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Despite a fertile growth environment, private hospitals fail to address key healthcare sector shortcomings

A woman walks past the FV Hospital in Ho Chi Minh City's District 7. Vietnam is believed to be a good destination for investors in the healthcare sector in the long term.

An overstretched state-run healthcare system and increasing affluence has opened up opportunities for the development of private and foreign hospitals nationwide in recent years, but their contribution to reducing the overload has been limited.

Over 100 private and foreign-invested hospitals have been built in 29 cities and provinces over the last decade, according to the Ministry of Health.

Luong Ngoc Khue, head of the Department of Medical Examination and Treatment under the ministry, said the government encourages foreign and local investors to build hospitals, contributing to meeting the healthcare demand of local people.

"The government facilitates investors with favorable investment procedures, taxes, and land policies to develop private health establishments," Khue said.

Hospitals in Vietnam now pay corporate income tax of just 10 percent instead of the 28 percent regulated earlier. Newly-established hospitals are exempted from the tax for the first four years, and enjoy a tax reduction of 50 percent in the five following years. Some projects to construct and expand hospitals can access low-interest bank loans of up to 70 percent of its total investment.

With these incentives, many private hospitals have been built or expanded over the past few years.

The An Thinh Obstetric Hospital opened late last year in Hanoi, becoming the first private hospital in the field in the northern region.

Fortis Healthcare Ltd of India recently bought a controlling stake in Hoan My Medical Corp, the Vietnamese hospital operator backed by Deutsche Bank AG, raising the promise of increasing foreign investment inflow into Vietnam's healthcare sector.

The French Hospital of Hanoi also plans to expand this year, tripling its current capacity. As of now, the hospital has 68 sick beds, said the hospital's deputy general director Vo Van Ban.

"The potential for the development of private and foreign invested hospitals in Vietnam is largely due to high demand among local people for high-quality healthcare service," Ban said. "Many people still have to fly abroad for medical treatment."

Some 40,000 Vietnamese citizens spend about US$1 billion on medical treatment services abroad each year, according to the Ministry of Health.

The results of a private equity survey released last November by Grant Thornton Vietnam, an audit and business advisory service provider, shows that the healthcare and pharmaceutical sector is the third most attractive investment sector in Vietnam, after real estate and education.

Struggle to survive

According to some industry insiders, Vietnam, in the long term, is a good destination for investors in the healthcare sector. However, many private hospitals are now struggling to get patients. Some of them are even on the verge of bankruptcy, they said, declining to name the troubled hospitals.

Explaining why private hospitals find it hard to attract customers, while state-owned ones are overcrowded, Pham Vu Thu, managing director of the An Thinh Obstetric Hospital, said: "Some private hospitals have limited treatment quality, and have not yet built up a good reputation."

According to the Health Ministry, most of the private hospitals now are small, mainly offering outpatient treatment to people with common diseases. Each of them has 30-50 beds on average. Their combined capacity accounts for just 3 percent of the total number of beds available nationwide, and their staff make up just 0.2 percent of the health sector's employees.

Ban 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."

It takes hospitals years to build a brand name, and they need to have access to large capital, he said. "In the current context of high interest rates, hospitals would face bankruptcy if they depended on bank loans. No business can bring enough profit to pay the current interest rates."

Investment in many private hospitals in general is still limited.

Thu of An Thinh said his hospital has invested just $2 million in machines and equipment. "The construction of a hospital with modern equipment and good staff requires a large investment. But spending on healthcare by Vietnamese people is still low, and recouping investment is a slow process, so investors dare not pour large sums of money into such projects."

Experts say it takes between five and ten years for private hospitals to recoup their capital.

However, the biggest difficulty facing many private hospitals now is the availability of good staff. Most of them have to hire retired doctors or those who are still working in state-owned hospitals to work part-time for them.

Hospitals seeking to build a name for themselves would not be keen on hiring newly-graduated medical students.

Thu of An Thinh said his hospital, due to limited capital, could not make large investments in training employees as many state-owned hospitals do now.

Ban of the French Hospital said his hospital is always in need of highly qualified staff. "However, when expanding the hospital, it is not easy for us to employ highly qualified staff who are good both in their speciality and have foreign language skills. And we have demand for not only excellent doctors, but also nurses and accountants," he said.

Wrong priorities

With the private sector unable to help significantly reduce the overload at state-owned hospitals, the government is seeking other ways to deal with the problem.

The state-run Saint Paul Hospital in Hanoi has 550 beds, but receives some 1,500-2,000 patients for medical examination and treatment each day. In many other hospitals, the situation of two or even three patients sharing a bed is quite common.

The Ministry of Health said Vietnam now has 21 hospital beds per 10,000 people, much lower than average of 33 hospital beds per 10,000 people for the Asia-Pacific region.

Local media have frequently reported on the constant overloading at many hospitals, where each doctor has to examine some 100 patients a day and does not have enough time to conduct thorough examinations or offer detailed consulting services to the patients.

Minister of Health Nguyen Thi Kim Tien has said the country's population has doubled since 1975, but the infrastructure of the health sector, the number of hospitals has not kept pace at all.

"Land for hospital construction is limited, while land for industrial parks and golf courses is large," she said.

The ministry would map out a plan for reducing overloading at big state-owned hospitals, she said, adding that they would try to increase state budget investment in building and expanding new hospitals.

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