Merger Increases Bangkok Dusit Medical Services (BGH) Hospital Network in Thailand

Posted on Dec 16, 2010 by Sergio Ulloa (G+)

Thailand's hospital operator Bangkok Dusit Medical Services (BGH) has announced that it is to merge with the Health Network Group, which operates the Phyathai Hospital group and the Paolo Memorial Hospital group. The move is part of Bangkok Dusit's move to expand its healthcare coverage in Thailand and Asia. The proposed merger provides Bangkok Dusit with an additional 8 hospitals from the Health Network Group. This will consist of 4 hospitals currently operated by Phyathai Hospitals and 4 hospitals from the Paolo Memorial Hospital group - for approximately US$315 million. The deal will be comprised of cash payments and the issuing of new shares. The acquisition is expected to be completed by the second quarter of 2011 and will add the 8 healthcare facilities to Bangkok Dusit's existing network of 19 hospitals, bringing the Thai hospital operators network to 27 with a 20,000 a-day outpatient capacity when the merger is completed. "The merger will reemphasize BGH's leadership as the leading private hospital operator and will enable us to expand our patient portfolio to cover a wider demographic of Thai patients, foreign patients, and social security patients... We expect that our leading position in Thailand will enhance our capabilities to become a leading regional player as part of our plan to prepare ourselves for the competition as a result of the ASEAN Economic Community (AEC) agreements that includes liberalization of many sectors including the private healthcare sector," said Dr. Prasert Prasarttong-Osoth, Group CEO & President of Bangkok Dusit Medical Services. Earlier this year, Bangkok Dusit acquired ANB Laboratories (ANB) for US$27 million to expand into the pharmacy and medical laboratory business. This move by Bangkok Dusit was its first step into its non-core front-line medical business activities, with the takeover of ANB providing access to the Thai medicine and pharmaceutical manufacturing and distribution market. BGH's current client base is predominately foreign patients seeking treatment as part of the medical tourism industry and the more affluent local population seeking high quality private healthcare services through the Thai or Cambodian network chain. The acquisition of the 8 hospitals from the Phyathai Hospital and Paolo Memorial Hospital groups will enable BGH to capture a proportion of the Thai middle and lower income healthcare market, broadening their range of clients. In addition to the high-income earners and foreign nationals seeking medical treatment within Thailand's established private healthcare system, there is a growing middle income class in the country, creating a new client target for Thai healthcare providers. The expanding middle-class population across Asia is becoming more influential as the private healthcare industry aims to capitalize on the growing demand for a higher standard of medical treatment. BGH has established a reputation as a key player in the medical tourism industry catering for foreign patients seeking private healthcare treatment - and is one of the original private healthcare providers in Thailand and the Asian region involved in competing in the lucrative private healthcare market. Thailand was one the first countries to realize the potential in the medical tourism market and, after Singapore, lead the creation of a niche market for this medical sector. Asian countries have now established a strong reputation as a prime destination for relatively low cost medical treatment, with prominent private healthcare providers - including Bangkok Dusit hospitals Samitivej and BNH in the capital Bangkok - competing with market leaders Bumrumgrad in the Thai and Asian medical tourism industry. The private medical market in Asia has become increasingly competitive, with India, Singapore and Malaysia, in addition to Thailand, being key destinations for medical tourism. Other Asian countries such as the Philippines and Taiwan have also emerged more recently as providers for medical tourism, which is predicted to be worth approximately US$100 billion in the short to medium-term; the regional leaders - India - reported that the healthcare market was worth US$38 billion in 2009. Earlier in 2010, there was a fierce bidding war between Malaysia's Khazanah and India's Fortis Healthcare for Asia's largest hospital group Parkway; Khazanah emerged the winner with a US$3.3 billion offer. The medical tourism industry has developed in Asia, with Hong Kong and Singapore being the original providers. India has now become the market leader in Asia as it can offer a broader range of products for a fraction of the price of homeland treatment in European, USA, Middle Eastern and Japanese healthcare facilities. The attraction of Asia for medical treatment reflects the provision of quality facilities in exotic locations, with minimal waiting times for procedures at affordable prices. As an example of cost comparisons, a heart by-pass operation in the USA is likely to cost a patient US$130,000 whereas the same procedure in Thailand would be approximately US$11,000, while in India it could be as little as US$10,000. Other cost comparisons (shown in US$) - bottom end figures for treatment in Asia versus higher figures for USA for typical medical procedures - are:

Medical Procedure	Thailand	USA	India	Singapore
Heart Bypass	11000	130000	10000	18500
Heart Valve Replacement	10000	160000	9000	12500
Angioplasty	13000	57000	11000	13000
Hip Replacement	12000	43000	9000	12000
Hysterectomy	4500	20000	3000	6000
Knee Replacement	10000	40000	8500	13000
Spinal Fusion	7000	62000	5500	9000

As western hemisphere countries are faced with austerity measures, healthcare reforms, increasing medical costs and longer waiting periods for treatments, the alternative Asian equivalent offers Americans, Europeans, the Japanese and patients from wealthy Middle Eastern countries a desirable option for obtaining medical treatment - where capable, affordable and efficient healthcare facilities have been established. Although the medical tourism industry in Asia has developed and evolved, some barriers still remain in terms of language particularly when complicated procedures are involved, but this issue is being addressed. As BGH expands its customer base following the new merger to cater for market opportunities in Thailand, the optimism in the Asian medical tourism industry is for USA insurers to offer patients the opportunity to receive treatment from Asian private healthcare rather than US counterparts as a cost saving measure. Asia is expecting the expansion of the private medical market to continue with healthcare providers enhancing positions across the region. According to KGI Securities, there were 1.5 million medical tourists visiting Thailand in 2007, with forecasters estimating that by the end of 2010 the figure will be in the region 2 million medical visitors. Overall the medical tourism industry is set to boom in the coming years, with Asian nations leading the provision of services and, in this respect, BGH will be well placed to maximize opportunities. Companies mentioned: Bangkok Dusit Medical Services Bangkok Dusit Medical Services was founded in 1969 and the Bangkok hospital started its operation in 1972. Bangkok Dusit Medical Services operates a private hospital network in Bangkok, other Thai provinces and in Cambodia. The Group's private healthcare facilities include Samitivej hospital and BNH hospital. Bumrungrad International The Group's principal activities are owning and operating hospitals. Its flagship hospital, Bumrungrad International, is a renowned medical centre attracting over 1 million patients annually and named one of the world's top ten international hospitals by Newsweek International. The Company also owns a businesses in real estate and anti-aging and functional medicine. Parkway Holdings Limited Parkway Holdings Limited, is one of the region's leading providers of healthcare services, with a network of 16 hospitals with more than 3,400 beds throughout Asia, including Singapore, Malaysia, Brunei, India and China. Fortis Healthcare Limited Fortis Healthcare Limited is a healthcare provider having a network of 28 hospitals, satellite centers and heart command centers with nearly 3,300 beds capacity. Khazanah Nasional Khazanah Nasional is the investment holding arm of the Government of Malaysia and is empowered as the Government's strategic investor in new industries and markets.