A Tough Road Ahead for Thai Hospitals

McKinsey & Company recently published a paper entitled “The hospital Is dead, long live the hospital!” This well crafted piece documents nine major forces reshaping hospitals and healthcare delivery. In a nutshell, their thesis is that hospitals as we know them are dead, and the hospital of tomorrow will require significant re-engineering to address transformational shifts in consumer expectations, digital technology, finance and funding.

Now one could reasonably apply this analysis to virtually any industry, not just healthcare, but healthcare, and specifically private hospitals in Thailand, look particularly susceptible to these nine disruptors, which McKinsey defines as:

• Changes in patient populations and their needs
• Higher patient expectations
• Recognition that many types of care can be better provided in community settings
• High-quality care requires high-volume centers, and the emergence of standalone single-specialty centers
• Advances in clinical knowledge and technology
• Impact of digital technologies on how healthcare is delivered
• Difficulties in attracting and retaining an appropriately skilled workforce
• Financial and funding challenges
• Requirements to measure quality

Pre-Covid, most Thai hospital operators and investors saw these forces like clouds in the distant horizon – visible but not threatening – because the operational landscape remained unchanged. Clinics were full, medical tourists were plenty, and everyone was making money. But then came Covid, and those once distant clouds are now a storm threatening to destabilize businesses and balance sheets.

Looking at the aggregate, Thai private hospitals have a difficult road ahead. Operators must contend with two competing realities. The first is generating footfall and getting patients back into clinics and heads into beds. The second is preparing their organizations for the changes McKinsey describes in their white paper. To complicate matters even further, the Thai economy is in free fall and some economists are predicting the economy in 2021 will not rebound from a negative growth of 6.1% last year and could risk facing a financial crisis like in 1997.

This assessment is validated by a 2020 white paper conducted by IQVIA documenting the impact of Covid on SE Asia healthcare providers. The top level highlights are grim. Footfall at private hospitals declined 70%, as did surgical procedures. Medical tourism volumes declined 90%. Physician activity at large hospitals was down more than 50%. To add salt to the wound, predictions of a quick rebound in 2021 have not materialized, because with every new Covid variant comes a new government lockdown.

Thailand’s large private multispecialty hospitals seem particularly at risk. These facilities are built to provide a wide range of services and specialties, but they require volume to work efficiently. That’s a tough ask these days. Medical tourism has been decimated, household incomes are shrinking, and patients are delaying clinic visits and elective surgeries. The net result is Thai private hospitals are competing for a smaller pool of domestic patients with less purchasing power.  

On the flip side of the coin, McKinsey, IQVIA and others see a transformational shift in how healthcare will be delivered.  The bricks and mortar model where doctors sit behind a desk waiting for patients to come in looks dated, like bank tellers waiting for deposits.  People have changed.  Our habits, preferences and purchases all reflect a world moving from analog to digital.  Healthcare will be challenged to look ‘beyond the building’ to engage and serve customers where they are, not where you are.

The digitalization of healthcare is a mega-trend supercharged by Covid; but lasting well beyond Covid.  While the benefits of digitalization are clear (empowers patients, improves client engagement, optimizes operations and cost efficiencies) only “51% of CEO’s have prioritized digital transformation to better connect with their customers”, according to a 2016 PWC Global CEO survey.  Telling but true.

Digitalization is expensive, time consuming, disruptive and the ROI is often unknown or hard to calculate. When hospitals spend on “digital” it usually refers to their hospital information systems (HIS), but these operating systems work in the background controlling patients records, orders, billing, etc. As a rule, they lack the customer facing attributes that patients want, like online registration and appointments, virtual consults, e-pharmacy and delivery. Marrying the two is an onerous task.

But bridging the digital divide must be done. Hospitals that do not invest in their digital capabilities today will not keep pace with their peers tomorrow.  Furthermore, they will be most susceptible to disruption or disintermediation by 3rd party technology companies, like Booking.com in the hospitality industry or Grab to the restaurant industry, that take a 30% commission and own the customer and their data.

Thailand’s resiliency has been proven time again, but this time it feels different. Just last week, Kasikorn Research Centre (K-Research) forecast a huge slump in the number of foreign tourists visiting Thailand in 2021 to around 250,000 to 1.2 million people.  By comparison, Thailand welcomed 39.9 million foreign visitors in 2019, generating 1.91 trillion baht for the country.

Covid has shaken the foundations of its tourism dependent economy and has exposed the limitations of the volume over value based strategy the government has clung to far too long..  Maybe it will all bounce back, but hoping for the return of the ‘good old days’ is like driving a car using the rear view mirror as a guide.  Eventually, it leads to a crash.

The clear take-away here is that Thai private healthcare is facing challenges it hasn’t seen since 1997, and operators will have to fight a two pronged battled — one to survive and the other to thrive.

InterMedika Expands Team and Services

InterMedika, a company providing corporate advisory services to healthcare and hospitality investors, hospitals, governments and health tourism promotion boards around the world, has expanded its advisory team to include Edgar Toral Hernandez, Gareth Jones and Carl Stanifer.  The addition of these specialists expands Intermedika’s depth and breadth of services in healthcare for hospitality, IT systems, business operations and financial management. 

Edgar Toral is a healthcare and hospitality executive with over 20 years of experience working at C-level positions in Asia with market leaders including Hilton International, Bumrungrad International, Sodexo Healthcare, Ramsay Sime Darby Healthcare and Thanyapura Health and Sports Resorts.  Edgar has extensive operations experience in clinical facilities, health and wellness resorts, and wellness clinics.

Gareth Jones is a specialist in information technology and business transformation with over 20 years of experience implementing end-to-end information technology systems and supporting business transformation programs in Asia.  Gareth has worked with some of the world’s largest companies, including Samsung, Microsoft, American Express designing and implementing hardware and software IT systems to enable process and productivity transformation, improve customer service experience and insights, and perform statistical and financial analysis.

Carl Stanifer is a seasoned global healthcare executive with decades of experience in healthcare operations, financial management, acquisition & development, deal structures, new company start-ups and new facility development.  He has served as board member, CEO, CFO or in top corporate executive positions with private and public organizations in the USA, Middle East, Australia and throughout Asia.  His professional associations include operating partner at TVM Capital Investments, director of the Cambridge Medical & Rehabilitation Center, CEO of the Abu Dhabi Health Services Company (SEHA), Group CFO at Bumrungrad Hospital Thailand and numerous senior roles with the US-based Tenet Healthcare Corporation in the US, Singapore, Malaysia, Australia and Thailand.

InterMedika continues to specialize in business reviews for hospitals, investor support and medical tourism. The expansion of its advisory team will enhance the company’s capabilities in wellness and medical-light programs for hotels and hospitals, as well as digital services to better connect patients and doctors online.

Will COVID-19 Kill or Cure Medical Tourism?

Medical tourism is stagnating and the go-go years of double digit growth are gone…for now at least.

The sector was the darling of hospital and clinics all around the world because it attracted cash paying patients for higher acuity services where margins are fatter. The first and fast movers did well, establishing leadership and brand dominance, then the late adopters piled in to get a piece of the action leading to commoditization and a flattening of the curve.

Now it’s COVID-19.  The virus has exposed a significant weak link in the medical tourism business model. If people cannot travel freely and safely then international patient volumes and revenue start to shrink and shrink fast.  I see this first hand here in Bangkok where one of the worlds biggest medical tourism hospitals reported a more than 80% drop in net profit last quarter.

So is this the beginning of the end or the inflection point for medical tourism?

The million dollar question coming out of the pandemic is this: will it materially change habits and preferences of medical tourists? COVID-19 has reset the chess board, and when the world is finally free to travel will these high value specialty tourists go back to the same old places to do the same old things?

I think medical tourism will bounce back, but it will be uneven.  Here in Thailand, arguably the mecca of medical tourism, the government did an admirable job containing the spread of the virus in phase 1 and 2, but completely bungled the vaccination roll-out deemed essential to restarting tourism and the economy at-large. Hospitals and hotels are ready to welcome back tourists, but they are hostages of government policies that change with the wind.

COVID-19 has clearly disrupted travel patterns globally and supercharged trends towards more wellness and lifestyle focused products as more people look to prevent rather than just treat illness.  Hotels and non traditional players are exploring new ways they can incorporate wellness and medically light services into their portfolio of guests services. And, of course, the pandemic has forever changed our reliance on digital technologies to communicate and connect. 

Like all crisis moments, the response is everything. COVID-19 may just prove to be the kick in the pants tourism-dependent hospitals and economies need to rethink their business and marketing strategies. Those that are proactive and forward looking will be better positioned to react than those waiting for the return of the status quo.

One thing is for certain. COVID-19 will either be a cure or a killer for many in medical tourism sector. 

Let retirees rejuvenate Thai tourism

Thailand is in trouble. The economy is shrinking, unemployment is rising and tourism is crumbling. According to data released by Thailand’s Ministry of Tourism and Sports, foreign visitor arrivals are down 83 per cent from 2019. Any hope of a quick rebound evaporated in late 2020 with a fresh outbreak of Covid cases, triggering a new round of lockdowns and more business shutdowns.

Once bursting at the seams with tourists, resort destinations like Phuket, Pattaya, Krabi and Samui are now ghost towns. Thai authorities talk incessantly about revitalising tourism and pivoting the industry to attract ‘high value tourists’, but the reality is Thai tourism has always been a churn and burn, volume-based game. Size over sustainability.

To stem the bleeding, the government devised a Special Tourist Visa (STV) scheme designed to lure tourists back to the country. The catch, of course, is a mandatory 14-day quarantine. Having gone through this experience myself, I describe it like going through a Rube Goldberg contraption – you are tossed and turned through bureaucratic twists and turns only to end up hermetically sealed in a hotel room paying business class prices for an economy class product.

To be fair, Covid-19 presents a massive challenge for governments around the world and puts authorities in a no-win situation. Open the borders and risk widespread infection or keep them closed and suffer economic strangulation. Thailand has done a great job battling the spread of the virus, but it is losing the war in lost jobs and wages. The longer this Mexican standoff between live and livelihoods continues, the harder it will be to resuscitate the economy back to health.

One area where Thailand can focus attention is retirement living. No country in Asia is better positioned to attract seniors looking for a first or second home. The 50+ market represents a multi-billion dollar opportunity impacting virtually every sector of the economy, and demographics ensure that it will be a growth market for many years to come.

Thailand has everything it needs to become The Retirement Capital of Asia; yet it is woefully incapable of developing a product that is coherent, customer friendly and market competitive. Arcane immigration policies, restrictive property ownership rules and convoluted banking regulations are just some of the many disincentives that make long-stay living in Thailand onerous and investing in the country a gamble. As a permanent resident in Thailand, I know all too well the frustrations that expats face getting visas and mortgages.

Covid-19 presents the country’s leaders with a once-in-a-decade opportunity to rethink its strategy on retirees and retirement living, like it did with medical tourism after the Asian financial crisis in 1997. As the marketing director for Bumrungrad International Hospital from 2001-2007, I saw Thailand transform itself from a local player to a global healthcare heavyweight in the span of five years.

Medical tourism is a perfect example of how Thailand can create opportunity out of crisis. Thailand’s private hospitals and health resorts gained market share and pole positioning by being at the right place at the right time with the right product at the right price. Thailand wasn’t the first mover in medical tourism; it was the fast mover. Speed to market made all the difference, and now this segment attracts over three million international high value tourists annually and contributes 45 billion Thai baht (US$1.5 billion) to the economy.

The moral of this story is simple. Hope is not a strategy and waiting for the return of mass market tourism is folly. Thailand has a clear competitive advantage in retirement living and should use this downtime to develop smart strategies to gain fast mover advantage in high value, niche segments that are less fragile and more sustainable.

As the saying goes, “Never let a crisis go to waste”.

Read the article originally published in TTG Asia here.