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India’s Fortis Healthcare has lost out to Malaysian government company Khazanah in the bidding war for Singapore based Parkway Holdings. Fortis’s main Indian rival Apollo Hospitals has links with Khazanah and expects to benefit from new joint ventures. The key to understanding why several parties were so interested in Parkway is that Apollo, Fortis, Parkway and Khazanah see many opportunities not only in their own countries, but across Asia and beyond. The simplistic version is that all see massive opportunities in attracting medical tourists to their hospitals. On this, they compete with countries and hospitals worldwide. Many of their competitors are happy to slowly expand in their home countries and attract domestic and medical tourist customers.
These four companies, although different in approach, size and management style, have a longer term and wider vision. They understand that there is a finite limit to how many people they can persuade to go to another country for surgery or a health check. They also understand that modern private healthcare is increasingly global. So their aim, on their own and with private and public partners, is to build new hospitals in countries where people will want treatment, but in their own country. Asia, and particularly China, is seen as offering huge potential, but other countries are under the microscope too. The trick is getting into a new country or area, ahead of local and international rivals.
Fortis saw Parkway as a vehicle for international expansion, particularly into South-East Asia. Fortis Healthcare will sell the 24% stake it currently holds in the Singapore’s largest hospital chain to Malaysia’s sovereign wealth fund Khazanah Nasional Berhad. So instead of borrowing money to buy Parkway, it will get money from exiting Parkway. Fortis can either try to increase its investments at home or look for other targets similar to the Parkway chain. Malvinder Mohan Singh of Fortis says, “We intend building a pan-Asian and global healthcare group and will explore other organic and inorganic opportunities within the region. Our vision for a global healthcare service provider which can cross leverage learnings across geographies, optimize cost and provide the best quality to the benefit of the patient has not changed. We hope to re-invest the value unlocked from this experience to support our vision to become a global healthcare provider.”
The acquisition of Parkway would have turned Fortis into Asia’s largest private healthcare network, with a presence in Bangladesh, Brunei, Cambodia, China, India, Indonesia, Malaysia, Mongolia, Myanmar, Pakistan, the Philippines, Russia, Saudi Arabia, Sri Lanka, Ukraine, the United Arab Emirates and Vietnam. Now Fortis will have to find other ways to expand. Fortis had hoped to use Parkway’s brand and secure a pan-Asia recognition that would help it promote medical tourism.
Demand for private medical services has been growing in Asia as incomes rise. Most of Asia’s medical tourism is intra-regional, or from the Middle East and Africa, with a flow of patients from countries with less developed healthcare infrastructure towards those with better hospitals, rather than the widely promoted opportunities for Americans and Europeans to get lower cost healthcare. Singapore was an early mover in medical tourism. Parkway has shown that middle class patients from developing countries such as Indonesia can be tempted to make the short flight to Singapore for a standard of healthcare that is difficult or impossible to obtain in their own countries.
Parkway runs three hospitals in Singapore, with a fourth under development, plus one in energy-rich Brunei, six in China and two in India. In addition, it runs 11 in Malaysia, including nine operated by the Pantai group, in which it has a 40 per cent stake, with Khazanah holding the remaining 60 per cent. The Malaysian government has identified private healthcare as a key sector for development, and recently announced a series of initiatives to promote the industry, including tax breaks for new hospitals aimed at medical tourists, simplified visa requirements for patients and incentives for medical specialists to work in the country. Khazanah has not revealed plans for Parkway, but unlike Fortis it does not run hospitals, it will probably just act as a source for funding new investments and may encourage Parkway to look for partners in joint deals, to give it the expertise in countries where it does not operate now.
Where does Apollo Hospitals fit? Khazanah has a stake in Apollo and Apollo has partnerships with Parkway. Apollo plans to build 100,000 beds per year for the next two decades. It has 50 hospitals in India and other countries. Apollo Hospitals owns, part owns or manages hospitals in Mauritius, Ghana, Nigeria, Yemen, Bangladesh, Kuwait, Seychelles, Sri Lanka, Caribbean islands and the Dutch Antilles. It has just agreed to manage the Indira Gandhi Memorial Hospital located in Male, Republic of Maldives. Apollo is also developing business by technical innovation. It is now offering endovascular treatment [liberation treatment] to patients with multiple sclerosis and has already performed this procedure on 35 patients from Canada and the USA. India’s oldest corporate hospital chain attracted 60,000 foreign patients in 2009.
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