IHH's refreshed brand logo on display at the Prince Court Medical Centre reception area
PETALING JAYA: The diagnosis related group (DRG) payment system for Malaysia’s healthcare system continues to be the focus for industry stakeholders.
CIMB Research said the DRG mechanism would have limited impact on private hospitals as their participation “is non-mandatory”.
The research house said the rollout of the medical and health insurance/takaful (MHIT) also faced several challenges, including limited government financial support, which would result in policyholders having to fund premiums through their Employees Provident Fund savings.
As a result, it expects slower MHIT policy take up among those from the lower income brackets and therefore see slower DRG adoption among private hospitals.
Also, the potential limitations of the base MHIT product with lower premiums, no investment-linked features, low annual limits and high co-payments may deter many from the lower income brackets.
The research house has maintained an “overweight” stance on healthcare stocks, with IHH Healthcare Bhd
as the top pick, with a “buy” call and target price of RM9.40.
It has a “hold” call and target price of RM2.70 for KPJ Healthcare Bhd.
An analyst said several catalysts support healthcare stocks, in particular Malaysia’s ageing population together with the opportunities that come with it, while the upcoming listing of Sunway Healthcare Holdings Bhd would focus investor interest on healthcare stocks.
Maybank Investment Bank Research (Maybank IB), which remains positive on healthcare stocks, said revenue intensity continues to be the dominant earnings lever amid moderating inpatient volume growth.
“Greater case complexity, rising medical tourism, and steady occupancy rate should underpin earnings visibility even as payor pressures persist, in our view,” it added, with capacity expansions to support greater earnings momentum this year.
“We believe the deferment of the DRG implementation to next year should provide a near-term reprieve on price pressure concerns and allow private hospitals to optimise case-mix and pricing strategies.
“In the long term, we expect a gradual phased rollout on DRG, likely to start with less serious procedures, which should subdue impact across the board, and hospital players with higher focus on complex cases should be relatively more insulated to DRG’s impact, in our view,” the research house said.
IHH is the research house’s top pick with a target price of RM9.48 due to its diversified earnings base and re-energised domestic and overseas operations.
It also has a “buy” rating on KPJ at RM3 due to its strong domestic leverage.
Maybank IB sees higher demand for more complex treatments supported by income growth, an ageing population and lifestyle diseases as well as more-complex diseases across the cardiology, oncology, neurology, gastroenterology, and orthopaedic specialities.
