well as local middle-class Chinese people. Worldlink's doctors are teaching at local medical schools, and Worldlink has gotten 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. "We're working side by side with their physicians and training people."

With the Beijing government eager to develop alternatives to the costly "iron rice bowl" social-welfare system for state workers, it is letting in more foreign companies--and U.S. medical schools. In May, InterHealth Canada, a Toronto company that is backed by the Canadian government, formed a joint venture with Singapore Technologies Industrial Corp. and two Chinese partners to construct and operate a hospital in Beijing and clinics in other cities. A Maryland company, U.S.-China Industrial Exchange, inaugurated the first such private U.S. facility in Beijing this spring.

New forms of health 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 the employees of its corporate clients and then expand across the region. Raffles Medical and others are buying up practices, too.

EXCESSES. In some cases, eagerness to build has gotten ahead of demand. In Bangkok, after a construction boom left the city with 140 hospitals, the Thai capital 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 are finding that they must splurge on expensive new equipment if they want to keep up with the competition. "It's 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 forms 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.