IHH Annual Report 2019

We review and plan our growth strategies in an increasingly competitive and volatile healthcare environment of game-changing technological disruptions. This entails monitoring the development of long-term global trends. Trend Impact to Group Our Response Link to Strategy Technological Disruption Global consulting firms have identified technological disruptions as one of the impending, if not current, issues that the healthcare industry will face. With the exponential growth of technology, innovators and non-traditional healthcare players around the world have begun to enter the industry for a piece of the pie. For IHH Healthcare, any failure to keep up with the changes will put us behind the curve. Taking an active approach, we established the Innovation Office at Parkway Pantai in 2016 to bring new technologies and business models to the organisation, whether by partnership or investment. We embrace an innovation culture and encourage new ideas at all levels of the Group. We further sharpened our competitive edge in 2019 by investing in innovative, proven healthcare solutions. An example is our investment in Lucence, a genomic medicine company which gives IHH’s patients access to Lucence’s suite of cutting-edge liquid biopsy cancer diagnostics and AI-driven analytics. In 2019, Parkway Pantai won an award with its groundbreaking AI-powered hospital bill estimation system that empowers patients to make better informed decisions on medical treatment options available. Geographical Cluster Strategy Enhance Service Offerings Leverage Innovation Strong Demand for Private Healthcare By the year 2050, we expect to see an elderly population of nearly 923 million in Asia. The region’s growing ageing population and increasing affluence will significantly drive demand for private healthcare as life expectancy, incidence of chronic diseases and co-morbidity jump. Asia’s overall healthcare spending is projected to surge to US$2.27 trillion by 2026 from US$1.69 trillion in 2017. By 2030, the mass affluent income group is expected to climb from 57 million to 137 million in ASEAN alone, accounting for 21 per cent of the region’s combined population by 2030. As patients are demanding more personalised, efficient and seamless healthcare experiences with rising affluence, IHH must be ready to capitalise on these growth opportunities. IHH is expanding capacity of our hospitals in Malaysia and India. We continue to ramp up existing capacity and clinical services offerings of our hospitals in Hong Kong and Chengdu. IHH has a cluster strategy for growth in key metro cities where there is strong demand for private healthcare. In 2019, we received shareholder’s approval for the proposed acquisition of Prince Court Medical Centre, located in the “Golden Triangle” area of Kuala Lumpur. The proposed acquisition is expected to be completed upon obtaining regulatory approvals. Geographical Cluster Strategy Enhance Service Offerings Regulatory Risk Arising from New Pricing Controls Changes to healthcare regulations will affect the margins in countries where we operate. In Malaysia, the Health Ministry may potentially introduce drug price controls in a bid to improve access to medicine. We will work with regulators in public consultation sessions to achieve a mutually beneficial outcome. We aim to focus on cost efficiency and innovation initiatives across our hospitals to mitigate the potential impact on profitability. Enhance Service Offerings Leverage Innovation Shortage of Skilled Healthcare Professionals Amid a Competitive Landscape The demand for skilled healthcare professionals has grown immensely globally. The World Health Organization and the World Bank have projected a global shortage of 18 million healthcare workers in 2030. Southeast Asia alone will require about 4.7 million more health workers to achieve effective coverage. This pursuit of effective and skilled professionals has also resulted in rising labour costs over the years. With labour shortages and a higher cost base, delivering effective and efficient service is a challenge for many healthcare providers. The healthcare industry is largely reliant on manpower, so given the rising population and their growing needs, we must find effective solutions to reduce labour-intensive tasks and enhance overall productivity. Besides ensuring competitive remuneration packages and career development opportunities for our employees, we leverage technology and innovation to drive productivity. Our well-established international reputation and cross-country exchange programmes between our operating subsidiaries continue to give us the edge in talent recruitment and retention. IHH keeps seeking new ways to raise productivity standards through increased digitisation, innovation and technology. We believe in cultivating a culture of consistent upskilling through training and maintaining positive mindsets. The Group organises an annual Quality Summit where innovative projects of staff from our different countries are presented. Selected projects are potentially implemented to realise synergies across the Group. Build Trust With Our Stakeholders Leverage Innovation IHH Healthcare Berhad | Annual Report 2019 42 Strategic Report Market Outlook