August 24, 2012 |
Total Page: 113 Pages
Topic: Health Care Equipment & Services
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Market size and growth
· Based on official data released by the Ministry of Health and some other researches, the size of Vietnamese healthcare market by the end of 2011 could be in the circa of US$9.3bn. Healthcare service is the largest segment at US$6.67bn, representing 72% of total market; Medical equipment sales including the lab and diagnostic imaging equipment about US$1.89, or 20%; and Drugs sales was about US$0.73bn (8%).
· During the period 2006-2011, CARG of Vietnamese healthcare market was 12%. For the next five-year period, 2012-2017, the market is expected to grow faster. CARG will be about 15%.
· The growth of healthcare market is driven by economic growth thus improving revenue per capital, higher awareness for health issues, changes in living and working habit as well as rapid urbanization and industrialization.
· However, based on our conversation with experts of the industry, especially managers of private hospitals and policlinics, we believe the actual market size could be significantly higher than estimates above for a number of reasons:
· As a legacy of socialist healthcare system, Vietnam healthcare market is dominated by public hospitals. Private hospitals only accounted for 3% of total country’s hospital beds. There are only 135 (8%) private hospitals over 1184 hospitals in Vietnam currently. Also, private hospitals only provided 4.2% and 5.1% of total hospital system’s inpatients and outpatients in 2011, respectively.
· Public hospitals are heavily subsidized. Financial resource from State budget allocation and health insurance are usually from 60-70% of their revenue. In addition, public hospitals, especially leading ones in HCM City and Hanoi, have long history and enjoy good perception that they have the best trained, experienced doctors in the country. They have great appeal to patients and doctors.
· Private hospitals in Vietnam have a short history. The oldest ones were established in the mid 1997. The perception about private hospital is that they provide better caring services but they don’t have good doctors as their public counterparts.
· Consequently, private hospitals have to cooperate with doctors from public hospitals, especially in early years of their operation, in order to attract clients before they can build their own doctor team and their own clientele. Privatization of public hospitals in Vietnam has been discussed for more than 10 years but it seems that the plan is impossible because of strong resistance from doctors.
· Until now, there have been few foreign invested hospitals in Vietnam. Like private hospitals, foreign invested hospitals are handicapped by the perception of Vietnamese patients that they don’t have good doctors. Bringing foreign doctors is not necessarily a solution because of language and cultural differences. In addition, foreign invested hospitals normally target premium segments and rich Vietnamese people can choose to use healthcare service oversea.
· Foreign players in Vietnam such as FV International and Viet-France International from a group of French doctors, Fortis Healthcare Group from India with Hoan My as a local brand, Columbia Asia from Malaysia, Family Medical Practice from Israel. Most of these foreign players are making a net profit margin of 20%, on average while local large players reported very thin margin from 5-10%.
· Doctors in Vietnam are allowed to have their own clinics, doctors from public hospitals are allowed to cooperate with private, foreign hospitals (after official hour or after they finish some quota with public hospital). Most doctors from public hospital have their own clinics or cooperate with a private hospital/policlinic. They earn more money working with private hospital but rarely quit their job at public hospitals. This shapes a very important character of competition in healthcare market in Vietnam.
· Attraction of doctors from public hospitals, especially highly respected names, is considered the key competitive advantages of private hospitals/policlinics as a good doctor can bring hundreds of visits/patients per day. Cooperation between doctors with private hospitals is mainly in revenue sharing schemes.
HCMC health snapshot
· HCMC is the largest city in Vietnam with 9 million population and is the economic center of Vietnam. In addition, HCMC is medical center of the whole South East area. Patients from other provinces in the South East usually go to HCMC for medical services. For example, 70% of patients from Medic are from other provinces surrounding HCMC such as Binh Duong, Vung Tau, Dong Nai, Vinh Long etc.
· In 2010, hospitals in HCMC delivered 28 million consultations to patients which is 4 times higher than Hanoi. Number of inpatients, outpatients and inpatient days are also about 2 times greater than Hanoi.
· HCMC Authority has been very active in designing and creating mechanisms for improving the healthcare service. It has very clear design for the 4-healthcare clusters and a more friendly welcoming to private sector.
· In HCMC has 34 private hospitals, 176 private policlinics and nearly 17 thousands of private clinics or specialty units.
· In lab and diagnostic imaging services, Medic currently accounted for 20% total market share with total reported revenue of about US$20mn in 2010. Some public hospitals are also very strong in these businesses and it was built in-house as their departments. Hundreds of private followers are very small and highly fragmented.
· The Law on Medical Examination and Treatment and its guiding documents with effect from 2011 set various requirements for an establishment of a healthcare service operation license. Minimum conditions are specified for functions of operations; construction design and facilities; personnel and practicing certificates; and waste management and staff safety.
· However, the guidance is very minimum. An investor should consult and work closely with the authority for obtaining an operation license, changing the scope of operation and making an acquisition of an existing license.
· Acquisition of an existing hospital and clinics must be made with due attention to the renewal of license in accordance with the new regulations. Additional costs would incur to bring the establishment up to standards under the new law.
· Operation license for a foreign hospital must be approved by the Minister of Health. By law, the license for foreign policlinic is within the provincial authority but in practice, it must be brought to the attention and no objection by the ministerial level. It takes approximately 3 months in obtaining a policlinic license and 6 months for a hospital license, at least.
· Private and foreign participation in healthcare services is encouraged by the Government.
· Hospital business is subject to 10% business income tax (which is 15% lower than the normal business) and an incentive of 4-year land use right tax exemption and 50% reduction in the next 9 consecutive years if the hospital investment has 100 beds at minimum.
· Healthcare service fees in Vietnam is at discretion of the business management. In contrast to drug market, the Government doesn’t interfere in the price.