IHH takes fresh breath on post-pandemic expansion, M&A

Hospital operator to add over 2,000 new beds across Malaysia, India and Turkiye over next 3 years

by P PREM KUMAR / graphic TMR

IHH Healthcare Bhd, one of the world’s largest hospital operators, is optimistic about expanding organically in existing markets while exploring merger and acquisition (M&A) opportunities as the healthcare industry moves away from the Covid-19 frenzies, its top executive told The Malaysian Reserve in an interview.

IHH group COO Joe Sim Heng Joo said the company will add over 2,000 new beds across Malaysia, India and Turkiye over the next three years to meet growing healthcare needs and demand both domestically and from the region.

“We will pursue organic growth in Malaysia by driving bed occupancy and increasing our capacity by adding another 600 beds over the next three years,” he said in an interview.

Sim said IHH would also be more active in pursuing “earnings-accretive” M&A activities.

“We are looking at how we can provide acute hospital care for even more patients via brownfield expansion and/or mergers and acquisitions, as well as through driving organic growth,” he said. “IHH will place emphasis on exploring earnings-accretive opportunities that are aligned with our corporate strategy, backed by a healthy balance sheet.”

IHH operates a network of 83 hospitals in 10 countries, including Malaysia, Singapore, India, Turkiye, China and Europe. The group offers over 15,000 medical beds and hosts over 65,000 workers. Among hospital brands under the company include Gleneagles, Parkway, Pantai, Mount Elizabeth, Acibadem, Fortis and Prince Court.

Dually-listed on Bursa Malaysia and Singapore Exchange, IHH’s market capitalisation is RM51.6 billion as of May 5, 2023. Japanese investor Mitsui & Co Ltd owns the majority stake in IHH at 33%, while Khazanah Nasional Bhd, through Pulau Memutik Ventures Sdn Bhd, and the Employees Provident Fund (EPF) own 26% and 10% respectively.

For the financial year ended Dec 31, 2022, IHH registered a net profit of RM1.55 billion on the back of RM18 billion in revenue.

Ambitious Expansion

Fortis Healthcare, the Indian hospital operator owned by IHH, acquired a 350-bed Medeor Hospital last month in Gurugram, Haryana, while its Turkiye brand Acibadem expanded into the country’s third-largest city, Izmir, in February by acquiring Kent Health Group.

IHH also opened two new hospitals last year: A 200-bed multi-speciality hospital by Fortis in India and a 300-bed Acibadem Ataşehir Hospital in Türkiye.

Sim said IHH is looking at growth and expansion across several other dimensions, including expanding across the healthcare continuum to extend the service of care for patients to include mental health with its recent investment into Intellect — a leading digital mental health company.

IHH also intends to expand its value chain vertically, particularly in the laboratory and diagnostics business.

“We are already leaders in the sector and will work towards becoming a global end-to-end laboratories service provider, backed by our deep clinical know-how and capabilities,” he said.

IHH had invested in precision medicine company Lucence Diagnostics to help doctors better identify genetic mutations and changes in cancer cells in patients with advanced lung cancer, where its innovative and less invasive method to diagnose and treat cancer can impact more individuals and save lives.

The healthcare service provider has also invested in Us2.ai, a MedTech developer of artificial intelligence (AI) echocardiography software that enables earlier detection and treatment of heart disease. As a result, patients can receive complete and accurate cardiac measurements in under two minutes anywhere, including on their mobile devices, using FDA (US Food and Drug Administration)-approved software.

Strong Demand

Sim said IHH believes there is a strong underlying demand for the private healthcare industry in Asia and Malaysia, and this will outweigh the headwinds that the industry can expect.

“Today, trusted, accessible and quality healthcare is in high demand, and this will only increase due to Asia’s ageing population, as well as the advancement in medicine that provides more targeted and precision treatments,” he said.

In terms of an ageing population and as governments focus more on population health and preventative care, IHH believes there are opportunities for its primary care and ambulatory segment to grow and play an even more prominent role in managing the wellness of local healthcare consumers.

“Our Singapore and Acibadem operations (which comprise Türkiye and Europe operations), for example, are exploring ways to further expand in the ambulatory care space,” he said.

As for Malaysia, Sim said the private healthcare sector remains underserved, especially for the growing middle-income segment.

In terms of challenges, Sim said the healthcare industry faces near-term macroeconomic headwinds such as inflationary pressures – including salary costs from a tight labour supply of nursing talent — and high energy prices and rising interest rates.

“On the issue of manpower and inflation, our global network gives us differentiated access to a deep and wide global talent pool, including for nurses,” he said.

“We are also able to maintain a tight rein on costs and leverage synergies from our scale to mitigate some cost pressures,” he said and pointed out that via a centralised procurement process, IHH achieved RM100 million in annual savings over the last two years.

New Healthcare Delivery Model

Sim said the Covid-19 pandemic had been a transformational catalyst in accelerating the implementation and adoption of changes for a new healthcare delivery model.

He said several megatrends have come into focus during and after the pandemic. Covid-19 drives some, while others are more secular trends that will remain even in a post-coronavirus world.

“For one, digital is now an imperative,” he said. “Covid-19 has accelerated digital adoption and reshaped expectations. Not only are patients expecting more digital services and support, but there has also been increased consumerisation in that they expect healthcare services to be faster, seamless, better and provide more value for money.”

Sim pointed out that IHH launched its patient-centric mobile app, MyHealth360, in Singapore last year and in Malaysia this year for its patients to manage their wellness journey online — including setting appointments, checking bills, seeing a doctor remotely, accessing laboratory test results, viewing x-ray images — using technology platforms as a seamless complement to its offline services.

The pandemic, which toughened the recruitment and retention of healthcare professionals, aided by the geopolitical risks, only means that healthcare service providers like IHH need to be more agile and adaptive to the trends facing the industry and the macro climate, said Sim.

“Our agility to adapt has always been our strength. This is powered by our scale and positioning, with a portfolio of more than 80 hospitals across 10 countries and a solid financial position,” he said.

“We can pivot our business across multiple geographies when needed, as we did during the pandemic, by prioritising Covid-related services while investing in new technologies and innovations to future-proof ourselves,” Sim added.

He said as IHH transited out of the pandemic in the second half of 2022 (2H22) and Covid-related business gradually eased off, the group moved nimbly to manage the return of local and foreign patients to IHH hospitals.

“This put us on an accelerated path of operational recovery, with inpatient admission growing and exceeding pre-Covid times across most of our markets,” he said.