Kuala lumpur: Malaysia’s healthcare sector is expected to remain on a steady growth path, backed by rising affluence and an ageing population, according to Kenanga Investment Bank Bhd (Kenanga IB).
According to BERNAMA News Agency, the investment bank stated in a note today that it is positive about the recent announcement on the implementation of the diagnosis-related group (DRG) system, along with ongoing efforts towards a major revamp of the healthcare sector. It described these developments as a step in the right direction.
The implementation of the DRG system could, however, put pressure on margins for private hospitals. Yet, the near-term impact may be minimal as the initial rollout is expected to target lower-value or minor illnesses. In terms of earnings impact, KPJ Healthcare Bhd (KPJ) is expected to be more affected, given that 95 percent of its topline is derived from its Malaysian operations. Conversely, IHH Healthcare Bhd (IHH) will be less impacted, as its Malaysian operations accounted for 17 percent of its topline in the financial year 2024 (FY2024) and in the first quarter of 2025 (1Q FY2025), respectively.
Overall, the investment bank remains positive on the private healthcare sector, noting that investors may gravitate towards the defensive nature of healthcare stocks amid a more risk-off environment. Meanwhile, Kenanga IB highlighted the urgent need to address national healthcare financing to ensure equitable access to healthcare for all Malaysians, irrespective of income.
It noted that Malaysia has a dual healthcare funding system, where the private healthcare system is paid for by consumers through out-of-pocket payments and private health insurance. Meanwhile, public healthcare is funded by the government, primarily through the Ministry of Health, and to a lesser extent, the Ministry of Higher Education and the Ministry of Defence.
Broadly, it is a multi-payer, multi-provider system with contributors including federal and state agencies, local authorities, the Social Security Organisation, and the Employees Provident Fund. Kenanga IB suggested that a revamped healthcare insurance system could lead to better overall healthcare services for Malaysians, lower out-of-pocket spending, reduced waiting times, and greater access to modern medicines and technology.
The investment bank illustrated that such a system could resemble the Australian hybrid model-a single-payer, multi-provider arrangement-where both public and private hospitals provide equal facilities and functions to patients, compared to the current multi-payer, multi-provider system. Essentially, the system would require mandatory contributions from all, with every working citizen obligated to set aside a portion of income into a fund for medical expenses when needed.