The government's plan to allow a new private hospital is not likely to create a big stir for existing private hospital operators IHH Healthcare and Raffles Medical Group, says DBS Group Research.
This proposed hospital, which is still under consideration, is to be located in eastern Singapore. As announced by health minister Ong Ye Kung on April 9, this new hospital, with between 300 and 400 beds, is to be under a new "not for profit" model. The only not for profit hospital here is Mount Alvernia.
The last private hospital tender was around two decades ago when IHH Healthcare bid $1.25 billion for the site to build Mount Elizabeth Novena, right next to Tan Tock Seng Hospital.
Mindful of the significant costs incurred, and the subsequent impact ranging from poaching of public healthcare professionals, bigger bill sizes, significant increases in healthcare costs, if this new hospital is to go ahead, the tender will be under new rules.
Instead of competing to see who put in the highest bid for the land, bidders will compete based on qualitative factors such as care models, cost efficiency, manpower development and commitment to affordability.
This new hospital will operate under bill size restrictions, which could expand access to lower cost private healthcare options. "In our view, this may divert patients with private health insurance towards private hospitals while helping to ease capacity constraints in the public healthcare system," says DBS.
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Having said so, this new hospital is not likely to have immediate impact on listed private healthcare operators.
In short, hospital will be targeting the more cost conscious patient segment rather than the premium private healthcare market served by hospitals such as Mount Elizabeth and Gleneagles operated by IHH Healthcare, says DBS.
However, DBS warns that Parkway East, which is also under IHH Healthcare and in the eastern part of Singapore, may be impacted more given its location in the East and positioning in the mid tier private hospital segment.
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"Nonetheless, the impact is likely modest as Parkway East accounts for only 143 out of 793 beds within IHH’s Singapore operations and the group’s earnings exposure is diversified across multiple markets including Malaysia, India and Türkiye," says DBS.
As for Raffles Medical Group, the impact will likely be mitigated by patient flow from its integrated healthcare ecosystem including its network of primary care clinics and referral flow from Raffles Health Insurance.
"More broadly, the development timeline for a new hospital including tender, construction and commissioning typically spans several years, suggesting that any competitive effects on existing operators would only emerge in the longer term," says DBS.
"Overall, Singapore’s healthcare sector continues to be supported by structural tailwinds such as an ageing population and rising healthcare utilisation, though concerns around healthcare financing and cost inflation remain key areas to watch," adds DBS.
