Besides heading to Johor over the weekend to get their shopping and beauty services done, many Singaporeans also seek cheaper medical care or healthcare services across the Causeway.
DBS Group Research believes that healthcare businesses operating in Johor could be primary beneficiaries of the Johor-Singapore Special Economic Zone (JS-SEZ). Depending on the type of medical service, comparable offerings in Johor can lead to cost savings of between 30% and 80%, thereby lifting demand, says DBS.
Different segments will see varying impacts. Within primary healthcare, DBS is of the view that leakage in the treatment for basic illnesses like the common cold would be minimal given the low revenue per case and reduced inclination to travel overseas for healthcare when feeling unwell for modest savings.
In contrast, routine health screenings and dental services, which can cost hundreds of dollars, may lead more patients to seek care in Johor. The same could be true for sub-categories of secondary to quaternary care such as diagnostic services, specialist consultations or even surgeries, albeit constrained by certain factors such as medical emergencies, the availability of advanced treatment options and portability of Medisave or private healthcare insurance.
According to information from DBS and the Malaysia Healthcare Travel Council, 45% of travellers entering Malaysia seek healthcare screening services from healthcare institutions, followed by 10% seeking gastroenterology and 7% each for cancer, and obstetrics and gynaecology.
Essential healthcare to stay resilient
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While there will be those from Singapore seeking non-urgent medical treatments in Johor, DBS does not anticipate a mass exodus of patients from Singapore to Johor just because of the JS-SEZ. DBS reasons that with more than 70% of Singapore residents covered by an integrated shield plan, out-of-pocket expenses through co-payments can be as low as 5% locally. This provides less incentive for insured patients to seek treatment overseas, where insurance coverage, if any, is less comprehensive.
Additionally, factors such as comfort and familiarity may discourage patients from receiving treatment abroad, especially for more serious ailments that require longer lengths of stay.
Overall, DBS believes that the JS-SEZ is “neutral” for IHH Healthcare , the healthcare giant that is present in both Singapore and Malaysia, including Johor. Potential patient leakage in Singapore could be offset by higher patient volumes at its Johor facilities, such as Gleneagles Hospital Medini Johor.
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“Further distinctions in impact are expected among different brands. Brands like Mount Elizabeth and Gleneagles, which target the high-income domestic market, are likely to be more resilient due to the lower price sensitivity of their clientele,” says DBS. In contrast, brands under IHH with broader mass market appeal, such as Parkway, which operates a chain of medical clinics, may be more vulnerable to patient outflows.
As for Raffles Medical Group (RMG), the lack of operations in Malaysia could subject the company to risks from patient diversion to Johor, although DBS believes that any negative impact will not be substantial.
DBS has a “buy” call on IHH with a target price of $2.58, and a “hold” call on RMG with a 97 cents target price.
Cheaper non-essential treatments in Johor
Meanwhile, Maybank Securities analyst Eric Ong has observed a growing number of Hong Kongers going to Shenzhen, China, to seek cheaper medical treatment after the borders reopened following the pandemic. “While there may be a similar trend happening following the set-up of the JS-SZE, we believe Singapore still retains a competitive edge in premium or more complex/critical treatments given its strong reputation for quality healthcare services,” he says.
Ong believes that insurance coverage will be a key factor. “Notwithstanding the higher healthcare costs, most Singaporeans would be covered by Medisave and private insurance companies,” he adds.
Ong believes that Thomson Medical Group (TMG), which has already staked out its presence in Johor in the form of the Thomson Iskandar Medical Hub, may benefit from the JS-SEZ. Through its Malaysian entity, the company will begin construction of this integrated medical hub in Johor Bahru (JB), by late 2025.
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When completed by 2030, the Thomson Iskandar development will feature the 500-bed Iskandariah Hospital, 400 medical suites, medical and allied health training institutes, research facilities, as well as a 33-storey commercial block. TMG also owns about 9.23ha freehold waterfront land plot in Johor Bahru’s City Centre, with a proposed long-term plan to build an integrated healthcare city. Other catalysts include the potential monetisation and/or revaluation of its prime assets in JB, given the rise in property values within the area.
However, Ong is slightly negative on RMG and Q&M Dental Group (Singapore), as there could be some adverse effect on their Singapore operations once the RTS is completed, making it more convenient for patients to cross over to Johor for non-urgent and standardised procedures.
Malaysian healthcare to also benefit
RHB Singapore’s head of equity research Shekhar Jaiswal believes that the non-essential medical care and services segment is sensitive about product or service costs. A tight labour market for skilled healthcare professionals has pushed the operating costs of Singapore healthcare service providers up further.
In addition, a relatively strong Singapore dollar compared to regional currencies has made Singapore healthcare costs higher compared to similar services offered by Malaysia or Thailand.
“The completion of the RTS link in 2026 and the expedited immigration clearances should make it easier for Singapore patients looking for cheaper healthcare options across the border. This could have a slight negative impact on the local healthcare service providers. Based on the current state of operations, we view this to be mildly negative for RMG and Q&M,” says Jaiswal.
While he believes that Singapore healthcare service providers may lose out on price-sensitive, non-essential medical care and services, they may still benefit in terms of revenues from foreign and local patients who are seeking elective single-speciality care — including scopes — to more critical and complex multi-speciality care that may not be available in the neighbouring countries, such as proton therapy to treat cancer. Three players here have been offering it since 2023: IHH, Singapore Institute of Advanced Medicine Holdings (SAM) and the National Cancer Centre Singapore.
Based on RHB’s last information, Thailand does offer proton therapy but reportedly restricts it to Thai nationals.
When it comes to price-sensitive services, Jaiswal sees a trend of private healthcare players in Singapore turning their attention to ambulatory care facilities and expanding such outpatient offerings while reducing overhead costs and addressing staff shortages.
Similar to Maybank’s Ong, Jaiswal sees TMG as a beneficiary of the JS-SEZ following the completion of the Thomson Iskandar Medical Hub.
For Malaysia’s healthcare sector (JB in particular), RHB thinks that the establishment of the SEZ, especially the plans to develop a light rail transit (LRT) or an autonomous rail transit system, will further enhance connectivity, which in turn may benefit private hospital players in JB. “Given the shorter commuting time, we wouldn’t rule out the possibility that patients requiring intensive treatment or follow-up (except for ICU cases) may opt to visit JB in the future. Malaysian healthcare companies that could benefit include IHH and KPJ,” says RHB.
