Deal focus: Bringing specialization to healthcare

According to the World Health Organization, 79% of Indonesian males over 15 years old are smokers, and 25% of everyone aged 18 and above has elevated blood pressure. Cardiovascular diseases are the country’s leading killer, accounting for more than one-third of deaths. For investors interested in cardiovascular hospitals, this is the demand side of the equation, and it’s easy to understand.

The supply side is trickier. Hospitals are nothing without doctors and nurses, who are often relatively scarce in developing countries, especially in specialist areas. It takes 12-15 doctors to make a specialist hospital viable business, and Indonesia has not historically had enough talent to make this work. There are only three cardiologists per one million people, compared to 40 in Singapore and 60 in the US.

TE Asia Healthcare Partners, a Singapore-based platform backed by TPG Capital, sees this end of the equation turning around, however. This week, the firm acquired controlling stakes in two Jakarta area cardiology practices in a $50 million transaction alongside regional family office Altrui Investment Management. TE Asia and doctors at both practices will own 75%, with TE Asia being the majority shareholder. Altrui will own the remaining 25%.

“You do actually have enough doctors who are able to do this right now and are willing to come together. We see an interesting inflection point, where you have a new generation of doctors saying, ‘we should do this as a group and make it effective,’” says Eng Aik Meng, CEO of TE Asia, adding that his firm’s model of partnering with doctors as owners is a critical motivational factor.

“This means that they have a financial, emotional, and professional interest – all three. If doctors want it to work, they have to make sure that their colleagues do well and that the whole hospital does well. It’s no longer about being the solo independent contributor.”

Much of the thesis is about the rise of specialization. TE Asia believes it can achieve economic efficiencies in facilities that concentrate on one or two disciplines, despite the high cost of unusual equipment. Indonesia is seen as ready for this service, with rising insurance rates and patient sophistication, as well as growing exasperation about long wait times for specialized treatment at general hospitals.

There is also the idea that COVID-19 has lowered public appetite for large general hospitals, making smaller specialist operations more appealing. Perhaps most straightforwardly, the fact remains that the deadliest diseases cannot always be effectively treated by generalist practitioners using generalist equipment.

“Diseases and healthcare have become quite complex. You’re not going to have a one-doctor solution anymore, so we believe the solution is going to be group practices,” Eng says. “The days when you saw your friendly neighborhood doctor for everything from a headache to a cancer diagnosis are gone.”

The assets in question include Heartology Cardiovascular Centre, which began operations in September last year, having leased some space in Brawijaya Hospital. Heartology currently employs nine doctors and boasts Indonesia’s first true hybrid operating theater, which enables complex procedures. Most of the investment will be poured into Kebayoran, a greenfield development set to become a 44-bed facility with two cardiac catheterization labs by early 2023.

Both facilities will become the hub of a hub-and-spoke model, most likely featuring small clinics around the greater Jakarta area, where basic check-ups can be conducted. There is also potential for digital connectivity between facilities as a way of spreading a limited skills base over a wider service area.

TE Asia plans to build out the project in other cities, but the talent issue remains the recurring inhibitor. In Indonesia, as in many developing countries, the top talent tends to congregate in the capital city, leaving other urban areas wanting.

“We think some of the larger cities that have already established either teaching hospitals or medical universities could be attractive, but it will take time,” Eng says. “It takes 10 years to be a specialist after med school. It’s not going to be a quick turnaround.”

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• Topics
• Southeast Asia
• Buyouts
• Healthcare
• Indonesia
• TPG Capital