Hospital Sector Indonesia: Opportunities and Challenges
Although Indonesia's National Health Insurance program is not without problems, it does benefit Indonesian hospitals and makes investment in the nation's hospital sector attractive, particularly as the Indonesian government targets to provide universal health care to all Indonesians by the year 2019. Reportedly, those hospitals that receive patients that fall under Indonesia's Healthcare and Social Security Agency (Badan Penyelenggara Jaminan Sosial, or BPJS Kesehatan) are the busiest hospitals in Indonesia at the moment.
Due to lucrative perspectives, several large Indonesian business conglomerates have expanded into the hospital sector in recent years (even though their core business was far away from those services related to healthcare). Examples are the Lippo Group, the Ciputra Group and the Mayapada Group. Besides private investors, state-owned Indah Karya also plans to open a hospital in Makassar (South Sulawesi). This company's core business is consulting and construction management. When finished (expected next year), the hospital will be operated in cooperation with another state-owned firm (Pelayaran Nasional, Pelni) that already has experience operating the Pelni hospital in Jakarta.
Listed (yet state-controlled) tin manufacturer and exporter Timah has also expanded to the hospital sector last year. Through its subsidiary Rumah Sakit Bakti Timah it owns six hospitals in the Bangka Belitung province. Due to positive revenue generated in this sector it will invest further in order to equip these hospitals with good facilities (international standard). Timah targets revenue from its hospital wing to account for 20 percent of the company's total revenue this year.
Lastly, HK Realtindo, subsidiary of state-owned Hutama Karya will establish a hospital in Denpasar (Bali).
Indonesia's Largest Hospital Operators:
| Company | Hospital Name | Number of Hospitals |
New Hospitals Planned |
| Sejahtera Anugrahjaya | Mayapada Hospital | 2 units | 50 units |
| Sarana Meditama Metropolitan | Omni Hospitals | 2 units | 2 units |
| Siloam International Hospitals | Siloam | 20 units | 50 units |
| Mitra Keluarga Karyasehat | Mitra Keluarga | 12 units | 18 units |
| Ciputra Development | Ciputra Hospital | 3 units | 7 units |
Source: Kontan
Opportunities and Challenges in Indonesia's Hospital Sector
During the years 2011-2014 the number of new hospitals that came online in Indonesia grew by an average of nearly 11 percent per year. Most of these were hospitals developed by the private sector. However, Indonesia's bed-to-patient ratio (0.9) remains among the lowest in the ASEAN region. Meanwhile, the nation's doctor-to-patient ratio per 1,000 people is also among the lowest in the region at 0.3. Why is Indonesia's hospital sector promising (attractive for investment) and what are the challenges?
• The government's National Health Insurance program and its target to provide universal healthcare to all Indonesians by the year 2019 is a major opportunity for Indonesian hospital operators and pharmaceutical companies as the customer base will be enlarged significantly. However, there remain concerns about the financial sustainability of this ambitious government program.
• Indonesia is the world's fourth-largest country in terms of population size. Presently there are more than 250 million Indonesians. Although the Indonesian population is known for being "young" (with around halve of the population being below the age of 30 years), it is estimated that by 2020 there will be 17 million Indonesians aged over 65 years and - most likely - in need of medical services. Furthermore, it is estimated that by 2020 there will be 184 million of Indonesians between the age of 15 and 64 years.
• Growing economic growth and per capita GDP of Indonesia give rise to increasing purchasing power and higher disposable income. This implies that the rising middle class segment has more money to spend on healthcare services. Indonesia's annual disposable income is expected to reach USD $750 billion by 2020, up 53 percent from 2013. However, the challenge is to make Indonesians more aware of the benefit of spending on health. Historically, growth of spending power in Indonesia does not automatically lead to growth of health spending.
• Although Indonesia's healthcare sector is developing (including a growing number of internationally accredited hospitals) the richer segments of Indonesian society still prefer to visit Singapore in case they need hospital services.
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