• Private hospitals will be accepting non-Covid-19 inpatients from government hospitals and emergency departments, according to a recent report in The Star, quoting Datuk Dr Kuljit Singh, president of the Association of Private Hospitals Malaysia (APHM). While some elective surgeries have been referred to private hospitals in the past, these were far from a scale comparable to the current programme.

• About 35 to 40 private hospitals in the greater Klang Valley area will be participating in this exercise, with >800 beds provided. However as private parties are still in negotiations with the Ministry of Health (MoH), the number of participating hospitals from listed healthcare providers is still uncertain.

• This implies an average of 20 beds provided per hospital. Assuming an average inpatient hospital stay of three days, with an average inpatient revenue of RM8,500, this implies an additional RM1.7mil revenue contribution per month for each participating hospital. We expect the actual value to be higher, as the patient population will likely be skewed towards dire, complex cases which require higher-costing treatments.

• The government will pay accordingly, based on a cap. The ceiling costs per patient is for the lowest available charge for beds available in the ward, RM45,000 for surgery costs, RM25,000 for non-surgery costs and RM5,000 for follow-up costs.

• With little visibility as to when the number of Covid-19 cases in Malaysia will decline to a manageable value, we expect this arrangement to carry on for at least one quarter.

• While we are positive on its effects on earnings, we doubt that it will be enough to offset the steep drop in income stemming from the effects of prolonged lockdown measures. We maintain our NEUTRAL call on the Malaysian private healthcare sector: Although we are positive on the healthcare players’ growth and recovery prospects in the following year, we believe that these have already been priced in.

Source: AmInvest Research - 23 Jul 2021