Investors cautious with Vietnam's healthcare sector, wait for stronger vital signs

By Ngan Anh, Thanh Nien News

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Medical staff at Tu Du, a major public ob-gyn hospital in Ho Chi Minh City which has almost always been crowded with too many patients. Photo: Thanh Tung Medical staff at Tu Du, a major public ob-gyn hospital in Ho Chi Minh City which has almost always been crowded with too many patients. Photo: Thanh Tung

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When the interest of private investors for one of Vietnam’s biggest hospitals simply did not match expectations, it brought into sharp focus the continuing weaknesses of the healthcare sector.
The Central Transport Hospital wanted to sell a large number of shares to strategic investors. Initial predictions suggested that the competition among private investors for those shares would be fierce.
But in the end, only two companies registered to buy the shares, while Singapore Brookline Medical and real estate developers Vingroup and FLC did not, even after expressing their interest, local newspaper Dau Tu (Investment) reported.
T&T Group, a Hanoi-based real estate company, eventually became the sole strategic investor in the state-owned medical facility, which had to extend the registration period last month in an attempt to attract more potential partners.
With an estimated value of VND158 billion (US$7.18 million), the hospital owned by the Ministry of Transport will have its first initial public offering (IPO) this month. It remains to be seen whether the hospital will have more luck this time.
The hospital is an epitome of the state of Vietnam’s healthcare sector: it is in dire need of money for a major transformation; it has great potential; but many investors are still cautious about pouring a lot of money into it.
Vietnam has a 90 million population, and its middle class is expected to grow five times bigger in size by 2020, owing to annual economic growth of over 5 percent since 1999. The demand for healthcare is set to grow accordingly.
Many foreign investors such as Thailand's Bumrungrad Hospital Pcl and Indonesian conglomerate Lippo Group, have eyed the healthcare sector. Lippo wants to build 15 hospitals in Vietnam, but they have not yet made any specific move.
Many other foreign medical groups, instead of investing in hospitals in Vietnam, simply opened representative offices here to bring local patients to their hospitals abroad for treatment.
Parkway Hospitals Singapore Ltd. is one of such cases. The group has run representative offices in Vietnam for some 10 years, but not showed any plans for opening its own hospital in the country.
Truong Vinh Long, medical manager of Hoa Lam-Shangri-La Healthcare LLC, which is the investor of City International Hospital, said this is a potential market as the medical need from Vietnamese is increasing.
State-run hospitals are overloaded, and many local people choose to go abroad for treatment. Some 40,000 Vietnamese citizens spend about $1 billion on overseas treatment each year, according to the Ministry of Health.
However, many investors have not decided to enter the market.
The construction of a hospital with modern equipment and a good staff requires a large investment outlay, which could top billions of US dollars.
But spending on healthcare by Vietnamese people is still relatively low, and recouping that investment can be a slow and painful process. Investors have to be willing to swallow huge losses in first years of operation, industry insiders say.
In 2012, Vietnam's health spending was the highest in the region as a percentage of gross domestic product, the latest data from the World Health Organization shows. But at $102 per capita, that's less than half of Thailand's, a quarter of Malaysia’s and about 4 percent of Singapore’s.
Another difficulty facing many private hospitals now is the availability of good medical staff.
Vietnam still lacks qualified doctors, Long said.
Meanwhile, foreign doctors who want to practice in Vietnam would have to master the Vietnamese language or work with interpreters. However, it is not easy to find interpreters who could work in the sector, he said.
Challenges and opportunities
According to some industry insiders, many private hospitals are now struggling to get patients. Private hospitals now operate at 25-30 percent of capacity, so investment effectiveness is very low, they said.
Despite being located in a highly populated area in Ho Chi Minh City's Tan Phu District, Phu Tho Hospital has ceased operation for more than a year due to losses. Lenders have seized many machines and medical equipment.
Leaders of the hospital have met with lenders and planned to sell the hospital for $26 million to pay off its debts, according to local media.
High service prices are one of the reasons for the lack of patients at private hospitals.
Patiently waiting in a long queue at Ha Noi-based Bach Mai Hospital, the public facility with chronic bed shortages and overworked doctors, Nguyen Thi Hoa, 24, from the northern province of Nam Dinh, said: “I don’t intend to move to private hospitals. Their services are three to five times more expensive than the price here.”
Another reason is that private hospitals have not managed to create a very good reputation yet.
Vo Van Ban, vice general director of the Hanoi French Hospital, said: "To compete well in the market, not only hospitals, but also all businesses have to have a good brand name.”
“However, newly-established hospitals cannot do this immediately,” he said. 
The number of private hospitals has more than quadrupled to 170 over the past decade, but about half of them are either dying or dead, said Nguyen Van De, chairman of the Association of Vietnamese Private Hospitals.
The private sector has failed to meet the increasing demand for medical treatment, he said.
The overloaded situation is common in major public hospitals where waiting time averages four to seven hours and bed occupancy can be 170 percent, according to the Ministry of Health.
Despite difficulties, a few investors are still seeing opportunities in the market.
Local conglomerate Vingroup has planned to increase its network of private hospitals, known as Vinmec, to 10 from only one at the moment within five years. It will complete construction of a medical university in 2015. Vinmec's early focus will be cancer, cardiac, pediatrics and stem cells.
Vinmec is also targeting medical tourists with hospitals in travel hot spots Ho Chi Minh City, Phu Quoc, Nha Trang and Ha Long.
Ban said there are opportunities in the sector.
After all, many Vietnamese still have to fly abroad for treatment, Ban said.

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