Public-private partnership, consolidation next stage of growth for KPJ Healthcare

AFTER 40 years of being in what it describes as the “build” mode, KPJ Healthcare Bhd, the healthcare arm of Johor state-owned conglomerate Johor Corp, is now looking to focus more on consolidating its assets and services, with a keen interest to work alongside the government to strengthen the country’s healthcare system.

This is a priority for the group’s new president and managing director Ahmad Shahizam Mohd Shariff, who took the reins from Datuk Amiruddin Abdul Satar in July last year.

Ahmad Shahizam has been an independent director at Malaysia Healthcare Travel Council since May 2019. He previously served as CEO of Pantai Holdings Bhd from July 2014 to June 2017 and later as chief corporate officer at IHH Healthcare Bhd from July 2017 to December 2017.

Although Ahmad Shahizam is not new to the healthcare industry, the 49-year-old acknowledges that joining KPJ in the midst of the Covid-19 outbreak has brought unprecedented challenges for the country’s largest listed private healthcare group by capacity.

“For me, it was interesting because in my previous roles, I ran country systems such as Malaysia and I was doing a lot of strategic work at IHH. I was part of the original team from Khazanah Nasional Bhd that worked on the listing of IHH. I did acquisition and merger integrations with Singapore. But I’ve never seen what you would call healthcare services under duress,” he tells The Edge in an interview.

“The reality is because of the nature of the industry, you wouldn’t expect a situation where suddenly there are no patients coming to the hospital. This was unprecedented. Suddenly, patients can’t come to the hospital or they are worried about coming. Hypothetical scenarios of low occupancy levels became a reality.”

KPJ’s net profit for the nine months ended Sept 30, 2020 (9MFY2020) came in 33.1% lower at RM85.16 million compared with RM127.37 million in the previous corresponding period as a result of the impact of the Movement Control Order last year.

The group was hit in 2QFY2020 ended June 30, when net profit came in at RM12.66 million compared with RM41.83 million in the previous year. By 3QFY2020, however, the easing of the lockdown had improved economic conditions, translating to a pickup in healthcare services, which saw its net profit more than double to RM33.97 million.

On the back of a tough year, the silver lining is that the need for private healthcare remains clear, says Ahmad Shahizam. Noting that public hospitals have become overwhelmed due to rising Covid-19 cases, he says KPJ has always been ready to step in and help them manage other non-Covid-19 cases, which could have been sidelined in the process.

“The government continues to have to deal with a high volume of patients. We’re an ageing population, so the demand [for healthcare] is continuously rising. The way we are currently managing this situation on the public side is unsustainable,” he notes.

Ahmad Shahizam points out that private hospitals have spare capacity where patients can get almost on-demand services. “Yet, the availability of these medical facilities are not being channelled to the demand on the public hospital side when in reality, it could.”

He blames this on the existing “dichotomy” between the cost structure of the public and private healthcare systems, adding that it would result in a net loss to the country in the long term. He hopes that with public-private partnerships, it would help shift some of the long-standing assumptions that people have about the inaccessibility of private healthcare in the country. On its part, KPJ has been in talks with the Ministry of Health (MoH) on this matter.

“We are part of the same system … yet there’s a dichotomy. It’s actually one of the opportunities that the pandemic has shown us. We need to start looking at our healthcare as one system, not two,” says Ahmad Shahizam.

“By right, private hospitals can do a lot more and I want KPJ to do a lot more. That’s why we are looking to establish proper arrangements with the government.”

 

Source: Theedgemarkets