THE DOCTOR IS IN
IHH chief’s prescription for hospital success
‘Imay not look like it, but I play to win,” Tan See Leng says in an even tone, smiling slightly. The words may have rolled off his tongue with only a hint of firmness, but make no mistake: the down-to-earth doctor who now leads Asia’s largest listed private healthcare group, IHH Healthcare Berhad, is quite the go-getter. Beneath the tailored suit and genteel exterior lies a competitive streak that has stood the 52-year-old in good stead.
A family physician by training and the only child of a bus timekeeper and a housewife, Dr Tan, at the age of 27, went right into private practice after completing national service in Singapore in 1992. He broke his bond with the Ministry of Health and took a loan of S$90,000 to start Healthway Medical Group with three friends, one of whom became his wife.
Healthway Medical flourished into a network of more than 30 branches and was later sold to the British United Provident Association for an undisclosed sum. And just like that, Dr Tan, armed with sharp business acumen, joined the millionaires’ club in his mid-30s.
Upon the invitation of Lim Cheok Peng, who headed Parkway Holdings at the time and is now chairman of China Medical & Healthcare Group, Dr Tan joined Mount Elizabeth Hospital as chief operating officer in 2004, quickly rising through the ranks to become the CEO of Parkway in April 2010. The next year, after a restructuring, he took over as group CEO and managing director of Parkway Pantai, an indirect wholly owned subsidiary of IHH. On his watch, the average revenue per inpatient climbed steadily for Parkway Pantai’s Singapore and Malaysian hospitals from 2012-15.
Staff describe Dr Tan as a hands-on leader who has no qualms about rolling up his sleeves and jumping right into multiple projects — a trait that has earned him their respect.
Other observers, on the other hand, will point out that his predecessor had steered IHH during the run-up to its market listing, while Dr Tan is now overseeing the group in its growth phase.
In 2012 — the year IHH was publicly listed after a takeover fight — Dr Tan was appointed as its executive director before being named managing director and CEO in January 2014.
In the past year alone, IHH — whose major shareholders include the Malaysian government investment holding company Khazanah and Tokyo-based Mitsui Group — has been buying up hospitals in Eastern Europe and the Middle East, and building new ones in Asia. Its stable of hospitals has grown to 52 across 10 countries, with more than 10,000 beds and a global staff of more than 30,000.
The upward trajectory has been impressive so far, with Parkway Pantai contributing more than 60% of total revenue for the third quarter of 2016. Its 60%-owned Turkey subsidiary, Acibadem, accounted for more than 30%, with the rest coming from its medical education arm IMU Health and the real estate investment trust, Parkway Life Reit.
Between 2012 and 2015, net profit jumped 45% to 899.2 million ringgit (S$287 million), excluding exceptional items. For the first nine months of 2016, net profit stood at 643.5 million ringgit.
The share price has risen over the years despite concerns of steep valuations. IHH shares opened at 3.07 ringgit in Malaysia and S$1.22 in Singapore and today are trading above RM6 and close to S$2.
Looking at the next three to five years, Dr Tan says that China, a key market, and India, the group’s fourth and newest home market, will continue to drive growth, outside of the existing core markets of Singapore, Malaysia and Turkey. The push to grow in the emerging economies of Vietnam, Myanmar, Thailand and Laos is also continuing.
The group also expects to expand its footprint in some parts of central Asia through Acibadem, while the Indian operations will be the launch pad for further forays into the rest of South Asia.
Still, overseas expansion brings with it risks, particularly in times of uncertainty — something the group knows and prepares for.
For instance, Myanmar’s lower house of parliament last April put a stop to the Parkway Yangon Hospital project, but the group is in the midst of resolving this. There were also concerns about operations in Turkey where the lira is at record lows against the US dollar amid political uncertainties, rising inflation and security worries, but the group has a natural hedging system in place to mitigate foreign-exchange volatility.
MOVING WITH THE TIMES
As important as it is for the business to find growth at a time when governments are looking to stretch their healthcare budgets, patients should not be overlooked, Dr Tan stresses. Under his leadership, Parkway hospitals are taking steps to explore ways to improve patient care and staff productivity. To this end, he has set up a team to look into innovative disruption “that can help reinvent the group”.
In the past five years, IHH has invested heavily in medical technology, the development of its intensive care unit (ICU) and operating rooms, among others, to position itself at the tertiary level and beyond. Eighteen months ago, it teamed up with IBM Watson to tap artificial intelligence (AI) and the internet of things to look at ways to harness and integrate data to produce electronic medical records. The technology will enable professionals at all hospitals in the group to extract timely information from the best global publications on the most effective treatments and decision-making processes, explains Dr Tan.
Digitised information and data analytics are especially helpful for patients in intensive care, where real-time data such as blood pressure, pulse, oxygen level and biochemical clinical indicators are a matter of life and death. Dr Tan wants to take this further — to manage patients by looking at the data in ways that can connect patients, their caregivers and doctors.
About a decade ago, IHH made a conscious decision to build smaller hospitals. It moved away from huge hospitals to building those with between 250 and 350 beds. Hong Kong is the only place where the group is constructing a 500-bed facility.
“We find that [hospitals with] 200-300 beds are very efficient in terms of investigations being done, in terms of the type of services that we render to the patients and then after that they get discharged to either rest at home or rest in a rehab facility or community hospital,” says Dr Tan.
In the future, he says, the number of beds in hospitals will shrink even more with the trend toward minimally invasive surgery — which spells shorter post-op stays — and as healthcare providers increasingly tap the primary care sector (such as general practitioners) for patient care, especially for those with chronic diseases.
Even as the giant healthcare provider prepares for the future, it is under pressure to deliver growth at a time when medical tourism in Singapore is on the wane, particularly as a third of its patients are from overseas.
According to Dr Tan, even though “mass-market” services such as health screenings and endoscopy — “the bread and butter stuff” — have seen a decline, “I think it’s been more than adequately compensated by the upper end of the spectrum”. At the tertiary-care level and further up the value chain, where Parkway and IHH are positioned, these segments still have room to grow, he says.
What Singapore has going for it is the high level of healthcare expertise and treatment protocols that are comparable to Western standards, he notes. But the city-state is slowly losing this competitive advantage and Dr Tan thinks Singapore will probably have another 10-15 years before regional healthcare providers catch up.
One way to mitigate this is to ensure that there are no weak links in the system, he says. This means having not only top-notch doctors, but also excellent clinical nurses and ancillary staff to support the delivery of healthcare.
But here he faces a big challenge — a shortage of medical talent. “Our biggest drawback, from a broad perspective, is the fact that while healthcare is a sunrise industry, that level of potential acquisition, growth opportunity, is really disproportionately high compared to the human capital that we have to run and integrate all these assets and bring it to the next level.”
It worries him that the healthcare sector does not have enough doctors and nurses trained to handle the future deluge of patients, driven by an ageing population and increasingly complicated diseases. And while there are talented managers in Singapore, he finds it hard to deploy them.
“One of the greatest achievements of the [Singapore] government is that it has provided too much material comfort in this country, so for [managers] to relocate to another country to work is hardship. ... That’s what keeps me awake at night. How do I, with all these opportunities, find the calibre of people to come in to do this?”
MANAGING REALITIES
What keeps some Singaporeans up at night, though, are rising healthcare costs — chiefly doctors’ fees, compounded by consumption of services through private health insurance.
But the rise in healthcare costs is inevitable, Dr Tan says matter-of-factly. “What can be done is to manage the gradient of increase [so that it is] as gradual as possible.”
From IHH’s perspective, managing hospital charges is the key to keeping a lid on healthcare costs. Its business model is one in which it owns the medical facilities and largely does not hire doctors. In Singapore and Malaysia, Parkway hospitals do not hire their own doctors, unlike their sister hospitals in India, China and Turkey. In Hong Kong, Parkway is testing a hybrid model.
To manage hospital charges, Dr Tan says there must be cost savings from procurement, improvement in productivity and service turnaround time. The hospitals also advocate fee transparency — pre-treatment, patients are given an estimate of the amount they can be expected to pay.
“Now, if a doctor wants to charge way above, up to the 90th percentile, at least the patient knows,” says Dr Tan. “I think it’s important because at the end of the day, the value really lies in your relationship with your doctors, the price of that confidence, the price of that ability, the chemistry that you have with the doctor, it is priceless and you feel that [you’re] justified in paying that amount.”
The Singapore Medical Council recently clarified its position on the new code of ethics for doctors following concerns that some managed-care providers have tapped the Integrated Shield Plan market, a highly lucrative business. A group of private doctors also took issue with third-party administrators’ (TPA) fee models.
Weighing in on this, Dr Tan notes that in the short term, “there will be some pain for some of the managed-care providers”, but he believes the Council’s move will benefit Singapore as a healthcare destination in the medium to long term. It also “bodes well for the entire medical community as a whole”, he adds.
REMEMBERING BEGINNINGS
True to his “people person” nature, Dr Tan makes it a point to pay tribute to his “unsung heroes”. In his view, these are the staff members such as the housekeepers, those who open the hospital doors, employees who sterilise instrument sets and handle menial tasks day in day out. The ability to help improve the lives of his staff — by making sure, for instance, that they get their bonuses so they can put food on the table or pay for their children’s education — is rewarding for him.
These unsung heroes probably remind Dr Tan of his own humble beginnings. Now that he is in a position to influence and change things, he has also managed to persuade the Parkway Pantai board to offer scholarships to medical undergraduates at the National University of Singapore.
Indeed, success can beget a lot of good, but it is also a double-edged sword. The worst thing about it is that “you do not know sometimes whether you’re doing the right thing or not because when you’re successful, people don’t point out to you problems anymore, or your flaws”, says Dr Tan. So does he get this feeling all the time?
“In a way. Sometimes you keep thinking ‘Is this right?’” he says, showing a hint of uncertainty.
In his case, a dose of doubt now and then perhaps is also what helps to spur him on to outdo himself.
One of the greatest achievements of the [Singapore] government is that it has provided too much material comfort in this country, so for [managers] to relocate to another country to work is hardship. ... That’s what keeps me awake at night. How do I, with all these opportunities, find the calibre of people to come in to do this?”