IHH Healthcare revenue could soften on medical inflation measures
The group is now negotiating directly with insurers, offering more packages and discounts, he said. Issues that triggered the medical inflation issue, such as a weak ringgit, have 'abated significantly'.
'(Medical inflation) has not fully gone away, but we have all now come to the table,' said Dr Nair, noting that the group is also in discussion with various parties including Malaysia's health ministry and life insurance association to curb medical inflation.
The group in February guided that the country's current sustained period of medical inflation may affect IHH Healthcare's profit margins.
Bank Negara Malaysia cited data indicating that medical cost inflation in Malaysia reached 15 per cent in 2024, above the global and Asia-Pacific average of 10 per cent, and rolled out measures to tackle the high costs.
Dr Nair noted that although Malaysia now faces sustained medical inflation, these issues previously occurred in other markets IHH Healthcare has operations in.
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These countries have since come up with ways to manage high costs. For example, in Singapore, the government formed a committee for payers, providers and regulators to discuss, he said.
'Payer-provider issues have been with us in healthcare for the longest time... and it will never go away because there is a third party paying for the patient,' said Dr Nair.
'I can guarantee it will come up again in another country, and we will have to use the same playbook to manage these issues as well.'
He was speaking at an analyst briefing after the group's first-quarter earnings. IHH Healthcare posted net profit of RM514 million (S$156.3 million) for the three months ended Mar 31, down 33 per cent from RM768 million in the corresponding year-ago period.
Despite the impact of medical inflation and the Ramadan fasting period on Malaysia, contributions from Island Hospital in Penang resulted in the segment's revenue gaining 17 per cent year on year to RM1.1 billion. The segment's earnings before interest, taxes, depreciation and amortisation gained 14 per cent on year to RM273 million.
The group in November last year completed the acquisition of the hospital. This resulted in a 'robust increase in in-patient admissions (in Malaysia), up 6 per cent', said group chief corporate officer Ashok Pandit.
Group chief financial officer Dilip Kadambi added that without the medical tourism-focused Island Hospital, revenue growth in Malaysia would have been 'probably flattish' with a slight increase.
Meanwhile, Singapore's Mount Elizabeth Hospital, which is currently operating at a lower capacity as it undergoes renovations, is on track to fully reopen by Q3 this year, said the group's senior management.
'While Q2 continues to be soft, we anticipate a reasonable rebound in the second half of the year. This recovery will be driven by successful negotiation with payers and completion of Mount Elizabeth Hospital renovations,' said Kadambi.
Maybank Securities analysts Nur Natasha Ariza and Yin Shao Yang said the results are in line with expectations and IHH Healthcare's growth outlook remains intact, as it looks to add around 4,000 beds in several markets by 2028.
'Despite some geopolitical, structural and regulatory challenges across the different countries, we stay bullish on resilient demand and growing case-mix intensity as IHH remains focused on organic and opportunistic inorganic growth,' they said.
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