Raffles Med’s lucrative medical tourism cash cow under threat

Foreign patients account for half of its revenue.

Foreign patients are the lifeblood of Raffles Medical, but this all-important revenue source is at risk of drying up after the Singapore Tourism Board (STB) earlier cut its visitor arrival forecast for 2015.

The STB estimates that Singapore will welcome 15.1m-15.5m tourists and expects ~S$24bn in tourism receipts in 2015, compared to their earlier target of 17m visitor arrivals and S$30bn in tourism receipts.

Data from CIMB show that foreign patients traditionally account for 30-35% of total number of patients, with Indonesians forming the largest group at around 5-7% of all patients.

Foreign patients account for 45-50% of total hospital revenues because they typically have larger bills, as they seek treatment for more complex medical issues. They also have a longer average length of stay as they prefer to recover in the hospital as opposed to a hotel.

“We think the slowdown in medical tourism bottomed out in 2014. Historically, when Singapore medical tourism receipts dropped to lows in 2009, RMG’s hospital services grew at 8.2% (past five-year average: 13%). In a worst case scenario, further weakness in medical tourism will translate to a 2% drop in RMG’s FY15 group EBIT. Apart from Indonesian patients, RMG’s top five foreign patient mix always changes. Their diversified patient base, especially with growing volumes from Middle East, should help cushion any volume declines. RMG’s two-year collaboration with the Ministry of Health to receive A&E patients will also aid in cost recovery,” stated the report.