Nomura Investment Forum Asia: Asia Healthcare Post Covid-19

Unsurprisingly, the hospital sector is one of the industries that has been most impacted by the Covid-19 outbreak. Our analysts specializing in this sector tell us how countries such as China, ASEAN and India have been dealing with the pandemic and what can be expected in the future.

China healthcare

As we enter Q2, the number of both new and potential Covid-19 cases have declines except in some high-risk regions where there are some small-scale outbreaks. In the hospital market, after an initial short decline of patient visits, hospitals and the economy have started to reopen. According to the National Health Commission, hospital services as of May have recovered to 85-90% of last year’s level, and outpatient expenditure per patient is up approximately 15% year-on-year as of March. Doctors have been prescribing more drugs to patients, particularly those suffering from chronic disease to minimize hospital visits.

Additionally, government measures in three dimensions have been implemented including increased testing capacity, telemedicine, online medical insurance reimbursement and encouraging development of a Covid-19 vaccine. We have also seen an improvement in public health infrastructure such as vaccine development, quick testing techniques, ICUs and mobile labs.

Over the summer, we can expect the approval of innovative drugs, which was delayed due to the pandemic. Towards the end of the year, we are likely to see a second batch of new product approvals, particularly injection products, which will lay the foundation for implementation of injections and Group Purchasing Organization in 2021 and 2022.

ASEAN healthcare

For the hospital sector, utilizations have declined quite sharply from about 65% at the beginning of the year, to about 30% from March onwards, when most countries in the region started to impose mobility control orders and lockdowns. The segment most impacted within the industry has been medical tourism as most countries closed their borders to foreigners. Most local patients were advised to delay non-essential surgeries. It is worth noting that elective surgeries range from 50-70% of the total number of surgeries for private hospitals.

Government-run hospitals in the Singapore and Malaysia region have primarily taken on the care for Covid-19 patients. In Singapore, some patients who are no longer critical but are still carrying the virus have been transferred to private hospitals to complete their treatment. On the other hand, private hospitals in Malaysia have been using their facilities to conduct surgeries for some non Covid-19 patients who have been transferred from public hospitals. An additional revenue generator for private hospitals in Malaysia at this time has also been on-demand virus testing.

In the long-term, the current environment is expected to accelerate the use of technology in hospital operations, including telemedicine, remote ICUs, and robotic nursing assistants. These technologies can help increase efficiency, shift monitoring to outpatient facilities and optimize operations. The use of robotic nursing assistant can help improve productivity and reduce infection risks.

India healthcare

Similar to the ASEAN region, occupancy levels have fallen significantly in India, and currently ranges between 20-40% in most cases, much lower than 60%+ before the beginning of the pandemic. Due to government intervention and the lack of available hospital beds, general wards in private hospitals have been converted into Covid-19 wards. This impacts efficiency and reduces the number of available beds as quarantine measures need to be implemented in hospitals. We expect a pent-up demand which could be catered to once lockdown eases. However there will be some loss of sales as hospitals will not be able to cater to all the pent up demand in a short period, resulting in patients getting treated at other hospitals. Furthermore, medical tourism that accounts for 10-15% of revenues will remain impacted for a while.

In terms of diagnostics, volumes are recovering but still at about 50-70% of pre-lockdown level. The Covid-19 disruption is likely to accelerate industry consolidation. We can expect to see a shift in volume from smaller unorganized players to companies such as Dr. Lal Pathlabs, Thyrocare and Metropolis, which are the listed names in this space.

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