Singapore healthcare plan riddled with financial kinks

The move to raise hospital bed count and manpower poses major cost concerns, says DBS.

In the short term, private healthcare operators like Parkway East Hospital and Raffles Hospital will need to figure out how much of its bed capacity to lease out to governments and at what rates.

Then for the longer term, healthcare firms will need to manage ballooning manpower costs as a result of the mandated public sector salary increase.

Here's more from DBS:

The measures to lease beds/ capacity from private hospital operators will be positive in terms of operational utilisation, and could create some initial euphoria in share prices of private healthcare operators. However, the financial metrics of how this will be done are still being ironed out. For example,
patient charges, level of subsidies to be provided by the government, and the level of take-up rates (if based on patients' preference), etc. Furthermore, we believe there is a limit to the number of beds each operator is able to lease to the public sector given that this could compromise its service level if the public partnership saps too much resources.

Short term positive, but metrics still being ironed out. The measures to lease beds/ capacity from private hospital operators will be positive in terms of operational utilisation, and could create some initial euphoria in share prices of private healthcare operators. However, the financial metrics of how this will be done are still being ironed out. For example, patient charges, level of subsidies to be provided by the government, and the level of take-up rates (if based on patients' preference), etc. Furthermore, we believe there is a limit to the number of beds each operator is able to lease to the public sector given that this could compromise its service level if the public partnership saps too much resources.

Fight for manpower issues a longer term challenge. With the increase in public sector remuneration, the bar by private operators to attract healthcare workers is likely to be raised. This comes at a time when capacity is increasing in the private sector. These are Parkway's Mt Elizabeth Novena Hospital, Singapore Health Partners' Connexion One (at Farrer Park), Adam Road Hospital by Fortis Healthcare, and Raffles Medical Specialist Medical Centre at Bideford Road and 30% increase in GFA at its hospital. Essentially, both public and private healthcare sector will need additional manpower resources. Staff cost accounts for about 49% of revenue at Raffles Medical.